<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FOUNTAIN OIL INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
FOUNTAIN OIL INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 1997
To The Stockholders:
The Annual Meeting of Stockholders of Fountain Oil Incorporated (the
"Company") will be held at the Fairbanks Room of the Holiday Inn Select, 14703
Park Row, Houston, Texas 77079, on June 3, 1997 at 10:00 a.m. for the following
purposes:
1. To elect six directors to serve until the next Annual Meeting of
Stockholders or until their successors are duly elected and qualified;
2. To ratify the selection of Coopers & Lybrand L.L.P. as independent
public accountants of the Company for the fiscal year ending
December 31, 1997; and
3. To transact such other business as may properly come before the Meeting
and any adjournments thereof.
The Board of Directors has fixed the close of business on April 11, 1997 as
the record date for determination of the stockholders entitled to notice of and
to vote at the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD PROMPTLY TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED AT THE MEETING. THE PROXY CARD MAY BE RETURNED IN THE ACCOMPANYING
ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON EVEN IF YOU HAVE SENT IN YOUR
PROXY CARD.
SUSAN E. PALMER
Secretary
April 21, 1997
<PAGE>
FOUNTAIN OIL INCORPORATED
1400 Broadfield Boulevard, Suite 100
Houston, Texas 77084
PROXY STATEMENT
GENERAL INFORMATION
SOLICITATION, REVOCATION AND VOTING OF PROXIES
The accompanying proxy is solicited by and on behalf of the Board of Directors
of Fountain Oil Incorporated (the "Company"), in connection with the Annual
Meeting of Stockholders to be held at 10:00 a.m. on June 3, 1997, at the
Fairbanks Room of the Holiday Inn Select, 14703 Park Row, Houston, Texas 77079,
and at any and all adjournments thereof. It is anticipated that this Proxy
Statement and accompanying proxy will first be mailed to stockholders on or
about April 21, 1997.
The accompanying proxy, if properly executed and returned, will be voted as
specified by the stockholder or, if no vote is indicated, the proxy will be
voted FOR each matter specified. As to any other matter of business which may
be brought before the Meeting, a vote may be cast pursuant to the accompanying
proxy in accordance with the judgment of the persons voting the same, but
management does not know of any such other matter of business. A stockholder
may revoke his proxy at any time prior to the voting of shares by voting in
person at the Meeting or by filing with the Secretary of the Company a duly
executed proxy bearing a later date or an instrument revoking the proxy.
The costs of solicitation of proxies will be paid by the Company. In addition
to soliciting proxies by mail, the Company's officers, directors and other
regular employees, without additional compensation, may solicit proxies
personally, by telephone or by other appropriate means. Banks, brokers,
fiduciaries and other custodians and nominees who forward proxy soliciting
material to their principals will be reimbursed their customary and reasonable
out-of-pocket expenses.
RECORD DATE AND VOTING RIGHTS
Only stockholders of record of the Company's $0.10 par value Common Stock as
of the close of business on April 11, 1997 will be entitled to vote at the
Meeting. On April 11, 1997 there were outstanding 22,411,489 shares of Common
Stock, which constituted all of the outstanding voting securities of the
Company, each of which is entitled to one vote per share. A majority of the
shares entitled to vote, represented in person or by proxy, constitutes a quorum
at the Meeting. Abstentions and broker non-votes are counted as present for
purposes of determining the existence of a quorum.
1
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors has nominated six persons to be elected directors
at the Annual Meeting to hold office until the next Annual Meeting of
Stockholders and until the election of their respective successors. Directors
are elected by a plurality of the shares voted; broker non-votes and votes
withheld have no effect on the vote. All proxies received by the Board of
Directors will be voted for the nominees listed below if no direction to the
contrary is given. In the event that any nominee is unable or declines to
serve, an event that is not anticipated, the proxies will be voted for the
election of any nominee who may be designated by the Board of Directors.
<TABLE>
<CAPTION>
The nominees for director are:
<S> <C> <C>
Name Age Principal Occupation
---- --- --------------------
Einar Bandlien 49 Executive Vice President, Business Development
Robert A. Halpin (1) 61 President, Halpin Energy Resources Ltd.
Stanley D. Heckman (1) 57 President, JSB Services Corp.
Eugene J. Meyers 62 President, GSM Financial Corporation
Oistein Nyberg 54 Chairman of the Board
Nils N. Trulsvik 47 President and Chief Executive Officer
</TABLE>
___________________
(1) Member of Audit and Compensation Committees.
