U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission File Number: 0-25386
FX ENERGY, INC.
(Name of registrant issuer in its charter)
Nevada 87-0504461
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3006 Highland Drive, Suite 206, Salt Lake City, Utah 84106
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: Telephone (801) 486-5555
Telecopy (801) 486-5575
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.001
Preferred Stock Purchase Rights
(Title of class)
PART III
- --------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
- --------------------------------------------------------------------------------
Directors and Executive Officers
The following table sets forth the name, age, term of directorship, and
principal business experience of each executive officer and director of FX
Energy who has served in such position since FX Energy's last fiscal year:
-------------------------------------------------------------------------------------------------------------------
Year
------------------
Director Term Business Experience During Past
Name Age Since Expires Five Years and Other Information
-------------------------------------------------------------------------------------------------------------------
David N. Pierce 53 1992 2002 President, Director and Chairman of FX Energy since 1992. For
over three years prior to 1992, Vice-President and Director of
FX Energy's predecessor, Frontier Exploration Company,
co-founded with his brother, Andrew W. Pierce in January 1989.
Executive capacities with privately held oil and gas companies
since 1979. Graduate of Princeton University and Stanford Law
School.
-------------------------------------------------------------------------------------------------------------------
Andrew W. Pierce 52 1992 2000 Vice-President and Director of FX Energy since 1992. For over
three years prior to 1992, President and Director of FX Energy's
predecessor, Frontier Exploration Company, co-founded with his
brother, David N. Pierce, in January 1989, which was acquired by
FX Energy in 1992.
-------------------------------------------------------------------------------------------------------------------
Thomas B. Lovejoy 63 1995 2001 Vice-chairman of the Board of Directors. Engaged in financial
advisory and investment banking activities since 1961. In 1992,
formed Lovejoy Associates, Inc., Greenwich, Connecticut, to
provide financial strategic advice respecting private
placements, mergers and acquisitions. 1989-1992,
Managing Director of natural resource, utility, and mining
groups for Prudential Securities, Inc., New York City. 1980 to
1988, managing director of the energy and natural resources
group of Paine Webber, Inc. Since 1993, Director of Scaltech,
Inc., Houston, Texas, a processor of petroleum refinery oil
waste. B.S. from the Massachusetts Institute of Technology and
M.B.A. from Harvard Business School.
-------------------------------------------------------------------------------------------------------------------
Scott J. Duncan 51 1993 2001 Vice-President Investor Relations, Secretary and Director of FX
Energy. Financial consultant to FX Energy from its inception
through April 1993, when he became FX Energy's Treasurer until
December 1998. Graduate of the University of Utah School of
Business.
-------------------------------------------------------------------------------------------------------------------
Peter L. Raven(1) 61 1996 2002 Retired, President of American Ultramar. From 1957 through
1985, various positions with Ultramar, PLC, London, England, a
fully integrated oil and gas company, and its U.K. and American
held subsidiaries, including Chief Financial Officer of Ultramar
PLC. From 1985 through 1988, Executive Vice-President, and from
1988 through 1992, President of American Ultramar. Graduate of
the Downside School in England, the Institute of Chartered
Accountants in 1962, and the Harvard Business School Advanced
Management Program in 1987.
-------------------------------------------------------------------------------------------------------------------
Jay W. Decker(1) 48 1996 2000 President of Patina Oil & Gas Corporation, an independent oil
company, Denver, Colorado, since March 1998 and Director since
May 1996. From September 1995 through March 1998, Executive
-------------------------------------------------------------------------------------------------------------------
2
-------------------------------------------------------------------------------------------------------------------
Jay W. Decker, continued Vice-President and Director of Hugoton Energy Corporation, an
independent oil company, Denver, Colorado. From 1989 until its
merger into Hugoton, President and Chief Executive Officer of
Consolidated Oil & Gas, Inc., Denver, Colorado. Prior to 1989,
Vice-President of Operations for General Atlantic Energy Company
and in various capacities for Peppermill Oil Company, Wainoco
Oil & Gas, and Shell Oil Company. B.S. degree from the
University of Wyoming.
-------------------------------------------------------------------------------------------------------------------
Jerzy B. Maciolek 49 1996 2000 Vice-President of International Exploration and Director of FX
Energy. Employed by FX Energy since September 1995.
Instrumental in FX Energy's exploration efforts in Poland.
Member of the Advisory Board of the Polish Oil and Gas Company.
Prior to becoming a Company employee, a private consultant for
over five years, including consulting on hydrocarbon potential
of Poland and Kazakhstan, translating and interpreting
geological and geophysical information for several integrated
hydrocarbon potential reports on Poland and Kazakhstan and
developing applied integrated geophysical interpretations over
gold mines in Nevada, California, and Mexico. Since 1992,
provided consulting services to FX Energy regarding exploration
projects in the western United States and Poland. M.S. in
exploration geophysics from the Mining and Metallurgy Academy in
Krakow, Poland.
