SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
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[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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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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FX ENERGY, INC.
3006 Highland Drive, #206
Salt Lake City, Utah 84106 USA
Telephone: (801) 486-5555
Facsimile: (801) 486-5575
May 14, 2006
Dear FX Energy Stockholder:
Our Proxy Statement for the 2006 Annual Stockholders' Meeting of FX
Energy, Inc. and our 2005 Annual Report are enclosed. At this meeting, we will
seek your support for the election of directors and the ratification of
PricewaterhouseCoopers LLP as our independent registered public accounting firm
for 2006.
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 each 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 JUNE 14, 2006
To the Stockholders of FX Energy, Inc.:
The 2006 Annual Stockholders' Meeting (the "Annual Meeting") of FX
Energy, Inc. (the "Company") will be held June 14, 2006, in the Sawtooth Room,
Little America Hotel, 500 South Main Street, Salt Lake City, Utah. 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 ratify the appointment of PricewaterhouseCoopers LLP as the
independent registered public accounting firm for the Company
for 2006;
(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 Company's common stock outstanding as of
the close of business April 30, 2006 (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
May 14, 2006
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. If you prefer, you may send the Company your proxy by facsimile
transmission at 1-801-486-5575.
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.
FX ENERGY, INC.
3006 HIGHLAND DRIVE, SUITE 206
SALT LAKE CITY, UTAH 84106
PROXY STATEMENT
INTRODUCTION
This proxy statement is furnished in connection with the solicitation
of proxies, on behalf 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 June 14, 2006, 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 the Company 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) TO ratify the appointment of PricewaterhouseCoopers LLP as the
independent registered public accounting firm for the Company
for 2006;
(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 or sent by facsimile
transmission to 1-801-486-5575, 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 Company's 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 May
14, 2006.
Only holders of the Company's 35,097,279 shares of common stock, par
value $0.001, outstanding as of the close of business on April 30, 2006 (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. Routine matters are considered approved by the stockholders if the
number of votes cast in favor of the action exceeds the number of shares cast in
opposition to the action. 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 811,965 shares of common
stock, or approximately 2.3% of the outstanding shares, have indicated their
intent to vote in favor of all proposals.
1
The Company's policy is that each member of the Board of Directors is
encouraged, but not required, to attend the Annual Meeting. None of the
Company's directors attended the Company's 2005 Annual Meeting.
CORPORATE GOVERNANCE
Executive Officers, Directors
The following sets forth the name, age, term of directorship, and
principal business experience of each executive officer and director of the
Company.
Year
---------------------
Director Term Business Experience During Past
Name Age Since Expires Five Years and Other Information
------------------------ ----- --------- ---------- ---------------------------------------------------------------
Directors
David N. Pierce 60 1992 2008 President and a director of the Company since 1992, Chairman
from 1992 through 2003. For more than 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 more than 30 years of experience in natural resources,
securities and international business law. Graduate of
Princeton University and Stanford University Law School.
Thomas B. Lovejoy 70 1995 2007 Chairman of the Board of Directors since October 27, 2003,
Chief Financial Officer since 1999, Vice-Chairman from 1995
through 2003, 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 56 1995 2006 Vice-President of International Exploration and a director of
the Company since 1995. Employed by the Company since
September 1995. Instrumental in the Company's exploration
efforts in Poland. 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.
2
Year
---------------------
Director Term Business Experience During Past
Name Age Since Expires Five Years and Other Information
------------------------ ----- --------- ---------- ---------------------------------------------------------------
David L. Worrell 60 2003 2007 Director of the Company since 2003. Founder and President of
David Worrell Associates, a commercial real estate consulting
and development firm with emphasis on the hospitality
industry, from 1990 through 1997 and 1999 through the
present. Served in 1998 as Senior Vice-President,
Development, for Homestead Village, Inc., a New York Stock
Exchange listed, lodging company. From 1993 through 1997,
served as Chief Executive Officer, and from 1998 through the
present, as Chairman of Subway Russia Franchising Company,
exclusive master franchisee of the Subway Sandwich Shop
restaurant concept in Russia; from 1981 through 1990,
Managing Director, Vice-President and Director of Development
for MAT Associates, a national real estate developer
specializing in hotel and related commercial development.
Prior to 1981, practicing attorney in the areas of real
estate acquisition and development and international
transactions. Graduate of Stanford Graduate School of
Business, Stanford Law School, and Cornell University. Mr.
Worrell is a member of the Company's Nomination and
Governance Committee and its Audit Committee, and is Chairman
of the Company's Compensation Committee.