EINAR BANDLIEN was elected a Director on August 17, 1994, Senior Vice
President on December 15, 1994 and Executive Vice President on
November 14, 1995. Mr. Bandlien is a petroleum expert with extensive experience
in exploration and petroleum resource management. Prior to joining the Company,
he held various positions with Nopec a.s., a Norwegian petroleum consulting
company, including Director of International Activities from 1987 to 1991 and
Chairman from 1990 to 1993. He was a Special Advisor to Nopec from 1993 to
1994. Mr. Bandlien also served as Executive Secretary of the Norwegian
Petroleum Resource Management Alliance from 1991 to 1993.
ROBERT A. HALPIN was elected a Director on March 4, 1995 and served as
Chairman of the Board from November 14, 1995 to February 4, 1997 when he was
elected Vice Chairman of the Board. Mr Halpin has long experience in the oil
and gas industry. From 1989 to his retirement September 1993, he served as Vice
President for International Exploration and Production with Petro-Canada. In
October 1993, Mr. Halpin became President of Halpin Energy Resources Ltd., a
firm he formed to provide advisory services to energy companies with emphasis on
international petroleum projects.
STANLEY D. HECKMAN was elected a Director on March 4, 1995. For more than
the past five years, Mr. Heckman has been the owner of JSB Services Corp., a
company whose primary business is in real estate development and investments.
EUGENE J. MEYERS was elected a Director on January 3, 1994 and served as
Chairman of the Board from January 3, 1994 to November 14, 1995. He served as
Chief Executive Officer from August 16, 1994 until November 21, 1994 and as
President from September 8, 1994 to November 21, 1994. Mr Meyers is also
President and owner of GSM Financial Corporation. Through such company and
other companies, Mr. Meyers has been involved in real estate development and
investments for the past 30 years.
OISTEIN NYBERG was elected a Director on March 4, 1995 and served as
President and Chief Executive Officer from March 9, 1995 to February 4, 1997
when he was elected Chairman of the Board. From January 1984 to March 1995, Mr.
Nyberg was Managing Director of Smedvig Technology A/S, a Norwegian technology
company which, among other activities, provides consulting services within the
areas of reservoir evaluation, production drilling and well control.
2
<PAGE>
NILS N. TRULSVIK has served as President and Chief Executive Officer since
February 4, 1997. He was elected a Director of the Company on August 17 1994,
and he served the Company as Executive Vice President from September 8, 1994
until November 21, 1994; as President and Chief Executive Officer from
November 21, 1994 to March 9, 1995; and as Executive Vice President from
March 9, 1995 to February 4, 1997. Mr. Trulsvik is a petroleum industry
executive with extensive experience in petroleum exploration and development
throughout the world. Prior to joining the Company, he held various positions
with Nopec a.s., a Norwegian petroleum consulting company, including Managing
Director from 1987 to 1993 and Special Advisor from 1993 to August 1994.
INFORMATION CONCERNING BOARD AND COMMITTEE MEETINGS
The Company's Board of Directors held ten meetings during the fiscal year
ended August 31, 1996 and four meetings during the four month period ended
December 31, 1996. The members of the Audit Committee and the Compensation
Committee are Robert A. Halpin and Stanley D. Heckman. The Audit Committee is
responsible for reviewing the Company's financial statements, audit results,
internal controls, and accounting principles, policies and practices. The Audit
Committee also recommends to the Board the selection of the Company's outside
accounting firm and approves the fees of such firm. The Audit Committee held
three meetings during the fiscal year ended August 31, 1996 and five meetings
during the four month period ended December 31, 1996. The Compensation
Committee approves the compensation of the Company's executive officers,
oversees the compensation scheme for other Company employees, administers and
grants awards under stock option and other compensation plans, and recommends to
the Board the adoption of retirement and other employee benefits plans. The
Compensation Committee held four meetings during the fiscal year ended
August 31, 1996 and six meetings during the four month period ended
December 31, 1996. The Board of Directors has not designated a nominating
committee.
DIRECTORS' COMPENSATION
The Company pays non-employee Directors (other than a Chairman or Vice
Chairman of the Board) fees at the rate of $14,000 per year plus a fee of $3,000
per year for each committee on which such non-employee Director serves. The
Company also pays a fee of $1,000 per day, other than a day on which the Board
meets, for each day spent by a non-employee Director on the business of Board
committees which exceeds one day per year with respect to the Compensation
Committee and three days per year with respect to the Audit Committee and the
Petroleum Committee. The Company also reimburses ordinary out-of-pocket
expenses for attending Board and Committee meetings.
