SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under ss. 240.14a-12
FX Energy, Inc.
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(Name of Registrant as Specified In Its Charter)
n/a
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:_______________________________________________
2) Form, Schedule, or Registration Statement No.:________________________
3) Filing Party:_________________________________________________________
4) Date Filed:___________________________________________________________
FX ENERGY, INC.
August 12, 2002
Dear FX Energy Stockholder:
Our 2001 Annual Report and our Proxy Statement for the 2002 Annual
Stockholders' Meeting of FX Energy, Inc. are enclosed. At this meeting, we will
seek your support for the election of directors and for the approval of our 2001
Stock Option and Award Plan.
These are important considerations for all stockholders. Therefore, the
Board of Directors urges you to review each of these proposals carefully. The
enclosed proxy statement discusses the intended benefits as well as possible
disadvantages of these proposals.
Your Board of Directors believes that the adoption of all of the
proposals is in the best interests of all stockholders.
Sincerely,
FX ENERGY, INC.
David N. Pierce
President
FX ENERGY, INC.
3006 HIGHLAND DRIVE, SUITE 206
SALT LAKE CITY, UTAH 84106
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 10, 2002
To the Stockholders of FX Energy, Inc.:
The 2002 Annual Stockholders' Meeting (the "Annual Meeting") of FX
Energy, Inc. (the "Company") will be held in the Sawtooth Room, Little America
Hotel, 500 South Main Street, Salt Lake City, Utah, on September 10, 2002. The
Annual Meeting will convene at 10:00 a.m., local time, to consider and take
action on the following proposals:
(1) to elect two directors to serve until the expiration of their
respective terms and until their respective successors are
elected and qualified;
(2) to approve the FX Energy, Inc. 2001 Stock Option and Award
Plan; and
(3) to transact such other business as may properly come before
the Annual Meeting or any adjournment(s) thereof.
Only owners of record of the 17,648,917 shares of the Company's common
stock outstanding as of the close of business on August 7, 2002 (the "Record
Date"), will be entitled to notice of and to vote at the Annual Meeting. Each
share of common stock is entitled to one vote.
Holders of at least a majority of the shares of common stock
outstanding on the Record Date must be represented at the meeting to constitute
a quorum for conducting business.
The attendance at and/or vote of each stockholder at the Annual Meeting
is important, and each stockholder is encouraged to attend.
FX ENERGY, INC.
By Order of the Board of Directors
Scott J. Duncan, Secretary
Salt Lake City, Utah
August 12, 2002
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IMPORTANT
Regardless of whether you plan to attend the meeting in person, please
fill in, sign, date and return the enclosed proxy promptly in the
self-addressed, stamped envelope provided. No postage is required if mailed
in the United States.
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SPECIAL REQUEST
If your shares are held in the name of a brokerage firm, nominee or
other institution, only it can vote your shares. Please contact promptly
the person responsible for your account and give instructions for your
shares to be voted.
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FX ENERGY, INC.
3006 HIGHLAND DRIVE, SUITE 206
SALT LAKE CITY, UT 84106
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation
of proxies, on behalf of the management of FX Energy, Inc., to be voted at the
Annual Meeting to be held in the Sawtooth Room, Little America Hotel, 500 South
Main Street, Salt Lake City, Utah, on September 10, 2002, at 10:00 a.m., local
time, or at any adjournment thereof. The enclosed proxy, when properly executed
and returned in a timely manner, will be voted at the Annual Meeting in
accordance with the directions set forth thereon. If no instructions are
indicated on the enclosed proxy, the proxy will be voted as follows at the
Annual Meeting:
(1) FOR the election of two nominees of management set forth
herein as directors of the Company to serve as directors until
the expiration of their respective terms and until their
successors are elected and qualified;
(2) FOR the approval of the FX Energy, Inc. 2001 Stock Option and
Award Plan; and
(3) IN accordance with the best judgment of the persons acting as
proxies on other matters presented for a vote.
The enclosed proxy, even though executed and returned to the Company,
may be revoked at any time before it is voted, either by giving a written
notice, mailed or delivered to the Secretary of the Company, by submitting a new
proxy bearing a later date, or by voting in person at the Annual Meeting. If the
proxy is returned to the Company without specific direction, the proxy will be
voted in accordance with the Board of Directors' recommendations as set forth
above.
The entire expense of this proxy solicitation will be borne by the
Company. In addition to this solicitation, officers, directors and regular
employees of the Company, who will receive no extra compensation for such
services, may solicit proxies by mail, by telephone or in person. This proxy
statement and form of proxy were first mailed to stockholders on or about August
12, 2002.
Only holders of the Company's 17,648,917 shares of common stock, par
value $0.001, outstanding as of the close of business on August 7, 2002 (the
"Record Date"), will be entitled to vote at the Annual Meeting. Each share of
common stock is entitled to one vote. Holders of at least a majority of the
shares of common stock outstanding on the Record Date must be represented at the
Annual Meeting to constitute a quorum for conducting business.
All properly executed and returned proxies as well as shares
represented in person at the meeting will be counted for purposes of determining
if a quorum is present, whether the proxies are instructed to abstain from
voting or consist of broker nonvotes. Under Nevada corporate law and the
Company's Articles of Incorporation and Bylaws, the election of directors
requires the vote of a plurality of the shares present at the Annual Meeting.
Abstentions and broker nonvotes will not be counted for the election of
directors. Certain specified matters are considered approved by the stockholders
if approved by the holders of a majority of the outstanding common stock at a
meeting of the stockholders at which a quorum is present. No such specified
matters are to be considered at the Annual Meeting. All other matters are
considered approved by the stockholders if approved by the holders of a majority
of the shares present and voting at a meeting of the stockholders at which a
quorum is present. Therefore, abstentions and broker nonvotes are not counted
and will have the same legal effect as a vote in favor of matters other than the
election of directors.
Officers and directors holding an aggregate of 861,920 shares of common
stock, or approximately 3.7% of the outstanding shares, have indicated their
intent to vote in favor of all proposals.
ELECTION OF DIRECTORS
General
The Company's Articles of Incorporation provide that the Board of
Directors shall be divided into three classes, with each class as equal in
number as practicable. One class is to be elected each year for a three-year
term. At the Annual Meeting, two directors will be elected to serve three-year
terms.
Votes will be cast, pursuant to authority granted by the enclosed proxy
when properly executed and returned to the Company, for the election of the
nominees named below as directors of the Company, except as otherwise specified
in the proxy. In the event a nominee shall be unable to serve, votes will be
cast, pursuant to authority granted by the enclosed proxy, for such person as
may be designated by the Board of Directors. The officers of the Company are
elected at the Annual Meeting of the Board of Directors to hold office until
their respective successors are elected and qualified. The information
concerning the nominees and directors and their security holdings has been
furnished by them to the Company. Biographical information and business
experience of each person nominated and for each director whose term of office
will continue after the Annual Meeting are discussed below. (See "Principal
Stockholders.")