Arnold S. Grundvig, Jr. 57 2003 2007 Director of the Company since 2003. President and Chief
Financial Officer of A-Systems Corporation, a developer of
accounting software, since 1993. From 1990 to 1992, served
as Controller for Weider Health & Fitness, a sports nutrition
company, and Schiff Vitamin, a nutrition enhancement
company. From 1985 to 1989, served as a Financial Analyst
for Petro Source Corporation, a crude oil trading firm. From
1983 to 1985, worked as an independent turn-around consultant
on several projects. From 1977 to 1983, worked for First
Interstate Bank (now Wells Fargo Bank) as Manager of the
Credit Department and as a Commercial Loan officer. From
1971 to 1977, served as a Financial Analyst for Dun &
Bradstreet, Inc., a commercial credit rating bureau.
Graduate of Phoenix University (MBA) and the University of
Utah. Mr. Grundvig is Chairman of the Company's Audit
Committee and a member of the Company's Nomination and
Governance Committee and its Compensation Committee.
Richard Hardman CBE 70 2003 2006 Exploration Advisor since February 2003 and director since
October 27, 2003. From January 2002 through January 2003,
Advisor on Exploration to the Chief Executive Officer of
Enterprise Oil and worked in an advisory capacity to Neptune
Oil and Gas. Between 1983 and January 2002, served in
various executive capacities with Amerada Hess, a worldwide,
integrated oil and gas firm. Vice-President of Worldwide
Exploration based in London between May 1998 and May 2001 and
Exploration Advisor thereafter until January 2002. Over a
career spanning more than 40 years, worked in oil and gas
exploration as a geologist in Libya, Kuwait, Colombia, Norway
3
Year
---------------------
Director Term Business Experience During Past
Name Age Since Expires Five Years and Other Information
------------------------ ----- --------- ---------- ---------------------------------------------------------------
and the North Sea. Chairman of the Petroleum Society of
Great Britain, President of the Geological Society of London,
as the European member of the Advisory Counsel of the
American Association of Petroleum Geologists, and currently
Chairman of APPEX, a farmout fair organization based in
London. Commander of the British Empire in New Year Honours
List of 1998 for services to the oil industry. Mr. Hardman
is a member of the Company's Nomination and Governance
Committee and its Compensation Committee.
Dennis B. Goldstein 60 2003 2008 Mr. Goldstein has been a director since October 27, 2003, and
was appointed Lead Director November 10, 2003. He previously
served as a member of the Board of Directors from 1999 to
2002, and was a member of the Audit Committee of the Company
prior to his resignation. Since March of 2002, Mr. Goldstein
has been practicing natural resources law in San Francisco,
California. From 1976 until March of 2002, Mr. Goldstein was
with Homestake Mining Company, a New York Stock Exchange
listed, international gold mining company in various
capacities. When Homestake was purchased by Barrick Gold
Corporation in 2002, he was Vice-President and Corporate
Counsel. Mr. Goldstein is a graduate of Brown University
('67), Stanford University Law School ('71) and the Executive
Program of the Stanford Graduate School of Business ('87).
He is a member of the California and the American Bar
Associations. Mr. Goldstein is Chairman of the Company's
Nomination and Governance Committee and is a member of its
Audit Committee and its Compensation Committee.
Executive Officers
Andrew W. Pierce 58 -- -- Vice-President and Chief Operating Officer of the Company
since 1992, director from 1992 through his resignation in
2003. For more than 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.
More than 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.
Scott J. Duncan 57 -- -- Vice-President Investor Relations and Secretary of the
Company, director from 1993 through 2004, when he did not
stand for reelection. 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.
4
Year
---------------------
Director Term Business Experience During Past
Name Age Since Expires Five Years and Other Information
------------------------ ----- --------- ---------- ---------------------------------------------------------------
Clay Newton 49 -- -- Vice-President of Finance, Treasurer and Chief Accounting
Officer since 2003 and a director from 2002-2003. Worldwide
Controller for LANDesk Software, Inc. from 2002-2003, a
private technology company with operations and entities in
eight countries. Director of Corporate Finance and
Administration for Talk2 Technology, Inc., a private
technology company, from 2000 to 2002. Chief Financial
Officer and Corporate Secretary for Equity Oil, Inc., a
publicly-traded international oil and gas company, from 1986
to 2000. Graduate, University of Utah. Certified Public
Accountant, Certified Equity Professional.
The Board of Directors has determined that Dennis B. Goldstein, Arnold
S. Grundvig, Jr., Richard Hardman, and David L. Worrell are "independent
directors" as that term is defined in Rule 4200(a)(15) of the National
Association of Securities Dealers.
Board of Directors' Meetings and Committees
Board of Directors
The Board of Directors held four meetings during 2005 and one meeting
to date in 2006. The directors also discussed the Company's business and affairs
informally on numerous occasions throughout the year and took several actions
through unanimous written consents in lieu of meetings.