Robert A. Halpin was compensated for his services as Chairman of the Board
and member of Board committees pursuant to an agreement which provided for an
annual fee of $37,500 plus $1,000 per day for each day of service in excess of
55 days per year. On December 10, 1996, this agreement was amended to provide
an annual fee of $45,000 plus $1,000 per day for each day of service in excess
of 66 days per year. The Company provides Mr. Halpin with an office at the
Company's offices located in Calgary, Alberta, Canada, and reimburses Mr. Halpin
for his out-of-pocket expenses in connection with services on behalf of the
Company, including travel and related expenses for his wife if Mr. Halpin is
required to be outside of Calgary for more than two consecutive weeks on Company
business. The Company also from time to time uses the consulting services of
Halpin Energy Resources, Ltd., which is controlled by Mr. Halpin, in the area of
petroleum projects, for which such company is compensated at its customary
rates.
The Company provides automatic grants of non-qualified options to non-
employee Directors pursuant to the 1995 Long-Term Incentive Plan. Pursuant to
the Plan, a non-qualified option to purchase 7,500 shares of Common Stock is
granted automatically to each non-employee Director on each of (i) the date of
each Meeting of Stockholders at which such non-employee is elected or re-elected
as a Director and (ii) the date such non-employee is first elected as a
Director, if not at a Meeting of Stockholders. In addition, a non-employee
Director will automatically be granted a non-qualified Option to purchase 7,500
shares of Common Stock on each date on which such non-employee Director is
elected or re-elected by the Board of Directors as Chairman of the Board of
Directors, or, if the Chairman
3
<PAGE>
of the Board is then an employee of the Company, as Vice Chairman of the Board
of Directors. The exercise price of each option is equal to 100% of the fair
market value of the Common Stock on the date of grant. Each option so granted is
100% vested six months after the date of grant. Options expire on the first to
occur of three years from the date of grant or the first anniversary of the date
the Director ceases to be a Director for any reason. Non-employee Directors are
not eligible to receive other options pursuant to the 1995 Long-Term Incentive
Plan.
Since January 1, 1996, Eugene Meyers, a non-employee Director, has
provided financial relations consulting services to the Company at the rate of
$15,000 per year for 22 days of service, and thereafter at the rate of $100 per
hour ($1,000 maximum per day). The Company also reimburses him for his out-of-
pocket expenses associated with such services.
The following table shows the compensation paid to non-employee Directors,
including their respective affiliates, during the four month period (PE) ended
December 31, 1996 and the fiscal year (FY) ended August 31, 1996:
Directors Fees
and Other Consulting
Name Compensation Payments Options Granted
---------------------------------------------------------------
Robert Halpin
PE 12/96 $ 20,123 $ --- ---
FY 8/96 29,733 11,000 15,000
Stanley Heckman
PE 12/96 6,721 --- ---
FY 8/96 13,381 --- 7,500
Eugene Meyers
PE 12/96 4,667 5,000 ---
FY 8/96 9,333 10,000 7,500
The options were granted on February 12, 1996 at an exercise price of $3.84375,
expire on February 11, 1999 and were 100% vested at August 12, 1996.
4
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows all compensation paid or accrued by the Company
and its subsidiaries during the ten month period ended August 31, 1994, the
fiscal years ended August 31, 1995 and August 31, 1996 and the four month period
ended December 31, 1996 to certain executive officers of the Company (the "Named
Officers").
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
- -----------------------------------------------------------------------------------------------------
Securities
Other Annual Underlying All Other
Name and Compensation Options/SARs Compensation(6)
Principal Position Year Salary ($) ($) (#) ($)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Oistein Nyberg 12/96* 53,425 48,994 (1) 100,000 6,801
(1) 1996 154,104 83,151 (1) --- 21,965
1995 113,246 24,199 --- 6,125
1994** --- --- 44,000 ---
Nils N. Trulsvik 12/96* 51,834 --- 100,000 5,679
(2) 1996 161,241 --- --- 8,635
1995 147,754 --- --- 6,344
1994** --- --- 60,000 ---
Arnfin Haavik 12/96* 54,893 9,070 (3) 100,000 6,801
(3) 1996 154,560 34,560 (3) --- 21,259
1995 92,685 24,234 --- 6,279
1994** --- --- 36,000 ---
Gary J. Plisga 12/96* 50,000 --- 65,000 4,767
(4) 1996 150,300 --- --- 15,613
1995 104,777 --- --- 6,556
1994** --- --- --- ---
Arild Boe 12/96* 51,833 --- 100,000 5,679
(5) 1996 149,380 --- --- 8,780
1995 22,125 --- --- ---
1994** --- --- 28,000 ---
</TABLE>
___________________________
* Four month period ended December 31, 1996.