Executive Officers, Directors and Nominees
The Board of Directors' nominees for election as directors of the
Company at the Annual Meeting are David N. Pierce and Peter L. Raven. The
following sets forth the name, age, term of directorship, and principal business
experience of each executive officer and director of the Company.
David N. Pierce, age 56. President and Chairman of the Board of
Directors of the Company since 1992. For over three years prior to 1992,
Vice-President and a director of the Company's predecessor, Frontier Exploration
Company, co-founded with his brother, Andrew W. Pierce, in January 1989, which
was acquired by the Company in 1992. Executive capacities with privately held
oil and gas companies since 1979. An attorney with over 25 years of experience
in natural resources, securities and international business law. Graduate of
Princeton University and Stanford University Law School.
Andrew W. Pierce, age 54. Vice-President, Chief Operating Officer and a
director of the Company since 1992. For over three years prior to 1992,
President and a director of the Company's predecessor, Frontier Exploration
Company, co-founded with his brother, David N. Pierce, in January 1989, which
was acquired by the Company in 1992. Over 25 years of experience in oil and gas
exploration, drilling, production and leasing experience, with primary
management and line responsibility for drilling and completion activities in the
western United States.
Thomas B. Lovejoy, age 66. Vice-Chairman of the Board of Directors
since 1995, Chief Financial Officer since 1999, and a consultant to the Company
from 1995 to 1999. Between 1992 and 1999, principal of Lovejoy & Associates,
Inc., Greenwich, Connecticut, which provided financial strategic advice
respecting private placements, mergers and acquisitions. From 1989 through 1992,
Managing Director and head of natural resource, utility and mining groups of
Prudential Securities, Inc., New York City. From 1980 through 1988, Managing
Director and head of the energy and natural resources group of Paine Webber,
Inc. From 1993 to 2001, director of Scaltech, Inc., Houston, Texas, a processor
of petroleum refinery oil waste. Graduate of Massachusetts Institute of
Technology and Harvard Business School.
Jerzy B. Maciolek, age 51. Vice-President of International Exploration
and a director of the Company. Employed by the Company since September 1995.
Instrumental in the Company's exploration efforts in Poland. Member of the
advisory board of the Polish Oil and Gas Company. Prior to becoming the
Company's employee, a private consultant for over five years, including
consulting on exploration projects in the western United States, the hydrocarbon
potential of Poland and Kazakhstan, and developing applied integrated
geophysical interpretations over gold mines in Nevada, California and Mexico.
Graduate of the Mining and Metallurgy Academy in Krakow, Poland.
Scott J. Duncan, age 53. Vice-President Investor Relations,
Secretary/Treasurer and a director of the Company. Financial consultant to the
Company from its inception through April 1993, when he became the Company's
Treasurer. Prior to becoming a consultant with the Company, an executive and
director of several small businesses in Salt Lake City. Graduate of the
University of Utah School of Business.
Peter L. Raven, age 63. Retired, formerly 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, and the Harvard Business School Advanced Management
Program. Peter L. Raven is a member of our Audit Committee and Compensation
Committee.
Dennis B. Goldstein, age 56. Member of the Mining and Environmental
Practice Group of the law firm of Baker & McKenzie in San Francisco, California.
Former Vice-President and corporate counsel of Homestake Mining Company, an
international gold mining company, from 1976 to 2001. Instrumental in
Homestake's gold exploration activities conducted in Poland during 1998 and
1999. Graduate of Brown University, Stanford University Law School and the
Executive Program of the Stanford Graduate School of Business. Member of
California Bar Association. Dennis B. Goldstein is a member of our Audit
Committee and Compensation Committee.
Clay Newton, age 45. Independent financial consultant and certified
public accountant. Director of Corporate Finance and Administration for Talk2
Technology, Inc., a private start-up technology company, from 2000 to 2002.
Corporate Secretary, Treasurer, and Chief Financial Officer for Equity Oil,
Inc., a publicly-traded international oil and gas company, from 1986 to 2000.
Graduate, with honors, University of Utah. Certified Public Accountant,
Certified Equity Professional. Member, American Institute of Certified Public
Accountants, Utah Association of Certified Public Accountants, National
Association of Stock Plan Professionals. Clay Newton is a member of our Audit
Committee and Compensation Committee.
Board of Directors' Meetings and Committees
Board of Directors
The Board of Directors had four meetings during 2001 and two meetings
to date in 2002. The directors also discussed the business and affairs of the
Company informally on numerous occasions throughout the year and took several
actions through unanimous written consents in lieu of meetings. Jerzy B.
Maciolek, a director and Vice President of International Exploration of the
Company, who is responsible for the Company's day-to-day activities in Poland,
consulted with the members of the Board of Directors informally from time to
time during 2001, but did not attend any formal meeting.
Audit Committee
On November 2, 1999, the Board of Directors formally adopted a written
Audit Committee Charter, which is incorporated by reference from the Company's
definitive proxy statement provided in conjunction with its 2000 Annual Meeting.
The Audit Committee of the Board of Directors is currently composed of three
independent directors appointed by the Board of Directors, Peter L. Raven,
Dennis B. Goldstein, and Clay Newton, who was appointed to serve out the term of
Jay W. Decker, which expires in 2004. Prior to his resignation on January 31,
2002, Mr. Decker was also a member of the Audit Committee.
The Audit Committee recommends the selection of independent auditors,
approves the scope of audit and related fees, and reviews financial reports,
audit results, internal accounting procedures, related-party transactions, where
appropriate, and programs to comply with applicable requirements relating to
financial accountability. The Audit Committee's responsibilities also include
the development of policies and procedures for compliance by the Company and its
officers and directors with applicable laws and regulations. The Audit Committee
met once during 2001 and has met once to date in 2002, in addition to several
informal telephone meetings throughout 2001 to review the Company's quarterly
reports on Form 10-Q prior to filing, and in early 2002 to review the results of
the audit of the 2001 financial statements of the Company by its independent
accountants and other related matters.
Compensation Committee
The Compensation Committee is responsible for reviewing performance of
senior management, recommending compensation, and developing compensation
strategies and alternatives throughout the Company. The Compensation Committee
met once during 2001 and once to date during 2002, in addition to several
informal telephone meetings throughout 2001 and early 2002 to review the
Company's compensation programs and to consider and approve salaries, stock
option grants and bonus payments related to 2001 and 2002. The Compensation
Committee of the Board of Directors is composed of independent directors: Peter
L. Raven, Dennis B. Goldstein and Clay Newton. Prior to his resignation on
January 31, 2002, Jay W. Decker was also a member of the Compensation Committee.