Audit Committee
The Company's Audit Committee Charter was included as an appendix to
the proxy statement for our 2004 annual meeting of stockholders and is available
on the Company's website, www.fxenergy.com. The Audit Committee of the Board of
Directors is currently composed of three independent directors: Arnold S.
Grundvig, Jr., its Chairman, whom the Board of Directors has determined to be an
audit committee financial expert, and David L. Worrell and Dennis B. Goldstein,
each of whom the Board of Directors has determined to be independent, all as
required by Rule 10A-3(b)(1) adopted pursuant to the Securities Exchange Act of
1934.
The Audit Committee selects the Company's independent auditors,
approves the scope of audit and related fees, and reviews financial reports,
audit results, internal accounting procedures, related-party transactions, when
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 nine times during 2005 and has met two times to date in 2006, including
meetings in early 2006 to review the results of the audit of the Company's 2005
financial statements by its independent accountants and other related matters,
as reported below.
Compensation Committee
The Company's Compensation Committee Charter is available on the
Company's website, www.fxenergy.com. 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 six times during 2005 and has met once to date during
2006, in addition to several informal telephone meetings throughout 2005. The
Compensation Committee of the Board of Directors is composed of four independent
directors: David L. Worrell, its Chairman, Richard Hardman, Dennis B. Goldstein
and Arnold S. Grundvig, Jr.
5
Nomination and Governance Committee
The Company's Nomination and Governance Committee Charter is available
on the Company's website, www.fxenergy.com. The Nomination and Governance
Committee is responsible for recommendations to the Board of Directors
respecting corporate governance principles; prospective nominees for director;
Board member performance and composition; function, composition and performance
of Board committees; succession planning; director and officer liability
insurance coverage; and directors' responsibilities. The Nomination and
Governance Committee met four times during 2005 and has met once to date during
2006. The Nomination and Governance Committee of the Board of Directors is
composed of four independent directors: Dennis B. Goldstein, its Chairman,
Richard Hardman, David L. Worrell and Arnold S. Grundvig, Jr.
When considering candidates for directors, the Nomination and
Governance Committee takes into account a number of factors, including the
individual's reputation for judgment, skill, integrity and other relevant
qualities; whether the candidate has relevant business experience; whether the
candidate has achieved a high level of professional accomplishment; independence
from management under both Nasdaq and Securities and Exchange Commission
definitions; existing commitments to other businesses; potential conflicts of
interest with other pursuits; corporate governance background and experience;
financial and accounting background that would permit the candidate to serve
effectively on the Audit Committee; and the size, composition, and experience of
the existing Board of Directors.
The committee will also consider candidates for directors suggested by
stockholders using the same considerations. Stockholders wishing to suggest a
candidate for director should write to Scott J. Duncan and include a statement
that the writer is a stockholder and is proposing a candidate for consideration
by the committee; the name of and contact information for the candidate; a
statement that the candidate is willing to be considered and would serve as a
director if elected; a statement of the candidate's business and educational
experience, preferably in the form of a resume or curriculum vitae; information
regarding each of the factors identified above, other than facts regarding the
existing Board of Directors, that would enable the committee to evaluate the
candidate; a statement detailing any relationship between the candidate and any
customer, supplier or competitor of the Company; and detailed information about
any relationship or understanding between the stockholder and the proposed
candidate.
Before nominating a sitting director for reelection at an annual
meeting, the committee considers the director's performance on the Board of
Directors and attendance at Board of Directors' meetings, and whether the
director's reelection would be consistent with the Company's governance
guidelines and ability to meet all applicable corporate governance requirements.
When seeking candidates for director, the committee may solicit
suggestions from incumbent directors, management or others. After conducting an
initial evaluation of the candidates, the committee will interview that
candidate if it believes the candidate might be suitable for a position on the
Board of Directors. The committee may also ask the candidate to meet with
management. If the committee believes the candidate would be a valuable addition
to the Board of Directors, it will recommend to the full Board of Directors that
candidate's nomination.
Rights Redemption Committee
In connection with the adoption of a stockholder Rights Agreement, the
Board of Directors formed a Rights Redemption Committee during 1997 to perform
certain functions in accordance with such plan. The Rights Redemption Committee,
which shall be appointed by the Board of Directors as necessary, must consist of
at least three continuing directors, a majority of whom may not be Company
employees. The Rights Redemption Committee did not meet during 2005.