-------------------------------------------------------------------------------------------------------------------
Dennis L. Tatum 38 1999 2002 Vice President and Treasurer of FX Energy. Appointed as a
Director of FX Energy during 1999. Joined FX Energy in March
1997 as Controller prior to becoming Treasurer in December 1998.
From 1989-1997, employed by Zilkha Energy, a private oil and
gas firm with interests in the Gulf of Mexico, where he was
instrumental in overseeing joint ventures. From1987-1989,
employed by Global Natural Resources, a public oil and gas firm
with domestic and international holdings, where he was
responsible for acquisition accounting. From 1983-1987,
employed by Roosth & Genecov, a private real estate and oil and
gas firm in Tyler, Texas. B.B.A. in Accounting from University
of Texas at Tyler in 1983, CPA from the State of Texas in 1984.
Series 7 securities license 1994 - 1998.
-------------------------------------------------------------------------------------------------------------------
Dennis B. Goldstein(1) 54 1999 2001 Corporate Counsel, Assistant Secretary and Manager of Land
Services for Homestake Mining Company, a publicly traded mining
company, San Francisco, California since 1976. Instrumental in
Homestake's gold exploration activities conducted in Poland
during 1998 and 1999. Deputy Attorney General, State of
California 1973-1976. Graduate of Brown University in 1967,
Stanford University Law School in 1971 and the Executive Program
of the Stanford Graduate School of Business in 1987. Member of
California Bar Association.
-------------------------------------------------------------------------------------------------------------------
(1) Member of the Compensation and Audit Committees of the Board of Directors of FX Energy.
3
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires FX Energy's directors and executive officers, and persons who own more
than 10% of a registered class of FX Energy's equity securities to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of equity securities of FX Energy. Officers, directors, and
greater than 10% stockholders are required to furnish FX Energy with copies of
all Section 16(a) forms they file.
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to FX Energy during or respecting its last fiscal year ended December
31, 1999, no person who, at any time during the most recent fiscal year, was a
director, officer, beneficial owner of more than 10% of any class of equity
securities of FX Energy or any other person known to be subject to Section 16 of
the Exchange Act failed to file, on a timely basis, reports required by Section
16(a) of the Exchange Act.
- --------------------------------------------------------------------------------
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
Summary Compensation
The following table sets forth, for the last three fiscal years of FX
Energy, the annual and long term compensation earned by, awarded to, or paid to
the person who was Chief Executive Officer of FX Energy and each of the four
other highest compensated Executive Officers of FX Energy as of the end of the
last fiscal year (the "Named Executive Officers").
-------------------------------------------------
Long Term Compensation
---------------------------------------- -------------------------------------------------
Annual Compensation Awards Payouts
- ------------------------- --------- ---------------------------------------- -------------------------- ----------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Annual Restricted Securities Other
Year Compen- Stock Underlying LTIP Compen-
Name and Principal Ended Salary Bonus sation Award(s) Options/SARs Payouts sation
Position Dec. 31, ($) ($)(1) ($) ($) (no.)(5) ($) ($)(6)
- ------------------------ ---------- -------------- ----------- ------------- ----------- -------------- ----------- ----------
David N. Pierce 1999 $ 197,466 $ 242,983 $ -- -- 60,000 -- 7,409
President (CEO) 1998 185,600 185,760 100,000(2) -- 60,000 -- --
1997 153,256 185,760 -- -- 55,000 -- --
Andrew W. Pierce 1999 $ 146,951 $ 151,307 $ -- -- 50,000 -- 9,228
Vice-President 1998 134,400 115,200 100,000(2) -- 50,000 -- --
(COO) 1997 114,267 115,200 -- -- 45,000 -- --
Thomas B. Lovejoy 1999 $ 146,951 $ 151,307 $ --(4) -- 50,000 -- 5,878
Vice-Chairman 1998 -- -- --(4) -- -- -- --
(CFO) 1997 -- -- --(4) -- -- -- --
Scott J. Duncan 1999 $ 114,806 $ 118,209 $ -- -- 50,000 -- 7,325
Vice President 1998 105,000 90,000 -- -- 50,000 -- --
Secretary 1997 88,750 90,000 -- -- 45,000 -- --
Jerzy B. Maciolek 1999 $ 146,951 $ 151,307 $ 100,000(3) -- 50,000 -- 7,149
Vice-President 1998 134,400 115,200 100,000(3) -- 50,000 -- --
Exploration 1997 113,600 115,200 -- -- 45,000 -- --
- ------------------------ ---------- -------------- ----------- ------------- ----------- -------------- ----------- ----------
(1) All 1999 bonuses were approved by FX Energy's Board of Directors on
November 1, 1999 and accrued for as of December 31, 1999. 25% of the
accrued bonus was paid on February 15, 2000. The remaining 75% will not
be paid in cash until FX Energy raises a significant amount of
additional capital.
4
(2) During 1998, David N. Pierce and Andrew W. Pierce applied a $100,000
bonus, which was awarded to them during 1997, against their exercise of
stock options for 150,000 shares each. (See "Certain Relationships and
Related Transactions.")