Rights Redemption Committee
In connection with the adoption of a Stockholder Rights Plan, the Board
of Directors formed a Rights Redemption Committee during 1997 to perform certain
functions in accordance with such plan. The Rights Redemption Committee is
comprised of four directors appointed by the Board of Directors: David N.
Pierce, Andrew W. Pierce, Thomas B. Lovejoy and Peter L. Raven. Prior to his
resignation on January 31, 2002, Jay W. Decker was also a member of the Rights
Redemption Committee. The Rights Redemption Committee did not meet during 2001.
Vote Required
Directors are elected by the affirmative vote of the holders of a
plurality of the shares of common stock voted at the Annual Meeting. Abstentions
and broker nonvotes will not be counted in the election of directors.
The Board of Directors recommends a vote "FOR" the election of the
nominees of management, David N. Pierce and Peter L. Raven, as directors of the
Company, to serve in such capacities until the expiration of their term and
until their successors are elected and qualified.
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
The Company has engaged Dennis B. Goldstein to provide special legal
services from time to time, not to exceed an aggregate of $60,000 per year.
During 2001, the Company paid Dennis B. Goldstein $2,250 for such services.
Stock Option Extensions
On April 5, 2001, the Company extended the term of options to purchase
125,000 shares of the Company's common stock that were to expire during 2001 for
a period of two years, with a one-year vesting period. The Company incurred
deferred compensation cost of $218,750, including $175,000 covering the
intrinsic value applicable to 100,000 options held by an executive and $43,750
covering the intrinsic value applicable to 25,000 options held by a nonexecutive
employee, to be amortized to expense over the one-year vesting period.
Principal Stockholders
The following table sets forth, as of June 30, 2002, the name and
shareholdings of each person who owns of record, or was known by the Company to
own beneficially, 5% or more of the common stock currently 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 those exercisable
within 60 days of the table date:
Principal Stockholders, Officers and Directors
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Nature of Ownership Percentage of Ownership(1)
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Common Common
Beneficial Owner Stock Options(2) Total(3) Stock Options(2) Total
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David N. Pierce(4).......... 70,550 825,000 895,550 0.4% 4.5% 4.8%
Andrew W. Pierce............ 65,103 760,000 825,103 0.4 4.1 4.5
Thomas B. Lovejoy(5)........ 527,367 460,000 987,367 3.0 2.5 5.5
Jerzy B. Maciolek........... -- 510,000 510,000 0.0 2.8 2.8
Scott J. Duncan(6).......... 153,500 250,000 403,500 0.9 1.4 2.3
Peter L. Raven.............. 40,000 28,000 68,000 0.2 0.2 0.4
Dennis B. Goldstein(7)...... 5,400 14,000 19,400 0.0 0.1 0.1
Clay Newton................. -- -- -- -- -- --
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All executive officers and
directors as a group
a group (eight persons) 861,920 2,847,000 3,708,920 4.9% 13.9% 18.1%
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(1) Calculations of total percentages of ownership outstanding for each
individual assume 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.
(2) 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 2002 to December 2007.
(3) Except as otherwise noted, shares are owned beneficially and of record, and
such record stockholder has sole voting, investment and dispositive power.
(4) Includes 50,000 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 14,000 shares held by Mr. Pierce's
wife, Mary Phillips, and 2,000 shares held by Mary Phillips as custodian
for minor children, of which Mr. Pierce disclaims beneficial ownership.
(5) Includes 41,000 shares held in trust for the benefit of Thomas B. Lovejoy's
children, 104,500 shares held in Mr. Lovejoy's IRA account, 10,000 shares
held by Mr. Lovejoy's spouse's IRA account, 200,000 shares held by Lovejoy
& Associates, Inc. (of which Mr. Lovejoy is sole owner), and 17,500 shares
owned by Lovejoy & Associates Profit Sharing Plan. Mr. Lovejoy is deemed to
hold dispositive power over all of such shares.
(6) Includes 125,000 shares held by Scott J. Duncan jointly with his wife,
Cathy H. Duncan; 6,500 shares held solely by Cathy H. Duncan; and 22,000
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.
(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.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than 10% of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of equity securities of the Company. Officers,
directors and greater than 10% stockholders are required to furnish the Company
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 the Company during or respecting its last fiscal year ended
December 31, 2001, 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 the Company, 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 Securities Exchange Act.
Executive Compensation
Summary Compensation
The following table sets forth, for the last three fiscal years of the
Company, the annual and long-term compensation earned by, awarded to, or paid to
the person who was Chief Executive Officer of the Company and each of the five
other highest compensated executive officers of the Company as of the end of the
last fiscal year (the "Named Executive Officers"):
Annual Compensation Long-Term Compensation
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Awards Payouts
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(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities All
Restricted Underlying Other
Year Other Annual Stock Options/ LTIP Compen-
Name and Principal Ended Salary Bonus Compensation Award(s) SARs Payouts sation
Position Dec. 31 ($)(1) ($)(1) ($) ($) (no.) (2) ($) ($)(3)
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David N. Pierce 2001 $203,319 $ -- $ -- -- 60,000 -- $ --
President 2000 203,319 60,996 -- -- 60,000 -- 10,000
(CEO) 1999 197,466 185,760 -- -- 60,000 -- 7,409
Andrew W. Pierce 2001 $151,307 $ -- $ -- -- 50,000 -- $ --
Vice-President 2000 151,307 37,827 -- -- 50,000 -- 10,000
(COO) 1999 146,951 115,200 -- -- 50,000 -- 9,228
Thomas B. Lovejoy 2001 $151,307 $ -- $ -- -- 50,000 -- $ 9,078
Vice-Chairman 2000 151,307 37,827 -- -- 50,000 -- 10,000
(CFO) 1999 146,951 0 --(4) -- 50,000 -- 5,878
Jerzy B. Maciolek 2001 $151,307 $ -- $ -- -- 50,000 -- $ 9,078
Vice-President 2000 151,307 37,827 --(1) -- 50,000 -- 10,000
Exploration 1999 146,951 115,200 --(1) -- 50,000 -- 7,149
Scott J. Duncan 2001 $118,209 $ -- $ -- -- 50,000 -- $ 7,093
Vice-President 2000 118,209 29,552 -- -- 50,000 -- 8,866
Secretary/Treasurer 1999 114,806 90,000 -- -- 50,000 -- 7,325
Dennis L. Tatum(5) 2001 $118,209 $ -- $ -- -- 50,000 -- $ 7,093
Vice-President 2000 118,209 29,552 -- -- 50,000 -- 8,866
Treasurer 1999 108,139 60,000 -- -- 50,000 -- 3,647
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(1) During each of the three preceding fiscal years, the Company approved the
Named Executive Officers' salary increases and bonuses that were
conditioned on results of future activities or financings that were not
met. The conditional salary increases and bonuses were previously accrued
for financial reporting purposes and reported in the summary compensation
table for previous years. In March 2002, each of the Named Executive
Officers agreed to waive all such accrued but unpaid salary increases and
bonuses. Accordingly, the amounts reported for all periods reflect only
amounts earned and not subsequently waived.