Policy on Stockholder Communications with Directors
Company stockholders that want to communicate with the Board, any of
its committees, or with any individual director can write to the Company at 3006
Highland Drive, Suite 206, Salt Lake City, Utah 84106. Such letter should
indicate that it is from a Company stockholder. Depending upon the subject
matter, management will:
o forward the communication to the director, directors or
committee to whom it is addressed;
6
o attempt to handle the inquiry directly if it is a request for
information about the Company or other matter appropriately
dealt with by management; or
o not forward the communication if it is primarily commercial in
nature or if it relates to an improper or irrelevant topic.
At each Board of Directors' meeting, a member of management will
present a summary of all communications received since the last meeting that
were not forwarded to the directors and make those communications available to
the directors on request.
Code of Ethics
The Company has adopted a Code of Ethics that applies to all of its
employees, including its principal executive officer, principal financial
officer, and its principal accounting officer. The Code of Ethics is available
on the Company's website, www.fxenergy.com.
Corporate Governance Guidelines
The Company has adopted Corporate Governance Guidelines to assist its
directors in promoting the best interests of the stockholders in terms of
corporate governance, fiduciary responsibilities, compliance with applicable law
and regulations, and maintenance of accounting, financial or other controls. The
Corporate Governance Guidelines are available on the Company's website,
www.fxenergy.com.
Stockholder Proposals
No proposals have been submitted by the Company's stockholders for
consideration at the Annual Meeting. It is anticipated that the next annual
meeting of stockholders will be held during June 2007. Stockholders may present
proposals for inclusion in the proxy statement to be mailed in connection with
the 2007 Annual Meeting of Stockholders of the Company, provided such proposals
are received by the Company no later than January 3, 2007, and are otherwise in
compliance with applicable laws and regulations and the governing provisions of
the Company's Articles of Incorporation and Bylaws.
PROPOSAL 1. ELECTION OF DIRECTORS
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.
The Board of Directors has nominated Richard Hardman and Jerzy B.
Maciolek for election as directors of the Company at the Annual Meeting, each to
serve for a term of three years expiring at the 2009 annual meeting and until
his successor is elected and qualified. Such nominations have been approved
unanimously by the Company's Nomination and Governance Committee and by the
Board of Directors.
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 Company's officers 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 above. (See "Corporate Governance: Executive
Officers, Directors.")
7
Recommendation of the Board of Directors
The Board of Directors recommends a vote "FOR" the election of the
nominees Richard Hardman and Jerzy B. Maciolek as directors of the Company, to
serve in such capacities until the expiration of their term at the 2009 annual
meeting of stockholders and until their successors are elected and qualified.
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.
PROPOSAL 2. RATIFICATION OF THE APPOINTMENT BY THE AUDIT COMMITTEE OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The firm of PricewaterhouseCoopers LLP (PWC) has served as the
Company's Independent Registered Public Accounting Firm since 1995. The Audit
Committee has appointed PWC to act in that capacity for the year ended December
31, 2006.
Although the Company is not required to submit this appointment to a
vote of the stockholders, the Audit Committee believes it is appropriate as a
matter of policy and a desirable corporate governance practice to request that
the stockholders ratify the appointment of PWC as the Company's Independent
Registered Public Accounting Firm. If the stockholders do not ratify this
appointment, the Audit Committee will investigate the reasons for that
nonratification and determine whether to retain PWC or appoint another
independent registered public accounting firm. Even if the appointment is
ratified, the Audit Committee may determine to engage a different independent
registered public accounting firm at any time if it determines that such a
change would be in the best interests of the Company and its stockholders.
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.
Recommendation of the Board of Directors
The Board of Directors recommends voting "FOR" the ratification of the
appointment by the Audit Committee of PricewaterhouseCoopers LLP as the
Company's Independent Registered Public Accounting Firm.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 31, 2006, the name and
shareholdings of each person that 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 indicated otherwise in the footnotes,
each person named below has, to the best of the Company's knowledge, sole voting
and investment power with respect to all shares of common stock shown as
beneficially owned by each person:
Percent
Amount and Nature of of
Name Beneficial Ownership Class(1)
================================================================== ======================= ===========
Principal Stockholders:
Cascoh, Inc., Barton J. Cohen and A. Baron Cass III group(2).... 2,054,046 5.7%
Directors:
David N. Pierce(3).............................................. 497,160 1.4
Thomas B. Lovejoy(4)............................................ 776,838 2.2
Jerzy B. Maciolek(5)............................................ 252,806 0.7
8
Percent
Amount and Nature of of
Name Beneficial Ownership Class(1)
================================================================== ======================= ===========
David L. Worrell(6)............................................. 56,000 0.2
Arnold S. Grundvig, Jr.(7)...................................... 14,000 --
Dennis B. Goldstein(8).......................................... 64,000 0.2
Richard B. Hardman(9)........................................... 55,000 --
All executive officers and directors as a group
(9 persons)(10)............................................... 2,498,799 6.8%
- ----------------------
(1) Calculations of total percentages of ownership outstanding for each person
or group assume the exercise of derivative securities that are exercisable
within 60 days of the table date by the individual or group to which the
percentage relates, pursuant to Rule 13d-3(d)(1)(i).
