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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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SWIFT ENERGY COMPANY
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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
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CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 10, 2005
The annual meeting of shareholders of SWIFT ENERGY COMPANY (the "Company")
will be held at the Wyndham Greenspoint Hotel, 12400 Greenspoint Drive, Houston,
Texas, on Tuesday, May 10, 2005, at 4:00 p.m., Houston time, for the following
purposes:
1. To elect three Class III directors to serve until the 2008 Annual
Meeting of Shareholders or until their successors are duly qualified
and elected;
2. To approve the Swift Energy Company 2005 Stock Compensation Plan,
including the reservation of between 625,000 and 900,000 shares of
the Company's common stock that may be issued under the plan,
depending on the nature of the stock awards (as more fully described
in the attached proxy statement);
3. To ratify the appointment of Ernst & Young LLP as Swift Energy's
independent registered public accounting firm for the fiscal year
ending December 31, 2005; and
4. Such other business as may properly be presented at the meeting, or
at any and all adjournments or postponements thereof.
A record of shareholders has been taken as of the close of business on
March 21, 2005, 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 26, 2005, and may be
inspected during normal business hours prior to the meeting at the offices of
the Company, 16825 Northchase Drive, Suite 400, Houston, Texas. This list will
also be available at the meeting.
By Order of the Board of Directors,
/s/ Bruce H. Vincent
Bruce H. Vincent
Secretary
March 24, 2005
YOUR VOTE IS IMPORTANT!
Whether or not you plan to attend the annual meeting of shareholders,
we urge you to vote and submit your proxy by telephone or by mail as promptly as
possible to ensure the presence of a quorum for the meeting. For additional
instructions on voting by telephone, please refer to your proxy card. To vote
and submit your proxy by mail, please complete, sign and date the enclosed proxy
card and return it in the enclosed postage pre-paid envelope. If you attend the
meeting, you may, of course, revoke the proxy and vote in person. If you hold
your shares through an account with a brokerage firm, bank or other nominee,
please follow the instructions you receive from them to vote your shares.
TABLE OF CONTENTS
PAGE
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS.......................................... 1
PROPOSAL 1 -- ELECTION OF DIRECTORS............................................................. 3
Class III Director Nominees.............................................................. 4
BOARD OF DIRECTORS.............................................................................. 5
Class I Directors........................................................................ 5
Class II Directors....................................................................... 5
Compensation of Directors................................................................ 6
Meetings of the Board.................................................................... 7
Meetings of Independent Directors........................................................ 7
Board Succession Plan.................................................................... 7
Affirmative Determinations Regarding Independent Directors and Financial Experts......... 7
Committees of the Board.................................................................. 8
Compensation Committee Interlocks and Insider Participation.............................. 9
Section 16(a) Beneficial Ownership Reporting Compliance.................................. 9
Corporate Governance..................................................................... 9
PRINCIPAL SHAREHOLDERS.......................................................................... 10
EXECUTIVE OFFICERS.............................................................................. 13
EXECUTIVE COMPENSATION.......................................................................... 14
Summary Compensation Table............................................................... 14
Employment Contracts..................................................................... 15
Stock Option Grants in 2004.............................................................. 16
Aggregated Option Exercises in 2004 and Year-End Option Values........................... 17
Equity Compensation Plan Information..................................................... 18
Related Party Transaction................................................................ 18
COMPENSATION COMMITTEE REPORT................................................................... 19
Compensation Philosophy.................................................................. 19
Review and Evaluation of Compensation Practices.......................................... 19
Director Compensation.................................................................... 19
Executive Compensation Criteria and Performance Measurement.............................. 20
Compensation of Chief Executive Officer ................................................. 21
Section 162(m) of the Internal Revenue Code.............................................. 22
PROPOSAL 2 -- APPROVAL OF THE SWIFT ENERGY COMPANY 2005 STOCK COMPENSATION PLAN................. 23
Summary of the 2005 Plan................................................................. 23
Federal Income Tax Considerations........................................................ 27
Board Recommendation..................................................................... 29
AUDIT COMMITTEE REPORT.......................................................................... 30
INDEPENDENT AUDITORS AND FEES................................................................... 31
Pre-approval Policies and Procedures..................................................... 31
PROPOSAL 3 - RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR................................... 32
PERFORMANCE GRAPH............................................................................... 33
SHAREHOLDER PROPOSALS........................................................................... 34
COMMUNICATIONS WITH THE BOARD OF DIRECTORS...................................................... 34
FORWARD LOOKING STATEMENTS...................................................................... 35
ANNUAL REPORT ON FORM 10-K...................................................................... 35
GENERAL......................................................................................... 35
APPENDIX A -- SWIFT ENERGY COMPANY 2005 STOCK COMPENSATION PLAN................................. A-1
ii
SWIFT ENERGY COMPANY
16825 NORTHCHASE DRIVE, SUITE 400
HOUSTON, TEXAS 77060
(281) 874-2700
PROXY STATEMENT
FOR THE
2005 ANNUAL MEETING OF SHAREHOLDERS
This proxy statement is mailed to shareholders commencing on or about
March 29, 2005, in connection with the solicitation by the board of directors
(the "Board of Directors" or "Board") of Swift Energy Company (the "Company") of
proxies to be voted at the annual meeting of shareholders to be held at the
Wyndham Greenspoint Hotel, 12400 Greenspoint Drive, Houston, Texas, on Tuesday,
May 10, 2005, at 4:00 p.m., Houston time, and any adjournment or postponement
thereof (the "Annual Meeting"), for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders. Management does not know of any
matters other than those listed on the notice that will be presented for action
at the Annual Meeting.
The Annual Report to Shareholders covering the fiscal year ended
December 31, 2004, will be mailed to each shareholder entitled to vote at the
Annual Meeting on or before the date of mailing this proxy statement or may
accompany this proxy statement.
The cost of preparing, printing, and mailing this proxy statement and
soliciting proxies will be borne by the Company. In addition to solicitations by
mail, employees of the Company may solicit proxies in person or by telephone or
facsimile, without additional remuneration. In addition, the Company has
retained Georgeson Shareholder Communications Inc. to act as a proxy solicitor
in conjunction with the Annual Meeting. The Company has agreed to pay that firm
$8,000, plus reasonable out of pocket expenses, for proxy solicitation services.
The Company will also request brokerage firms, banks, nominees, custodians, and
fiduciaries to forward proxy materials to the beneficial owners of shares of the
Company's common stock as of the record date and will reimburse such persons for
the cost of forwarding the proxy materials in accordance with customary
practice. Your cooperation in promptly voting your shares and submitting your
proxy by telephone, internet, or by completing and returning the enclosed proxy
card will help to avoid additional expense.
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
21, 2005. On the record date, there were 28,094,517 shares of common stock of
the Company, par value $.01 per share, issued and outstanding and entitled to
vote.
Each share of common stock entitles the holder to one vote on each
matter presented at the Meeting. Proxies will be voted in accordance with the
directions specified thereon. Any proxy on which no direction is specified will
be voted "FOR" the election of all nominees to the Board for the terms
indicated, "FOR" the approval of the Swift Energy Company 2005 Stock
Compensation Plan, "FOR" the ratification of the selection of Ernst & Young LLP
as the Company's independent auditors, and otherwise at the discretion of the
persons designated as proxies. A shareholder may revoke his or her proxy at any
time prior to the voting thereof by attending and voting at the Annual 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 Annual 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 Annual Meeting may adjourn or postpone the Annual Meeting
from time to time without notice, other than an announcement at the Annual
Meeting, until a quorum is present or represented.
An automated system administered by the Company's transfer agent
tabulates the votes. Abstentions are included in the determination of the number
of shares present and voting and are counted as abstentions in tabulating the
votes cast on director nominees or proposals presented to shareholders. Broker
nonvotes are not included in the determination of the number of shares present
and voting and are not counted as a vote with respect to the proposals.
2
PROPOSAL 1 -- ELECTION OF DIRECTORS
At the Annual Meeting, three Class III directors are to be elected for
terms to expire at the 2008 annual meeting. The Company has three classes of
directors and each year the directors in one of these classes are nominated to
serve three year terms, or until their successors have been duly elected and
qualified. Ms. Deanna L. Cannon, an incumbent Class III director, is standing
for re-election after having been elected to serve out the remainder of the
Class III term at the Company's May 2004 annual meeting of shareholders. The
terms of Messrs. Virgil N. Swift and G. Robert Evans as Class III directors
expire at the Annual Meeting and they are not standing for re-election due to
the Board's policy related to age. To fill such vacancies, Messrs. Douglas J.
Lanier and Bruce H. Vincent, who are not currently directors, have been
nominated to stand for election as Class III directors. Directors are elected by
a plurality of the votes cast by the holders of shares entitled to vote in the
election of directors at a meeting of shareholders at which a quorum is present.
The persons named as proxies on the accompanying proxy card, unless
authority is withheld by a shareholder on a proxy card, intend to vote "FOR" the
election of all of the nominees named below to the Board. If any nominee should
become unavailable or unable to serve as a director, the persons named as
proxies may vote for a substitute selected by them, or the Board may be reduced
accordingly; however, the Board is not aware of any circumstances likely to
render any nominee unavailable. Any director elected by the Board to fill a
vacancy will be elected for the unexpired term of such director's predecessor in
office.
CLASS III
(Term to expire at the 2008 Annual Meeting)
-----------------------------------------------------------
Deanna L. Cannon
Douglas J. Lanier
Bruce H. Vincent
Set forth below, for information purposes only, are the names and
remaining terms of the other six directors:
CLASS I CLASS II
(Terms to expire at the 2006 Annual Meeting) (Term to expire at the 2007 Annual Meeting)
------------------------------------------------------- ----------------------------------------------------
Raymond E. Galvin A. Earl Swift
Clyde W. Smith, Jr. Greg Matiuk
Terry E. Swift Henry C. Montgomery
3
CLASS III DIRECTOR NOMINEES
Deanna L. Cannon, 44, was elected to serve as a member of the Company's
Board of Directors at the Company's 2004 annual meeting of shareholders. Ms.
Cannon is a director of Corporate Finance Association of Northern Michigan
("CFA") and the President of Cannon & Company CPA's PLC, a privately held
consulting firm. CFA provides transaction consulting services to business owners
involved in buying or selling a business, due diligence services, and business
valuations. She served Miller Exploration Company as Chief Financial Officer and
Secretary from November 2001 to December 2003, Vice President--Finance and
Secretary from June 1999 to November 2001, Assistant Vice President--Finance
from May 1998 to June 1999, and a director of one of its wholly owned
subsidiaries from May 2001 to December 2003. Miller Exploration Company was a
publicly held independent oil and gas exploration and production company that
was acquired by Edge Petroleum Corporation in December 2003. Previously, Ms.
Cannon was employed in public accounting for 16 years, initially for Arthur
Andersen & Co. and later for Plante & Moran, LLP. Ms. Cannon holds a Bachelor of
Science degree in Accounting and is a Certified Public Accountant. Ms. Cannon is
also a member of the Michigan Oil and Gas Association, American Institute of
Certified Public Accountants, and Michigan Association of Certified Public
Accountants.
Douglas J. Lanier, 55, retired in 2004 as Vice President of
ChevronTexaco Exploration & Production Company, Gulf of Mexico Business Unit. He
began his career with Gulf Oil Company and served in various positions until
1985 when he was appointed Operations Manager of Cabinda Gulf Oil Company
("CABGOC"). In 1988, he became General Manager-Operations of CABGOC. In 1989,
Mr. Lanier was appointed Assistant General Manager-Production for Chevron USA
Central Region in Houston and served in subsequent appointments until he joined
Chevron Petroleum Technology Company as President in 1997. In October of 2000,
he was appointed Vice President of the Gulf of Mexico Shelf of the Southern
Business Unit. Mr. Lanier holds a B.S. degree in petroleum engineering. He is a
member of the Society of Petroleum Engineers and is a Texas registered
professional engineer. Mr. Lanier was inducted into the University of Tulsa
College of Engineering Hall of Fame in 2003.
Bruce H. Vincent, 57, was appointed President of the Company in
November 2004 and President of Swift Energy International, Inc. in February
2004. He has served as Secretary of the Company since August 2000. He previously
served as Executive Vice President--Corporate Development from August 2000 to
November 2004 and as Senior Vice President--Funds Management since joining the
Company in 1990. Mr. Vincent holds a Bachelor's degree in Business
Administration and a Master's degree in Finance.
================================================================================
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" ALL OF THE DIRECTOR NOMINEES TO SERVE AS CLASS III DIRECTORS.
================================================================================
4
BOARD OF DIRECTORS
CLASS I DIRECTORS
Raymond E. Galvin, 73, has served as a director of Swift Energy since
August 5, 2003. From 1992 until he retired in February 1997, he was the
President of Chevron USA Production Company. He also served as a director of
Chevron Corp. from 1995 to 1997 and as a Vice President of Chevron Corp. from
1988 to 1997. Mr. Galvin has also served as chairman of the Natural Gas Council
and the Natural Gas Supply Association. Mr. Galvin holds a Bachelor of Science
degree in Petroleum Engineering.
Clyde W. Smith, Jr., 56, has served as a director of Swift Energy since
1984. Since January 2002, Mr. Smith has served as President of Ascentron, Inc.,
an electronics manufacturing services company that acquired the assets of D.W.
Manufacturing, Inc. in January 2002. From May 1998 until January 2002, Mr. Smith
served as General Manager of D.W. Manufacturing, Inc. d/b/a Millennium
Technology Services, an electronics manufacturer. Mr. Smith is a Certified
Public Accountant and holds a Bachelor's degree in Business Administration.
Terry E. Swift, 49, has served as the Chief Executive Officer of Swift
Energy since May 2001 and as a director of the Company since May 2000. He was
President of the Company from November 1997 to November 2004, Chief Operating
Officer from 1991 to February 2000, and Executive Vice President from 1991 to
1997. He served in other progressive positions of responsibility since joining
the Company in 1981. Mr. Swift has a Bachelor's degree in Chemical Engineering
and a Master's degree in Business Administration. He is the son of A. Earl Swift
and the nephew of Virgil N. Swift.
CLASS II DIRECTORS
A. Earl Swift, 71, is Chairman of the Board of Swift Energy and has
served in that capacity since the Company's founding in 1979. He previously
served as President from 1979 to November 1997 and as Chief Executive Officer
from 1979 until May 2001. For the 17 years prior to 1979, he was employed by
affiliates of American Natural Resources Company. Mr. Swift is a registered
professional engineer and holds a Bachelor's degree in Petroleum Engineering, a
Juris Doctorate degree and a Master's degree in Business Administration. He is
the brother of Virgil N. Swift and the father of Terry E. Swift.
Greg Matiuk, 59, has served as a director of the Company since 2003.
After 36 years of service, Mr. Matiuk retired from ChevronTexaco Corp. in May
2003 having last served as Executive Vice President, Administrative and
Corporate Services, a position he had held since 2001. From 1998 until 2001, he
was Vice President, Human Resources and Quality, and from 1996 to 1998 he served
as Vice President of Strategic Planning and Quality. Mr. Matiuk began his career
at ChevronTexaco in 1967 as a production and reservoir engineer. He holds a
Bachelor of Science degree in Geological Engineering and a Master's degree in
Business Administration.
Henry C. Montgomery, 69, has served as a director of the Company since
1987. Since 1980, Mr. Montgomery has been Chairman of the Board of Montgomery
Professional Services Corporation, a management consulting and financial
services firm. Mr. Montgomery currently also serves as Chairman of the Board of
Catalyst Semiconductor, Inc., a public company that designs, develops, and
markets programmable integrated circuit products, and is a member of the Board
of ASAT Holdings, Ltd., a public company that packages and tests semiconductor
devices. From January 2000 to March 2001, Mr. Montgomery served as Executive
Vice President--Finance and Administration and Chief Financial Officer of Indus
International, Inc., a public company engaged in enterprise asset management
systems. For eight months in 1999, he served as interim Executive Vice President
of Finance and Administration of Spectrian Corporation, a publicly held wireless
telecom infrastructure company. Mr. Montgomery holds a Bachelor of Arts degree
in Economics.
5
COMPENSATION OF DIRECTORS
Only non-employee directors are compensated for serving as directors of
the Company. Effective October 1, 2004, as a result of significantly increased
duties and responsibilities for the entire Board of Directors and its
committees, the cash compensation of non-employee directors was increased to a
base of $40,000, with an additional $5,000 for serving on one or more committees
of the Board of Directors, as compared to $34,750 and $5,000, respectively,
earned per year by non-employee directors prior to that time. Additionally, the
Chairman of the Audit Committee will now receive an additional $12,000 in cash
for a minimum of four meetings annually. The Chairmen for each of the Corporate
Governance and Compensation Committees will receive an additional $6,000 in cash
for a minimum of two meetings annually. All of these amounts are to be paid over
the course of a year in four equal installments.
Under the Company's 1990 Nonqualified Stock Option Plan, as amended
(the "1990 Nonqualified Plan"), each non-employee director is granted options to
purchase 10,000 shares of the Company's common stock on the date he or she first
becomes a non-employee director. Additionally, on the day after each annual
meeting of the shareholders (occurring more than eleven months after each
non-employee director first becomes a director), each individual who is a
non-employee director on that date is granted options to purchase 5,000 shares
of the Company's common stock. The 1990 Nonqualified Plan permits each
non-employee director to hold a maximum of 66,000 options to purchase shares of
common stock under the Plan, subject to adjustments for changes in
capitalization affecting the stock of the Company.
Upon shareholder approval, non-employee directors of the Board will be
compensated under the Swift Energy Company 2005 Stock Compensation Plan and no
future awards will be granted under the 1990 Nonqualified Plan. See, "Proposal
2--Approval of Swift Energy Company 2005 Stock Compensation Plan--Restricted
Awards for Non-Employee Directors" for a description of such proposed
compensation.