(3) During 1998 and 1999, Jerzy B. Maciolek was awarded a $100,000 bonus
each year to be used against future stock option exercises or payable
in cash in the event his employment with FX Energy is terminated. At
the end of 1999, Mr. Maciolek had not used the $200,000 bonus.
(4) Excludes $60,000, $200,000 and $120,000 paid during 1999, 1998 and
1997, respectively, to Lovejoy and Associates, a consulting firm owned
by Mr. Lovejoy, prior to Mr. Lovejoy becoming FX Energy's Chief
Financial Officer during 1999.
(5) Includes stock options only.
(6) Includes FX Energy's employer contributions under FX Energy's 401(k)
plan.
Option/SAR Grants in Last Fiscal Year
The following table sets forth information respecting all individual
grants of options and stock appreciation rights ("SARs") made during the last
completed fiscal year to the Named Executive Officers of FX Energy.
- ------------------------ --------------- --------------- --------------- -------------- -------------------------------
(a) (b) (1) (c) (1) (d) (e)
% of Total Potential Realizable Value at
Number of Options/SARs Assumed Rates of Share Price
Securities Granted to Appreciation for Option Term
Underlying Employees Exercise of ($)
Options/SARs During Fiscal Base Price Expiration -------------------------------
Name Granted (no.) Year ($/share) Date 5% 10%
- ------------------------ --------------- --------------- --------------- -------------- --------------- ---------------
David N. Pierce 60,000 14.0% $5.750 11/1/06 $140,520 $327,360
Andrew W. Pierce 50,000 11.6% 5.750 11/1/06 117,100 272,800
Thomas B. Lovejoy 50,000 11.6% 5.750 11/1/06 117,100 272,800
Scott J. Duncan 50,000 11.6% 5.750 11/1/06 117,100 272,800
Jerzy B. Maciolek 50,000 11.6% 5.750 11/1/06 117,100 272,800
- ------------------------ --------------- --------------- --------------- -------------- --------------- ---------------
- -----------------
(1) Includes stock options only.
Aggregate Option/SAR Exercises in Last Fiscal Year and Year End Option/SAR
Values
The following table sets forth information respecting the exercise of
options and SARs during the last completed fiscal year by the Named Executive
Officers and the fiscal year end values of unexercised options and SARs.
- ------------------------ ------------------ --------------- -------------------------- ---------------------------
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs at FY End at FY End
(no.) ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (no.) Realized ($) Unexercisable(7) Unexercisable(1)
- ------------------------ ------------------ --------------- -------------------------- ---------------------------
David N. Pierce -- -- 706,667 / 118,333 (2) $ 1,425,000 / $ --
Andrew W. Pierce -- -- 661,667 / 98,333 (3) 1,306,250 / --
Thomas B. Lovejoy -- -- 461,667 / 98,333 (4) 831,250 / --
Scott J. Duncan -- -- 151,667 / 98,333 (5) 118,750 / --
Jerzy B. Maciolek -- -- 361,668 / 148,332 (6) 581,250 / --
- ------------------------ ------------------ --------------- -------------------------- ---------------------------
- ----------------
(1) Based on the closing sales price for the Common Stock of $5.375 on
December 31, 1999.
(2) Consists of options to purchase 500,000 shares of Common Stock becoming
exercisable in installments of 100,000 shares per year commencing June
1, 1995, at an exercise price of $3.00 per share expiring June 9, 2004;
100,000 shares of Common Stock at an exercise price of $3.00 per share
expiring October 5, 2000; 50,000 shares of Common Stock at an exercise
price of $8.875 per share expiring November 4, 2001; 55,000 shares of
Common Stock becoming exercisable in installments of 18,333 shares per
year commencing December 1, 1998, at an exercise price of $6.625 per
share, expiring November 30, 2004; 60,000 shares of Common Stock
becoming exercisable in installments of 20,000 shares per year
commencing November 10, 1999, at an exercise price of $8.625 per share,
5
expiring November 10, 2005; and 60,000 shares of Common Stock becoming
exercisable in installments of 20,000 shares per year commencing
November 1, 2000, at an exercise price of $5.75 per share, expiring
November 1, 2006.
(3) Consists of options to purchase 500,000 shares of Common Stock becoming
exercisable in installments of 100,000 shares per year commencing June
1, 1995, at an exercise price of $3.00 per share expiring June 9, 2004;
50,000 shares of Common Stock at an exercise price of $3.00 per share
expiring October 5, 2000; 65,000 shares of Common Stock at an exercise
price of $8.875 per share expiring November 4, 2001; 45,000 shares of
Common Stock becoming exercisable in installments of 15,000 shares per
year commencing on December 1, 1998, at an exercise price of $6.625 per
share, expiring November 30, 2004; 50,000 shares of Common Stock
becoming exercisable in installments of 16,667 shares per year
commencing on November 10, 1999, at an exercise price of $8.625 per
share, expiring November 10, 2005; and 50,000 shares of Common Stock
becoming exercisable in installments of 16,667 shares per year
commencing November 1, 2000, at an exercise price of $5.75 per share,
expiring November 1, 2006.