(2) According to a Schedule 13-D dated March 29, 2006, by the Cascoh, Inc.
group, 2100 McKinney Ave., Suite 155, Dallas, TX 75209. The calculation of
beneficial ownership in the Schedule 13-D and in this table includes
771,352 warrants that are exercisable within 60 days of the table date and
130,000 shares subject to long-call options.
(3) The calculation of beneficial ownership includes 350,000 shares subject to
outstanding options that are exercisable within 60 days of the table date,
40,000 shares held by David N. Pierce as custodian for minor children, and
24,286 shares held in Mr. Pierce's IRA accounts. Excludes 2,000 shares held
by Mr. Pierce's wife, Mary Phillips, as custodian for minor children, of
which Mr. Pierce disclaims beneficial ownership.
(4) The calculation of beneficial ownership includes 300,000 shares subject to
outstanding options that are exercisable within 60 days of the table date,
26,000 shares held in trust for the benefit of Thomas B. Lovejoy's
children, 63,472 shares held in Mr. Lovejoy's retirement accounts, 10,000
shares held by Mr. Lovejoy's spouse's IRA account, and 200,000 shares held
by Lovejoy & Associates, Inc. (of which Mr. Lovejoy is sole owner).
(5) The calculation of beneficial ownership includes 243,834 shares subject to
outstanding options that are exercisable within 60 days of the table date
and 8,972 shares held in Mr. Maciolek's retirement account.
(6) The calculation of beneficial ownership includes 14,000 shares subject to
outstanding options and warrants that are exercisable within 60 days of the
table date. Includes 30,000 shares held by David L. Worrell jointly with
his wife, Julianne Shedd Worrell, 7,000 shares held by Mr. Worrell's IRA,
and 5,000 shares held solely by Julianne Shedd Worrell's IRA.
(7) The calculation of beneficial ownership includes 14,000 shares subject to
outstanding options that are exercisable within 60 days of the table date.
(8) The calculation of beneficial ownership includes 44,000 shares subject to
outstanding options that are exercisable within 60 days of the table date.
(9) The calculation of beneficial ownership includes 50,000 shares subject to
outstanding options that are exercisable within 60 days of the table date.
(10) The calculation of beneficial ownership includes 1,686,834 shares subject
to outstanding derivative securities that are exercisable within 60 days of
the table date.
Equity Compensation Plans
Number of Securities
Remaining Available
for Future Issuance
Number of Securities under Equity
To Be Issued upon Weighted-Average Compensation Plans
Exercise of Exercise Price of (excluding securities
Outstanding Options, Outstanding Options, reflected in column
Warrants and Rights Warrants and Rights (a))
Plan Category (a) (b) (c)
----------------------- ---------------------- -----------------------
Equity compensation plans
approved by security holders..... 3,422,283 $4.73 693,783
Equity compensation plans not
approved by security holders..... 70,000 4.43 --
----------- ----------
Total 3,492,283 4.72 693,783
=========== ==========
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. As of December 31, 2005, the Company had
outstanding options and restricted stock purchase rights to purchase an
aggregate of 3,422,283 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
9
arrangements that have not been submitted to the stockholders for approval. This
includes compensatory options granted to employees, consultants, officers,
directors and others. As of December 31, 2005, there was an aggregate of 70,000
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 Company's common stock; 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.
The Company granted to an outside consultant options to purchase 30,000
shares at $7.375 per share in 1999. The options vest one third per year after
the anniversary date of the grant and are exercisable for a period of seven
years after the date of vesting. One-third of those options have been exercised
by the optionee.
The Company 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.
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 that 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
filed with the Securities and Exchange Commission during or respecting the last
fiscal year ended December 31, 2005, no person that, 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The written charter of the Company's Audit Committee requires that all
related-party transactions, including any between the Company and its executive
officers, directors and principal stockholders (i.e., stockholders owning
beneficially 5% or more of the outstanding voting securities of the Company)
must be approved by the Audit Committee. For this purpose, a transaction is
deemed material if such transaction, alone or together with a series of similar
transactions during the same fiscal year, involves an amount that exceeds
$60,000. No such transactions occurred during the fiscal year ended December 31,
2005.