In addition to his fees as a non-employee director, Mr. Virgil Swift
received compensation pursuant to a consulting agreement. Under his consulting
agreement, which has been in effect since July 2000, Mr. Swift is paid $5,000
per month for providing advisory services to key employees, officers, and
directors, especially in the area of the Company's New Zealand oil and gas
exploration and production operations and as otherwise requested by the Chairman
of the Board, Chief Executive Officer, and the President. The consulting
agreement is terminable by either party without cause upon two weeks written
notice. Upon a change of control during the term of the consulting agreement,
all outstanding stock options held by Mr. V. Swift will become 100% vested.
The Company also has a consulting agreement with Raymond O. Loen,
director emeritus, effective July 1, 2003, for a two-year period. Pursuant to
the agreement, Mr. Loen receives $2,000 per month for consulting services. The
agreement is terminable by either party without cause upon thirty days written
notice. The Company does not expect this agreement to be renewed or extended
when it expires on July 1, 2005.
On February 7, 2005, the Board of Directors adopted a new policy going
forward relating to post-retirement director compensatory agreements. The policy
discourages these agreements or arrangements with former directors, including
consulting services, except in instances in which a majority of the independent
directors of the Board agrees that an individual former director has specific
expertise that the Board and management agree is of material benefit to the
Company. Any post-retirement agreement must be approved in advance by the Board
under the policy and may only be in effect during the three years following the
termination of the former director's term on the Board.
6
MEETINGS OF THE BOARD
During 2004, the Board met on seven occasions, six in person and one
telephonically, and acted by unanimous written consent or resolution twice. In
addition, management confers frequently with its directors on an informal basis
to discuss Company affairs. During 2004, each director attended at least 75% of
the aggregate of (i) the total number of meetings of the Board and (ii) the
total number of meetings of all committees of the Board on which he or she
served.
MEETINGS OF INDEPENDENT DIRECTORS
At each executive session of the independent directors, the independent
directors select from their group an independent director to preside at the
executive session. During 2004, the independent directors met in executive
session at the conclusion of each Board meeting other than the one telephonic
meeting.
BOARD SUCCESSION PLAN
The Board formally considered, addressed, and approved a Board
succession plan during 2004, as recommended to the Board by the Corporate
Governance Committee. In adopting such plan, the Board took into consideration
the Company's policy that present members of the Board will not stand for
re-election once they have reached the age of 72. Due to this policy, Messrs. V.
Swift and Evans are not standing for re-election to the Board of Directors of
the Company and their terms will expire at the 2005 Annual Meeting. To fill
these vacancies, Messrs. Lanier and Vincent have been nominated to stand for
election at the Annual Meeting. The diverse experience of Messrs. Lanier and
Vincent was a consideration in nominating both such persons, as well as in the
nomination of Ms. Cannon to stand for re-election at the Annual Meeting. As set
forth in its charter, the Corporate Governance Committee also considered other
factors in nominating the director nominees to the Board, including reputation,
mature judgment, career specialization, relevant technical skills, diversity,
and the extent to which the candidate would fill a present need on the Board.
AFFIRMATIVE DETERMINATIONS REGARDING INDEPENDENT DIRECTORS AND FINANCIAL EXPERTS
The Board has determined that each of the following directors is an
"independent director" as such term is defined in Section 303A of the Listing
Standards of the New York Stock Exchange ("NYSE"): Deanna L. Cannon, G. Robert
Evans, Raymond E. Galvin, Greg Matiuk, Henry C. Montgomery, and Clyde W. Smith,
Jr. These independent directors represent over a majority of the Company's Board
of Directors.
The Board has also determined that each member of the three committees
of the Board meets the independence requirements applicable to those committees
prescribed by the NYSE, the Securities and Exchange Commission ("SEC") and/or
the Internal Revenue Service. Further, the Board has determined that Henry C.
Montgomery, Chairman of the Audit Committee, and Clyde W. Smith, Jr. and Deanna
L. Cannon, members of the Audit Committee, are each an "audit committee
financial expert" as such term is defined in Item 401(h) of Regulation S-K
promulgated by the SEC.
The Board reviewed the applicable standards for Board member and Board
committee independence and the criteria applied to determine "audit committee
financial expert" status, as well as the answers to annual questionnaires
completed by each of the independent directors. On the basis of this review, the
Board made its independence and "audit committee financial expert"
determinations.
7
COMMITTEES OF THE BOARD
The Board of the Company has established the following standing
committees: Audit, Corporate Governance, Compensation, and Executive Committees.
Descriptions of the functions of the Audit, Corporate Governance, and
Compensation Committees are set forth below:
AUDIT COMMITTEE. The Audit Committee assists the Board in fulfilling
its responsibilities with respect to oversight in monitoring (i) the integrity
of the financial statements of the Company; (ii) Swift Energy's compliance with
legal and regulatory requirements; (iii) the independent auditors' selection,
qualifications and independence; and (iv) the performance of Swift Energy's
internal audit function and independent auditors. The committee is required to
be comprised of three or more non-employee directors, each of whom is determined
by the Board to be "independent" under the rules promulgated by the SEC under
the Securities Exchange Act of 1934, and meets the financial literacy and
experience requirements under the rules or listing standards established by the
NYSE, all as may be amended from time to time. In addition, at least one member
of the Committee must satisfy the definition of audit committee financial expert
as such term may be defined from time to time under the rules promulgated by the
SEC. The Board has determined that Messrs. Montgomery and Smith and Ms. Cannon
qualify as audit committee financial experts and that each member of the Audit
Committee is independent as defined in the SEC's rules and NYSE's listing
standards. A report of the Audit Committee appears below. Messrs. Montgomery
(Chairman), Evans, and Smith and Ms. Cannon are members of the Audit Committee,
which held nine meetings in 2004.
CORPORATE GOVERNANCE COMMITTEE. The Corporate Governance Committee
identifies individuals qualified to become directors and nominates candidates
for directorships and also recommends to the Board the membership for each of
the Board's committees. This committee may consider nominees recommended by
shareholders upon written request by a shareholder in accordance with the
procedures for submitting shareholder proposals. See "Shareholder Proposals"
below. The Corporate Governance Committee also develops, monitors, and
recommends to the Board corporate governance principles and practices applicable
to Swift Energy. The committee also assists management of the Company in
identifying, screening, and recommending to the Board individuals qualified to
become executive officers of the Company. In addition, this committee
administers the Company's conflicts of interest policy. The Corporate Governance
Committee is required to be comprised of at least three directors who are
"non-employee directors" and determined by the Board to be "independent" under
the listing standards or rules of the NYSE and the SEC. Messrs. Evans
(Chairman), Galvin, and Matiuk and Ms. Cannon are members of the Corporate
Governance Committee and all are independent as defined in the SEC's rules and
NYSE's listing standards. The Corporate Governance Committee held five meetings
in 2004.
COMPENSATION COMMITTEE. The Compensation Committee discharges the
responsibilities of the Board relating to compensation of the Company's
executive officers. This includes evaluating the compensation of the executive
officers of the Company and its affiliates and their performance relative to
their compensation to assure that such executive officers are compensated
effectively in a manner consistent with the strategy of Swift Energy,
competitive practices, and the requirements of the appropriate regulatory
bodies. In addition, this committee evaluates and makes recommendations to the
Board regarding the compensation of the directors. The Compensation Committee
also evaluates and approves any amendment, subject to shareholder approval, to
the Company's existing equity-related plans and approves the adoption of any new
equity-related plans, subject to shareholder and Board approval. The
Compensation Committee is required to be comprised of at least three directors
who are "non-employee directors" and determined by the Board to be "independent"
under the SEC rules and NYSE's listing standards. The Board has determined that
all members are independent as defined by the SEC's rules and NYSE's listing
standards. The report of the Compensation Committee is included below.
8
Messrs. Smith (Chairman), Galvin, Matiuk, and Montgomery are members of the
Compensation Committee, which held three meetings and acted by unanimous written
consent once during 2004.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2004, the Compensation Committee of the Board consisted of
Messrs. Smith, Galvin, Montgomery, and Matiuk, who are all independent
directors. Until the expiration of his term as a director from the Board during
May 2004, Mr. Harold Withrow also served on the Compensation Committee. 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers, and persons who own more than 10% of
the Company's common stock to file reports with the SEC regarding their
ownership of, and transactions in, the Company's common stock. SEC regulations
require Swift Energy to identify anyone who filed a required report late during
the most recent fiscal year. Based on a review of the Forms 3 and 4 filed during
the 2004 fiscal year and written certifications provided to the Company, the
Company believes that all of these reporting persons timely complied with their
filing requirements.
CORPORATE GOVERNANCE
Part of the Company's historical and on-going corporate governance
practices is the Company's policy that requires officers, directors, employees,
and certain consultants of the Company to submit annual disclosure statements
regarding their compliance with the Company's conflict of interest policy. A
management representation letter is provided to the Corporate Governance
Committee of the Board regarding the results of the annual disclosure and
management's assessment of any potential or actual conflicts of interest. Based
on this assessment and further discussion with management, the Committee then
directs management on what additional action, if any, the Committee determines
is necessary to be undertaken with regard to any potential or actual conflict of
interest.
During 2003, the Board adopted new charters for each of its Audit,
Corporate Governance, and Compensation Committees. The Board also adopted
Principles of Corporate Governance for the Company as well as a Code of Ethics
and Business Conduct applicable to all employees, directors, and consultants.
All of these documents are posted on the Company's website at
www.swiftenergy.com.
In addition, the Company has adopted a Code of Ethics for Senior
Financial Officers and Principal Executive Officer. The Company has also posted
this Code of Ethics on its website, where it also intends to post any waivers
from or amendments to this Code of Ethics.
9
PRINCIPAL SHAREHOLDERS
The following table sets forth information concerning the
shareholdings, as of March 15, 2005 (unless otherwise indicated), of the nine
current members of the Board, the Company's Chief Executive Officer, and each of
the Company's four most highly compensated executive officers other than the
CEO, all executive officers and directors as a group, and to the Company's
knowledge, each person who beneficially owned more than five percent of the
Company's outstanding common stock.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED AT
MARCH 15, 2005(1)
------------------------------
PERCENT OF
CLASS
NAME OF PERSON OR GROUP POSITION NUMBER OUTSTANDING
----------------------- -------- ------ -----------
A. Earl Swift.............. Chairman of the Board 345,267 1.2%
Virgil N. Swift............ Vice Chairman of the Board 292,639(2) 1.0%
Deanna L. Cannon........... Director 3,000 (3)
G. Robert Evans............ Director 49,800 (3)
Raymond E. Galvin.......... Director 29,000 (3)
Greg Matiuk ............... Director 2,000 (3)
Henry C. Montgomery........ Director 27,115 (3)
Clyde W. Smith, Jr. ....... Director 47,000(4) (3)
Terry E. Swift ............ Chief Executive Officer and Director 275,983 (3)
Bruce H. Vincent........... President and Secretary 180,361 (3)
Joseph A. D'Amico ......... Executive Vice President and Chief Operating Officer 140,574 (3)
Alton D. Heckaman, Jr. .... Executive Vice President and Chief Financial Officer 131,331 (3)
Officer
James M. Kitterman ........ Senior Vice President-Operations 153,003 (3)
All executive officers and directors as a group (16 persons) ..................... 1,834,516 6.4%
EARNEST Partners, LLC............................................................. 3,558,952(5) 12.7%
75 Fourteenth Street, Suite 2300
Atlanta, Georgia 30309
Dimensional Fund Advisors Inc. ................................................... 2,229,292(6) 8.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
FMR Corp. ........................................................................ 2,065,200(7) 7.4%
Fidelity Low Priced Stock Fund
Fidelity Management and Research Company
Edward C. Johnson 3d
Abigail P. Johnson
82 Devonshire Street
Boston, Massachusetts 02109
10
Wellington Management Company, LLP ............................................... 1,390,700(8) 5.0%
Wellington Trust Company, NA
75 State Street
Boston, Massachusetts 02109
---------------------------
(1) Unless otherwise indicated below, the persons named have sole voting and
investment power, or joint voting and investment power with their
respective spouses, over the number of shares of the Company's common
stock shown as being beneficially owned by them, less the shares set forth
in this footnote. The table includes the following shares that were
acquirable within 60 days following March 15, 2005, by exercise of options
granted under the Company's stock option plans: Mr. A. E. Swift - 187,452;
Mr. V. Swift - 82.433; Ms. Cannon - 2,000; Mr. Evans - 25,500; Mr. Galvin
- 5,000; Mr. Matiuk - 2,000; Mr. Montgomery - 24,200; Mr. Smith - 36,000;
Mr. T. Swift - 186,353; Mr. D'Amico - 118,800; Mr. Vincent - 120,832; Mr.
Heckaman - 96,355; Mr. Kitterman - 103,048; and all executive officers and
directors as a group - 1,119,159.
(2) Includes 59,400 shares held of record by a Texas family limited
partnership in which Mr. Virgil Swift and his wife hold a 2% general
partner interest. Mr. Virgil Swift and his wife are both general partners
of the family limited partnership and, as such, they share voting and
dispositive power as to the 59,400 shares held by the family limited
partnership. Mr. Virgil Swift is deemed to beneficially own the 59,400
shares held by the partnership. Mr. Virgil Swift expressly disclaims
beneficial ownership as to 4,455 of the shares held by the partnership.
(3) Less than one percent.
(4) Mr. Smith disclaims beneficial ownership as to 1,000 shares held in a Roth
IRA for the benefit of Mr. Smith's son.
(5) Based on a Schedule 13G dated February 10, 2005, filed with the SEC to
reflect shares held at December 31, 2004, EARNEST Partners, LLC, is an
investment advisor in accordance with SEC Rule 13d-1(b)(1)(ii)(E), and
holds sole voting power as to 2,025,895 shares, shared voting power as to
1,003,857 shares, and sole dispositive power as to all 3,558,952 shares.
No EARNEST Partners, LLC client's interest relates to more than five
percent of the class.
(6) Based on a Schedule 13G dated February 9, 2005, filed with the SEC to
reflect shares held at December 31, 2004, Dimensional Fund Advisors Inc.
("Dimensional"), an investment advisor registered under Section 203 of the
Investment Advisers Act of 1940, furnishes investment advice to four
investment companies registered under the Investment Company Act of 1940,
and serves as investment manager to certain other commingled group trusts
and separate accounts. These investment companies, trusts and accounts are
the "Funds." In its role as investment advisor or manager, Dimensional
possesses voting and/or investment power over the shares of the Company
described in this schedule that are owned by the Funds and may be deemed
to be the beneficial owner of the shares of the Company held by the Funds.
However, all securities reported in this schedule are owned by the Funds.
Dimensional disclaims beneficial ownership of such securities.
(7) Based on a Schedule 13G dated February 14, 2005, filed with the SEC to
reflect shares held at December 31, 2004, FMR Corp. has the sole power to
vote 95,700 of such shares and the power to dispose of all 2,065,200
shares. Fidelity Management & Research Company ("Fidelity"), a wholly
owned subsidiary of FMR Corp. and an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, is the beneficial
owner of 1,969,500 of the shares or 7.026% of the common stock outstanding
of the Company as a result of acting as investment adviser to various
investment companies registered under Section 8 of the Investment Company
Act of 1940 (the "Fidelity Funds"). One of the Fidelity Funds, Fidelity
Low Priced Stock Fund, beneficially owns 1,718,700 shares or 6.132% of the
common stock outstanding. Edward C. Johnson 3d, Chairman of FMR Corp., and
FMR Corp., through its control of Fidelity and the Fidelity Funds, each
has sole power to dispose of the 1,969,500 shares.
Neither FMR Corp. nor Edward C. Johnson 3d has the sole power to vote or
direct the voting of the shares owned directly by Fidelity Funds, which
power resides with the Fidelity Funds' Boards of Trustees.
Fidelity Management Trust Company, a wholly owned subsidiary of FMR Corp.
and a bank as defined in Section 3(a)(6) of the Securities Exchange Act of
1934, is the beneficial owner of 95,700 shares or 0.341% of the Company's
common stock. Edward C. Johnson 3d and FMR Corp., through its control of
Fidelity Management Trust Company, each has sole dispositive and voting
power over these 95,700 shares.
Members of the Edward C. Johnson 3d family are the predominant owners of
Class B shares of common stock of FMR Corp., representing approximately
49% of the voting power of FMR Corp. Mr. Johnson 3d owns 12.0% and Abigail
Johnson owns 24.5% of the aggregate outstanding voting stock of FMR Corp.
Abigail P. Johnson is a Director of FMR Corp. The Johnson family group and
all other Class B shareholders have entered into a shareholders' voting
agreement under which all Class B shares will be voted in accordance with
the majority vote of Class B shares. Accordingly, through their ownership
of voting common stock and the execution of the shareholders' voting
agreement, members of the Johnson family may be deemed, under the
Investment Company Act of 1940, to form a controlling group with respect
to FMR Corp.
11
(8) Based on a Schedule 13G dated February 14, 2005, filed with the SEC to
reflect shares held at December 31, 2004, the shares of common stock shown
in the table are owned of record by clients of Wellington Management
Company, LLP ("WMC"), an investment advisor. WMC reported that the
percentage owned was 4.961%, which has been rounded up in the table, and
that WMC had ceased to become a beneficial owner of 5.0%. WMC has shared
power to vote 731,500 of the shares and shared power to dispose of
1,390,700 shares of common stock.
12
EXECUTIVE OFFICERS
The Board appoints the executive officers of the Company annually.
Information regarding Terry E. Swift, Chief Executive Officer, and Bruce H.
Vincent, President and Secretary, is set forth above under "Election of
Directors." Set forth below is certain information, as of the date of this proxy
statement, concerning the other executive officers of the Company.
Joseph A. D'Amico, 56, was appointed Executive Vice President in August
2000 and was appointed Chief Operating Officer of the Company in February 2000.
He was Senior Vice President of Exploration and Development of the Company from
February 1998 to February 2000. He served as the Company's Vice President of
Exploration and Development from 1993 to 1998, Director of Exploration and
Development from 1992 to 1993, and Funds Manager from 1988, when he joined the
Company, until 1992. Mr. D'Amico holds Bachelor of Science and Master of Science
degrees in Petroleum Engineering and a Master's degree in Business
Administration.