(4) Consists of options to purchase 150,000 shares of Common Stock becoming
exercisable on August 3, 1995, at an exercise price of $3.00 per share
expiring August 3, 2000; 100,000 shares of Common Stock becoming
exercisable on August 3, 1995, at an exercise price of $3.00 per share
expiring August 3, 2001; 100,000 shares of Common Stock becoming
exercisable on August 3, 1995, at an exercise price of $3.00 per share
expiring August 3, 2002; 65,000 shares of Common Stock at an exercise
price of $8.875 per share expiring November 4, 2001; 45,000 shares of
Common Stock becoming exercisable in installments of 15,000 shares per
year commencing on December 1, 1998, at an exercise price of $6.625 per
share, expiring November 30, 2004; 50,000 shares of Common Stock
becoming exercisable in installments of 16,667 shares per year
commencing on November 10, 1999, at an exercise price of $8.625 per
share, expiring November 10, 2005; and 50,000 shares of Common Stock
becoming exercisable in installments of 16,667 shares per year
commencing November 1, 2000, at an exercise price of $5.75 per share,
expiring November 1, 2006.
(5) Includes options to purchase 50,000 shares of Common Stock at an
exercise price of $3.00 expiring October 5, 2000; 55,000 shares of
Common Stock at an exercise price of $8.875 per share expiring November
4, 2001; 45,000 shares of Common Stock becoming exercisable in
installments of 15,000 shares per year commencing December 1, 1998, at
an exercise price of $6.625 per share, expiring November 30, 2004;
50,000 shares of Common Stock becoming exercisable in installments of
16,667 shares per year commencing on November 10, 1999, at an exercise
price of $8.625 per share, expiring November 10, 2005; and 50,000
shares of Common Stock becoming exercisable in installments of 16,667
shares per year commencing November 1, 2000, at an exercise price of
$5.75 per share, expiring November 1, 2006.
(6) Includes options to purchase 150,000 shares of Common Stock at any time
through August 30, 2000, at an exercise price of $1.50; 65,000 shares
of Common Stock at an exercise price of $8.875 per share through
November 4, 2001; 50,000 shares of Common Stock becoming exercisable in
installments of 16,667 shares per year commencing on May 12, 1998, at
an exercise price of $8.25 per share, expiring May 11, 2004; 100,000
shares of Common Stock becoming exercisable in installments of 33,333
shares per year commencing on July 18, 1998, at an exercise price of
$7.25 per share, expiring July 17, 2004; 45,000 shares of Common Stock
becoming exercisable in installments of 15,000 shares per year
commencing December 1, 1998, at an exercise price of $6.625 per share,
expiring November 30, 2004; 50,000 shares of Common Stock becoming
exercisable in installments of 16,667 per year commencing on November
10, 1999, at an exercise price of $8.625 per share, expiring November
10, 2005; and 50,000 shares of Common Stock becoming exercisable in
installments of 16,667 shares per year commencing November 1, 2000, at
an exercise price of $5.75 per share, expiring November 1, 2006.
(7) Includes stock options only.
Directors' Compensation
FX Energy reimburses its directors for costs incurred by them in
attending meetings of the Board of Directors and its Committees. FX Energy does
not pay any separate compensation to employees who serve on the Board of
Directors.
During 1999, Lovejoy and Associates, a consulting firm owned by Thomas
B. Lovejoy, was paid $60,000 prior to Mr. Lovejoy becoming FX Energy's Chief
Financial Officer; Peter L. Raven received a cash fee of $18,000 and was granted
seven-year options to purchase 10,000 shares of Common Stock at $5.75 per share;
Jay W. Decker received a cash fee of $18,000 and was granted seven-year options
to purchase 10,000 shares of Common Stock at $5.75 per share; and Dennis B.
Goldstein received a cash fee of $16,500; was granted seven-year options to
purchase 16,000 shares of Common Stock, including 6,000 shares at $6.75 per
share and 10,000 shares at $5.75 per share. The exercise prices of the foregoing
options are equal to the market price of the Common Stock as of the date of
grant.
Employment Agreements, Termination of Employment, and Change in Control
FX Energy has entered into executive employment agreements with each of
the Named Executive Officers, except for Thomas B. Lovejoy. Each employment
agreement is for a three-year term and is automatically extended for an
additional year on the anniversary date of such agreement. The agreements
provided for annual salaries during 1999 of David N. Pierce, $197,466; Andrew W.
Pierce, $146,951; Scott J. Duncan, $114,806; and Jerzy B. Maciolek, $146,951. In
addition, the Named Executive Officers may receive such bonuses or incentive
compensation as the Board of Directors or Compensation Committee may deem
appropriate. Each agreement provides that the Board of Directors or Compensation
Committee may increase the base salary under the agreements at the beginning of
each year, with such increases to be at least 7.5% for David N. Pierce, Andrew
W. Pierce and Scott J. Duncan. Each Executive Officer is entitled under his
respective employment agreement to certain
6
continuation of compensation in the event the agreement is terminated upon death
or disability or FX Energy terminates the agreement other than for cause.