10
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth, for the last three fiscal years of the
Company, the annual and long-term compensation earned by, awarded to, or paid to
the person who was Chief Executive Officer of the Company and each of the four
other highest compensated executive officers of the Company as of the end of the
last fiscal year (the "Named Executive Officers"):
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------------------------- ---------------------- --------
Securities
Other Restricted Underlying All Other
Year Annual Stock Options/ LTIP Compen-
Name and Principal Ended Compensation Award(s) SARs Payouts sation
Position Dec. 31 Salary ($) Bonus ($) ($) ($)(3) (no.) (1) ($) ($)(2)
- ----------------------- --------- ------------- ----------- ------------ ----------- ---------- -------- ----------
David N. Pierce 2005 $350,000 $ 105,000 $ -- $ 324,900 -- $ -- $42,000
President 2004 250,000 -- -- -- 85,000 -- 41,000
(CEO) 2003 248,000 -- -- -- 85,000 -- --
Andrew W. Pierce 2005 $250,000 $ 62,500 $ -- $ 297,825 -- $ -- $42,000
Vice-President 2004 189,000 -- -- -- 75,000 -- 37,800
(COO) 2003 189,000 -- -- -- 75,000 -- --
Thomas B. Lovejoy 2005 $250,000 $ 50,000 $ -- $ 259,920 -- $ -- $42,000
Chairman 2004 189,000 -- -- -- 75,000 -- 37,800
(CFO) 2003 186,000 -- -- -- 75,000 -- --
Scott J. Duncan 2005 $250,000 $ 37,500 $ -- $ 243,675 -- $ -- $42,000
Vice-President 2004 189,000 -- -- -- 75,000 -- 37,800
Investor Relations 2003 186,600 -- -- -- 75,000 -- --
Jerzy B. Maciolek 2005 $250,000 $ 62,500 $ -- $ 297,825 -- $ -- $42,000
Vice-President 2004 189,000 -- -- -- 75,000 -- 37,800
Exploration 2003 186,000 -- -- -- 75,000 -- --
- -------------------
(1) Consists of stock options only.
(2) Includes 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.
(3) The dollar value of the restricted stock purchase rights listed in the
table is calculated based on the closing price of the Company's common
stock on the effective date of the grant as follows: fiscal 2005
grant--$10.83. The restricted stock purchase rights vest in three equal
annual installments beginning November 21, 2006. The following table lists
the number of restricted stock purchase rights held by each individual and
the market value of the total holdings of the restricted stock purchase
rights of the Company for the Named Executive Officers as of the end of
fiscal year 2005. The value shown is based on the closing market price of
$7.98 per share on December 31, 2005, as reported on NASDAQ.
Number of Restricted Market Value
Named Executive Officer Stock Purchase Rights as of 12/31/05
-------------------------- -------------------------- -------------------
David N. Pierce 30,000 $239,400
Andrew W. Pierce 27,500 219,450
Thomas B. Lovejoy 24,000 191,520
Scott J. Duncan 22,500 179,550
Jerzy B. Maciolek 27,500 219,450
11
Aggregate Option/SAR Exercises in Last Fiscal Year and Year-End Option/SAR
Values
The following table sets forth information respecting the exercise of
options and SARs during the last completed fiscal year by the Named Executive
Officers and the fiscal year-end values of unexercised options and SARs:
(a) (b) (c) (d) (e)
Number
of Securities Underlying
Unexercised Options/ Value of Unexercised
Shares SARs at Fiscal In-the-Money Options/SARs
Acquired Value Year-End (#) at Fiscal Year-End ($)(1)
on Exercise Realized --------------------------------- ---------------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- ------------ --------------- ---------------- ---------------- ---------------- ----------------
David N. Pierce 60,000 $ 94,500 350,000 85,000 $ 1,402,368 $ 113,332
Andrew W. Pierce 50,000 84,050 300,000 75,000 1,203,000 100,000
Thomas B. Lovejoy 50,000 367,750 300,000 75,000 1,203,000 100,000
Scott J. Duncan 50,000 157,250 300,000 75,000 1,203,000 100,000
Jerzy B. Maciolek 105,500 567,395 243,834 141,666 804,415 100,000
- ---------------
(1) Based on the closing sales price for the common stock of $7.98 per share on
December 31, 2005.
Directors' Compensation
The Company pays its outside directors a retainer of $20,000, pays them
a per-meeting fee of $1,500 for each Board of Directors' regularly-scheduled
meeting attended, issues them restricted stock purchase rights for 4,200 shares
of common stock per year, and reimburses costs incurred by them in attending
meetings of the Board of Directors and its committees. The chairmen of the Audit
Committee, currently Arnold S. Grundvig, Jr., and of the Compensation Committee,
currently David L. Worrell, each receive $5,000 additional per year. Each
director is granted restricted stock purchase rights for 2,100 shares of common
stock upon initial election or appointment to the Board of Directors. The
Company does not pay any separate compensation to employees who serve on the
Board of Directors.