Alton D. Heckaman, Jr., 48, was appointed Executive Vice President in
November 2004 and Chief Financial Officer in August 2000. He previously served
as Senior Vice President--Finance from August 2000 until November 2004. From May
1993 to August 2000, Mr. Heckaman served as Vice President and Controller, and
from March 1986 to May 1993, he was Assistant Vice President--Finance of the
Company. Mr. Heckaman joined the Company in 1982. He is a Certified Public
Accountant and holds a Bachelor's degree in Accounting.
James M. Kitterman, 60, 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 Bachelor's degree in
Petroleum Engineering and a Master's degree in Business Administration.
James P. Mitchell, 51, was appointed Senior Vice President-Commercial
Transactions and Land in February 2003. He previously served as Vice
President-Land and Property Transactions from December 2001 to February 2003,
and Vice President-Land from 1996 to 2001. Previously he had served successively
as Manager of Land, Director of Land Acquisitions and Joint Venture
Negotiations, and Coordinator of Land Acquisitions, having joined the Company in
1987. Mr. Mitchell holds a Bachelor's degree in History and Business Law.
Victor R. Moran, 49, was appointed Senior Vice President and Chief
Compliance Officer in November 2004, having previously served as Senior Vice
President--Energy Marketing and Business Development from August 2000 until such
appointment. From 1995 to August 2000, he served as Vice President--Natural Gas
Marketing/Business Development, after previously serving as Director of Business
Development since January 1992, when he joined the Company. Mr. Moran holds a
Bachelor's degree in Government, a Master's degree in Business Administration,
and a Juris Doctorate degree.
David W. Wesson, 46, was appointed Controller in January 2001. He
previously served as Assistant Controller--Reporting from April 1999 to January
2001, Manager--Reporting/Budget from October 1995 to April 1999, and
Manager--Corporate Accounting/Budget from February 1990 to October 1995. He
joined the Company as Senior Accountant in 1988. Mr. Wesson is a Certified
Public Accountant and holds a Bachelor's degree in Accounting.
13
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
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 2004) for the
fiscal years ended December 31, 2004, 2003, and 2002.
LONG TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION ANNUAL COMPENSATION
------------------------------------ ----------------------- -------------------
BONUS(1) COMMON
---------------------- STOCK LIFE
NAME AND UNDERLYING RESTRICTED INSURANCE 401(k)
PRINCIPAL POSITION(2) YEAR SALARY ($) CASH ($) STOCK ($) OPTIONS(#) STOCK(#) ($)(3) ($)(4)
--------------------- ---- ---------- -------- --------- ----------- ---------- --------- ------
Terry E. Swift 2004 $495,000 $355,100 $0 35,528 18,000 $26,877 $10,250
Chief Executive Officer 2003 450,000 180,000 $0 40,000 26,207 10,000
2002 400,000 120,000 $0 20,000 24,870 8,500
Bruce H. Vincent 2004 $348,955 $196,700 $0 37,634 7,500 $27,294 $10,250
President and Secretary 2003 316,268 92,248 $0 36,171 24,918 10,000
2002 277,424 57,700 $0 34,000 33,099 8,500
Joseph A. D'Amico 2004 $333,485 $126,900 $0 9,700 6,700 $20,596 $10,250
Executive Vice President 2003 314,608 55,051 $0 20,000 19,260 10,000
and Chief Operating 2002 302,504 45,800 $0 28,560 23,036 8,500
Officer
Alton D. Heckaman, Jr. 2004 $275,220 $133,300 $0 15,255 5,900 $14,463 $10,250
Executive Vice President 2003 244,776 71,378 $0 27,370 13,050 10,000
and Chief Financial Officer 2002 214,711 44,700 $0 26,000 21,832 8,500
James M. Kitterman 2004 $275,443 $92,400 $0 28,060 4,600 $30,121 $10,250
Senior Vice President- 2003 259,852 62,857 $0 20,000 28,880 10,000
Operations 2002 245,165 46,900 $0 23,000 27,459 8,500
-----------------------------------
(1) Bonus amounts reported for 2004, 2003, and 2002 include bonuses earned
during those years but paid in the following year.
(2) In accordance with the terms of A. Earl Swift's employment agreement upon
his retirement from his position as Chief Executive Officer in 2001, he
began working half-time for the Company. His salary in 2004 was $330,972
and he also received the third of his five non-competition payments in the
amount of $406,842. Additionally, he received a cash bonus of $150,000.
The Company also paid $119,591 in insurance premiums for his benefit and
contributed $10,250 to his 401(k) in 2004.
(3) Represents insurance premiums paid by the Company during the covered
fiscal year with respect to life insurance for the benefit of the named
executive officer.
(4) Contributions by the Company to the Swift Energy Company Employee Savings
Plan (100% in Company common stock) for 2004, 2003, and 2002 for the
account of the named executive officer.
14
EMPLOYMENT CONTRACTS
A. Earl Swift's employment agreement was amended and restated in
November 2000. During 2001, Mr. Swift stepped down as Chief Executive Officer
and began working on a half-time basis. He may continue on a half-time basis
through May 2006 on specific matters designated by the Board. During this
five-year period, Mr. Swift's compensation is approximately one-half (i.e.
$300,000) of his annual base compensation in 2001, with a 4% per annum inflation
adjustment, plus any bonuses awarded by the Board. These amounts are also
payable in one lump sum, discounted to present value, upon Mr. Swift's death or
disability, which also triggers 100% vesting of all unexercised options, plus
continuation of insurance for his spouse and minor children for a year. In the
event of a change of control, Mr. Swift is to be paid a lump sum equal to the
discounted present value of amounts payable during the remainder of the
contract, plus a one-year continuation of medical and dental coverage, and a tax
gross-up if such payments are deemed to be subject to "parachute payment" excise
taxes. Mr. Swift's contract also provides for a payment of approximately
$407,000 per year to Mr. Swift or his estate during each of the five years in
consideration of Mr. Swift's agreement not to compete with the Company while he
is receiving payments from the Company. These payments have been made for each
of the years 2004, 2003, and 2002. Upon termination of Mr. Swift's employment
during the contract term, other than for cause, Mr. Swift is entitled to receive
continuation of his salary for a period of one year plus 4 weeks' salary for
every year of service to the Company if he is then being employed and paid on a
half-time basis, provided that salary payments are not to be made for more than
five years after he begins his part-time status. Insurance coverage is to be
continued while he is being paid, and all unexercised stock options held at such
date are to become vested.
Effective May 9, 2001, the Company entered into amended and restated
employment agreements with Terry E. Swift, Bruce H. Vincent, Joseph A. D'Amico,
Alton D. Heckaman, Jr., and James M. Kitterman, and on the same date entered
into a new employment agreement with Victor R. Moran. Effective November 1,
2003, the Company also entered into an employment agreement with James P.
Mitchell. All of the agreements provide for an initial three-year term, which is
automatically extended for one year on May 9 of each year (such period, as so
extended at any time, the "Contract Term"). These agreements provide for payment
of certain amounts and continuation of medical benefits for one-half of the
remainder of the Contract Term upon termination of employment other than for
cause. The payment shall be equal to the executive's base salary in effect
immediately prior to the termination date, plus one week's salary for every year
of service to the Company, plus in the case of Messrs. T. Swift, Heckaman and
Kitterman, certain amounts compounded at a rate of 8% per annum, representing
amounts in lieu of Company contributions to a 401(k) plan for those periods of
employment prior to adoption of such a plan by the Company. The agreements also
provide for the continuation of medical benefits for one-half of the remainder
of the Contract Term upon termination of employment other than for cause. The
agreements can be terminated by the Company other than for cause only by a
majority of the continuing directors who have been directors for two years or
nominated for election by a majority of continuing directors. Upon employment
termination in connection with or following a change of control, the executives
are entitled to receive their salary that would have been paid for the remainder
of the Contract Term, plus two weeks' salary for every year of service to the
Company, plus in the case of Messrs. T. Swift, Heckaman and Kitterman, certain
amounts compounded at a rate of 8% per annum, representing amounts in lieu of
Company contributions to a 401(k) plan for those periods of employment prior to
adoption of such a plan by the Company, and continuation of medical and dental
insurance and universal life coverages for certain periods. Immediately prior to
termination of employment, outstanding unexercised stock options vest or are
deemed to have vested, and the executives retain such options with no change to
their terms, except as to Messrs. Moran and Mitchell, for whom the only
outstanding options that vest are those granted after the date of their
respective employment agreement.
15
STOCK OPTION GRANTS IN 2004
During 2004, the following stock options were granted to the named
executive officers under the Company's stock compensation plans.
GRANT DATE
INDIVIDUAL GRANTS VALUE
-------------------------------------------------------------------------------------------------- -------------
% OF TOTAL OPTIONS
NUMBER OF GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME(1) GRANTED(2) FISCAL YEAR ($/SH) DATE(2) ($)(3)
--------------------------- ---------- ------------------- ----------- ---------- -------------
Terry E. Swift 9,528 2.29% $19.30 04/13/2006 $43,543
26,000 6.25% $25.18 11/08/2014 $281,320
Bruce H. Vincent 8,660 2.08% $20.04 06/13/2006 $42,694
6,321 2.80% $20.10 05/10/2006 $30,720
10,800 2.60% $25.18 11/08/2014 $116,856
3,274 0.79% $25.48 10/06/2006 $19,448
2,670 0.64% $27.80 12/26/2006 $17,916
600 0.14% $28.46 11/03/2007 $4,902
Joseph A. D'Amico 9,700 2.33% $25.18 11/08/2014 $104,954
Alton D. Heckaman, Jr. 1,541 0.37% $21.21 12/07/2008 $12,590
2,794 0.67% $23.19 12/07/2008 $26,655
2,075 0.50% $23.85 12/26/2006 $14,546
345 0.08% $23.85 11/03/2007 $2,864
8,500 2.04% $25.18 11/08/2014 $91,970
James M. Kitterman 6,748 1.62% $18.80 04/06/2006 $29,894
14,612 3.51% $21.13 06/08/2006 $74,813
6,700 1.61% $25.18 11/08/2014 $72,494
-----------------------------
(1) A. Earl Swift, Chairman of the Board, received options to purchase 2,254
shares of the Company's common stock. Options for 528 shares, representing
0.13% of total options granted to employees in 2004, have an exercise
price of $28.25, an expiration date of February 18, 2008, and a grant date
present value of $4,572. Options for 1,726 shares, representing 0.42% of
total options granted to employees in 2004, have an exercise price of
$28.25, an expiration date of December 7, 2008, and a grant date present
value of $16,898.
(2) Includes options granted as reloads pursuant to the terms of the 2001
Plan. Options that have an expiration date of less than ten years are
reload options.
(3) Estimated present values are based on the Black-Scholes Model, a
mathematical formula used to value exchange-traded options. The stock
options granted by the Company are long term, non-transferable and subject
to vesting restrictions, while exchange-traded options are short term and
can be exercised or sold immediately in a liquid market. The Black-Scholes
Model considers a number of factors, including the expected volatility of
the stock, interest rates, and the estimated time period until exercise of
the option. In calculating the grant date present values set forth in the
table, the following ranges of assumptions were used: daily volatility for
common stock of 37.9% risk-free rate of return of 1.85% to 3.72% and
actual number of years from grant date up to six years. In each case, the
risk-free rate was based on an applicable 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.
16
AGGREGATED OPTION EXERCISES IN 2004 AND YEAR-END OPTION VALUES
The following table contains information concerning the number of
shares acquired and value realized from the exercise of options during 2004 and
the number of unexercised options held by the named executive officers at
December 31, 2004.
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT YEAR END 2004 AT YEAR END 2004(1)
SHARES ------------------------------- --------------------------------
ACQUIRED
ON VALUE(2)
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------------------- -------- -------- ----------- ------------- ----------- -------------
Terry E. Swift 21,709 $235,086 154,325 111,528 $2,108,233 $904,082
Bruce H. Vincent 64,406 $823,816 96,102 103,234 $1,206,350 $994,174
Joseph A. D'Amico 21,560 $295,479 101,750 66,900 $1,232,129 $621,239
Alton D. Heckaman, Jr. 18,415 $268,075 87,466 74,255 $833,623 $723,104
James M. Kitterman 51,426 $616,105 87,700 70,260 $1,316,119 $718,431
---------------------------
(1) Options are "in-the-money" if the market price of a share of common
stock exceeds the exercise price of the option. The value of
unexercised in-the-money options equals the closing price of the
Company's common stock at December 31, 2004, of $28.94 less the
exercise price.
(2) Value Realized represents the difference between the exercise price of
the options and the NYSE closing price on the exercise date for the
Company's common stock received upon exercise.
17
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2004,
regarding shares outstanding and available for issuance under the Company's
existing stock option and employee stock purchase plans:
(a) (b) (c)
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
TO BE ISSUED UPON EXERCISE PRICE OF EQUITY COMPENSATION
EXERCISE OF OUTSTANDING PLANS (EXCLUDING
OUTSTANDING OPTIONS, OPTIONS, WARRANTS SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS AND RIGHTS COLUMN (a))
------------- ------------------- ----------------- -----------------------
Equity compensation plans approved by security holders 2,998,668 $ 18.51 334,913
Equity compensation plans not approved by security
holders -0- $ -0- --
---------- ---------- ---------
TOTAL 2,998,668 $ 18.51 334,913(1)
========== ========== =========
-----------------------------
(1) Includes 245,635 shares remaining available for issuance under employee
stock purchase plans, 28,043 under the 2001 Stock Plan, and 61,235 under
the 1990 Nonqualified Plan that will no longer be available for issuance
upon approval of the 2005 Plan.
RELATED PARTY TRANSACTION
During 2004, the Company received research, technical writing,
publishing, and website-related services from Tec-Com Inc., a corporation
located in Knoxville, Tennessee, and controlled by the sister of the Company's
Chairman and Vice Chairman of the Board. The sister and brother-in-law of
Messrs. E. Swift and V. Swift also own a substantial majority of Tec-Com. For
the fiscal year ended December 31, 2004, the Company paid approximately $0.4
million to Tec-Com for such services pursuant to the terms of the contract
between the parties. The contract was renewed as of June 30, 2004, with its term
to expire June 30, 2007. The Company believes that the terms of this contract
are consistent with third parties that provide similar services.
18
COMPENSATION COMMITTEE REPORT
COMPENSATION PHILOSOPHY
The Board first established its Compensation Committee in 1982. The
Compensation Committee has always been composed solely of non-employee 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 founding
Chief Executive Officer believed it to be beneficial to the Company in its early
years to keep executive compensation in the low to middle ranges in comparison
to levels paid by comparable entities, particularly in comparison to many
companies in the oil and gas industry. Since 1987, the bonus compensation of the
Company's Chief Executive Officer has been based almost solely upon the
Company's performance, as described below.
Since late 1989, the bonus formula for the Chief Executive Officer has
been based upon earnings per share and growth in oil and gas reserves, as
described in detail below. Since 1995, the criteria also have reflected the
importance of cash flow to the Company and the Company's increased emphasis on
exploration and drilling activities to achieve growth in probable reserves, in
addition to acquisition of producing properties, given the Compensation
Committee's belief that successful drilling activities are based upon a high
level of drilling prospects. Accordingly, the bonus formula in the Swift Energy
Company 2001 Omnibus Stock Compensation Plan (the "2001 Plan"), which was
adopted by the Shareholders at the 2001 Annual Meeting and was in effect with
respect to compensation in 2004, provides for bonuses based upon year-to-year
increases in earnings per share, cash flow per share, proved reserves and
probable reserves and an assessment of the individual's contribution over the
course of the year.
During 2003, the Compensation Committee adopted a new charter, which
additionally provided for the Compensation Committee to evaluate and make
recommendations as to the compensation of the Company's directors.
REVIEW AND EVALUATION OF COMPENSATION PRACTICES
The Compensation Committee continued to take measures during 2004 to
implement various recommendations received during 2003 from the independent
consulting group, The Delves Group, which the Board had retained to work with
management and the Compensation Committee to examine the compensation practices
for its top executive team and directors and to make recommendations with regard
to alignment with competitive and best practices. The Delves Group is a
consulting firm with expertise in measuring performance, setting goals, and
designing effective pay and incentive systems. Additional review and studies
were conducted during 2004 by the Compensation Committee based in part on
recommendations from The Delves Group, as well as at the request of the Chairman
of the Board.
DIRECTOR COMPENSATION
Under the Company's Principles for Corporate Governance, management of
the Company is directed to report annually to the Compensation Committee on the
amount and composition of the compensation of the Company's directors in
relation to the compensation of directors of peer companies. Data relating to
director compensation of twelve of the Company's peers was collected, analyzed,
and presented to the Compensation Committee by management. The peer group was
chosen based on companies of a similar size and business of the Company with
available data. Consideration was given to the fact that the data was based on
information provided during 2004 and that it was widely acknowledged that many
companies were in the process of increasing director compensation based on the
increased duties and responsibilities placed on directors by the Sarbanes Oxley
Act of 2002.
19
Management also presented, after consulting with outside legal counsel, the form
of equity consideration currently being provided to directors. Based on
management's review and analysis of this data, management recommended that Board
cash compensation be increased and that the Board authorize management to take
the necessary steps to implement a new stock plan for providing restricted stock
on an annual basis to directors.
Because of the continuing increased demands on the time required from
its directors due to the heightened corporate governance environment, the
Compensation Committee recommended and the Board of Directors approved an
increase in the cash compensation portion of director compensation, effective
October 1, 2004, from an aggregate amount of $39,750 for a full year of service
on the Board and service on one or more committees of the Board to $45,000. Also
because of the even greater increase in the duties and responsibilities of the
Board's committee chairmen, it was determined that the Chairman of the Audit
Committee would receive an additional $12,000 per year based on a minimum of
four meetings per year, and that the Chairmen of the Corporate Governance and
Compensation Committees would receive an additional $6,000, based on a minimum
of two meetings per year. Previously, the Chairmen received no additional
compensation.