In addition to the foregoing terms, Mr. Maciolek's employment agreement
provides for annual bonuses of $100,000, payable in cash, stock, or options, as
may be determined by the Board of Directors or the Compensation Committee, based
on the progress of projects on which Mr. Maciolek is primarily engaged. On each
of May 12, 1999, 2000 and 2001, Mr. Maciolek is entitled to receive a bonus in
the form of a $100,000 credit that may be applied against the exercise of his
options to purchase Common Stock.
Each executive employment agreement provides that, on the occurrence of
a change of control event, the employee may terminate the agreement. In the
event of such termination, the employee is entitled to a termination payment
equal to 150% of his annual salary (100% in the case Jerzy B. Maciolek), and the
value of previously granted employee benefits. Additionally, FX Energy is
required to maintain certain benefits and, in the case of David N. Pierce,
Andrew W. Pierce and Scott J. Duncan, repurchase outstanding options. Options
held by Jerzy B. Maciolek will immediately vest on such termination. For
purposes of the foregoing, a change of control shall exist on any of the
following events: (i) the sale by FX Energy of all or substantially all of its
assets; (ii) a transaction or series of transactions resulting in a single
person or group of persons under common control owning 25% of the outstanding
Common Stock; (iii) a change in the composition of the Board of Directors so
that more than 50% of the directors are persons neither nominated nor elected by
the Board of Directors or any authorized Committee; (iv) the decision by FX
Energy to terminate its business and liquidate its assets; or (v) a merger or
consolidation of FX Energy in which FX Energy's existing shareholders own less
than 50% of the outstanding voting shares of the surviving entity.
Options Granted to Officers, Directors, Employees, and Consultants
FX Energy currently has outstanding options to purchase an aggregate of
3,896,501 shares that have been granted to officers, directors, employees, and
consultants of FX Energy. Of such options, 587,334 contain vesting limitations
contingent on continuing association with FX Energy. These options are
exercisable at prices ranging between $1.50 and $10.25 per share. Options issued
to executive officers and directors contain terms providing that in the event of
a change in control of FX Energy and at the election of the optionee, the
unexercised options will be canceled, and FX Energy will pay to the optionee an
amount equal to the number of unexercised options multiplied by the amount by
which the fair market value of the Common Stock as of the date preceding the
change of control event exceeds the option exercise price. The grants of options
to officers and directors were not the result of arm's length negotiations.
Report of the Compensation Committee
General
Under the supervision of the Compensation Committee, FX Energy has
developed and implemented compensation policies, plans, and programs that seek
to enhance FX Energy's ability to recruit and retain qualified executive and
other personnel, including stock option and award programs that create long-term
incentive for executive management and key employees by enabling them to acquire
an equity stake in FX Energy.
FX Energy's basic compensation practices consist of salary, bonus, and
stock options. In developing and implementing compensation policies and
procedures, the Compensation Committee's objectives are to provide rewards for
the long-term value of individual contribution and performance to FX Energy;
provide rewards that are both recurring and non-recurring and both financial and
non-financial; provide for fairness and consistency; pay competitively; conduct
an effective performance review process; and meet all legal requirements.
The functions of the Compensation Committee are to:
o Review and recommend to the Board of Directors the amount and
manner of compensation of the Chief Executive Officer for final
determination by the Board of Directors.
7
o Consider the recommendations of the Chief Executive Officer
respecting the amount and manner of compensation of the other
executive officers and recommend to the Board of Directors the
amount and manner of compensation for such executive officers for
final determination by the Board of Directors.
o Consult with the Chief Executive Officer respecting the amount and
manner of compensation for other executive level personnel.
o Counsel the Chief Executive Officer in personnel matters,
management organization and long range management success or
planning.
o Support an employment environment of equal opportunity without
regard to discrimination on the basis of age, race, religion, sex,
or national origin.
o Prepare for inclusion in FX Energy's proxy or information
statement for its annual shareholders' meeting disclosure of the
Compensation Committee's compensation policies applicable to
executive officers, including the specific relationship of
corporate performance to executive compensation.
o Develop and administer FX Energy's stock option and stock award
plans for executive officers and other employees.
1999 Compensation Review for Executives and Employees other than the
Chief Executive Officer
Utilizing the criteria and objectives set forth above, in November
1999, the Compensation Committee met to review 1999 year-end raises, bonuses and
option awards. Initially, the Committee reviewed the budget prepared by
management for the balance of 1999 through early 2001. The Committee and
management discussed in detail FX Energy's upcoming capital requirements,
discretionary expenditures, and alternative sources of capital. The material
prepared by management included a proposal for raises to be effective January 1,
2000, the payment of cash bonuses prior to the end of 1999 and the immediate
grant of stock options.