** Ten month period ended August 31, 1994
(1) Mr. Nyberg was elected President and Chief Executive Officer on March 9,
1995. Other annual compensation paid in the year ended August 31, 1996
includes $54,441 as a housing allowance and $20,457 in childrens' school
fees. Other annual compensation paid in the four month period ended
December 31, 1996 includes $41,812 as a housing allowance and $6,551 in
childrens' school fees.
(2) Mr. Trulsvik served as Executive Vice President from September 8, 1994 to
November 21, 1994; as President and Chief Executive Officer from
November 21, 1994 to March 9, 1995 and as Executive Vice President
subsequent to March 9, 1995.
(3) Mr. Haavik was elected Executive Vice President and Chief Financial Officer
on February 1, 1995. Other annual compensation paid in the year ended
August 31, 1996 and the four month period ended December 31, 1996 includes
$31,038 and $8,573, respectively, as a housing allowance.
(4) Mr. Plisga was elected as an Executive Vice President on January 16, 1995.
5
<PAGE>
(5) Mr. Boe was elected as a Senior Vice President on August 1, 1995 and as an
Executive Vice President on November 14, 1995.
(6) Represents the Company's contributions to or accruals with respect to
individual retirement and pension plans.
OPTION GRANTS DURING THE SIXTEEN MONTH PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Number of % of Total
Securities Options
Underlying Granted to Exercise Grant Date
Options Employees or Base Expiration Present Value (2)
Name Granted (1) in FY 12/96 Price Date Per Share Total
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Oistein Nyberg 100,000 12% $7.25 12/30/03 $3.27 $326,630
Nils N. Trulsvik 100,000 12% $8.99 1/30/99 $1.73 $173,270
Arnfin Haavik 100,000 12% $7.25 12/30/03 $3.27 $326,630
Gary J. Plisga 65,000 7.9% $7.25 12/30/06 $3.65 $237,328
Arild Boe 100,000 12% $8.99 1/30/99 $1.73 $173,270
</TABLE>
______________
(1) No options were granted to executive officers in the fiscal year ended
August 31, 1996. The options granted to Messrs. Nyberg, Haavik and Plisga
vest with respect to one-third of the shares on each of December 30, 1997,
1998 and 1999, and were granted at an exercise price equal to the fair
market value of the Company's Common Stock on the date of grant. The
options granted to Messrs. Trulsvik and Boe are exercisable only from
December 30, 1998 through the expiration date of January 30, 1999, and were
granted at an exercise price equal to 124% of the fair market value of the
Company's Common Stock on the date of grant. Pursuant to the terms of the
1995 Long-Term Incentive Plan, the Compensation Committee may, subject to
Plan limits, modify the terms of outstanding options, including the exercise
price and vesting schedule thereof.
(2) These values were derived using the Black-Scholes option pricing model
applying the following assumptions: dividend yield of 0%; volatility of 49%;
6.09% risk-free interest rate and four-year expected term for the Nyberg and
Haavik options; 6.16% risk-free interest rate and five-year expected term
for the Plisga option; and 5.79% risk-free interest rate and 2.05-year
expected term for the Trulsvik and Boe options. These values are not
intended to forecast future appreciation of the Company's stock price. The
actual value, if any, that an executive officer may realize from his options
(assuming that they are exercised) will depend solely on the increase in the
market price of the shares acquired through option exercises over the
exercise price, measured when the shares are sold.
OPTION VALUES AT DECEMBER 31, 1996
Number of Shares
Underlying Unexercised Value of Unexercised In-the-
Options Held at Fiscal Money Options at Fiscal
Year End Year End(1)
------------------------------------------------------
Exercisable Unexercisable
Name Exercisable Unexercisable ($) ($)
-------------------------------------------------------------------------
Oistein Nyberg 44,000 100,000 253,000 0
Nils N. Trulsvik 60,000 100,000 345,000 0
Arnfin Haavik 36,000 100,000 207,000 0
Gary J. Plisga 0 65,000 0 0
Arild Boe 28,000 100,000 161,000 0
______________
(1) Represents the difference between the market value on December 31, 1996 and
the exercise price.