(2) Includes stock options only.
(3) Includes the Company's employer contributions under the Company's 401(k)
plan. No material benefits are payable on retirement under this plan, which
was initiated in mid-1999.
(4) Excludes $60,000 paid during 1999 to Lovejoy & Associates, a consulting
firm owned by Mr. Lovejoy, prior to Mr. Lovejoy becoming the Company's
Chief Financial Officer during 1999.
(5) Mr. Tatum resigned from the Company as of March 31, 2002.
Option/SAR Grants in Last Fiscal Year
The following table sets forth information respecting all individual
grants of options and stock appreciation rights ("SARs") made during the last
completed fiscal year to the Named Executive Officers of the Company:
Potential Realizable
Value at Assumed Rates
of Share Price
Appreciation for Option
Individual Grants Term ($)
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(a) (b)(1)(2) (c)(1) (d) (e) (f) (g)
Percent of
Number of Total Options/
Securities SARs Granted Exercise
Underlying to Employees or Base
Options/SARs During Price Expiration
Name Granted (#) Fiscal Year ($/share) Date 5% 10%
- ------------------------ --------------- -------------- ---------- ---------- ------------ ------------
David N. Pierce........ 60,000 12.6% $2.44 11/12/08 $59,600 $138,892
Andrew W. Pierce....... 50,000 10.5 2.44 11/12/08 49,666 115,743
Thomas B. Lovejoy...... 50,000 10.5 2.44 11/12/08 49,666 115,743
Jerzy B. Maciolek...... 50,000 10.5 2.44 11/12/08 49,666 115,743
Scott J. Duncan........ 50,000 10.5 2.44 11/12/08 49,666 115,743
Dennis L. Tatum(3)..... 50,000 10.5 2.44 11/12/08 49,666 115,743
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(1) Vests one-third per year, beginning November 12, 2002. Options issued to
executive officers and directors contain terms providing that in the event
of a change in control of the Company and at the election of the optionee,
the unexercised options will be canceled, and the Company will pay to the
optionee an amount equal to the number of unexercised options multiplied by
the amount by which the fair market value of the common stock as of the
date preceding the change of control event exceeds the option exercise
price. The grants of options to officers and directors were not the result
of arm's-length negotiations.
(2) Includes stock options granted during 2001 only. Excludes stock options
expiring during 2001 that were extended for a period of two years with a
one-year vesting period.
(3) Mr. Tatum resigned from the Company as of March 31, 2002.
Aggregate Option/SAR Exercises in Last Fiscal Year and Year-End Option/SAR
Values
The following table sets forth information respecting the exercise of
options and SARs during the last completed fiscal year by the Named Executive
Officers and the fiscal year-end values of unexercised options and SARs:
(a) (b) (c) (d) (e)
Number of Securities Underlying
Shares Unexercised Options/SARs at Value of Unexercised
Acquired Fiscal In-the-Money Options/SARs
on Value Year-End (#) at Fiscal Year-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable(1) Unexercisable(2)
---------------------- ----------- ---------- --------------------------------- ---------------------------
David N. Pierce....... -- -- 825,000 / 120,000 $ -- / $ --
Andrew W. Pierce...... -- -- 760,000 / 100,000 $ -- / $ --
Thomas B. Lovejoy..... -- -- 460,000 / 200,000 $ -- / $ --
Jerzy B. Maciolek..... -- -- 510,000 / 100,000 $69,000 / $225,000
Scott J. Duncan....... -- -- 250,000 / 100,000 $ -- / $ --
Dennis L. Tatum(3).... -- -- 145,200 / 100,000 $ -- / $ --
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(1) Includes stock options only.
(2) Based on the closing sales price for the common stock of $1.96 on
December 31, 2001.
(3) Mr. Tatum resigned from the Company as of March 31, 2002.
Directors' Compensation
The Company reimburses its directors for costs incurred by them in
attending meetings of the Board of Directors and its committees. The Company
does not pay any separate compensation to employees who serve on the Board of
Directors.
During 2001, the Company's outside directors, Peter L. Raven, Jay W.
Decker and Dennis B. Goldstein, were paid cash fees of $18,000 each and granted
options to purchase 10,000 shares of the Company's common stock each at an
exercise price of $2.44 per share. Jay W. Decker resigned as a director of the
Company on January 31, 2002. The exercise price for each of the foregoing
options was equal to the market price of the common stock as of the date of
grant. In addition to the above amounts, Dennis B. Goldstein was paid a cash fee
of $2,250 for special legal services during 2001. Prior to his appointment as a
director, Clay Newton was paid a consulting fee of $9,840 for conducting a
pre-appointment review of the Company's accounting and reporting practices and
policies.
Employment Agreements, Termination of Employment, and Change in Control
The Company 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 2001 of $203,319 for David N. Pierce,
$151,307 for Andrew W. Pierce, $151,307 for Jerzy B. Maciolek, and $118,209 for
Scott J. Duncan. 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. However, in view
of the Company's limited cash position, and notwithstanding the provisions of
the employment agreements, no salary increases have been granted since 1999, and
actual salaries paid under these agreements are reflected in the table on page
6. Each executive officer is entitled under his respective employment agreement
to certain continuation of compensation in the event the agreement is terminated
upon death or disability, or the Company terminates the agreement other than for
cause.
In addition to the foregoing terms, Mr. Maciolek's employment agreement
provided for an annual bonus 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, 1998, 1999 and 2000, Mr. Maciolek received a $100,000 contractual
bonus to be applied against any exercise of his options to purchase common
stock. In March 2002, Mr. Maciolek waived receipt of these bonuses.
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 of Jerzy B. Maciolek), and
the value of previously granted employee benefits. Additionally, the Company 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 the Company 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 the
Company to terminate its business and liquidate its assets; or (v) a merger or
consolidation of the Company in which the Company's existing stockholders own
less than 50% of the outstanding voting shares of the surviving entity.
Options and Warrants Granted to Officers, Directors, Employees and Consultants
As of December 31, 2001, the Company had outstanding options and
warrants to purchase an aggregate of 4,885,585 shares that had been granted to
officers, directors, employees and consultants of the Company. Of such options,
1,116,229 contain vesting limitations contingent on continuing association with
the Company. These options and warrants 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
the Company and at the election of the optionee, the unexercised options will be
canceled, and the Company 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.
Compensation Committee Report
General
Under the supervision of the Compensation Committee, the Company has
developed and implemented compensation policies, plans and programs that seek to
enhance the Company's ability to recruit and retain qualified executive and
other personnel, including incentive bonuses and 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 the Company.