The Compensation Committee and Board of Directors had previously
established the 1999 base salary for all officers by reference to an informal
overview of similar companies, adjusted as the Compensation Committee deemed
appropriate for variations in geographic location, size, emphasis on exploration
as compared to the level of production and reserves, and profitability. Because
of the foregoing variations, the group of similar firms reviewed by the
Compensation Committee did not include all of the firms included in the peer
group whose stock performance is reflected in the Performance Graph - Comparison
of Five-Year Cumulative Total Returns included within this document. In
reviewing the performance of FX Energy's employees, the Compensation Committee
specifically reviewed the individual objective criteria that had been
established at the beginning of 1999 as a measure of performance. The
Compensation Committee discussed those objectives that had been met or exceeded
as well as those objectives that had not been met, reviewing the extent to which
the failure to meet specific objectives was reasonably within the control or
responsibility of FX Energy 's management. Other management accomplishments not
included in the objective criteria were also discussed.
Based on the recommendation of management, the Compensation Committee
recommended that salaries be continued at current levels until FX Energy obtains
significant additional funding. Upon completion of such significant additional
funding, executive officers will receive a 7.5% salary increase retroactive to
January 1, 2000.
In reviewing FX Energy's cash resources, required expenditures and
discretionary expenditures, the Compensation Committee considered alternative
non-cash methods of compensation for FX Energy's executives other than the Chief
Executive Officer that would enable FX Energy to conserve cash for its
short-term cash requirements. This included a discussion of the possible effect
of significant cash expenditures for executive and non-executive bonuses. Based
upon such discussions and the ongoing activities of FX Energy, the Compensation
Committee determined to grant such cash bonuses equal to the 1999 base salaries
for all officers. The bonuses were awarded in light of FX Energy's continued
progress towards acquiring oil and gas assets in Poland, expanding FX Energy's
strategic alliances and, in general, advancing FX Energy's exploration program
in Poland, without ascribing any specific relative significance to individual
criteria. Because possible future exploration, appraisal, development and
property acquisition opportunities may require additional capital, the
Compensation Committee recommended payment of 25% of such bonuses on February
15, 2000 and deferment of 75% of such bonuses until FX Energy obtains
significant additional capital.
Management proposed, and the Compensation Committee recommended to the
Board of Directors, that 1999 stock option awards for executives be made at the
same level as 1998. On November 1, 1999, acting on
8
recommendation of the Compensation Committee, the Board of Directors approved
grants to twenty-seven individuals, twenty-two employees, one consultant and
four directors, to purchase a total of 481,000 shares at a price of $5.75 per
share, the closing price of FX Energy's Common Stock on such date. Included in
this number are options to purchase 310,000 shares granted to executive
officers, as described above. All options granted will vest in three equal
increments, commencing on the first anniversary of grant, with a seven-year
exercise period.
1999 Chief Executive Officer Compensation Review
The Compensation Committee and Board of Directors had previously
established the 1999 base salary of the Chief Executive Officer by reference to
an informal overview of similar companies, adjusted as the Compensation
Committee deemed appropriate for variations in geographic location, size,
emphasis on exploration as compared to the level of production and reserves, and
profitability. Because of the foregoing variations, the group of similar firms
reviewed by the Compensation Committee did not include all of the firms included
in the peer group whose stock performance is reflected in the Performance Graph
- - Comparison of Five-Year Cumulative Total Returns included within this
document. The Compensation Committee recommended that the Chief Executive
Officer's salary be continued at the 1999 level until FX Energy obtains
significant additional funding. Upon completion of such significant additional
funding, the Chief Executive Officer will receive a 7.5% salary increase
retroactive to January 1, 2000.
The annual bonus for the Chief Executive Officer was awarded on the
same basis as applied to other executives. Objective criteria where expectations
have been met or exceeded included continuing the development of FX Energy's
relationships with the government of Poland and FX Energy's strategic partners,
furthering FX Energy's exploration acreage and potential in Poland, negotiating
and developing exploration schedules with strategic partners, progress on
purchasing oil and gas assets in Poland, efforts to obtain additional funding,
conceiving and implementing programs to achieve growth, maintaining compliance
with regulatory requirements, achieving a high regard of shareholders and the
broad business community in the integrity of FX Energy and its management, and
minimizing factors that represent significant business risks, without any
specific weight assigned to any specific factors. The Committee weighed these
accomplishments against delays in completing exploration tests and in completing
its contemplated acquisition of oil and gas assets from POGC. The Committee
deemed each of the latter to be largely due to factors outside the Chief
Executive Officer's ability to control and concluded that the Chief Executive
Officer had met or exceeded the overall objective criteria that had been
established.
The Compensation Committee recommended to grant a cash bonus to the
Chief Executive Officer equal to 120% of his 1999 base salary. Because possible
future exploration, appraisal, development and property acquisition
opportunities may require additional capital, the Compensation Committee
recommended payment of 25% of such bonus on February 15, 2000 and deferment of
75% of such bonus until FX Energy obtains significant additional capital.
The Committee intends that stock options serve as a significant
component of the Chief Executive Officer's total compensation package in order
to retain his efforts on behalf of FX Energy and to focus his efforts on
enhancing shareholder value. On November 1, 1999, upon the recommendation of the
Compensation Committee, the Board of Directors awarded the Chief Executive
Officer options to purchase 60,000 shares of Common Stock at a price of $5.75
per share, the closing price of FX Energy's Common Stock on such date. The
options granted will vest in three equal increments, commencing on the first
anniversary of grant, with a seven-year exercise period.