The lead director, currently Mr. Goldstein, receives twice the retainer
and twice the number of restricted stock purchase rights received by the other
outside directors. Mr. Hardman, who serves as the Board of Directors' Technical
Advisor, was granted restricted stock purchase rights for an additional 22,050
shares of common stock for that service.
In addition to his service as a director, Mr. Hardman has been engaged
by the Company as a geologic consultant. In this capacity, he receives $57,000
per year.
Employment Agreements, Termination of Employment, and Change in Control
The Company has entered into Employment Agreements with each of the
Named Executive Officers. The agreements provide for base salaries and
participation in incentive and bonus plans at the discretion of the Company's
Board of Directors, as well as participation in the Company's stock option and
other employee benefit plans that are consistent with and similar to such plans
provided to its employees generally. For 2006, the annual base salaries of the
foregoing are $390,000 for David N. Pierce, $260,000 for Andrew W. Pierce and
Jerzy Maciolek, and $250,000 for Thomas B. Lovejoy and Scott J. Duncan. The
Named Executive Officers have also agreed to certain confidentiality and
non-competition provisions. In the event their employment is terminated by the
Company "without cause," or by the employee "for cause," they are entitled to
receive an amount equal to two times the greater of (a) employee's then-current
annual salary, or (b) employee's salary plus bonus compensation for the year
most recently ended. The agreements also provide payment provisions in the event
of the death or disability of the employee.
12
The Company has also entered into separate Change in Control
Compensation Agreements with the above executive officers. The agreements
provide for certain severance and separation benefits in the event that the
Company is involved in a change in control of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, which generally applies
if (i) any person other than the Company or a current director or officer of the
Company is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 20% of the combined voting power of the
Company's then-outstanding securities; or (ii) there is a merger or
consolidation of the Company in which the Company does not survive as an
independent public company; or (iii) the business or businesses of the Company
for which the specific executive's services are principally performed are
disposed of by the Company pursuant to a partial or complete liquidation of the
Company, a sale of the Company's assets, or otherwise. Following such change in
control, in the event their employment is terminated by the Company "without
cause," or by the employee "for cause," they are entitled to receive an amount
equal to two times the greater of (a) employee's then-current annual salary, or
(b) employee's salary plus bonus compensation for the year most recently ended.
In addition, the employee shall fully vest in and have the right to exercise all
outstanding options, stock purchase awards, and other outstanding awards
including shares as to which he would not otherwise be vested or exercisable.
Options and Restricted Stock Purchase Rights Granted to Officers,
Directors, Employees and Consultants
As of December 31, 2005, the Company had outstanding options and
restricted stock purchase rights to purchase an aggregate of 3,492,283 shares
that had been granted to officers, directors, employees and consultants of the
Company. Of such options, 1,711,683 shares contain vesting limitations
contingent on continuing association with the Company. These options and
restricted stock purchase rights are exercisable at prices ranging between $0.00
and $9.00 per share. Options and restricted stock purchase rights issued to
executive officers and directors contain terms providing that, in the event of a
change in control of the Company all unvested options will become immediately
exercisable. 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,
stock options and restricted stock grants, and retirement plan contributions. 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, 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 outside the presence of the Chief Executive Officer, 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;
13
o counsel with the Chief Executive Officer in personnel matters
and management organization;
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;
o review and recommend to the Board of Directors incentive
awards under the Company's stock option and stock award plans
for executive officers, directors, employees and other
eligible participants; and
o take such further action as necessary to comply with all
applicable requirements of law and related regulations and the
rules of any national securities exchange or national
securities association on which the Company's securities are
traded.
All stock option and award plans are administered by the Board of
Directors or a committee thereof. At its discretion, the Board of Directors or
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 may also issue 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 Compensation Committee reviews the various components of
compensation from time to time during the year rather than only once annually,
comparing them to those offered by similar companies when such information is
available. The Compensation Committee may consider additional compensatory
programs for its Chief Executive Officer, other executive officers, and other
employees in an effort to broaden the range of indirect and deferred
compensation and perquisites provided while attempting to mitigate adverse tax
consequences. In reviewing deferred compensation alternatives, the Compensation
Committee may adopt and fund benefit plans under criteria that enable the
employee beneficiary to, in effect, recoup some of the benefits previously
foregone because of the Company's other priorities when its financial resources
were more limited.