The Company's basic compensation package consists 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 the Company,
provide rewards that are both recurring and nonrecurring and both financial and
nonfinancial, 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;
o consult with and 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 succession
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 the Company's proxy or information
statement for its annual stockholders' meeting disclosure of
the Compensation Committee's compensation policies applicable
to executive officers, including the specific relationship of
corporate performance to executive compensation; and
o develop and administer the Company's stock option and stock
award plans for executive officers and other employees.
The Compensation Committee conferred on November 12, 2001, in
connection with the board meeting of that date and met March 3, 2002, to
consider base salaries for 2002 and bonuses for 2001. In light of the Company's
diminished cash position at the end of 2001, the Compensation Committee
recommended to the Board of Directors that there be no salary increases for 2002
or cash bonuses for the year ending 2001. Management concurred with the
Compensation Committee's recommendation and the Board of Directors approved the
committee's recommendation. The recommendation of the Compensation Committee and
the action of the Board of Directors were based solely on the Company's cash
position and not upon dissatisfaction with management's performance
The Compensation Committee intends that stock options serve as a
significant component of the Company's total compensation package in order to
retain employees and to focus their efforts on enhancing stockholder value.
Management proposed, the Compensation Committee recommended, and the Board of
Directors approved the year 2001 stock option awards for executives (other than
for the Chief Executive Officer, whose stock options are discussed below) at the
same level as 2000.
All stock option and award plans are administered by a committee
consisting of the Board of Directors or a committee thereof. At its discretion,
the committee may grant stock, incentive stock options or nonqualified options
to any employee, including officers. In addition to the options granted under
the stock option plans, the Company also issues nonqualified options outside the
stock option plans. The granted options have terms ranging from five to seven
years and vest over periods ranging from the date of grant to three years. Under
terms of the stock option award plans, the Company may also issue restricted
stock. The Company has not issued any stock awards during 2002 through the date
of this proxy statement under the terms of the above stock option and award
plans.
2001 Compensation Review for Executives and Employees other than the Chief
Executive Officer
The Compensation Committee recommended and the Board of Directors
approved a 2001 salary increase and 2000 bonus for all executive officers, other
than the Chief Executive Officer, by reference to an informal overview of
compensation at 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 for this purpose did not include all of the firms
included in the significantly larger 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 the Company and its executives, the
Compensation Committee considered the extent to which the Company and its
executives had accomplished objectives for the Company developed by discussion
between the Compensation Committee and management, the extent to which the
Company's successes and failures in meeting objectives was or was not reasonably
within the control or responsibility of the Company's management, and the
recommendations of management. However, due to the Company's limited cash
position, 2001 salary increases were waived in March 2002. Actual salaries paid
are reflected in the summary compensation table on page 6. In respect to 2001
bonuses, the Compensation Committee emphasized the Company's continued progress
towards discovering, developing and marketing gas reserves in Poland, acquiring
additional oil and gas assets in Poland, the individual performance of each
executive, and in general, expanding the Company's strategic alliances and
industry position. Based upon its discussions with management and the ongoing
activities of the Company, the Compensation Committee recommended and the Board
of Directors approved 2001 bonuses; however, due to the Company's limited cash
position, all of the bonuses recommended by the Compensation Committee and
approved by the board for 2001 were also waived in March 2002.
2001 Chief Executive Officer Compensation Review
The Compensation Committee recommended and the Board of Directors also
approved a 2001 salary increase and 2000 bonus for the Chief Executive Officer.
In March 2002, due to the Company's limited cash position, the 2001 salary
increase and bonus for 2000 were waived by the Chief Executive Officer. The
Compensation Committee recommended and the Board of Directors approved the
recommendation that, in light of the Company's diminished cash position at the
end of 2001, there be no salary increase for the year 2002 and that the cash
bonus for the year 2001 for the Chief Executive Officer be delayed indefinitely.
The recommendation of the Committee and the action of the Board of Directors
were based solely on the Company's cash position and not upon dissatisfaction
with the Chief Executive Officer's performance. In March 2002, the 2001 bonus
was also waived by the Chief Executive Officer.
The 2001 bonus for the Chief Executive Officer was awarded on the same
basis as applied to other executives, except that objectives against which
performance was measured also included continuing the development of the
Company's relationships with the government of Poland and the Company's
strategic partners, the Company's progress toward discovering, developing and
marketing gas reserves in Poland, acquiring additional oil and gas assets in
Poland, and expanding the Company's strategic alliances and industry position
generally. Efforts to obtain additional funding, conceiving and implementing
programs to achieve growth, maintaining compliance with regulatory requirements,
and achieving within the stockholder and the broader business community a high
regard for the integrity of the Company and its management were also considered,
without any specific weight assigned to any specific factors. The Compensation
Committee also weighed accomplishments and progress against various delays and
impediments encountered and considered the degree to which material events and
factors were or were not within the control of the Chief Executive Officer. Due
to the nature of the Company's business, the Compensation Committee did not
establish objective criteria in the determination of compensation for the Chief
Executive Officer.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is a present or former officer
of the Company or any subsidiary. There are no other interlocks. No member of
the Compensation Committee, his family, or his affiliate was a party to any
material transactions with the Company or any subsidiary since the beginning of
the last completed fiscal year. No executive officer of the Company 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 the Company.
The foregoing report has been furnished by: Dennis B. Goldstein
Peter L. Raven
Audit Committee Report
The Audit Committee oversees the financial reporting process for the
Company on behalf of the Board of Directors. In fulfilling its oversight
responsibilities, the Audit Committee reviewed the annual financial statements
included in the Annual Report and filed with the Securities and Exchange
Commission. The Audit Committee also reviewed the unaudited financial statements
filed with the Company's quarterly reports on Form 10-Q.
In accordance with Statements of Accounting Standards No. 61, 89 and
90, discussions were held with management and the independent auditors regarding
the acceptability and the quality of the accounting principles used in the
financial statements. These discussions included the clarity of the disclosures
made therein, the underlying estimates and assumptions used in the financial
reporting, and the reasonableness of the significant judgments and management
decisions made in developing the financial statements. In addition, the Audit
Committee has discussed with the independent auditors their independence from
the Company and its management, including the matters in the written disclosures
required by Independence Standards Board Standard No. 1.
The Audit Committee has also discussed issues related to the overall
scope and objectives of the audits conducted, the internal controls used by the
Company, and the selection of the Company's independent auditors with the
Company management and its independent auditors.
Pursuant to the reviews and discussions described above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the fiscal year
ended December 31, 2001, for filing with the Securities and Exchange Commission.