The foregoing report has been furnished by: Dennis B. Goldstein
Jay W. Decker
Peter L. Raven
Compensation and Option Committee Interlocks and Insider Participation
The members of the Compensation Committee are Dennis B. Goldstein, Jay
W. Decker, and Peter L. Raven. No member of such Committee is a present or
former officer of FX Energy or any subsidiary. There are no other interlocks. No
member of such Committee, his family, or his affiliate was a party to any
material transactions
9
with FX Energy or any subsidiary since the beginning of the last completed
fiscal year. No executive officer of FX Energy serves as an executive officer,
director, or member of a Compensation Committee of any other entity, an
executive officer or director of which is a member of the Compensation Committee
of FX Energy.
Audit Committee Report
The Audit Committee met twice during 1999 and once to date during 2000.
During the course of each meeting the Audit Committee met with management and
the independent auditors separately and collectively to discuss matters
pertaining to the audited financial statements. The independent auditors also
discussed with the Audit Committee certain required matters pertaining to SAS 61
and the Independent Standards Board Standard No.1 regarding the auditor's
independence. The Audit Committee recommended to the Board of Directors that the
audited financial statements be included in FX Energy's Annual Report on Form
10-K.
The foregoing report has been furnished by: Peter L. Raven
Jay W. Decker
Dennis B. Goldstein
Five Year Performance Comparison
The graph on the following page provides an indicator of cumulative
total shareholder returns for FX Energy as compared with the Total Returns Index
for the Nasdaq Stock Market (US companies) and industry group. The industry peer
group selected by FX Energy is comprised of US companies whose stock is traded
on Nasdaq and which are included in Standard Industrial Code 131 entitled "Crude
Petroleum and Natural Gas." For the five year period shown on the graph, the
total number of Peer Group distinct issues is 181. The total active issues on
December 31, 1998 was 57. The Peer Group comprised of firms in Standard
Industrial Classification Code 131 is different than the group of firms similar
to FX Energy considered in determining executive compensation. The Compensation
Committee selected firms from the Standard Industrial Classification Code 131
that were similar to FX Energy in terms of geographic location, size, and
emphasis on exploration as compared to the level of production and reserves, and
profitability. However, FX Energy believes that it is appropriate to provide
cumulative total shareholder returns data based on the broader Industrial
Classification Code group involving a larger number of firms.
10
FX Energy, Inc.
Performance Graph
Comparison of Five-Year Cumulative Total Returns
[Performance Graph appears here]
The plot points for the above graph are detailed in the following table:
- ------------------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
12/1994 12/1995 12/1996 12/1997 12/1998 12/1999
- ------------------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
FX Energy 60.42 279.46 196.38 305.89
- ------------------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Nasdaq Stock Market (US Companies) 99.43 140.64 172.95 212.12 298.89
- ------------------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
NASDAQ Stocks (SIC 1310 -1319 US Companies) Crude 107.06 112.51 162.63 154.99 75.19
Petroleum & Natural Gas
- ------------------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization of
the previous trading day.
C. If the monthly interval, based on the fiscal year end, is not a trading
day, the preceding trading day is used.
D. The index level for each series was set to $100 on January 31, 1995,
the date on which FX Energy registered its Common Stock under Section
12 of the Exchange Act. (The graph indicates the value over time of a
$100 investment in FX Energy made on January 31, 1995 compared to a
$100 investment in each of the other two categories made on the same
date.)
E. FX Energy began trading on the Nasdaq market in June 1996; from January
1995 until June 1996 FX Energy traded on the Electronic Bulletin Board
under the symbol FOEX.
11
- --------------------------------------------------------------------------------
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
The following table sets forth, as of the Record Date, the name,
address and shareholdings of each person who owns of record, or was known by FX
Energy to own beneficially, 5% or more of the Common Stock currently issued and
outstanding; the name and shareholdings of each director; and the shareholdings
of all executive officers and directors as a group. Unless otherwise indicated,
all shares consist of Common Stock, and all such shares are owned beneficially
and of record by the named person or group. Options include only vested amounts;
unvested options are excluded.
- --------------------------------------------------------------------------------------------
Directors and Principal Stockholders
- --------------------------------------------------------------------------------------------
Percentage of
Beneficial Owner Nature of Ownership Amount (1) Ownership (2)
- --------------------------------------------------------------------------------------------
David N. Pierce Common Stock 206,493 (3) 1.1%
Options 706,667 (6) 3.6%
-------------
Total 913,160 4.6%
Andrew W. Pierce Common Stock 208,500 1.1%
Options 661,667 (6) 3.4%
-------------
Total 870,167 4.4%
Thomas B. Lovejoy Common Stock 527,367 (4) 2.8%
Options 461,667 (6) 2.4%
-------------
Total 989,034 5.1%
Scott J. Duncan Common Stock 175,500 (5) 0.9%
Options 151,667 (6) 0.8%
-------------
Total 327,167 1.7%
Peter L. Raven Common Stock 40,000 0.2%
Options 10,000 (6) 0.1%
-------------
Total 50,000 0.3%
Jay W. Decker Options 12,000 (6) 0.1%
Jerzy B. Maciolek Options 361,668 (6) 1.9%
Dennis L. Tatum Common Stock 2,500 0.0%
Options 46,801 (6) 0.2%
-------------
Total 49,301 0.3%
Dennis B. Goldstein Common Stock 5,400 (7) 0.0%
All Executive Officers Common Stock 1,165,760 6.1%
and Directors as a Options 2,412,137 11.3%
-------------
Group (9 persons) Total 3,577,897 16.7%
=============
- --------------------------------------------------------------------------------------------
(1) Except as otherwise noted, shares are owned beneficially and of record,
and, such record stockholder has sole voting, investment, and
dispositive power.