2005 Compensation Review for Executives and Employees other than the Chief
Executive Officer
In late 2005, the Compensation Committee conducted a compensation
review with respect to executive officers (other than the Chief Executive
Officer whose salary is addressed in the following section) by reference to a
review of compensation at similar companies taking into consideration such
factors adjusted as the Compensation Committee deemed appropriate for variations
in geographic location, size, market capitalization, emphasis on exploration as
compared to the level of production and reserves, and profitability. Because of
the foregoing factors, the group of 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. The Compensation Committee recommended to the
Board of Directors that salary levels be set for the year 2006 at levels
recommended by the Compensation Committee. Acting on the recommendations of the
Compensation Committee, the Board of Directors approved the recommendation.
14
2005 Chief Executive Officer Compensation Review
In late 2005, the Compensation Committee recommended to the Board of
Directors that the 2006 salary level for the Chief Executive Officer be adjusted
on the same basis as applied to other executives, except that objectives against
which performance was measured also included the performance of the Company's
stock price during 2005, 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, but applied the subjective criteria discussed above. The
Board of Directors adopted the Compensation Committee's recommendations.
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 Company's
Compensation Committee.
The foregoing report has been furnished by: David L. Worrell, Chairman
Dennis B. Goldstein
Arnold S. Grundvig, Jr.
Richard Hardman
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.
15
Comparison of Five-Year Cumulative Total Returns
Performance Graph for FX Energy, Inc.
(Including data to December 31, 2005)
[GRAPHIC OMITTED]
The plot points for the preceding graph are detailed in the following
table:
[GRAPHIC OMITTED]
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
16
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.
The Committee discussed with management and the independent registered
public accountants 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, the reasonableness of the
significant judgments and management decisions made in developing the financial
statements, and the independent registered public accountants' evaluation of the
Company's internal controls. In addition, the Audit Committee has discussed with
the independent registered public accountants 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 registered public
accountants with the Company management and its independent registered public
accountants.
The Audit Committee also discussed with management the Company's
disclosure controls and procedures and the certifications by the Company's Chief
Executive Officer and Chief Financial Officer, which are required by the
Securities and Exchange Commission under the Sarbanes-Oxley Act of 2002 for
certain of the Company's filings with the Securities and Exchange Commission.
During 2005, the Company did not engage PricewaterhouseCoopers LLP to perform
any management or financial information systems design consulting services.
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, 2005, for filing with the Securities and Exchange Commission.
The foregoing report has been furnished by: Arnold S. Grundvig, Jr.,
Chairman
Dennis B. Goldstein
David L. Worrell
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
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, 2005, and for the reviews of
the financial statements included in the Company's quarterly reports on Form
10-Q for that fiscal year were $220,935. 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,
2004, for the reviews of the financial statements included in the Company's
quarterly reports on Form 10-Q for that fiscal year, and for reviews of
registration statements and for assistance with the Securities and Exchange
Commission's review of the Company's prior year financial statements were
$254,713.
Audit Related Fees
PricewaterhouseCoopers LLP did not bill the Company for any
professional services that were reasonably related to the performance of the
audit or review of financial statements for either the fiscal year ended
December 31, 2005, or the fiscal year ended December 31, 2004, that are not
included under Audit Fees above.
Tax Fees
The aggregate fees billed by PricewaterhouseCoopers LLP for
professional services rendered for domestic and international tax compliance,
tax advice, and tax planning for the fiscal years ended December 31, 2005, and
December 31, 2004, were $92,705 and $14,888, respectively.
17
All Other Fees
PricewaterhouseCoopers LLP did not perform any services for the Company
or charge any fees other than the services described above under "Audit Fees"
and "Tax Fees" for either the fiscal year ended December 31, 2005, or the fiscal
year ended December 31, 2004.
The engagements of PricewaterhouseCoopers LLP to perform all of the
above-described services were approved by the Audit Committee before the Company
entered into the engagements, and the policy of the Audit Committee is to
require that all services performed by the independent registered public
accountants be preapproved by the Audit Committee before the services are
performed.
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.
Salt Lake City, Utah
May 14, 2006 Scott J. Duncan, Secretary
PROXY
FX ENERGY, INC.
Annual Meeting of the Stockholders of (This Proxy Is Solicited on Behalf
FX Energy, Inc. on June 14, 2006 of the Company)
The undersigned hereby appoints David N. Pierce and Scott J. Duncan
proxies, and each of them, with full power of substitution, to vote all shares
of common stock of FX ENERGY, INC. (the "Company"), that the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company ("Annual
Meeting") to be held in the Ponderosa Room at Little America Hotel, 500 South
Main Street, Salt Lake City, Utah, on June 14, 2006, 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 2009 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.
Jerzy B. Maciolek Richard Hardman
2. To ratify the appointment of PricewaterhouseCoopers LLP as
the Company's independent registered public accounting firm
for the 2006 fiscal year.
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
FACSIMILE: (801) 486-5575