EXECUTIVE 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) the range paid by comparably sized oil and
gas exploration and production companies, based in part upon annual surveys
provided by outside consultants on independent oil and gas companies with
similar market capitalizations (the "Compensation Surveys"), and (iv) an
evaluation of the Company's performance during the preceding year, including the
Company's earnings, reserves growth, and cash flow. Annual individual
performance evaluations includes each executive's review of his own performance
throughout the year and a performance review and compensation recommendation by
the Company's Chief Executive Officer, both of which are then reviewed and acted
upon by the Compensation Committee.
The Compensation Surveys include companies in common with the Dow Jones
Oil U.S. Exploration & Production Index (the "Index"), used in the "Five Year
Shareholder Return Comparison" set forth herein. The Compensation Surveys are
used by the Company for purposes of executive compensation comparison because
they constitute a broader group than the group of companies included in the
Index, and because the Compensation Surveys are comprised of companies somewhat
closer in size and line of business to the Company than some of the companies
included in the Index. The Index was selected in accordance with SEC rules
solely for shareholder return comparison purposes because it is a published
industry index.
ANNUAL INCENTIVE BONUSES for a particular year are awarded after the
end of that year, based on both individual and Company performances during that
year. Under the 2001 Plan, bonuses are awarded in the form of Performance Bonus
Awards, which may be in cash, in shares of the Company's common stock or a
combination thereof, as determined by the Compensation Committee. The amount of
an executive officer's Performance Bonus Award for a particular year is
determined utilizing the following factors or metrics, including both financial
metrics and operating metrics: (i) the increase in earnings per share during
that year; (ii) the increase in the cash flow per share during that year ((i)
and (ii) representing measures of short-term performance); (iii) the increase in
the volume of the Company's proved oil and gas reserves during that year; and
(iv) the increase in the volume of the Company's probable oil and gas reserves
during that year ((iii) and (iv) representing measures of long-term
performance).
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These four factors are each given a one-sixth weighting. The remaining factor
with a one-third weighting is subjective and measures individual performance of
that executive officer in contributing to either the Company's overall
achievement of its strategic objectives, or the achievement of the objectives of
the executive's department or group within the Company. At the beginning of each
year, target levels are assigned and individual officers are assigned a
percentage for each metric for which his performance will be weighted. Success
in these five areas is then measured against maximum target bonus ranges as
percentages of base salaries.
In determining Performance Bonus Awards for 2004 (determined and paid
in cash during February 2005), the Committee considered all of the above factors
in determining bonuses awarded. The Compensation Committee also took into
account individual performance ratings reflecting individual contribution and
contribution to group effectiveness.
LONG-TERM STOCK-BASED INCENTIVES are provided through grants of
incentive stock options and restricted stock, usually on an annual basis, to
executives and others under the 2001 Plan. Restricted Stock was granted under
the 2001 Plan as long-term incentive compensation for executives for the first
time in November of 2004. This component is intended to retain and motivate
executives to improve long-term shareholder value. Stock options are granted at
the prevailing market price. Grants have always vested in equal amounts over
five years. The shares of restricted stock granted in November 2004 also will
vest in equal amounts over five years.
The Compensation Committee determines a total number of options and/or
shares of restricted stock to be granted in any year based on the total number
of outstanding unexercised options, so as to avoid excessive dilution of the
shareholders' value in the Company through option exercises or restricted stock
grants. Out of the number so determined, options and/or shares of restricted
stock are granted to executive officers in varying amounts, roughly related to
their levels of executive responsibility. Outstanding performance by an
executive officer may be recognized through a larger than normal option grant or
restricted stock award. Additionally, the metrics described under "Executive
Compensation Criteria and Performance Measurement--Annual Incentive Bonuses"
above are also used to determine an executive officer's long-term stock based
incentive award.
The Company believes that its compensation policy described above
provides an excellent link between the value created for shareholders and the
compensation paid to executive officers.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Base Salary. The Chief Executive Officer's base salary in 2004 was
$495,000, which included his service as President of the Company until November
2004. This was compared to his base salary of $450,000 and $400,000 in 2003 and
2002, respectively, for his service as President and Chief Executive Officer of
the Company. The Compensation Committee's determination was based on the factors
described above. See "Executive Compensation Criteria and Performance
Measurement--Base Salary."
Bonus. In determining the Chief Executive Officer's bonus, the
Compensation Committee has typically given more weight to factors based upon the
Company's performance than to its evaluation of his general contribution, since
the Compensation Committee does not observe and supervise such performance on a
day-to-day basis. Terry E. Swift received a bonus of $355,100 in cash for his
service during 2004 as Chief Executive Officer and through November 2004 as
President of the Company. This was compared to his cash bonuses of $180,000 and
$120,000 in 2003 and 2002, respectively, for his service in the same positions.
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Stock Awards. In 2004, the Company granted the Chief Executive Officer
18,000 shares of restricted stock and options to purchase 35,528 shares of the
Company's common stock, on the basis explained above under "Executive
Compensation Criteria and Performance Measurement--Long-Term Stock-Based
Incentives."
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) generally limits deductions for compensation paid to any
employee in excess of $1.0 million per year. The Compensation Committee
determined to address this issue for 2005 in the proposed Swift Energy Company
2005 Stock Compensation Plan. Because amounts of compensation paid to certain
executive officers may be subject to the limitations on deductibility by the
Company under Section 162(m) of the Internal Revenue Code, the proposed 2005
plan provides that any such executive officer may not receive a grant in any
given calendar year of awards covering or measured by more than 100,000 shares
of the Company's common stock. Further, acceleration of vesting or
exercisability of awards held by those executive officers can only be related to
their death, disability, termination of employment upon retirement, or a change
of control, as defined in the proposed plan.
COMPENSATION COMMITTEE
Clyde W. Smith, Jr., Chairman
Raymond E. Galvin
Greg Matiuk
Henry C. Montgomery
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PROPOSAL 2--APPROVAL OF SWIFT ENERGY COMPANY
2005 STOCK COMPENSATION PLAN
On March 23, 2005, the Board, subject to approval by the shareholders
of the Company, adopted the 2005 Stock Compensation Plan (the "2005 Plan") to
replace the 2001 Stock Compensation Plan (the "2001 Plan"). Between 625,000 and
900,000 shares of the Company's common stock will be reserved for issuance of
awards under the 2005 Plan, depending upon whether stock options or "full-value"
awards are granted, respectively, as discussed below. The 900,000 shares
represent approximately 3.2% of the Company's issued and outstanding shares as
of the record date, March 21, 2005 of 28,094,517. The purpose of the 2005 Plan
is to promote and advance the interests of the Company by aiding the Company in
hiring, retaining and rewarding qualified employees, attracting and retaining
outstanding directors, and increasing managerial and key employees' interest in
the growth and financial success of the Company by offering stock options and
stock and cash bonus incentives based on performance.
As of December 31, 2004, there were 2,998,668 options outstanding under
the 2001 Plan and its predecessor, the 1990 Stock Compensation Plan, with
exercise prices ranging from $7.00 to $41.00 per share, with a weighted average
exercise price of $18.51. At that same date, the closing price of our common
stock on the NYSE was $28.94 per share. Of the total outstanding stock options
as of December 31, 2004, there were 1,542,571 options exercisable. At that same
date, there were 24,807 shares remaining and reserved for future issuance of
awards under the 2001 Plan. Upon approval of the 2005 Plan by the Company's
shareholders, the 2001 Plan will no longer be used for new grants of awards
(other than for reload options granted upon a Participant tendering to the
Company an equal number of shares in order to exercise an already outstanding
option), and then issued stock options will remain outstanding until exercised
or they expire by their terms, which may be up to ten years from the date of
grant.
SUMMARY OF THE 2005 PLAN
The 2005 Plan authorizes the Company to grant various awards ("Awards")
to directors, officers, and other key employees of the Company or its
subsidiaries, including incentive stock options ("ISOs"), nonqualified stock
options ("NSOs"), "reload" options ("Reload Options"), stock appreciation rights
("SARs"), restricted stock grants ("Restricted Stock Grants"), restricted unit
grants ("Restricted Unit Grants") and performance bonus awards ("Performance
Bonus Awards").
ADMINISTRATION. The Compensation Committee of the Board (the
"Compensation Committee") will have sole authority to construe and interpret the
2005 Plan, to select participants ("Participants"), to grant Awards and to
establish the terms and conditions of Awards. The Compensation Committee is
allowed to give the Company's chief executive officer specifically limited
written authority to grant Awards to new employees.
ELIGIBILITY. Any employee of the Company or its subsidiaries, including
any officer or employee-director, any consultant, and the non-employee directors
of the Company (currently approximately 310 individuals), are eligible to
receive various Awards under the 2005 Plan.
SHARES SUBJECT TO 2005 PLAN. The maximum number of shares of common
stock in respect of which Awards may be granted under the 2005 Plan (the "Plan
Maximum") is 900,000 shares in a "fungible pool" of shares, plus shares covered
by previous awards granted prior to May 10, 2005 under any prior long-term
incentive plan which awards are forfeited or cancelled. That pool of shares will
be reduced by one share for every stock option, which is granted, and will be
reduced, by 1.44 shares for every "full-value" Award, which is granted.
"Full-value" Awards consist of Restricted Stock Grants, Restricted Unit Grants
and SARs. Thus, if only stock options are granted, options covering up to
900,000 shares may be granted; if only "full-value" Awards are granted, Awards
covering only 625,000 shares may be granted.
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If both stock options and "full-value" awards are granted under the 2005 Plan,
the number of shares which can be covered by Awards will fall somewhere between
625,000 shares and 900,000 shares, depending upon the ultimate mix of stock
options and "full-value" Awards which are granted under the 2005 Plan. ISOs
cannot be granted under the 2005 Plan covering more than 875,000 shares ("ISO
Limit"). The reserved share numbers (and the share numbers constituting the Plan
Maximum, ISO Limit and Named Executive Officer limits) are subject to
appropriate adjustment in the event of a reorganization, stock split, stock
dividend, merger, consolidation or other change in capitalization of the Company
affecting its common stock.
TERM. The 2005 Plan will terminate on May 10, 2015 unless sooner
terminated by the Board, except with respect to Awards then outstanding.
AMENDMENT. The Board may amend the 2005 Plan at any time, except that
(i) the Board must obtain shareholder approval to make any amendment that would
increase the total number of shares reserved for issuance (except for
adjustments necessary to reflect changes in capitalization), materially modify
eligibility requirements or materially increase the benefits accruing to
Participants, result in the repricing of Awards already issued, materially
extend the term of the plan, increase the maximum number of shares covered by
Awards to Named Executive Officers, and (2) certain amendments are altogether
prohibited (e.g., any amendment that would impair a Participant's vested
rights).
INCENTIVE STOCK OPTIONS. Options designated as ISOs within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
together with the regulations promulgated thereunder, may be granted under the
2005 Plan up to the ISO Limit. To the extent that any portion of an ISO that
first becomes exercisable by any Participant during any calendar year exceeds
the $100,000 aggregate fair market value limitation of Section 422(d) of the
Code, or such other limit as may be imposed by the Code, such excess portion
shall be treated as a validly granted NSO. ISOs shall be exercisable for such
periods as the Compensation Committee shall determine, but in no event for a
period exceeding ten years or, for Participants who own more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
("10% Shareholders"), five years.
NON QUALIFIED STOCK OPTIONS. NSOs may be granted for a stated number of
shares of common stock and will be exercisable for such period or periods, as
the Compensation Committee shall determine. Holders of NSOs may elect to have
the Company withhold from shares to be delivered upon exercise of an NSO, shares
whose fair market value satisfies withholding taxes attributable to the exercise
of the NSOs, and if shares are delivered for this purpose, the Committee, in its
sole discretion, may grant replacement NSOs in the form of Reload Options (see
below) in the amount of some or all of the shares delivered to satisfy the
withholding tax obligation.
EXERCISABILITY. ISOs and NSOs will become exercisable in installments as
determined in its sole discretion by the Compensation Committee, although it is
generally anticipated in keeping with past Company practice that such options
may be exercised as to 20% installments on each of the first five anniversary
dates of the date of grant or such other period as may be designated by the
Compensation Committee. The exercise price for options may be paid in cash or by
delivery of shares of common stock already owned by the Participant for more
than six months and having a market value equal to the exercise price.
OPTION EXERCISE PRICES. Stock options may only be issued at an exercise
price that is at least one hundred percent (100%) of the fair market value of
the common stock on the date of grant, and ISOs granted to 10% Shareholders must
have an exercise price of at least one hundred ten percent (110%) of the fair
market value of the common stock on the date of grant. The 2005 Plan provides
that the option exercise price may be paid in cash, by check, by cash
equivalent, by a broker assisted exercise, with shares of common stock (but
24
only where acceptable to the Compensation Committee and only with shares owned
for six months), or a combination of the above.
TERMINATION OF AWARDS. Unless otherwise provided in an Award or the
2005 Plan, Awards will terminate (i) three months following the holder's
termination of employment by the Company except for death, disability,
retirement or upon a Change of Control, (ii) on the first-year anniversary of a
Participant's death or disability or (iv) on the tenth-year anniversary of the
date of grant.
RELOAD OPTIONS. Under the 2005 Plan, unless otherwise provided in a
Participant's stock option agreement, whenever a Participant holding an ISO or
NSO exercises an option (the "Original Option") and pays part or all of the
exercise price by tendering shares of common stock (a "stock-for-stock
exercise"), the Participant will automatically receive a "Reload Option" which
provides that Participant an option to purchase the exact number of shares
tendered in the stock-for-stock exercise at an exercise price equal to the fair
market value of such shares at the date of grant of such Reload Options, which
date of grant will be the date of the notice of exercise of the Original Option.
Reload Options are not exercisable after the later of the expiration of the
option term of the Original Option or two years following the date of grant of
the Reload Option. Except as described above, the terms and conditions of Reload
Options will be identical to the terms and conditions of the related Original
Options. Reload Options are designed to encourage stock-for-stock exercises by
Participants, without necessarily diluting a Participant's percentage ownership
of the Company's common stock or the Company's outstanding common stock.
LIMITATION ON OPTIONS AND AWARDS TO NAMED EXECUTIVE OFFICERS. Because
amounts of compensation paid to Named Executive Officers are subject to the
limitations on deductibility by the Company under Section 162(m) of the Code, to
insure deductibility the Plan provides that such Named Executive Officers may
not receive a grant in any given calendar year of Awards covering or measured by
more than 100,000 shares of the Company's common stock. Further, acceleration of
vesting or exercisability of Awards held by Named Executive Officers can only be
related to their death, disability, termination of employment upon retirement,
or a Change of Control.
TRANSFERABILITY. The Compensation Committee may allow transfer of
Awards to family members, trusts and partnerships for their benefit or owned by
them, or to charitable trusts. Awards held by transferees are subject to the
same restrictions and forfeiture upon termination of employment applicable to
the original holder of the Award. ISOs are not transferable except by will or
the laws of descent and distribution.
CHANGE OF CONTROL. In the event of a change of control of the Company
as described in the 2005 Plan, all stock options and SARs outstanding shall
become fully vested and fully exercisable (other than certain options granted
within a year prior to the change of control), and all restrictions and
conditions of Restricted Stock Grants and Restricted Unit Grants outstanding
shall be deemed to be satisfied, unless the Board expressly provides otherwise.
A "change of control" occurs upon: (i) any person or group becoming the
beneficial owner of shares with 40% or more of the votes that may be cast for
the election of directors; (ii) persons who were directors of the Company
immediately prior to a cash tender offer, exchange offer, merger, sale of assets
or contested election cease to constitute a majority of the Board; (iii) the
shareholders of the Company approve a transaction in which the Company ceases to
be an independent publicly owned corporation or approve the sale of all or
substantially all the assets of the Company; or (iv) a tender offer or exchange
offer is made for shares of the Company's common stock (other than by the
Company) and shares are acquired thereunder.
In connection with a Change in Control, the Compensation Committee may
also cash out Awards at the higher of the highest price for shares of the
Company's common stock in reported NYSE trading or the highest price paid in any
bona fide transaction related to a Change in Control. The 2005 Plan also
contains provisions, which create a mechanism for a conditional exercise in
certain change of control transactions pending a cancellation of vested
unexercised options.
25
STOCK APPRECIATION RIGHTS. Under the 2005 Plan, the Compensation
Committee may grant an Award of SARs that entitle a Participant to receive the
excess (if any) of the fair market value of a share of common stock on the date
of exercise of the SAR, over the fair market value of a share of common stock on
the date of grant of the SAR ("Spread"). The Spread may only be paid in shares
having a fair market value on the date of payment equal to the Spread. The
Compensation Committee may establish procedures for exercise and restrictions
regarding the dates on which SARs may be exercised, and subject to the other
provisions of the 2005 Plan, a SAR shall not be exercisable before the first
anniversary date of the date of grant.
STOCK GRANTS, RESTRICTED STOCK GRANTS AND RESTRICTED UNIT GRANTS. The
Compensation Committee may in its discretion grant shares of common stock to a
Participant with or without restrictions, vesting requirements or other
conditions. A Restricted Stock Grant is an Award of shares of the Company's
common stock that does not vest until certain conditions established by the
Compensation Committee have been satisfied. Restricted Awards must provide for
vesting of such Awards over at least a three-year period, unless specifically
determined otherwise by the Compensation Committee, or a one-year period if the
Restricted Award is performance based ("Restriction Period"). A Restricted Unit
Grant is an Award of "units" subject to similar vesting conditions, each unit
having a value equal either to a share of common stock or the amount by which a
share of common stock appreciates in value between the date of grant and the
date at which any restrictions lapse. During the Restriction Period, a
Participant may vote and receive dividends on the shares of common stock awarded
pursuant to a Restricted Stock Grant, but may not sell, assign, transfer, pledge
or otherwise encumber such shares. During the restricted period, the
certificates representing Restricted Awards will bear a restrictive legend and
will be held by the Company, or will be recorded on the books of the Company's
stock transfer agent, but not issued to the Participant until the restrictions
on the shares covered by the Restricted Award lapse. When the Restriction Period
expires or the restriction with respect to installments of shares lapses, the
Participant is entitled to receive (i) with respect to a Restricted Stock Grant,
shares of common stock free and clear of restrictions on sale, assignment,
transfer, pledge or other encumbrances, or (ii) with respect to a Restricted
Unit Grant, payment for the value of the units.