12
(2) Calculations of total percentages of ownership outstanding for each
individual assumes the exercise of currently vested options held by
that individual to which the percentage relates. Percentages calculated
for totals of all executive officers and directors as a group assume
the exercise of all vested options held by the indicated group.
(3) Includes 48,000 shares held by David N. Pierce as custodian for minor
children. Mr. Pierce is deemed to hold or share voting and dispositive
power over all of such shares. Excludes 19,000 shares held by Mr.
Pierce's wife, Mary Phillips, and 23,000 held by Mary Phillips as
custodian for an adult child, of which Mr. Pierce disclaims beneficial
ownership. Mr. Pierce's address is in care of FX Energy.
(4) Includes 41,000 shares held in trust for the benefit of Thomas B.
Lovejoy's children, 49,500 shares held in Mr. Lovejoy's IRA account,
10,000 shares held by Mr. Lovejoy's spouse's IRA account, and 210,000
shares held by Lovejoy Associates, Inc., (of which Mr. Lovejoy is sole
owner). Mr. Lovejoy is deemed to hold dispositive power over all of
such shares. Mr. Lovejoy's address is 48 Burying Hill Road, Greenwich
CT 06831.
(5) Includes 123,000 shares held by Scott J. Duncan jointly with his wife,
Cathy H. Duncan; 7,000 shares held solely by Cathy H. Duncan; and
48,000 shares held by Cathy Duncan as custodian for minor children. Mr.
Duncan is deemed to hold or share voting and dispositive power over all
of such shares.
(6) These vested options give the holders the right to acquire shares of
Common Stock at prices ranging from $1.50 to $10.25 per share with
various expiration dates ranging from August 2000 to December 2006.
(7) Includes 400 shares held by Dennis B. Goldstein as custodian for a
minor child. Mr. Goldstein is deemed to hold or share voting and
dispositive power over all of such shares.
- --------------------------------------------------------------------------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
Unless otherwise indicated, the terms of the following transactions
between related parties were not determined as a result of arm's length
negotiations.
Consulting Agreement
During January through April 1999, FX Energy engaged Lovejoy and
Associates, a consulting company owned by Tom Lovejoy, a director of FX Energy,
to advise FX Energy respecting future financing alternatives, possible sources
of debt and equity financing, with particular emphasis on funding for FX
Energy's Polish activities and FX Energy's relationship with the investment
community at a fee of $17,000 per month. During 1999, the consulting agreement
was terminated when Mr. Lovejoy became FX Energy's Chief Financial Officer.
Officer Option Exercises and Loans
On February 17, 1998, two of FX Energy's officers exercised options to
purchase 300,000 shares of FX Energy's Common Stock at $1.50 per share that were
scheduled to expire on May 6, 1998. The officers paid the cost of exercising the
options by utilizing a bonus credit of $100,000 each issued to them during 1997
and signing a full recourse note payable to FX Energy for $125,000 each bearing
interest at 7.7%. On April 10, 1998, in consideration of the agreement of the
two officers to refrain from selling FX Energy's Common Stock in market
transactions, FX Energy agreed to advance the officers, on a non-recourse basis,
additional funds to cover their tax liabilities and other considerations. As of
December 31, 1999, the notes receivable and accrued interest totaled $2,036,385.
FX Energy had no commitment to advance additional funds to the officers.
In consideration for extending the term from December 31, 1999 through
December 31, 2000, the officers agreed that if the average closing price of the
Common Stock for five consecutive trading days results in a value of the
collateral equal to or above the total principal and accrued interest balances,
the officers will repay the loans within 45 days thereafter either in cash or by
tendering to FX Energy such number of shares which at the average closing price
for the previous five consecutive trading days equals the principal and interest
then accrued.
The notes receivable and accrued interest are collateralized by 233,340
shares of FX Energy's Common Stock. In accordance with SFAS No. 114, "Accounting
by Creditors for Impairment of a Loan," FX Energy recorded an impairment
allowance of $666,000 as of December 31, 1999, based on the value of the
underlying collateral. The impairment allowance will be adjusted quarterly based
on the market value of the collateral shares.
13
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange of 1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FX ENERGY, INC.
Dated: May 2, 2000 By /s/ Scott J. Duncan
---------------------
Scott J. Duncan, Vice-President
14