6
<PAGE>
EMPLOYMENT CONTRACTS
The Company has entered into Employment Contracts with each of its
executive officers. The Employment Contracts with Oistein Nyberg, Nils
Trulsvik, Arnfin Haavik, Gary Plisga and Arild Boe may be terminated by either
party on six months written notice. The contracts provide for an annual salary
of approximately $150,000 US (denominated in local currency in the country in
which the officer is located) which is subject to renegotiation at the end of
each fiscal year. In addition, beginning April 1, 1995, each person receives an
allowance equal to 12.5% of his base salary, a portion of which is used to
provide minimum life and disability insurance coverage for each such person.
The remainder of such allowance may be used by each person for additional life,
medical or accident insurance and to fund individual pension and retirement
plans. The Company reserves the right to review the 12.5% allowance every
three years. Each person is also entitled to receive up to a full year's salary
in the event he is unable to provide services due to sickness or injury. The
Employment Contracts for Messrs. Nyberg and Haavik also provide for, among other
things, housing allowances and, in the case of Mr. Nyberg, payment of childrens'
school fees.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors is responsible for
establishing and administering the executive compensation policies of the
Company. The Committee is comprised of Robert A. Halpin and Stanley D.
Heckman, non-employee Directors of the Company.
The basic compensation (salary and fringe benefits) of the Company's
executive officers is largely governed by employment agreements which were in
place when the Compensation Committee was formed in March 1995. See "Executive
Compensation - Employment Contracts." Executive officers Oistein Nyberg, Einar
Bandlien, Nils Trulsvik, Arild Boe, Arnfin Haavik and Svein Johansen, all of
whom had many years of experience in the oil and gas and natural resources
industries, first became affiliated with the Company as investors in
August 1994. During the ensuing twelve months, such persons assumed executive
positions with the Company as part of its transition from an oil and gas
technology company to a company involved in the acquisition and development of
oil and gas properties.
The basic compensation of the executive officers reflects the Company's
efforts to put into place an experienced management team to implement the
Company's new business plan and is not linked to performance. The Compensation
Committee believes that the salary of the executive officers is relatively
modest in light of such persons' experience in the oil and gas industry and the
challenges faced by management in expanding the Company's business. The
generally equal compensation levels of the executive officers (including the
chief executive officer) reflect management's view that a team approach to
implementing the Company's business plan is desirable and effective. This
compensation scheme also reflects certain cultural aspects of Norway, where most
of the executive officers reside. Pursuant to the terms of his employment
agreement, Mr. Nyberg, Chief Executive Officer from March 4, 1995 until
February 4, 1997, receives a housing allowance and reimbursement of a child's
school fees due to his relocation to England from Norway.
As the Company's business matures, the Compensation Committee will
consider instituting policies that will more closely link compensation to
operating performance. The Compensation Committee, in conjunction with the
Company's compensation consultants, is developing a cash bonus program which
will be based on the achievement of performance goals in order to provide
additional incentives and performance-based rewards to the executive officers.
The Company's 1995 Long-Term Incentive Plan enables the Compensation
Committee to provide long term incentives to executive officers through the
grant of stock options and stock appreciation rights. Stock options align
executive officers' interests with stockholders' interest by providing value to
the optionee only if the Company's stock price appreciates over the exercise
price of the option. In the fiscal year ended December 31, 1996, the
Compensation Committee approved option grants to executive officers ranging from
65,000 to 100,000 shares each. The number of options granted to the executive
officers was based primarily on management's recommendations, which the
Committee
7
<PAGE>
evaluated in the context of the total number of shares allocated to
the Plan and the general philosophy embodied in the Plan. Options granted to
executive officers (including the chief executive officer) who were residents of
the United States and the United Kingdom have an exercise price equal to the
fair market value of the Common Stock on the date of grant, vest equally over a
three year period and have a term of ten and seven years, respectively. Options
granted to executive officers who were residents of Norway have an exercise
price equal to 124% of the fair market value of the Common Stock on the date of
grant, vest on December 30, 1998, and expire on January 30, 1999. The terms of
options granted to residents of Norway reflect Norwegian legal and tax
considerations.