The foregoing report has been furnished by: Dennis B. Goldstein
Peter L. Raven
Five-Year Performance Comparison Graph
The following graph provides an indicator of cumulative total
stockholder returns for the Company as compared with the total returns index for
the Nasdaq Stock Market (U.S. companies) and an industry peer group for the past
five years. The industry peer group selected by the Company is comprised of
companies in the United States whose stock is traded on Nasdaq and which are
included in Standard Industrial Code 1311, or SIC 1311, entitled "Crude
Petroleum and Natural Gas." The industry peer group comprised of firms in SIC
1311 is different than the group of firms the Compensation Committee used for
comparison purposes in determining executive compensation. The Compensation
Committee selected firms from SIC 1311 that were similar to the Company in terms
of geographic location and size, with emphasis on exploration as compared to the
level of production and reserves, and profitability. For purposes of comparing
five-year cumulative total stockholder returns, the Company believes that it is
appropriate to provide five-year cumulative total stockholder returns data for
the industry peer group based on a broader industrial classification code group
involving a larger number of firms.
Comparison of Five-Year Cumulative Total Returns
The plot points for the above graph are detailed in the following
table:
12/1996 12/1997 12/1998 12/1999 12/2000 12/2001
---------- --------- ---------- -------------------- ----------
FX Energy................................... 100.00 70.27 109.46 58.11 38.51 21.19
Nasdaq stock market total return index...... 100.00 122.48 172.68 320.83 192.98 153.12
Industry peer group (SIC 1310 - 1319)....... 100.00 95.29 46.33 47.80 99.36 74.45
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are weighted on a daily basis, 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.
APPROVAL OF 2001 STOCK OPTION AND AWARD PLAN
General
On November 12, 2001, the Board of Directors of the Company approved
the terms of the 2001 Stock Option and Award Plan (the "2001 Plan"). In order
for certain 2001 Plan provisions relating to incentive stock options to be
effective, it must be approved by the stockholders of the Company and is being
submitted for such approval pursuant to this proxy statement.
Plan Summary
The Board of Directors of the Company believes that it is important
that senior management as well as other employees and individuals who contribute
to the success of the Company have a stake in the enterprise as stockholders.
Consistent with this belief, the award of stock options has been and will
continue to be an important element of their compensation program. The Board of
Directors and the stockholders previously approved and adopted the 1995 Stock
Option and Award Plan, the 1996 Stock Option and Award Plan, the 1997 Stock
Option and Award Plan, the 1998 Stock Option and Award Plan, the 1999 Stock
Option and Award Plan, and the 2000 Stock Option and Award Plan. As of December
31, 2001, options to purchase an aggregate of 2,865,585 shares were outstanding
under such plans, leaving 187,415 shares available for issue under such plans.
As the award of stock options is an important element of the Company's
compensation program, the Board of Directors believes that another plan should
be adopted.
The 2001 Plan is intended to (a) attract competent directors, executive
personnel and other employees, (b) ensure the retention of the services of
existing directors, executive personnel and employees, and (c) provide
incentives to all of such personnel to devote the utmost effort and skill to the
advancement and betterment of the Company by permitting them to participate in
ownership and thereby permitting them to share in increases in the value that
they help produce.
The 2001 Plan is to be administered either by the Board of Directors or
by the appropriate committee to be appointed from time to time by such Board of
Directors. Currently, the Compensation Committee recommends actions respecting
the 2001 Plan to the Board of Directors. Awards granted under the 2001 Plan may
be incentive stock options ("ISOs") as defined in the Internal Revenue Code,
appreciation rights, options that do not qualify as ISOs, or stock bonus awards
that are awarded to employees, officers and directors, who, in the opinion of
the board or the committee, have contributed or are expected to contribute
materially to the success of the Company. In addition, at the discretion of the
Board of Directors or the committee, options or bonus stock may be granted to
individuals who are not employees, officers or directors but contribute to the
success of the Company.
The exercise price of options granted under the 2001 Plan is to be
determined by the Board of Directors or the committee at the time of grant and,
in the case of ISOs, may not be less than 100% of the fair market value of such
capital stock on the date the option is granted (110% of the fair market value
in the case of 10% stockholders). Options granted under the 2001 Plan must
expire not later than 10 years after the date of grant (five years in the case
of ISOs granted to 10% stockholders). The option price may be paid by cash or,
at the discretion of the Company's Board of Directors or committee, by delivery
of shares of common stock of the Company already owned by the optionee (valued
at their fair market value at the date of exercise), a fully secured promissory
note, or a combination thereof.
All of the employees, officers and directors of the Company are
eligible to participate under the 2001 Plan. A maximum of 600,000 shares are
available for grant under the 2001 Plan. The identification of individuals
entitled to receive awards, the terms of the awards, and the number of shares
subject to individual awards are determined by the Board of Directors or the
committee, in its sole discretion; provided, however, that in no event may the
aggregate fair market value of shares for which an ISO is first exercisable in
any calendar year by any eligible employee exceed $100,000.
The aggregate number of shares with respect to which options or stock
awards may be granted under the 2001 Plan, the number of shares covered by each
outstanding option, and the purchase price per share shall be adjusted for any
increase or decrease in the number of issued shares resulting from a
recapitalization, reorganization, merger, consolidation, exchange of shares,
stock dividend, stock split, reverse stock split, or other subdivision or
consolidation of shares. In the case of an ISO, the ratio of the option price
immediately after the change to the fair market value of the stock subject to
the option immediately after the corporation transaction must not be more
favorable to the optionee on a share-by-share basis than the ratio of the old
option price to the fair market value of the stock subject to the option
immediately before such transaction. All such adjustments shall be made by the
Board of Directors or the committee, whose good faith determination shall be
binding absent manifest error.
The Board of Directors or the committee may, from time to time alter,
amend, suspend or discontinue the 2001 Plan with respect to any shares as to
which options or stock awards have not been granted. However, no such alteration
or amendment (unless approved by the stockholders) shall (a) increase (except
adjustment for an event of dilution) the maximum number of shares for which
options or stock awards may be granted under the 2001 Plan either in the
aggregate or to any eligible employee; (b) reduce (except adjustment for an
event of dilution) the minimum option prices that may be established under the
2001 Plan; (c) extend the period or periods during which options may be granted
or exercised; (d) materially modify the requirements as to eligibility for
participation in the 2001 Plan; (e) change the provisions relating to events of
dilution; or (f) materially increase the benefits accruing to the eligible
participants under the 2001 Plan.
Certain Tax Matters
A participant to whom a nonqualified option is granted will not realize
income at the time of the grant. Upon exercise of the option, the excess of the
fair market value of the stock on the date of exercise over the exercise price
will be taxable to the optionee as ordinary income. The tax basis to the
optionee for the stock acquired is the exercise price plus the amount recognized
as income. The Company will be entitled to a deduction equal to the amount of
the ordinary income realized by the optionee in the taxable year, which includes
the end of the optionee's taxable year in which the optionee realizes the
ordinary income. When shares acquired pursuant to the exercise of the option are
disposed of, the holder will realize additional capital gain or loss equal to
the difference between the sales proceeds and the optionee's tax basis in the
stock.