RESTRICTED AWARDS FOR NON-EMPLOYEE DIRECTORS. Under the Plan,
non-employee directors cannot receive any Award except the Restricted Awards
described in this paragraph. Under the Plan, commencing May 11, 2005 and in
subsequent years on the date following the annual meeting election of directors,
each non-employee director will receive a Restricted Award consisting of that
number of shares of Company common stock determined by dividing $100,000 by the
closing price of a share of common stock on the date of the Award, payable only
in installments as described below. The restrictions on non-employee directors'
Restricted Awards shall lapse on the date of the next annual meeting of
shareholders following the grant date, and each Restricted Award shall vest
ratably in three equal installments, one-third on the date of each of the three
successive annual meetings of shareholders following the grant date; provided
that following the date of such initial lapse of restrictions, if a non-employee
director's service as a director terminates and the non-employee director is in
good standing as determined in the sole discretion of our board of directors,
then the Restricted Award of that non-employee director shall vest immediately.
Prior to the date of such initial lapse of restrictions, no vesting shall occur
upon a non-employee director's termination of service (other than by death or
disability, in which cases all Restricted Awards shall vest immediately).
PERFORMANCE BONUS AWARDS. The Compensation Committee in its sole
discretion may award Participants a Performance Bonus Award in the form of cash
or shares of common stock, or a combination thereof, on such terms and
conditions as the Compensation Committee designates. Performance Bonus Awards
will be based upon evaluation of a variety of performance factors. Performance
factors are to be determined prior to the period of performance, which shall be
not less than one year, and may include (i) increases in earnings, earnings per
share, EBITDA, revenues, cash flow, return on equity or total shareholder
return, (ii) year-end volumes of proved oil and gas reserves and/or year-end
probable reserves, (iii) yearly oil and gas production, (iv) share price
performance, (v) relative technical, commercial and leadership attributes, or
(vi) similar performance factors.
26
If a Performance Bonus Award is paid in whole or in part in shares of common
stock, the number of shares shall be determined based upon the NYSE closing
price-based "Fair Market Value" of such shares. Performance Bonus Awards are
subject to terms and conditions set by the Committee in its sole discretion.
FEDERAL INCOME TAX CONSIDERATIONS
Under current U.S. federal tax law, the following are the U.S. federal
income tax consequences generally arising with respect to Awards made under the
2005 Plan.
EXERCISE OF INCENTIVE STOCK OPTION AND SUBSEQUENT SALE OF SHARES
A Participant who is granted an ISO does not realize taxable income at
the time of the grant or at the time of exercise. If the Participant makes no
disposition of shares acquired pursuant to the exercise of an ISO before the
later of two years from the date of grant or one year from such date of exercise
("statutory holding period"), any gain (or loss) realized on such disposition
will be recognized as a long-term capital gain (or loss). Under such
circumstances, the Company will not be entitled to any deduction for federal
income tax purposes.
However, if the Participant disposes of the shares during the statutory
holding period, that will be considered a disqualifying disposition. Provided
the amount realized in the disqualifying disposition exceeds the exercise price,
the ordinary income a Participant shall recognize in the year of a disqualifying
disposition will be the lesser of (i) the excess of the amount realized over the
exercise price, or (ii) the excess of the fair market value of the shares at the
time of the exercise over the exercise price; and the Company generally will be
entitled to a deduction for the amount of ordinary income recognized by such
Participant. The ordinary income recognized by the Participant is not considered
wages and the Company is not required to withhold, or pay employment taxes, on
such ordinary income. Finally, in addition to the ordinary income described
above, the Participant shall recognize capital gain on the disqualifying
disposition in the amount, if any, by which the amount realized in the
disqualifying disposition exceeds the fair market value of the shares at the
time of the exercise, which shall be long-term or short-term capital gain
depending on the Participant's post-exercise holding period for such shares.
To the extent a Participant pays all or part of the exercise price of
an ISO by tendering previously acquired common stock owned by such Participant,
the tax consequences described above generally will apply to such exchange.
However, if a Participant exercises an ISO by tendering shares previously
acquired on the exercise of an ISO, a disqualifying disposition will occur if
the applicable holding period requirements described above have not been
satisfied with respect to the surrendered stock. The consequence of such a
disqualifying disposition is that the Participant may recognize ordinary income
at that time.
Notwithstanding the favorable tax treatment of ISOs for regular tax
purposes, as described above, for alternative minimum tax purposes, an ISO is
generally treated in the same manner as an NSO. Accordingly, a Participant must
generally include as alternative minimum taxable income for the year in which an
ISO is exercised, the excess of the fair market value of the shares acquired on
the date of exercise over the exercise price of such shares. However, to the
extent a Participant disposes of such shares in the same calendar year as the
exercise, only an amount equal to the Participant's ordinary income for regular
tax purposes with respect to such disqualifying disposition will be recognized
for the Participant's calculation of alternative minimum taxable income in such
calendar year.
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EXERCISE OF NON-QUALIFIED STOCK OPTION AND SUBSEQUENT SALE OF SHARES
A Participant who is granted an NSO does not realize taxable income at
the time of the grant, but does recognize ordinary income at the time of
exercise in an amount equal to the excess of the fair market value of the shares
acquired on the date of exercise over the exercise price of such shares; and the
Company generally will be entitled to a deduction for the amount of ordinary
income recognized by such participant. The ordinary income recognized by the
Participant is considered supplemental wages and the Company is required to
withhold, and the Company and the Participant are required to pay, applicable
employment taxes on such ordinary income.
Upon the subsequent disposition of shares acquired through the exercise
of an NSO, any gain (or loss) realized on such disposition will be recognized as
a long-term, or short-term, capital gain (or loss) depending on the
Participant's post-exercise holding period for such shares.
To the extent a Participant pays all or part of the exercise price of
an NSO by tendering shares of common stock previously owned by the Participant,
the tax consequences described above generally would apply. However, the number
of shares received upon exercise of such option equal to the number of shares
surrendered in payment of the exercise price will have the same basis and tax
holding period as the shares surrendered. The additional shares received upon
such exercise will have a tax basis equal to the amount of ordinary income
recognized on such exercise and a holding period, which commences on the date of
the exercise.
LAPSE OF RESTRICTIONS ON RESTRICTED STOCK AND SUBSEQUENT SALE OF SHARES
When the restrictions on a restricted Award lapse, the Participant will
recognize ordinary income in an amount equal to the excess of the fair market
value of the shares at such time over the amount, if any, paid for such shares;
and the Company generally will be entitled to a deduction for the amount of
ordinary income recognized by such Participant. The ordinary income recognized
by the Participant is considered supplemental wages and the Company is required
to withhold, and the Company and the Participant are required to pay, applicable
employment taxes on such ordinary income. Upon the subsequent disposition of the
formerly restricted shares, any gain (or loss) realized on such disposition will
be recognized as a long-term, or short-term, capital gain (or loss) depending on
the Participant's holding period for such shares after their restrictions lapse.
Under Section 83(b) of the Code, a Participant who receives an award of
restricted stock may elect to recognize ordinary income for the taxable year in
which the restricted stock was received equal to the excess of the fair market
value of the restricted stock on the date of the grant, determined without
regard to the restrictions, over the amount (if any) paid for the restricted
stock. Any gain (or loss) recognized upon a subsequent disposition of the shares
will be capital gain (or loss) and will be long term or short term depending on
the post-grant holding period of such shares. If, after making the election, a
Participant forfeits any shares of restricted stock, or sells restricted stock
at a price below its fair market value on the date of grant, such Participant is
only entitled to a tax deduction with respect to the consideration (if any) paid
for the restricted stock, not the amount elected to be included as income at the
time of grant.
STOCK APPRECIATION RIGHTS, AND PERFORMANCE AWARDS
A Participant who is granted a SAR does not realize taxable income at
the time of the grant, but does recognize ordinary income at the time of
exercise of the SAR in an amount equal to the excess of the fair market value of
the shares (on the date of exercise) with respect to which the SAR is exercised,
over the grant price of such shares; and the Company generally will be entitled
to a deduction for the amount of ordinary income recognized by the such
Participant.
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A Named Executive Officer who has been awarded a Performance Bonus
Award does not realize taxable income at the time of the grant, but does
recognize ordinary income at the time the Award is paid equal to the amount of
cash (if any) paid and the fair market value of shares (if any) delivered; and
the Company generally will be entitled to a deduction for the amount of ordinary
income recognized by the such Participant.
The ordinary income recognized by a Participant in connection with a
SAR or Performance Bonus Award is considered supplemental wages and the Company
is required to withhold, and the Company and the Participant are required to
pay, applicable employment taxes on such ordinary income.
To the extent, if any, that shares are delivered to a Participant in
satisfaction of either the exercise of a SAR, or the payment of a Performance
Bonus Award, upon the subsequent disposition of such shares any gain (or loss)
realized will be recognized as a long-term, or short-term, capital gain (or
loss) depending on the participant's post-delivery holding period for such
shares.
BOARD RECOMMENDATION
The affirmative vote of a majority of the shares represented at the
annual meeting in person or by proxy is needed to approve the 2005 Plan. Unless
otherwise directed by a proxy marked to the contrary, it is the intention of
management to vote the proxies for the approval of the 2005 Plan. The Board
believes that such approval is essential to enable the Company to continue to
attract and retain qualified employees and directors. The Board supports
management's belief that the approval of the proposed 2005 Plan will contribute
to the continuation of the Company's history of employee longevity, as the
Company's stock compensation plans have done in the past.
================================================================================
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" APPROVAL OF THE SWIFT ENERGY COMPANY 2005 STOCK COMPENSATION PLAN.
================================================================================
29
AUDIT COMMITTEE REPORT
During fiscal 2004, Messrs. Montgomery, Evans, Smith, and Ms. Cannon
served on the Audit Committee. Each of Messrs. Montgomery, Evans, Smith, and Ms.
Cannon met the independence criteria prescribed by applicable law and the rules
of the SEC for audit committee membership and is an "independent director" as
defined in Section 303A of the NYSE's Listing Standards. Each of Messrs.
Montgomery and Smith and Ms. Cannon meets NYSE's financial knowledge
requirements and each was designated by the Board of Directors as an "audit
committee financial expert" under SEC rules. Due to the Board's policy related
to the age of directors, Mr. Evans is not standing for re-election to the Board
of Directors of the Company and his term will expire at the 2005 Annual Meeting.
The Audit Committee operates pursuant to a written charter, which
complies with the applicable provisions of the Sarbanes-Oxley Act of 2002 and
related rules of the SEC and NYSE. The charter is available on the Company's web
site at www.swiftenergy.com. As more fully described in its charter, the Audit
Committee is responsible for overseeing the Company's accounting and financial
reporting processes, including the quarterly review and the annual audit of the
Company's consolidated financial statements and internal control over financial
reporting by Ernst & Young LLP, the Company's independent registered public
accounting firm. As part of fulfilling its responsibilities, the Committee spent
a significant amount of time during 2004 conferring with management and Ernst
and Young LLP, the Company's independent registered accountants, and overseeing
management's year long compliance efforts with Section 404 of the Sarbanes-Oxley
Act of 2002.
The Audit Committee also reviewed and discussed the audited
consolidated financial statements for fiscal 2004 with management and Ernst &
Young and discussed those matters required by Statement on Auditing Standards
No. 61 (Communication with Audit Committees), as amended, with Ernst & Young.
The Audit Committee received the written disclosures and the letter required by
Independent Standards Board Statement No. 1 (Independence Discussions with Audit
Committee) from Ernst & Young and discussed that firm's independence with
representatives of the firm.
Based upon the Audit Committee's review of the audited consolidated
financial statements and its discussions with management, the internal audit
function and Ernst & Young, the Audit Committee recommended that the Board of
Directors include the Company's consolidated financial statements for the fiscal
year ended December 31, 2004, in the Company's Annual Report on Form 10-K filed
with the SEC along with the auditors' report, which report dated March 11, 2005,
expressed an unqualified opinion thereon.
No portion of this Audit Committee Report shall be deemed to be
incorporated by reference into any filing under the Securities Act or the
Exchange Act, through any general statement incorporating by reference in its
entirety the Proxy Statement in which this report appears, except to the extent
that the Company specifically incorporates this report or a portion of it by
reference. In addition, this report shall not be deemed to be filed under either
the Securities Act or the Exchange Act.
AUDIT COMMITTEE
Henry C. Montgomery, Chairman
Deanna L. Cannon
G. Robert Evans
Clyde W. Smith, Jr.
30
INDEPENDENT AUDITORS, SERVICES AND FEES
Ernst & Young LLP, certified public accountants, began serving as the
Company's independent auditor in early 2002. A representative from Ernst & Young
LLP will be present at this year's Annual Meeting. Such representative will have
the opportunity to make a statement if he or she desires to do so and is
expected to be available to respond to appropriate questions.
The following table presents fees and expenses billed by Ernst & Young
LLP for its audit of the Company's annual consolidated financial statements and
for its review of the financial statements included in the Company's Quarterly
Reports on Form 10-Q for 2004 and 2003, and for its audit of internal control
over financial reporting for 2004 and for other services provided by Ernst &
Young LLP. The increase in the amount of audit fees from 2003 to 2004 relates
primarily to work associated with the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002. The amounts provided for 2004 are estimates.
2004 2003
---------- --------
Audit Fees $2,296,000 $483,700
Audit-Related Fees 26,300 19,500
Tax Fees 257,900 181,500
All Other Fees -0- -0-
---------- --------
TOTALS $2,580,200 $684,700
========== ========
The audit-related assistance and services generally consisted of
limited scope audits performed in connection with the Company's Employee Savings
Plan and Employee Stock Option Plan for both years. The tax services provided
generally consisted of compliance, tax advice, and tax planning services
generally consisted of U.S., federal, state, local, and international tax
planning, compliance and advice, and expatriate and executive tax services.
PRE-APPROVAL POLICIES AND PROCEDURES
The charter of the Audit Committee provides that the Audit Committee
shall approve, in its sole discretion, any professional services to be provided
by the Company's independent auditors, including audit services and significant
non-audit services (significant being defined for these purposes as non-audit
services for which fees in the aggregate equal 5% or more of the base annual
audit fee paid by the Company to its independent auditors), before such services
are rendered, and consider the possible effect of the performance of such latter
services on the independence of the auditors. The Committee may delegate
pre-approval authority to a member of the Committee. The decisions of any
Committee member to whom pre-approval authority is delegated must be presented
to the full Committee at its next scheduled meeting. All of the services
described above for 2004 and 2003 were pre-approved by the Audit Committee
before Ernst & Young LLP was engaged to render the services.
31
PROPOSAL 3 - RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR
The Audit Committee of the Board of Directors has appointed Ernst &
Young LLP as the independent registered public accounting firm for the Company
to audit its consolidated financial statements and internal control over
financial reporting for 2005. Ernst & Young has served as the Company's
independent auditor since early 2002.
Stockholder approval is not required for the appointment of Ernst &
Young LLP, since the Audit Committee of the Board of Directors has the
responsibility for selecting the Company's independent auditors. However, the
appointment is being submitted for ratification at the Annual Meeting as a
matter of good corporate practice. No determination has been made as to what
action the Board of Directors would take if stockholders do not approve the
appointment, but the Audit Committee may reconsider whether or not to retain the
firm. Even if the appointment is ratified, the Audit Committee, in its
discretion, may direct the appointment of a different independent registered
public accounting firm at any time during the year if the Audit Committee
determines that such a change would be in the Company's and its stockholders'
best interests.
================================================================================
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITOR.
================================================================================
32
PERFORMANCE GRAPH
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 U.S. Exploration & Production Index, with "Cumulative total return"
equaling (i) the change in share price during the measurement period plus
cumulative dividends (of which, in accordance with its dividend policy, the
Company has paid none) for the measurement period (assuming dividend
reinvestment), divided by (ii) the share price at the beginning of the
measurement period.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG SWIFT ENEREGY COMPANY, THE S&P 500 INDEX
AND THE DOW JONES US EXPLORATION & PRODUCTION INDEX
[PERFORMANCE GRAPH]
*100 invested on 12/31/99 in stock or index-including reinvestment of dividends.
Fiscal year ending December 31.
Copyright(C) 2002, Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. All rights reserved. www.researchdatagroup.com/S&P.htm
CUMULATIVE TOTAL RETURN
---------------------------------------------------------
12/99 12/00 12/01 12/02 12/03 12/04
SWIFT ENERGY COMPANY 100.00 327.17 175.65 84.09 146.52 251.65
S & P 500 100.00 90.89 80.09 62.39 80.29 89.02
DOW JONES US EXPLORATION & PRODUCTION 100.00 159.71 146.63 149.81 196.34 278.55
33
SHAREHOLDER PROPOSALS
Pursuant to various rules promulgated by the SEC, a shareholder that
seeks to include a proposal in the Company's proxy materials for the annual
meeting of the shareholders of the Company to be held in 2006 must timely submit
such proposal in accordance with SEC Rule 14a-8 to the Company, addressed to
Bruce H. Vincent, Secretary, 16825 Northchase Drive, Houston, Texas 77060 no
later than November 28, 2005. Further, a shareholder may not submit a matter for
consideration at the 2006 Annual Meeting, unless the shareholder shall have
timely complied with the requirements in the Company's Bylaws. 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 2006
annual meeting unless duly given by no later than March 11, 2006, and no earlier
than February 9, 2006.