THE COMPENSATION COMMITTEE
Robert A. Halpin
Stanley D. Heckman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Robert A.
Halpin and Stanley D. Heckman, neither of whom is an employee of the Company.
In lieu of directors fees generally paid to non-employee Directors, Mr. Halpin
was compensated for his services as Chairman of the Board pursuant to a separate
agreement. The Company also from time to time uses the consulting services of
Halpin Energy Resources, Ltd., which is controlled by Mr. Halpin. See "Election
of Directors - Directors' Compensation."
8
<PAGE>
FOUNTAIN OIL STOCK PERFORMANCE
The following graph compares the cumulative total shareholder return,
assuming dividend reinvestment, on the Company's Common Stock for the five years
ended December 31, 1996, with the S&P Smallcap 600 Index and a selected peer
group of companies.
The amounts in the following graph assume that the value of an investment
in Fountain Oil Incorporated Common Stock and each index was $100 on December
31, 1991. The selected peer group consists of Benton Oil & Gas Co. and United
Meridian Corp. (included in the peer group from January 1, 1994 FORWARD).
Measurement Period Fountain Oil S&P Smallcap 600
(Fiscal Year Covered) Incorporated INDEX Selected Peer Group
December 31, 1991 100 100 100
December 31, 1992 33.45 121.04 70.15
December 31, 1993 11.03 143.78 59.70
December 31, 1994 60.50 136.92 76.55
December 31, 1995 58.72 177.94 104.04
December 31, 1996 103.20 215.88 238.54
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 31, 1997 with
respect to beneficial ownership of the Company's Common Stock by each person
known by the Company to be the beneficial owner of more than 5% of the Company's
stock, by each director and Named Officer of the Company and by all directors
and executive officers of the Company as a group.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership Percent of Class
----------------------------------------------------------------------------
Eugene J. Meyers 540,228 (1) 2.41%
Nils N. Trulsvik 194,900 (2) *
Einar Bandlien 179,968 (3) *
Oistein Nyberg 176,000 (4) *
Arnfin Haavik 163,000 (5) *
Arild Boe 160,000 (6) *
Stanley D. Heckman 108,293 (7) *
Robert A. Halpin 27,000 (8) *
All executive officers
and directors as a group
(11 persons) 1,740,550 (9) 7.68%
___________________
* Less than 1%.
(1) Includes 7,500 shares underlying presently exercisable options.
(2) Includes 60,000 shares underlying presently exercisable options.
(3) Includes 44,000 shares underlying presently exercisable options.
(4) Includes 44,000 shares underlying presently exercisable options.
(5) Includes 36,000 shares underlying presently exercisable options.
(6) Includes 28,000 shares underlying presently exercisable options.
(7) Includes 7,500 shares underlying presently exercisable options.
(8) Includes 15,000 shares underlying presently exercisable options.
(9) See Notes 1-8; also includes 191,161 issued shares held by executive
officers not named in the foregoing table.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 26, 1996, pursuant to an Amended and Restated Share Exchange
Agreement of that date between Zhoda Corporation ("Zhoda") and Fountain Oil
Ukraine Ltd. ("FOU"), both Alberta, Canada corporations, Zhoda transferred to
FOU shares representing 80% of the outstanding equity of UK-RAN Oil Corporation
("UK-RAN"). Through UK-RAN's ownership of a 45% equity interest in Kashtan
Petroleum, Ltd., a Ukrainian joint venture company developing the Lelyaky oil
field in central Ukraine ("Kashtan"), the shares transferred by Zhoda represent
an effective 36% ownership interest in Kashtan and the Lelyaky field project.
In consideration for the transfer, FOU assumed a $450,000 obligation owed by
Zhoda to the Company and issued to Zhoda 1,000,000 special non-voting common
shares of FOU (the "Special Shares") which, under certain circumstances relating
to the receipt by Kashtan of a license to develop the Lelyaky field, production
from the Lelyaky field and payment of dividends by Kashtan, may be exchanged on
a share-for-share basis for shares of the Common Stock of the Company. All
rights to exchange Special Shares for shares of the Company's Common Stock
expire on May 8, 2001. Following the expiration of the exchange rights, FOU may
redeem any then outstanding Special Shares at a price equal to one-half of one
cent ($.005) per Special Share.
As of the date of this Proxy Statement, Zhoda was indebted to the Company
in the principal amount of $190,186.