If a participant to whom an option is granted exercises such option by
payment of the exercise price in whole or in part with previously owned shares,
the optionee will not realize income with respect to the number of shares
received on exercise that equals the number of shares delivered by the optionee.
The optionee's basis for the delivered shares will carry over to the option
shares received. With regard to the number of nonqualified option shares
received that exceed the number of shares delivered, the optionee will realize
ordinary income at the time of exercise; the optionee's tax basis in these
additional option shares will equal the amount of ordinary income realized plus
the amount of any cash paid.
Recipients of ISOs will not be required to recognize income at the time
of the grant of the options or at the time of exercise of the options as long as
the stock received on exercise is held for at least two years from the date of
the grant of the ISO or one year from the date of exercise (although the
difference between the fair market value of the stock and the exercise price
paid at the time of exercise must be taken into account for alternative minimum
tax purposes). If the stock received upon exercise of an ISO is disposed of
prior to the expiration of either of such periods, the optionee will be required
to recognize as ordinary income the amount by which the fair market value of the
stock received at the time of exercise exceeds the exercise price of the ISO.
Under the 2001 Plan, stock appreciation rights ("SARs") can be granted
at the time an option is granted with respect to all or a portion of the shares
subject to the related option. SARs can only be exercised to the extent the
related option is exercisable and cannot be exercised for the six-month period
following the date of grant, except in the event of death or disability of the
optionee. The exercise of any portion of either the related option or the tandem
SARs will cause a corresponding reduction in the number of shares remaining
subject to the option or the tandem SARs, thus maintaining a balance between
outstanding options and SARs. SARs permit the holder to receive an amount (in
cash, shares or a combination of cash and shares, as determined by the Board of
Directors at the time of grant) equal to the number of SARs exercised multiplied
by the excess of the fair market value of the shares on the exercise date over
the exercise price of the related options.
Under the terms of the 2001 Plan, the Board of Directors or the
committee may also grant stock awards that may, at the discretion of such Board
of Directors or committee, be subject to forfeiture under certain conditions.
Recipients of stock awards will realize ordinary income at the time of the lapse
of any forfeiture provisions equal to the fair market value of the shares less
any amount paid in connection with the issuance (the Board of Directors or the
committee can require the payment of par value at the time of the grant). The
Company will realize a corresponding compensation deduction. The holder will
have a basis in the shares acquired equal to any amount paid on exercise plus
the amount of any ordinary income recognized by the holder. On sale of the
shares, the holder will have a capital gain or loss equal to the sale proceeds
minus his or her basis in the shares.
Vote Required
Adoption of the 2001 Plan requires the approval of a majority of the
shares present, in person or represented by proxy, and voting at the Annual
Meeting. Abstentions and broker nonvotes will not be counted and will have the
same legal effect as a vote in favor of the approval of the 2001 Plan.
The Board of Directors recommends a vote "FOR" the approval of the 2001
Plan. It is intended that, in the absence of contrary specifications, votes will
be cast pursuant to the enclosed proxies for the approval of the 2001 Plan.
DISCLOSURE WITH RESPECT TO THE
COMPANY'S EQUITY COMPENSATION PLANS
Number of Securities
Remaining Available
Number of Securities for Future Issuance
To Be Issued upon Weighted-Average under Equity
Exercise of Exercise Price of Compensation Plans
Outstanding Options, Outstanding Options, (excluding securities
Plan Category Warrants and Rights Warrants and Rights reflected in column (a))
(a) (b) (c)
----------------------- ----------------------- -----------------------
Equity compensation plans
approved by security holders..... 2,865,585 $6.090 187,415
Equity compensation plans not
approved by security holders..... 3,020,000 $3.685 --
--------- -------
Total 5,885,585 $4.856 187,415
========= =======
Since inception, the Company has issued options pursuant to stock
option and award plans that have been adopted by the Board of Directors and
approved by the stockholders. Currently, the Company has outstanding options to
purchase an aggregate of 2,865,585 shares under plans that have been approved by
the stockholders. In addition, from time to time, the Board of Directors has
authorized the issuance of options, warrants and convertible securities under
arrangements that have not been submitted to the stockholders for approval. This
includes compensatory options granted to employees, consultants, officers,
directors and others, as well as the right to convert to common stock the
outstanding principal balance of a promissory note issued pursuant to a gas
purchase option with an unaffiliated party. There is an aggregate of 3,020,000
shares reserved for issuance under currently outstanding options, warrants and
convertible securities not submitted to the stockholders for approval.
In addition to the specific provisions noted below, all such
outstanding options, warrants and convertible securities provide for
antidilution adjustments to the number of shares issuable and the exercise or
conversion price in the event of any stock split, stock dividend or
recapitalization of the common stock of the Company; restrict transfer; require
the Company to reserve for issuance that number of shares issuable on exercise
or conversion; require notice to the holder prior to certain extraordinary
corporate events; require payment of the exercise price of options and warrants
in cash plus such other type of consideration as specifically noted; are fully
vested and exercisable unless otherwise indicated; and contain other similar
miscellaneous items.
Early in the Company's history, in June 1994, the Company granted to
David N. Pierce and Andrew W. Pierce, founders, executive officers and
directors, options to purchase 500,000 shares each at $3.00 per share,
exercisable at any time within 10 years. These options are currently fully
vested and contain terms providing that, in the event of a change of control of
the Company and at the election of the optionee, in consideration of the
cancellation of the unexercised options, the Company 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
date of the change of control exceeded the option exercise price. The grants of
these options were not the result of arm's-length negotiations. The Company has
agreed to register under the Securities Act of 1933 the issuance of the common
stock on exercise of these options, at its cost, in certain circumstances. The
options may be exercised by the payment of cash or delivery of shares of common
stock already owned.
In August 1995, the Company granted to Thomas B. Lovejoy, then the
principal of a financial consultant to the Company and now an officer and
director, options to purchase an aggregate of 350,000 shares of common stock at
$3.00 per share, originally expiring August 1, 2000, with respect to 150,000
shares, August 1, 2001, with respect to 100,000 shares, and August 1, 2002, with
respect to 100,000 shares. The expiration dates of the options previously
expiring in 2000 and 2001 were each extended for two years. The Company has
agreed to register the issuance or resale of the common stock issuable upon
exercise of this option in certain circumstances.
In November 1995, the Company granted to an individual warrants to
purchase 100,000 shares of common stock at $3.00 per share, originally expiring
in 2000, for financial consulting services. The expiration date of these
warrants was extended for two years, until August 3, 2002, with a one-year
vesting period.
The Company has outstanding five-year options to purchase an aggregate
of 175,000 shares of common stock at $1.50 per share issued in August 1995 and
five-year options to purchase an additional 275,000 shares of common stock at
$3.00 per share issued in October 1995 and April 1996. These options were issued
to five individuals, including, officers, directors and employees of the
Company. Prior to the expiration of their original term, all of these options
were extended for two years.