The Corporate Governance Committee will consider shareholder
recommendations of individuals for membership on the Board, upon written request
by a shareholder in accordance with the procedures for submitting shareholder
proposals. The recommendation must state the name, age, business address, and
residence address of the recommended nominee and any other information required
to be disclosed in the Company's proxy statement by rules promulgated by the
SEC. Additionally, the recommendation must include the name and address of the
shareholder and the number of shares of the Company's securities that the
shareholder beneficially owns and the period for which the shareholder has held
such shares.
With respect to business to be brought before the 2005 Annual Meeting,
the Company has not received any notices, proposals, or nominees from
shareholders that the Company is required to include in this proxy statement.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Typically the Chairman of the Corporate Governance Committee presides
at executive sessions of the independent directors of the Board of Directors.
Any communications that shareholders may wish to send to the Board of Directors
may be directly sent to the Chairman of the Corporate Governance Committee at
the following address:
Chairman of the Corporate Governance Committee
Swift Energy Company
c/o CCI
P. O. Box 561915
Charlotte, NC 28256
Historically, the Company's annual meeting of its Board of Directors
was held to coincide with the annual meeting of its shareholders and a majority
of the directors would attend the annual meeting of shareholders. However, with
the increased responsibilities and time requirements in connection with the
Board meeting, the Board's annual meeting is now held the week before the
shareholders' annual meeting. Therefore, the Company does not have a policy with
regard to Board members' attendance at its annual meetings of shareholders.
Although many of the members of the Board will attend the 2005 Annual Meeting,
it is not expected that a majority will be in attendance. Those in attendance
will be available to address shareholder questions.
34
FORWARD LOOKING STATEMENTS
The statements contained in this proxy statement that are not
historical are "forward-looking statements," as that term is defined in Section
21E of the Exchange Act, that involve a number of risks and uncertainties.
Forward-looking statements use forward-looking terms such as "believe,"
"expect," "may," "intend," "will," "project," "budget," "should" or "anticipate"
or other similar words. These statements discuss "forward-looking" information
such as future net revenues from production and estimates of oil and gas
reserves. These forward-looking statements are based on assumptions that the
Company believes are reasonable, but they are open to a wide range of
uncertainties and business risks, including the following:
o fluctuations of the prices received or demand for crude oil and
natural gas over time;
o geopolitical conditions or hostilities;
o uncertainty of reserves estimates;
o operating hazards;
o unexpected substantial variances in capital requirements;
o currency rate fluctuations with regard to the New Zealand dollar;
o environmental matters; and
o general economic conditions.
Other factors that could cause actual results to differ materially from
those anticipated are discussed in the Company's Annual Report on Form 10-K for
the year ended December 31, 2004. The Company will not update these
forward-looking statements unless the securities laws require the Company to do
so.
ANNUAL REPORT ON FORM 10-K
UPON WRITTEN REQUEST, THE COMPANY WILL PROVIDE ANY SHAREHOLDER OF THE
COMPANY AT NO CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR 2004
AS FILED WITH THE SEC, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES, BUT
WITHOUT EXHIBITS. DIRECT REQUESTS SHOULD BE MADE BY MAIL TO SWIFT ENERGY
COMPANY, ATTENTION: SCOTT ESPENSHADE, DIRECTOR OF CORPORATE DEVELOPMENT AND
INVESTOR RELATIONS, 16825 NORTHCHASE DR., SUITE 400, HOUSTON, TEXAS 77060; BY
TELEPHONE AT (713) 874-2700 OR (800) 777-2412; OR BY EMAIL TO
INFO@SWIFTENERGY.COM.
GENERAL
The information contained in this proxy statement in the sections
entitled "Proposal-Election of Directors," "Proposal 2-Approval of Swift Energy
Company 2005 Stock Compensation Plan," "Proposal 3-Ratification of Selector of
Independent Auditor," "Compensation Committee Report," "Comparative Total
Returns," and "Audit Committee Report" shall not be deemed incorporated by
reference by any general statement incorporating by reference any information
contained in this proxy statement into any filing under the Securities Act, or
the Exchange Act, except to the extent that the Company specifically
incorporates by reference the information contained in such sections, and shall
not otherwise be deemed filed under the Securities Act or the Exchange Act.
By Order of the Board of Directors
/s/ Bruce H. Vincent
Bruce H. Vincent
Secretary
Houston, Texas
March 24, 2005
35
APPENDIX A
SWIFT ENERGY COMPANY
2005 STOCK COMPENSATION PLAN
1. PURPOSE.
This 2005 Stock Compensation Plan (the "PLAN") is intended as an
incentive to encourage stock ownership by certain officers, employees and
directors of SWIFT ENERGY COMPANY (the "COMPANY"), or of its Subsidiaries (as
defined below) so that they may acquire or increase their proprietary interest
in the success of the Company and Subsidiaries, and to encourage them to remain
in the employ of the Company or of the Subsidiaries or to continue to serve as
directors of the Company. The Plan is designed to meet this intent by offering
performance-based stock and cash incentives and other equity based incentive
awards, thereby providing a proprietary interest in pursuing the long-term
growth, profitability and financial success of the Company.
2. DEFINITIONS.
For purposes of this Plan, the following terms shall have the meanings
set forth below:
(a) "AWARD" or "AWARDS" means an award or grant made to a Participant
under Sections 6 through 9, inclusive, of the Plan.
(b) "BOARD" means the Board of Directors of the Company.
(c) "BROKER ASSISTED EXERCISE" means a special sale and remittance
procedure pursuant to which the Participant who holds a Stock Option shall
concurrently provide irrevocable written instructions to (a) a
Committee-designated brokerage firm ("BROKER") to effect the immediate sale of
the Common Stock covered by a Stock Option and remit to the Company, out of the
sale proceeds available on the settlement date, sufficient funds to cover the
aggregate price of the Stock Options, plus all applicable Federal, state and
local income and employment taxes required to be withheld by the Company, and
(b) the Company to deliver the certificates for the Common Stock directly to
such brokerage firm in order to complete the sale.
(d) "CODE" means the Internal Revenue Code of 1986, as amended,
together with the regulations promulgated thereunder.
(e) "COMMITTEE" means the Compensation Committee of the Board, or any
committee of the Board performing similar functions, constituted as provided in
Section 3 of the Plan.
(f) "COMMON STOCK" means the common stock of the Company or any
security of the Company issued in substitution, exchange or lieu thereof.
(g) "COMPANY" means Swift Energy Company, a Texas corporation, or any
successor corporation.
(h) "DATE OF GRANT" means the date on which the Committee takes formal
action to grant an Award, provided that it is followed, as soon as reasonably
practicable, by written notice to the Participant receiving the Award.
(i) "DISABILITY" means (i) in the case of a Participant whose
employment with the Company or a Subsidiary is subject to the terms of an
employment or consulting agreement that includes a definition of "disability,"
the meaning set forth in such employment or consulting agreement during the
period that such employment or consulting agreement remains in effect; and (ii)
in all other cases, a total and permanent disability as defined in the Company's
long-term disability plan, or if the Company has no long-term disability plan in
effect at the time of a Participant's disability, "disability" shall mean a
Participant's present incapacity resulting from an injury or illness (either
mental or physical) which, in the reasonable opinion of the Committee based on
such medical evidence as it deems necessary, will result in death or can be
expected to continue for a period of at least twelve (12) months and will
prevent the Participant from performing the normal services required of the
Participant by the Company; provided, however, that such disability did not
result, in whole or in part: (i) from chronic alcoholism; (ii) from addiction to
narcotics; (iii) from a felonious undertaking; or (iv) from an intentional
self-inflicted wound.
A-1
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended and in effect from time to time, or any successor statute.
(k) "FAIR MARKET VALUE" means on any given date (i) the closing price
of the Common Stock on any established national exchange or exchanges on such
date as reported in any newspaper of general circulation, provided, further,
that if the actual transaction involving the Common Stock occurs at a time when
the New York Stock Exchange is closed for regular trading, then it shall be the
most recent closing price, or (ii) if the Common Stock is not listed on an
established stock exchange, the mean between the closing bid and low asked
quotations of the Common Stock in the New York over-the-counter market as
reported by the National Association of Securities Dealers, Inc. for such
trading date.
(l) "IMMEDIATE FAMILY MEMBER" means the spouse, parents, siblings,
children, grandchildren and in-laws of a Participant.
(m) "INCENTIVE STOCK OPTION" means any Stock Option that is intended to
be and is specifically designated as an "incentive stock option" within the
meaning of Section 422 of the Code.
(n) "NONQUALIFIED STOCK OPTION" means any Stock Option granted pursuant
to the provisions of Section 6 of the Plan that is not an Incentive Stock
Option.
(o) "PARTICIPANT" means an employee of the Company or a Subsidiary, or
an individual who is performing services for those entities (including a
consultant to the Company, but only insofar as to Awards other than Incentive
Stock Options are concerned), who from time to time shall be designated by the
Committee and in all such cases who is also granted an Award under the Plan, and
only as to Restricted Awards, directors of the Company.
(p) "PERFORMANCE BONUS AWARD" means an Award of cash and/or shares of
Common Stock granted pursuant to the provisions of Section 9 of the Plan.
(q) "PLAN" means this Swift Energy Company 2005 Stock Compensation Plan
as set forth herein and as it may be hereafter amended.
(r) "RESTRICTED AWARD" means an Award granted pursuant to the
provisions of Section 8 of the Plan.
(s) "RESTRICTED STOCK GRANT" means an Award of shares of Common Stock
granted pursuant to the provisions of Section 8 of the Plan.
(t) "RESTRICTED UNIT GRANT" means an Award of units representing shares
of Common Stock granted pursuant to the provisions of Section 8 of the Plan.
(u) "STOCK APPRECIATION RIGHT" means an Award to benefit from the
appreciation of Common Stock granted pursuant to the provisions of Section 7 of
the Plan.
(v) "STOCK OPTION" means an Award to purchase shares of Common Stock
granted pursuant to the provisions of Section 6 of the Plan.
(w) "SUBSIDIARY" OR "SUBSIDIARIES" means any corporation or entity in
which the Company directly or indirectly owns stock or interests possessing
fifty percent (50%) or more of the total combined voting power of all classes of
such corporation's stock or interests.
(x) "TEN PERCENT SHAREHOLDER" means a person who owns (or is considered
to own after taking into account the attribution of ownership rules of Section
424(d) of the Code) more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any of its Subsidiaries.
A-2
3. ADMINISTRATION.
(a) The Plan shall be administered by the Committee, as appointed from
time to time by the Board. The Board may from time to time remove members from,
or add members to, the Committee. The Committee shall be comprised solely of two
or more members of the Board who are (i) "NON-EMPLOYEE DIRECTORS" as defined in
Rule 16b-3 promulgated by the Securities and Exchange Commission ("SEC") under
the Exchange Act as it may be amended from time to time, or any successor rule
and (ii) "outside directors" under Section 162(m) of the Code.
(b) A majority of the members of the Committee shall constitute a
quorum for the transaction of business. Action approved in writing by a majority
of the members of the Committee then serving shall be as effective as if the
action had been taken by unanimous vote at a meeting duly called and held.
(c) The Committee is authorized to construe and interpret the Plan, to
promulgate, amend, and rescind rules and procedures relating to the
implementation of the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. Any determination, decision, or
action of the Committee in connection with the construction, interpretation,
administration, or application of the Plan shall be binding upon all
Participants and any person validly claiming under or through any Participant
and any Award under this Plan will be made only if the Committee decides in its
sole and absolute discretion that the Participant or any persons validly
claiming through any Participant is entitled to such award. In the event of a
disagreement as to the interpretation of the Plan or any agreements issued
hereunder as to any right or obligation arising from or related to the Plan, the
decision of the Committee shall be final and binding.
(d) The Committee may designate persons other than members of the
Committee to carry out its responsibilities under such conditions and
limitations as it may prescribe, except that the Committee may not delegate its
authority to grant Awards to persons subject to Section 16 of the Exchange Act.
The Committee is specifically authorized to give authority to the Company's
chief executive officer within specified written limits to grant Awards to new
employees of the Company in connection with their hiring, which written limits
may be changed from time to time by the Committee in its sole discretion.
(e) The Committee is expressly authorized to make modifications to the
Plan as necessary to effectuate the intent of the Plan as a result of any
changes in the tax, accounting, or securities laws treatment of Participants and
the Plan, subject to those restrictions that are set forth in Section 14 (b) and
(c) below.
(f) The Company shall effect the granting of Awards under the Plan, in
accordance with the determinations made by the Committee, by execution of
instruments in writing in such form as approved by the Committee.
(g) No member of the Committee shall be liable for any action taken or
omitted to be taken by such member or by any other member of the Committee with
respect to the Plan, and to the extent of liabilities not otherwise insured
under a policy purchased by the Company, the Company does hereby indemnify and
agree to defend and save harmless any member of the Committee with respect to
any liabilities asserted or incurred in connection with the exercise and
performance of their powers and duties hereunder, unless such liabilities are
judicially determined to have arisen out of such person's gross negligence,
fraud or bad faith. Such indemnification shall include attorney's fees and all
other costs and expenses reasonably incurred in defense of any action arising
from such act of commission or omission. Nothing herein shall be deemed to limit
the Company's ability to insure itself with respect to its obligations
hereunder.
4. ELIGIBILITY.
Persons eligible for Awards under the Plan shall consist of employees
(including officers, whether or not they are directors) of the Company or its
Subsidiaries, or individuals performing services for these entities, who from
time to time shall be designated by the Committee (including consultants to the
Company, but only insofar as Awards other than Incentive Stock Options are
concerned). Directors of the Company are eligible to receive only Restricted
Awards under the Plan. If a person who has been a Participant under this Plan
ceases to be an employee but remains or becomes a director of the Company, then
Section 10(c)(ii) shall apply to Awards held by that Participant. No member of
the Committee shall be eligible to receive an Award other than a Restricted
Award.
A-3
5. DURATION OF AND COMMON STOCK SUBJECT TO PLAN.
(a) TERM. No Awards will be granted after May 10, 2015, but the Plan
shall remain in effect with respect to Awards then outstanding, including Reload
Options on Awards then outstanding.
(b) SHARES OF COMMON STOCK SUBJECT TO PLAN. The maximum aggregate
number of shares of Common Stock in respect of which Awards may be granted under
the Plan (the "PLAN MAXIMUM") shall be 900,000, subject to adjustment as
provided in Sections 5 or 12 below, plus any shares of Common Stock that are
subject to awards granted prior to the effective date of this Plan under any
prior long-term incentive plans of the Company ("PRIOR PLAN") that later (i)
cease to be subject to such awards for any reason other than such awards having
been exercised or (ii) result in the forfeiture of the shares of Common Stock
back to the Company. Subject to the provisions of Section 12 below, the maximum
aggregate number of shares of Common Stock in respect of which Incentive Stock
Options may be granted under the Plan shall not exceed 875,000. The aggregate
number of shares of Common Stock available for issuance under the Plan will be
reduced by 1.44 shares of Common Stock for each share of Common Stock delivered
in settlement of all Awards other than Stock Options (for which the number of
shares of Common Stock available for issuance under the Plan will be reduced by
one share of Common Stock for each share of Common Stock delivered in settlement
of a Stock Option). Common Stock issued under the Plan may be either authorized
and unissued shares or treasury shares. The following terms and conditions shall
apply to Common Stock subject to the Plan:
(i) In no event shall more than the Plan Maximum be
cumulatively available for Awards under the Plan;
(ii) If any Awards are forfeited, terminated, exchanged for
other Awards, settled in cash in lieu of stock, or expire unexercised,
or become unexercisable, the undelivered shares of Common Stock which
were previously subject to the Awards shall again be available for
Awards under the Plan to the extent of such forfeiture, termination,
expiration, unexercisability, cash settlement or exchange.
6. STOCK OPTIONS.
Stock Options granted under the Plan may be in the form of Incentive
Stock Options or Non-Qualified Stock Options (collectively, the "STOCK
OPTIONS"). Stock Options shall be subject to the following terms and conditions,
and each Stock Option shall contain such additional terms and conditions, not
inconsistent with the express provisions of the Plan, as the Committee shall
deem desirable:
(a) GRANT. Stock Options shall be granted separately. In no event will
Stock Options or Awards be issued in tandem whereby the exercise of one affects
the right to exercise the other. Incentive Stock Options may only be granted to
persons who are employees.
(b) STOCK OPTION PRICE. The exercise price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant, provided that, in no event shall the exercise price of a Stock
Option be less than one hundred percent (100%) of the Fair Market Value of the
Common Stock on the date of the grant of the Stock Option. In the case of a Ten
Percent Shareholder, the exercise price of an Incentive Stock Option shall be
not less than one hundred ten percent (110%) of the Fair Market Value of the
Common Stock on the date of the grant.
(c) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee. The term of all Stock Options shall not exceed ten (10) years after
the date the Stock Option is granted, and the term of any Incentive Stock
Options granted to Ten Percent Shareholders shall not exceed five (5) years
after the date of the grant.
(d) EXERCISABILITY.
(i) Incentive Stock Options and Nonqualified Stock Options
shall be exercisable in installments as determined by the Compensation
Committee in its sole discretion, and shall be subject to such other
terms and conditions as the Committee shall determine at the date of
grant, provided that if not otherwise determined by the Committee,
Incentive Stock Options and Nonqualified Stock Options may be
A-4
exercised as to twenty percent (20%) of the shares covered thereby
beginning on the first anniversary date of the date of grant
(hereinafter, "ANNIVERSARY DATE"), and thereafter an additional twenty
percent (20%) of shares subject to such stock options may be
exercisable beginning on the Anniversary Date in each of the following
four years, except as otherwise provided in Sections 10 and 13; and
(ii) Reload Options shall become exercisable in accordance
with Section 6(i)(iii) hereof.