Orest Senkiw, who was elected a Vice President of the Company on
February 4, 1997, Mr. Senkiw's wife and his two adult children each own 25%
of a corporation that holds 10.3% of the
10
<PAGE>
outstanding shares of Zhoda. Mr. Senkiw is the Company executive with the
principal operating responsibilities for the Lelyaky field project.
RATIFICATION OF SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS
At the recommendation of the Audit Committee, the Board of Directors has
selected Coopers & Lybrand L.L.P., independent public accountants, to audit the
financial statements of the Company for the year ending December 31, 1997 and to
perform other appropriate services. Coopers & Lybrand L.L.P. audited the
Company's financial statements for the fiscal year ended August 31, 1996 and the
four month period ended December 31, 1996. Representatives of Coopers & Lybrand
L.L.P. are expected to be present at the Meeting, with the opportunity to make a
statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
The Board of Directors recommends a vote FOR ratification of such
selection. In the event of a negative note on such ratification, the Board of
Directors will select another firm of independent accountants. This proposal
requires for approval the affirmative vote of a majority of the shares present
in person or by proxy and entitled to vote. Abstentions have the effect of a
vote against the proposal and broker non-votes have no effect on the vote.
STOCKHOLDER PROPOSALS
Any stockholder intending to submit to the Company a proposal for
inclusion in the Company's Proxy Statement and proxy for the 1998 Annual Meeting
must submit such proposal so that it is received by the Company no later than
December 23, 1997.
ANNUAL REPORTS ON FORMS 10-KSB AND FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the transition
period ended December 31, 1996, as filed with the Securities and Exchange
Commission is included in the Annual Report to Stockholders which accompanies
this Proxy Statement. A copy of the Company's Annual Report on Form 10-KSB for
the year ended August 31, 1996 filed with the Securities and Exchange Commission
may be obtained without charge by writing to: Corporate Secretary, Fountain Oil
Incorporated, 1400 Broadfield Boulevard, Suite 100, Houston, Texas 77084.
DISCRETIONARY AUTHORITY
While the Notice of Annual Meeting of Stockholders calls for the
transaction of such other business as may properly come before the Meeting, the
Board of Directors has no knowledge of any matters to be presented for action by
the stockholders other than as set forth above. The enclosed proxy gives
discretionary authority, however, in the event any additional matters should be
presented.
SUSAN E. PALMER
Secretary
April 21, 1997
11
<PAGE>
LOGO
FOUNTAIN OIL INCORPORATED
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 3, 1997
The undersigned hereby constitutes and appoints ROBERT A. HALPIN, OISTEIN
NYBERG and NILS N. TRULSVIK, and each of them, the attorneys and proxies of the
undersigned with full power of substitution to appear and to vote all of the
shares of Common Stock of Fountain Oil Incorporated held of record by the
undersigned on April 11, 1997 at the Annual Meeting of Stockholders to be held
on June 3, 1997, or any adjournment thereof, as designated below:
(1) ELECTION OF DIRECTORS:
[_] FOR all nominees [_] WITHHOLD AUTHORITY
(except as indicated to to vote for all nominees
the contrary below) listed below
Einar Bandlien, Robert A. Halpin, Stanley D. Heckman, Eugene J. Meyers, Oistein
Nyberg, Nils N. Trulsvik
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
(2) To ratify the selection of Coopers & Lybrand L.L.P. as the Company's
independent accounting firm.
[_] FOR [_] AGAINST [_] ABSTAIN
(3) IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE ON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.
(Continued and to be signed on other side)
LOGO
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FOUNTAIN OIL
INCORPORATED. IF NO VOTE IS INDICATED, THIS PROXY WILL BE VOTED WITH AUTHORITY
FOR THE ELECTION OF THE DIRECTORS AND FOR ALL OTHER PROPOSALS.
YOU ARE URGED TO DATE, SIGN AND RETURN PROMPTLY THIS PROXY IN THE ENVELOPE
PROVIDED. IT IS IMPORTANT FOR YOU TO BE REPRESENTED AT THE MEETING. THE
EXECUTION OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE
PRESENT AT THE MEETING.
Dated: , 1997
----------------------------------
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Signature(s)
-----------------------------------------------
IMPORTANT: Please sign exactly as
your name or names appear on this
proxy, and when signing as an
attorney, executor, administrator,
trustee or guardian, give your full
title as such. If the signatory is a
corporation, sign the full corporate
name by duly authorized officer, or
if a partnership, sign in partnership
name by authorized person.