The Company granted to an outside consultant options to purchase 20,000
shares at $8.25 per share in 1997 and 30,000 shares at $7.375 per share in 1999.
The Company has agreed to register the issuance and resale of the common stock
issuable on the exercise of the option to purchase 20,000 shares granted in 1997
in certain circumstances. The options to purchase 30,000 shares granted in 1999
vest one third per year after the anniversary date of the grant, are exercisable
for a period of seven years after the date of vesting, and are exercisable by
delivering common stock owned by the optionee for over six months or a
promissory note on terms acceptable to the Board of Directors.
In September 1997, the Company issued to one executive officer and
director and one employee seven-year options to purchase 10,000 shares each at
an exercise price of $7.25 per share. The options are currently fully vested.
The Company has agreed to register issuance of the common stock issuable on
exercise of these options in certain circumstances.
The Company has granted to a consultant in Poland options to purchase
25,000 shares at $4.0625 per share on October 18, 2000, and at $2.44 per share
on November 12, 2001. Each option vests one third per year after the date of
grant and is exercisable for a period of seven years after the date of vesting.
The options may be exercised by the delivery of a promissory note in a form
satisfactory to the Board of Directors, by the delivery of common stock owned by
the optionee for over six months, or in such other form as the Board of
Directors may deem appropriate.
On March 9, 2001, the Company entered into a Gas Purchase Option
Agreement and Loan Agreement with Rolls-Royce Power Ventures Limited, or RRPV,
under which it borrowed $5 million to be used for exploration and development of
additional gas reserves in Poland. The loan was interest free for the first
year. In consideration of the loan, the Company granted RRPV an option to
purchase up to 17.0 million cubic feet of gas per day from the Company's
properties in Poland, subject to availability, exercisable on or before March 9,
2002. The option to purchase gas from the Company's Polish properties was not
exercised by RRPV. Under the loan agreement, the entire principal amount plus
accrued interest are due on or before March 9, 2003, unless RRPV elects to
convert the loan to restricted common stock at $5.00 per share, the market value
of the Company's common stock at the time the terms with RRPV were finalized.
INDEPENDENT PUBLIC ACCOUNTANTS
Selection of Auditors
The selection of the Company's auditors will not be submitted to the
stockholders for their approval in the absence of a requirement to do so. It is
anticipated that representatives of PricewaterhouseCoopers LLP will be present
at the Annual Meeting and will be provided the opportunity to make a statement,
if they desire to do so, and be available to respond to appropriate questions.
Audit Fees
The aggregate fees billed by PricewaterhouseCoopers LLP for
professional services rendered for the audit of the Company's annual financial
statements for the fiscal year ended December 31, 2001, and for the reviews of
the financial statements included in the Company's quarterly reports on Form
10-Q for that fiscal year were $58,000.
Financial Information Systems Design and Implementation Fees
There were no services performed by PricewaterhouseCoopers LLP for
professional services rendered for information technology services relating to
the Company's financial information systems design and implementation for the
fiscal year ended December 31, 2001.
All Other Fees
The aggregate fees billed by PricewaterhouseCoopers LLP for services
rendered to the Company, other than the services described above under "Audit
Fees" and "Financial Information Systems Design and Implementation Fees," for
the fiscal year ended December 31, 2001, were $11,084. The Audit Committee has
considered whether the provision of the services rendered for financial
information systems design and implementation and other nonaudit matters is
compatible with maintaining PricewaterhouseCoopers LLP's independence and
concluded that its independence was not impaired by performing such work for the
Company.
STOCKHOLDER PROPOSALS
No proposals have been submitted by stockholders of the Company for
consideration at the Annual Meeting. It is anticipated that the next annual
meeting of stockholders will be held during May 2003. Stockholders may present
proposals for inclusion in the proxy statement to be mailed in connection with
the 2003 Annual Meeting of Stockholders of the Company, provided such proposals
are received by the Company no later than March 15, 2003, and are otherwise in
compliance with applicable laws and regulations and the governing provisions of
the Articles of Incorporation and Bylaws of the Company.
OTHER MATTERS
Management does not know of any business other than that referred to
herein that may be considered at the Annual Meeting. If any other matters should
properly come before the Annual Meeting, it is the intention of the persons
named in the accompanying form of proxy to vote the proxies held by them in
accordance with their best judgment.
In order to assure the presence of the necessary quorum and to vote on
the matters to come before the Annual Meeting, please indicate your choices on
the enclosed proxy and date, sign and return it promptly in the envelope
provided. The signing of a proxy by no means prevents your attending the
meeting.
By Order of the Board of Directors
FX ENERGY, INC.
Scott J. Duncan, Secretary
Salt Lake City, Utah
August 12, 2002
PROXY
FX ENERGY, INC.
Annual Meeting of the Stockholders of (This Proxy Is Solicited on Behalf
FX Energy, Inc. on September 10, 2002 of the Board of Directors)
The undersigned hereby appoints David N. Pierce and Scott J. Duncan
proxies, with full power of substitution, to vote the shares of common stock of
FX ENERGY, INC. (the "Company"), which the undersigned is entitled to vote at
the Annual Meeting of Stockholders of the Company ("Annual Meeting") to be held
at Little America Hotel, 500 South Main, Salt Lake City, Utah, on September 10,
2002, at 10:00 a.m., local time, or any adjournment(s) thereof, such proxies
being directed to vote as specified below. If no instructions are specified,
such proxy will be voted "FOR" each proposal.
To vote in accordance with the Board of Directors' recommendations,
sign below. The "FOR" boxes may, but need not, be checked. To vote against any
of the recommendations, check the appropriate box marked "AGAINST" below. To
withhold authority for the proxies to vote for any of the recommendations, check
the appropriate box(es) marked "WITHHOLD AUTHORITY" below.
The Board of Directors recommends votes "FOR" the following proposals,
each of which has been proposed by the Board of Directors:
1. To elect each of the following nominees to serve as a director
for a term expiring at the 2005 Annual Meeting of the
Stockholders of the Company and until a successor is elected
and qualified. To withhold your vote for any individual
nominee, strike a line through such nominee's name.
David N. Pierce Peter L. Raven
2. To approve the FX Energy, Inc. 2001 Stock Option and Award
Plan.
FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY [ ]
3. To transact such other business as may properly come before
the Annual Meeting or any adjournment(s) thereof.
FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY [ ]
Please print your name and sign exactly as your name appears in the records of
the Company. When shares are held by joint tenants, both should sign.
Dated:___________________________
_________________________________ ________________________________
Signature Signature (if held jointly)
_________________________________ ________________________________
Print Name Print Name
PLEASE MARK, SIGN, DATE, AND
RETURN THIS PROXY TO: FX ENERGY, INC.
3006 HIGHLAND DRIVE, SUITE 206
SALT LAKE CITY, UTAH 84106