(e) METHOD OF EXERCISE. Subject to applicable exercise restrictions set
forth in Section 6(d) above, a Stock Option may be exercised, in whole or in
part, by giving written notice of exercise to the Company specifying the number
of shares to be purchased and shall be deemed to be exercised when payment in
full of the purchase price has been received by the Company. The purchase price
may be paid by any of the following methods, subject to the restrictions set
forth in Section 6(f) hereof:
(i) in cash, by certified or cashier's check, by money order,
by personal check (if approved by the Committee) or through a Broker
Assisted Exercise, in an amount equal to the aggregate purchase price
of the shares of Common Stock to which such exercise relates; or
(ii) if acceptable to the Committee, by delivery of shares of
Common Stock already owned by the Participant and held by the
Participant for a minimum of six months, which shares, including any
cash tendered therewith, have an aggregate Fair Market Value equal to
the aggregate purchase price of the shares of Common Stock to which
such exercise relates.
(f) RESTRICTIONS ON METHOD AND TIMING OF EXERCISE. Notwithstanding the
foregoing provisions, the Committee, in granting Stock Options pursuant to the
Plan, may limit the timing or methods by which a Stock Option may be exercised
by any person or waive all or any portion of such limits on timing or methods,
and, in processing any purported exercise of a Stock Option granted pursuant to
the Plan, may refuse to recognize the timing or methods of exercise selected by
the Participant if, in the opinion of counsel to the Company, there is a
substantial risk that such exercise could result in the violation of any then
applicable rules or regulations, including federal or state securities laws.
(g) TAX WITHHOLDING. Holders of Nonqualified Stock Options, subject to
the discretion of the Committee, may be entitled to elect at or prior to the
time the exercise notice is delivered to the Company, to have the Company
withhold from the shares of Common Stock to be delivered upon exercise of the
Nonqualified Stock Option the number of shares of Common Stock having a Fair
Market Value which does not exceed the minimum tax withholding obligation of the
Company with respect to the exercise in question. If withholding is made in
shares of Common Stock pursuant to the method set forth above, the Committee, in
its discretion, may grant "Reload Options" (as defined and on the terms
specified in Section 6(h) below) for the number of shares so withheld.
Notwithstanding the foregoing provisions, a holder of a Nonqualified Stock
Option may not elect to satisfy his or her withholding tax obligation in respect
of any exercise as contemplated above if, in the opinion of counsel to the
Company, there is substantial risk that such election could result in a
violation of any then applicable rules or regulations, including federal or
state securities law, or such withholding would have an adverse tax or
accounting effect on the Company.
(h) GRANT OF RELOAD OPTIONS. Unless otherwise provided in a
Participant's Stock Option Agreement, whenever the Participant holding any
Incentive Stock Option or Nonqualified Stock Option (the "ORIGINAL OPTION")
outstanding under this Plan (including any "Reload Options" granted under the
provisions of this Section 6(h)) exercises the Original Option and makes payment
of a portion or all of the option price by tendering shares of the Common Stock
previously held by him or her pursuant to Section 6(e)(ii) hereof, then the
Participant shall automatically receive a reload option (the "RELOAD OPTIONS")
for that number of additional shares of Common Stock which is equal to the
number of shares tendered by the Participant in payment of the option price for
the Original Option being exercised. All such Reload Options granted hereunder
shall be on the following terms and conditions:
(i) The Reload Option price per share shall be an amount equal
to the current Fair Market Value per share of the Common Stock on the
date of grant, which shall be the date of the Company's receipt of the
exercise notice for the Original Option;
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(ii) The option exercise period shall expire, and the Reload
Option shall no longer be exercisable, on the expiration of the option
period of the Original Option or two (2) years from the date of the
grant of the Reload Option, whichever is later;
(iii) Any Reload Option granted under this Section 6(h) shall
vest and first become exercisable one (1) year following the date of
exercise of the Original Option; and
(iv) All other terms of Reload Options granted hereunder not
specified above in this Section 6(h) shall be identical to the terms
and conditions of the Original Option, the exercise of which gives rise
to the grant of the Reload Option.
(i) SPECIAL RULE FOR INCENTIVE STOCK OPTIONS. With respect to Incentive
Stock Options granted under the Plan, the aggregate Fair Market Value of the
Common Stock with respect to which Incentive Stock Options are exercisable for
the first time by a Participant during any calendar year under all stock option
plans of the Company or its Subsidiaries shall not exceed one hundred thousand
dollars ($100,000). The Fair Market Value of any Common Stock shall be
determined as of the time the option with respect to such stock is granted or
such other time as may be required by Section 422(d) of the Code, as such
section of the Code may be amended from time to time.
(j) INCENTIVE STOCK OPTIONS. Notwithstanding anything in the Plan to
the contrary, no term of this Plan relating to Incentive Stock Options shall be
interpreted, amended, or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify the Plan under Section 422
of the Code. To the extent permitted under Section 422 of the Code or applicable
regulations thereunder or any applicable Internal Revenue Service
pronouncements:
(i) to the extent that any portion of any Incentive Stock
Option that first becomes exercisable during any calendar year exceeds
the $100,000 limitation (as set forth in Section 6(i) above) and
contained in Section 422(d) of the Code, such excess portion shall be
treated as a Nonqualified Stock Option; and
(ii) if the vesting period or exercisability of an Incentive
Stock Option is accelerated, any portion of such Option that exceeds
the $100,000 limitation set forth in Section 6(i) above shall be
treated as a Nonqualified Stock Option.
Even if the shares of Common Stock which are issued upon exercise of
any Incentive Stock Option are sold or exchanged within one year following the
exercise of that Incentive Stock Option such that the sale constitutes a
disqualifying disposition for Incentive Stock Option treatment under the Code,
no provision of this Plan shall be construed as prohibiting such a sale.
(k) LIMIT ON AWARDS TO NAMED EXECUTIVE OFFICERS. Notwithstanding any
provision in this Plan to the contrary, no person whose compensation may be
subject to the limitations on deductibility under Section 162(m) of the Code (a
"NAMED EXECUTIVE OFFICER") shall be eligible for a grant during a single
calendar year of Awards with respect to or measured by, more than 100,000 shares
of Common Stock. The limitation under this Section 6(k) shall be construed so as
to comply with the requirements of Section 162(m) of the Code.
7. STOCK APPRECIATION RIGHTS.
The grant of Stock Appreciation Rights under the Plan shall be subject
to the following terms and conditions, and shall contain such additional terms
and conditions, not inconsistent with the express terms of the Plan, as the
Committee shall deem desirable:
(a) STOCK APPRECIATION RIGHTS. A Stock Appreciation Right is an Award
entitling a Participant to receive an amount equal to (or if the Committee shall
determine at the time of grant, less than) the excess of the Fair Market Value
of a share of Common Stock on the date of exercise over the Fair Market Value of
a share of Common Stock on the date of grant of the Stock Appreciation Right,
multiplied by the number of shares of Common Stock with respect to which the
Stock Appreciation Right shall have been exercised.
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(b) GRANT. Subject to the other provisions of this Plan, a Stock
Appreciation Right shall be granted separately. In no event will Stock
Appreciation Rights and other Awards be issued in tandem whereby the exercise of
one such Award affects the right to exercise the other.
(c) EXERCISE. A Stock Appreciation Right may be exercised by a
Participant in accordance with procedures established by the Committee, provided
that subject to the other provisions of this Plan, a Stock Appreciation Right
shall not be exercisable prior to the first Anniversary Date of the date of
grant, unless and to the extent, in the opinion of counsel, it would not subject
such Participant to a substantial risk of liability under Section 16 of the
Exchange Act, in which case the Committee, in its discretion, may provide that a
Stock Appreciation Right shall be automatically exercised on one or more
specified dates or upon occurrence of one or more specified events, or that a
Stock Appreciation Right may be exercised during only limited time periods.
(d) FORM OF PAYMENT. Payment to a Participant upon exercise of a Stock
Appreciation Right may be made only in shares of Common Stock.
8. STOCK GRANTS AND RESTRICTED AWARDS
Restricted Awards granted under the Plan may be in the form of either
Restricted Stock Grants or Restricted Unit Grants. Restricted Awards shall be
subject to the following terms and conditions, and may contain such additional
terms and conditions, not inconsistent with the express provisions of the Plan,
as the Committee shall deem desirable.
(a) RESTRICTED STOCK GRANTS. A Restricted Stock Grant is an Award of
shares of Common Stock made to a Participant subject to such terms and
conditions, if any, as the Committee deems appropriate, as set forth in Section
8(e) below. Further, as a condition to the grant of Restricted Stock to any
Participant who, at the date of grant has neither been a director of the Company
nor been employed by the Company, nor performed services for the Company, the
Committee shall require such Participant to pay at least an amount equal to the
par value of the shares of Common Stock subject to the Restricted Stock Grant
within thirty (30) days of the date of the grant, and failure to pay such amount
shall result in an automatic termination of the Restricted Stock Grant.
(b) RESTRICTED UNIT GRANTS. A Restricted Unit Grant is an Award of
units granted to a Participant subject to such terms and conditions as the
Committee deems appropriate in its discretion, including, without limitation,
the requirement that such Participant forfeit such units upon termination of
employment for specified reasons within a specified period of time or upon
termination of service as a director, and restrictions on the sale, assignment,
transfer or other disposition of the units. Subject to the discretion of the
Committee at the time a Restricted Unit Grant is awarded to a Participant, a
unit will have a value (i) equivalent to one share of Common Stock, or (ii)
equivalent to the excess of the Fair Market Value of a share of Common Stock on
the date the restriction lapses over the Fair Market Value of a share of Common
Stock on the date of the grant of the Restricted Unit Grant (or over such other
value as the Committee determines at the time of the grant).
(c) GRANT OF AWARDS. Restricted Awards shall be granted separately
under the Plan in such form and on such terms and conditions as the Committee
may from time to time approve (other than those granted to directors), including
grants of shares of Common Stock to a Participant other than a director without
restrictions, vesting requirements and/or conditions. Restricted Awards,
however, may not be granted in tandem with other Awards whereby the exercise of
one such Award affects the right to exercise the other. Subject to the terms of
the Plan, other than Restricted Awards granted to directors, the Committee shall
determine the number of Restricted Awards to be granted to a Participant and the
Committee may impose different terms and conditions on any particular Restricted
Award made to any Participant. Each Participant receiving a Restricted Stock
Grant shall either be issued a stock certificate in respect of the shares of
Common Stock so granted or such shares shall be recorded in the name of the
Participant on the books of Company's stock transfer agent, in either case
registered in the name of the Participant. If issued in certificated form, such
shares shall be accompanied by a stock power duly executed by the Participant.
Such certificates or stock transfer records shall bear an appropriate legend
referring to the terms, conditions and restrictions applicable to the Award. Any
certificates evidencing the shares and/or grants recorded on the books of the
Company's stock transfer agent shall be held in custody by the Company, or not
issued by the Company's stock transfer agent, until the restrictions imposed
thereon shall have lapsed or been removed.
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(d) RESTRICTED AWARDS FOR NON-EMPLOYEE DIRECTORS. Subject to approval
by the Company's shareholders at the 2005 annual meeting of shareholders on May
10, 2005, thereafter on the day following the date directors are elected by
shareholders at each subsequent annual meeting of shareholders (which shall be
the date of grant) beginning May 11, 2005, each individual who is a Non-Employee
Director (as defined in Section 3 of this Plan) shall automatically receive a
Restricted Award of that number of shares of Common Stock (rounded up to the
nearest multiple of 10 shares of Common Stock) determined by dividing $100,000
by the Fair Market Value of the Common Stock on the date of grant of the
Restricted Award (each $100,000 Restricted Award to a Non-Employee Director
being herein referred to as an "ANNUAL DIRECTOR AWARD"). If a Non-Employee
Director first becomes a Non-Employee Director other than by being elected by
shareholders at an annual meeting (which shall be the date of grant), that
director shall automatically receive that portion of an Annual Director Award
equal to the portion of a full twelve month period between the date of his or
her election as a director and the next annual meeting of shareholders.
The service restrictions contained in each Annual Director Award of
Common Stock shall lapse on the date of the next annual meeting of shareholders
and each Annual Director Award of Common Stock shall vest ratably in three equal
installments, one-third on the date of each of the three annual meeting of
shareholders following the grant date, provided that if prior to vesting of any
portion of an Annual Director Award of Common Stock, a Non-Employee Director's
service as a director terminates with the director in good standing as
determined in the sole discretion of the Board, then all Annual Director Awards
of Common Stock of that Non-Employee Director shall vest immediately and any
service restrictions thereon shall lapse. Further, in the event of death or
Disability of a Non-Employee Director, all service restrictions on any Annual
Director Awards of Common Stock shall lapse and all Annual Director Awards shall
vest except as may otherwise be provided in this Plan.
(e) RESTRICTION PERIOD. Restricted Awards shall provide for vesting of
such Awards over a three-year period, unless specifically determined otherwise
by the Committee (or a one-year period if the Restricted Award is performance
based) commencing on the date of the Award and ending on such later date or
dates as the Committee may designate at the time of the Award ("RESTRICTION
PERIOD"). During the Restriction Period, a Participant may not sell, assign,
transfer, pledge, encumber, or otherwise dispose of shares of Common Stock
received under a Restricted Stock Grant. Upon expiration of the applicable
Restriction Period (or lapse of restrictions during the Restriction Period where
the restrictions lapse in installments), the Participant shall be entitled to
receive his or her Restricted Award or the applicable portion thereof, as the
case may be, along with a return of the stock power executed by the Participant
once the restriction has fully lapsed. Upon termination of a Participant's
employment with the Company or any Subsidiary or termination of service as a
director for any reason during the Restriction Period, all or a portion of the
shares or units, as applicable, that are still subject to a restriction may vest
or be forfeited, in accordance with the terms and conditions established by the
Committee at or after grant.
(f) PAYMENT OF AWARDS. A Participant shall be entitled to receive
payment for a Restricted Unit Grant (or portion thereof) in an amount equal to
the aggregate Fair Market Value of the units covered by the Award upon the
expiration of the applicable Restriction Period. Payment in settlement of a
Restricted Unit Grant shall be made as soon as practicable following the
conclusion of the respective Restriction Period (i) in cash, by certified or
cashier's check, by money order or by personal check (if approved by the
Committee), (ii) in shares of Common Stock equal to the number of units granted
under the Restricted Unit Grant with respect to which such payment is made or
(iii) in any combination of the above, as the Committee shall determine. The
Committee may elect to make this determination either at the time the Award is
granted, or with respect to payments contemplated in clause (i) and (ii) above,
at the time the Award is settled.
(g) RIGHTS AS A SHAREHOLDER. A Participant shall have, with respect to
the shares of Common Stock received under a Restricted Stock Grant, all of the
rights of a shareholder of the Company, including the right to vote the shares,
and the right to receive any cash dividends. Stock dividends issued with respect
to the shares covered by a Restricted Stock Grant shall be treated as additional
shares under the Restricted Stock Grant and shall be subject to the same
restrictions and other terms and conditions that apply to shares under the
Restricted Stock Grant with respect to which the dividends are issued.
9. PERFORMANCE BONUS AWARDS.
Performance Bonus Awards granted under this Plan may be in the form of
cash or shares of Common Stock, or a combination thereof. If a Performance Bonus
Award is a combination of cash and shares of Common Stock, the portion of the
Performance Bonus Award comprised of cash and the portion comprised of shares of
Common Stock will be determined by the Committee based upon the Committee's
judgment as to the best interests of the Company as a whole, taking into account
both long-term and short-term strategic goals.
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Performance factors are to be determined prior to the period of performance,
which shall be not less than one year, and may include (i) increases in
earnings, earnings per share, EBITDA, revenues, cash flow, return on equity or
total shareholder return, (ii) year-end volumes of proved oil and gas reserves
and/or year-end probable reserves, (iii) yearly oil and gas production, (iv)
share price performance, (v) relative technical, commercial and leadership
attributes, or (vi) similar performance factors. If a Performance Bonus Award is
paid in whole or in part in shares of Common Stock, the number of shares shall
be determined based upon the Fair Market Value of such shares, and such shares
may be awarded in lieu of receipt of some or all of such Award in cash.
Performance Bonus Awards shall be subject to such terms and conditions as the
Committee shall determine in its sole discretion.
10. TERMINATION OF EMPLOYMENT OR SERVICE.
The terms and conditions under which an Award may be exercised after a
Participant's termination of employment or service as a director shall be
determined by the Committee, except as otherwise provided herein. The conditions
under which such post-termination exercises shall be permitted with respect to
Incentive Stock Options shall be determined in accordance with the provisions of
Section 422 of the Code and as otherwise provided in Section 6 above, provided
that the Committee, in its sole discretion, may change, by any agreement
approved by the Committee, the post-termination rights of a Participant,
including accelerating the dates upon which all or a portion of any outstanding
unexercised Stock Option or other Award held by a Participant may become vested
or be exercised following such termination of employment or service as a
director; provided that any such changes which affect Awards granted to a
Non-Employee Director or a Named Executive Officer (as defined in Sections 6(k))
shall be confined to changes related to the Non-Employee Director's or Named
Executive Officer's death, Disability, retirement as a director, termination of
employment upon retirement, or related to a Change of Control.
(a) TERMINATION BY DEATH. Subject to Section 6(j), if a Participant's
employment by the Company or any Subsidiary or service as a director terminates
by reason of the Participant's death, or if the Participant's death occurs
within three (3) months after the termination of his or her employment or
service as a director, any Award held by such Participant immediately prior to
the date of his or her death may thereafter be exercised, to the extent such
Award otherwise was exercisable by the Participant immediately prior to the date
of his or her death, by the legal representative of the Participant's estate or
by any person who acquired the Award by will or the laws of descent and
distribution, for a period of one year from the date of his or her death or
until the expiration of the stated term of the Award, whichever period is the
shorter; provided, however, that the Committee, in its discretion may
specifically provide, either in any agreement providing for an Award or in any
employment contract or any other agreement approved by the Committee, for the
acceleration of the vesting and/or right of exercise under any Award held by a
Participant immediately prior to the date of his or her death. Subject to the
provision of Section 8(d), after termination of employment or service as a
director by reason of a Participant's death, any right of exercise under an
Award held by that Participant that is not then vested and exercisable, or under
this Section 10(a) becomes vested and exercisable, shall be terminated and
extinguished.
(b) TERMINATION BY REASON OF DISABILITY. Subject to Section 6(j), if a
Participant's employment by the Company or Subsidiary or service as a director
terminates by reason of Disability, any Award held by such Participant
immediately prior to the date of his or her Disability may thereafter be
exercised by the Participant, to the extent such Award otherwise was exercisable
by the Participant immediately prior to the date of his or her Disability for a
period of one year from the date of such termination of employment or service as
a director by reason of Disability, or until the expiration of the stated term
of such Award, whichever period is shorter; provided, however, that if the
Participant dies within such one-year period, any unexercised Award held by such
Participant shall thereafter be exercisable to the extent to which it was
exercisable immediately prior to the date of such death for a period of one year
from the date of his or her death or until the expiration of the stated term of
such Award, whichever period is shorter; and provided further, that the
Committee may, in its discretion specifically provide, either in any agreement
providing for an Award or in any employment contract or any other agreement
approved by the Committee for the acceleration of the vesting and/or right of
exercise under an Award held by a Participant immediately prior to the time of
termination of employment or service as a director by reason of his or her
Disability. Subject to the provisions of Section 8(d), any right of exercise
under an Award held by the Participant that, after termination by reason of
Participant's Disability is not then vested and exercisable, or under this
Section 10(b) becomes vested and exercisable, shall be terminated and
extinguished.
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(c) OTHER TERMINATION. Subject to Section 6(j) and Section 13, if a
Participant's employment by the Company or any Subsidiary is terminated for any
reason other than retirement, death, Disability or a Change of Control, any
Award held by the Participant immediately prior to the date of his or her
termination shall be exercisable, to the extent otherwise then exercisable, for
the lesser period of three (3) months from the date of such termination or the
balance of the term of the Award, and any right of exercise under any Award held
by a Participant immediately prior to the time of his or her termination that is
not vested immediately after such date of termination, shall be terminated and
extinguished; provided, however, that (i) the Committee, in its discretion may
specifically provide that, for Awards held prior to termination, vesting and/or
exercise may be accelerated at or prior to the time of termination, for a period
which may not exceed the original term of such Award, either in any agreement
providing for an Award, or in any employment contract or any other agreement
approved by the Committee; provided that any such acceleration of vesting or
exercise which affects Awards granted to Non-Employee Directors or the Named
Executive Officers (as defined in Section 6(k)) shall be confined to
acceleration related to the Non-Employee Directors' and Named Executive
Officers' death, Disability, retirement as a director or termination of
employment upon retirement, or related to a Change of Control, and (ii) upon
termination of employment upon retirement, if the Participant continues to
serve, or commences serving, as a director of the Company, then in such event
any Awards may continue to be held by the Participant under the original terms
thereof, with such modifications as the Committee may determine in its
discretion, with any Incentive Stock Options held by such Participant to
henceforth be treated as Nonqualified Stock Options.
(d) GENERAL PROVISIONS. Unless otherwise specifically provided herein,
the Committee shall have the following discretion regarding the treatment of
outstanding Stock Options upon termination of employment:
(i) Any Stock Option outstanding at the time of a
Participant's retirement, termination of employment, Disability or
death shall remain exercisable for such period of time thereafter as
shall be determined by the Committee and set forth in the documents
evidencing the grant of any Stock Option or in an employment or other
agreement with such Participant, provided that no Stock Option shall be
exercisable more than ten (10) years from the date of grant of the
Original Option;
(ii) The Committee shall have complete discretion, exercisable
either at the time a Stock Option is granted or any time while the
Stock Option remains outstanding, to extend the period of time for
which the Stock Option is to remain exercisable following a
Participant's termination of employment from the limited exercise
period otherwise in effect for that Stock Option to such greater period
of time as the Committee shall deem appropriate, but in no event to a
date which is more than ten (10) years from the date of grant of the
Original Option; and
(iii) The Committee shall have the complete discretion to
permit a Stock Option to be exercised following a Participant's
retirement, termination of employment, Disability or death not only
with respect to the number of Stock Options which are then fully vested
but also with respect to one or more additional installments as to
which the Participant would have vested had the Participant continued
in the Company's employment.
11. TRANSFERABILITY OF AWARDS.
(a) No Incentive Stock Option under the Plan, and no rights or interest
therein, shall be assignable or transferable by a Participant except by will or
the laws of descent and distribution, after which assignment Section 10(a)
hereof shall apply to exercise of the Incentive Stock Option by the assignee.
During the lifetime of a Participant, Incentive Stock Options are exercisable
only by, and settlements of Incentive Stock Options are to be made to, such
Participant or his or her legal representative.
(b) The Committee may, in its discretion, authorize all or a portion of
any Awards (other than Incentive Stock Options) to be on terms which permit
transfer by the Participant to (i) the Immediate Family Members of the
Participant, (ii) a trust or trusts for the exclusive benefit of such Immediate
Family Members, (iii) a charitable trust or trusts created or controlled by the
Participant, or (iv) a partnership in which such Immediate Family Members are
the only partners, provided that (x) there may be no consideration for any such
transfer, (y) the transfer must be approved by the Committee in a manner
consistent with this Section, and (z) subsequent transfers of transferred Awards
shall be prohibited except to a transferee to whom the Participant could have
transferred the Award pursuant to this Section 11 or by will or the laws of
descent and distribution, after which assignment Section 10(a) hereof shall
apply to exercise of the Award by the assignee.
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Following transfer, any such Awards shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer, provided
however, that the transferee shall be entitled to exercise the Award to the same
extent as the Participant would be so entitled. The events of termination of
employment of Section 10 hereof shall continue to be interpreted by application
with respect to the original Participant, following which events the Awards
shall be exercisable by the transferee only to the extent, and for the periods
specified in Section 10.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
(a) The existence of the Plan and the Awards granted hereunder shall
not affect or restrict in any way the right or power of the Board or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, Common Stock, preferred or prior preference stocks ahead
of or affecting the Company's Common Stock or the rights thereof, the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding.
(b) In the event of any change in capitalization affecting the Common
Stock of the Company, such as a stock dividend, stock split, recapitalization,
merger, consolidation, split-up, combination, exchange of shares, other form of
reorganization, or any other change affecting the outstanding Common Stock as a
class, the Board, in its discretion, may make proportionate adjustments it deems
appropriate to reflect such change with respect to (i) the maximum number of
shares of Common Stock or class of shares reserved for issuance under the Plan,
(ii) the maximum number of shares of Common Stock or class of shares which may
be sold or awarded to any Participant, (iii) the number of shares of Common
Stock or class of shares covered by each outstanding Award, and (iv) the price
per share in respect of the outstanding Awards. Notwithstanding the foregoing,
the Board may only increase the aggregate number of shares of Common Stock for
which Awards may be granted under the Plan solely to reflect the changes, if
any, of the capitalization of the Company or a Subsidiary.
(c) The Committee may also make such adjustments in the number of
shares covered by, and the price or other value of any outstanding Awards in the
event of a spin-off or other distribution (other than normal cash dividends) of
Company assets to shareholders.
13. CHANGE OF CONTROL.
(a) In the event of a Change of Control (as defined in Paragraph (b)
below) of the Company, and except as the Board may expressly provide otherwise
in resolutions adopted prior to the Change of Control or in a Participant's
Award:
(i) All Stock Options or Stock Appreciation Rights then
outstanding shall become fully vested and exercisable as of the date of
the Change of Control; and
(ii) All restrictions and conditions of all Restricted Stock
Grants and Restricted Unit Grants then outstanding shall be deemed
satisfied as of the date of the Change of Control;
provided that unless otherwise expressly permitted in an employment agreement or
other agreement between a Participant and the Company, any Award which has been
outstanding less than one (1) year on the date of the Change of Control shall
not be afforded such treatment.
(b) A "CHANGE OF CONTROL" shall be deemed to have occurred upon the
occurrence of any one (or more) of the following events, other than a
transaction with another person controlled by the Company or its officers or
directors, or a benefit plan or trust established by the Company for its
employees:
(i) Any person, including a group as defined in Section
13(d)(3) of the Exchange Act, becomes the beneficial owner of shares of
the Company with respect to which forty percent (40%) or more of the
total number of votes for the election of the Board may be cast;
A-11
(ii) As a result of, or in connection with, any cash tender
offer, exchange offer, merger or other business combination, sale of
assets or contested election, or combination of the above, persons who
were directors of the Company immediately prior to such event shall
cease to constitute a majority of the Board;
(iii) The stockholders of the Company shall approve an
agreement providing either for a transaction in which the Company will
cease to be an independent publicly owned corporation or for a sale or
other disposition of all or substantially all the assets of the
Company; or
(iv) A tender offer or exchange offer is made for shares of
the Company's Common Stock (other than one made by the Company), and
shares of Common Stock are acquired thereunder ("OFFER").
(c) Notwithstanding any provision of the Plan to the contrary, in the
event of the proposed dissolution or liquidation of the Company, or in the event
of a proposed sale of all or substantially all of the assets of the Company, or
the proposed merger of the Company with or into another corporation
(collectively, the "Transaction"), unless otherwise expressly provided (by
express reference to this Section 13(c)) in the terms of a Stock Option, after
the public announcement of the Transaction, the Committee may, in its sole
discretion, direct the Company to deliver a written notice ("CANCELLATION
NOTICE") to any Participant holding a Stock Option, canceling the unexercised
vested portion (including the portion which becomes vested by reason of
acceleration), if any, of such Stock Option, effective on the date specified in
the Cancellation Notice ("CANCELLATION DATE"). Notwithstanding the foregoing,
the Cancellation Date may not be earlier than the last to occur of (i) the 15th
day following delivery of the Cancellation Notice, and (ii) the 60th day prior
to the proposed date for the consummation of the Transaction ("PROPOSED DATE").
Without limitation, the Cancellation Notice will provide that, unless the
Participant elects in writing to waive, in whole or in part, a Conditional
Exercise, that the exercise of the Stock Option will be a Conditional Exercise.
A "CONDITIONAL EXERCISE" shall mean that in the event the Transaction does not
occur within 180 days of the Proposed Date, the exercising Participant shall be
refunded any amounts paid to exercise such Participant's Stock Option, such
Stock Option will be reissued, and the purported exercise of such Stock Option
shall be null and void ab intitio, provided, that, if the Transaction follows a
Change in Control or would give rise to a Change in Control, no Stock Option
will be so terminated (without the consent of the Participant) prior to the
expiration of 20 days following the later of (i) the date on which the Award
became fully exercisable and (ii) the date on which the Participant received
written notice of the Covered Transaction.
(d) Unless otherwise expressly provided in an Award, in the event of a
Change in Control, in the sole discretion of the Committee, the value of some or
all Awards may be cashed out on the basis of the Change in Control Price (as
defined below), at any time during the 60 day period immediately preceding any
bona fide transaction related to a Change in Control; provided, further, that if
a date prior to such occurrence is selected for a cash out, any subsequent
increase in the Change in Control Price will be paid to each Participant on the
date of such occurrence, or as soon thereafter as reasonably possible. "CHANGE
IN CONTROL PRICE" means the higher of (i) the highest price per share of Common
Stock paid in any transaction reported on the NYSE or such other exchange or
market as is the principal trading market for the Common Stock, or (ii) the
highest price per share paid in any bona fide transaction related to a Change in
Control, at any time during the 60 day period immediately preceding such
occurrence with such occurrence date to be determined by the Committee.
14. AMENDMENT AND TERMINATION.
(a) AMENDMENTS WITHOUT SHAREHOLDER APPROVAL. Except as set forth in
Sections 14(b) and 14(c) below, the Board may, without further approval of the
shareholders, at any time amend, alter, discontinue or terminate this Plan, in
such respects as the Board may deem advisable.
(b) AMENDMENTS REQUIRING SHAREHOLDER APPROVAL. Except as set forth in
Section 14(c) below, subject to changes in law or other legal requirements
(including any change in the provisions of the Code and accompanying regulations
that would permit otherwise), the Board must obtain approval of the shareholders
to make any amendment that would (i) increase the aggregate number of shares of
Common Stock that may be issued under the Plan (except for adjustments pursuant
to Section 12 of the Plan), (ii) materially modify the requirements as to
eligibility for participation in the Plan or materially increase the benefits to
Participant, (iii) be required to be approved by the shareholders under any law,
rule or regulation or any rules for listed companies promulgated by any national
stock exchange on which the Company's Common Stock is traded, (iv) allow the
creation of additional types of Awards under the Plan, (v) result in the
repricing of Awards issued under the Plan by lowering the exercise price of a
previously granted Award, or by cancellation of outstanding Awards with
subsequent replacement, or by regranting Awards with lower exercise prices, (vi)
materially extend the terms of the Plan, or (vii) increase the annual maximum
number of shares of Common Stock covered by Awards to any Participant who is
subject to the provisions of Section 6(k).
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(c) PROHIBITED AMENDMENTS. Notwithstanding Sections 14(a) and 14(b),
under no circumstances may the Board or Committee (i) amend, alter, discontinue
or terminate the requirements set forth in Sections 6(b), 6(c), 6(i) or 6(j)
with respect to Incentive Stock Options unless (a) such modifications are made
to comply with changes in the tax laws, or (b) the Plan is completely
terminated, or (ii) make any amendment, alteration or modification to the Plan
that would impair the vested rights of a Participant under any Award theretofore
granted under this Plan.
15. MISCELLANEOUS MATTERS.
(a) TAX WITHHOLDING. As a condition to the exercise of Nonqualified
Stock Options or the lapse of restrictions or vesting of Restricted Stock, an
employee of the Company is required, and the Company may in its sole discretion
require any other Participant that it deems advisable, to pay the Company the
full amount of any federal, state, or local taxes of any kind required by law to
be withheld (at the minimum required level) with respect to such Awards,
provided that the Company may withhold any such amounts through payroll
deductions and/or the acceptance or retention of shares of Common Stock
otherwise issuable under any such Awards.
(b) NO RIGHT TO EMPLOYMENT OR SERVICE. Neither the adoption of the Plan
nor the granting of any Award shall confer upon any Participant any right to
continue employment with or providing services to or on behalf of the Company or
any Subsidiary, as the case may be, nor shall it interfere in any way with the
right of the Company or a Subsidiary to terminate the employment or service of
any Participant at any time, with or without cause.
(c) SECURITIES LAW RESTRICTIONS. No shares of Common Stock shall be
issued under the Plan unless counsel for the Company shall be satisfied that
such issuance will be in compliance with applicable federal and state securities
laws. Certificates for shares of Common Stock delivered under the Plan may be
subject to such stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Common
Stock is then listed, and any applicable Federal or state securities law. The
Committee may cause a legend or legends to be put on any such certificates to
refer to those restrictions.
(d) AWARD AGREEMENT. Each Participant receiving an Award under the Plan
shall enter into an agreement with the Company in a form specified by the
Committee agreeing to the terms and conditions of the Award and such related
matters as the Committee, in its sole discretion, shall determine.
(e) COSTS OF PLAN. The costs and expenses of administering the Plan
shall be borne by the Company.
(f) GOVERNING LAW. The Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Texas.
(g) EFFECTIVE DATE. This Plan, having been approved by the Committee on
March __, 2005, and by the Board on March __, 2005, and subject to approval by
the Company's shareholders at the 2005 Annual Meeting of Shareholders to be held
May 10, 2005, is effective as of May 11, 2005.
SWIFT ENERGY COMPANY, a Texas corporation
------------------------------------------
Clyde W. Smith, Jr.
Chairman, Compensation Committee
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SWIFT ENERGY COMPANY
THE BOARD OF DIRECTORS SOLICITS THIS PROXY FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 10, 2005
The undersigned hereby constitutes and appoints Terry E. Swift, Bruce
H. Vincent, and Alton D. Heckaman, Jr., or any one of them, with full power of
substitution and revocation of each, the true and lawful attorneys and proxies
of the undersigned at the Annual Meeting of Shareholders (the "Meeting") of
SWIFT ENERGY COMPANY (the "Company") to be held on Tuesday, May 10, 2005, at
4:00 p.m. Houston time, at the Wyndham Greenspoint Hotel, 12400 Greenspoint
Drive, Houston, Texas, or any adjournments or postponements thereof, and to vote
the shares of common stock of the Company standing in the name of the
undersigned on the books of the Company (or which the undersigned may be
entitled to vote) on the record date for the Meeting with all powers the
undersigned would possess if personally present at the Meeting.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
The Board of Directors recommends a vote "FOR" Proposals 1, 2 and 3. This proxy
will be voted in accordance with the specifications made hereon. If NO
specification is made, the shares will be voted "FOR" Proposals 1, 2 and 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
PROPOSAL 1: ELECTION OF DIRECTORS. Class III Nominees:
(Terms to expire 2008)
[ ] FOR ALL NOMINEES Deanna L. Cannon
[ ] WITHOLD AUTHORITY FOR ALL NOMINEES Douglas J. Lanier
[ ] FOR ALL EXCEPT (See instructions below) Bruce H. Vincent
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(s),
STRIKE HIS OR HER NAME(s) FROM THE LISTING ABOVE AND MARK "FOR ALL EXCEPT".
PROPOSAL 2: Approval of Swift Energy Company's 2005 Stock Compensation Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 3: Ratification of Ernst & Young LLP as Swift Energy Company's
Independent Auditors for the fiscal year ending December 31, 2005.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned hereby acknowledges receipt of the Notice of 2005 Annual Meeting
of Shareholders and Proxy Statement and the 2004 Annual Report to Shareholders
furnished herewith.
PLEASE SIGN AND RETURN IN THE ENCLOSED POSTAGE PAID, PRE-ADDRESSED ENVELOPE.
Signature of Shareholder Date
----------------------------- -------------------
Signature of Shareholder Date
----------------------------- -------------------
Note: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such.
If signer is a partnership, please sign in partnership name by
authorized person.