EXPLORATION AGREEMENT
BETWEEN
ZYDECO EXPLORATION, INC.
AND
FX ENERGY, INC.
DATED
APRIL 4, 1996
EXPLORATION AGREEMENT
i
INDEX
1. USE OF THE SEISMIC FUNDS.............................................. 2
2. SEISMIC FUNDS......................................................... 3
3. EXCESS SEISMIC COSTS DUE TO TURNKEY CONTRACTS......................... 4
4. DAMAGES TO THE STATE OF LOUISIANA UNDER THE EXCLUSIVE SEISMIC PERMIT.. 4
5. DISCONTINUANCE OF SEISMIC FUND PAYMENTS............................... 4
6. PROSPECTS............................................................. 6
7. PROSPECT DEVELOPMENT.................................................. 6
9. PROSPECT TEST WELL.................................................... 8
10. NON-PROPOSING PARTY'S ELECTION TO PARTICIPATE......................... 8
11. ZEI'S OBLIGATIONS..................................................... 9
12. ACCOUNTING OF SEISMIC FUNDS........................................... 9
13. RECORD TITLE..........................................................10
14. AREA OF MUTUAL INTEREST...............................................10
15. SEISMIC DATA..........................................................11
16. GENERAL PROVISIONS....................................................12
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EXPLORATION AGREEMENT
This Exploration Agreement is made and entered into this 4th day of April,
1996, by and between Zydeco Exploration, Inc. ("ZEI") and FX Energy, Inc.
("FX").
W I T N E S S E T H :
WHEREAS, ZEI has considerable expertise in exploration and production
activities in the formerly seismically-blind trends of southern Louisiana; and
WHEREAS, ZEI utilizes advanced seismic imaging and comprehensive well log
analysis and integration to identify new drilling opportunities in an attempt to
minimize the risk in each of the prospects so identified; and
WHEREAS, FX desires to acquire and explore for oil and gas reserves in the
on- and off-shore area of coastal Louisiana; and
WHEREAS, FX and ZEI desire to work together to generate, develop, and
exploit oil and gas exploration prospects in the coastal Louisiana area; and
WHEREAS, the parties desire to establish an area of mutual interest within
which to develop exploration and drilling prospects to be shared by them; and
WHEREAS, the parties desire to delegate to ZEI the responsibility of
managing the acquisition of seismic options and/or permits, managing the
acquisition, processing, and reprocessing of seismic data, identifying
potential prospects, acquiring leases and farmouts, interpreting geological and
geophysical data, making drilling recommendations, and managing the exploration
process, including selecting and monitoring a production operator, or
alternately, acting itself as production operator; and
WHEREAS, ZEI will contribute to the exploration program for costs a State
of Louisiana exclusive seismic survey permit obtained at the State of Louisiana
tender on February 14, 1996 (the "Exclusive Seismic Permit"), a copy of which is
attached hereto as Exhibit "A," and all overhead costs associated with the
development and interpretation of drillable prospects except for the costs of
processing and re-processing seismic data and well logs; and
WHEREAS, FX will pay 100% of Seismic Costs, as hereafter defined, up to
$13,500,000 and 50% of Seismic Costs thereafter; and
WHEREAS, the parties memorialize their undertakings pursuant to the terms
hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual and
dependent covenants hereinafter set forth, and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
1. USE OF THE SEISMIC FUNDS
------------------------
ZEI shall obtain seismic data (the "Program Data") covering the lands
depicted on Exhibit "B" and modified by Exhibit "B-1" (the "Initial Prospect
Lands") using funds ("Seismic Funds") contributed by FX, subject to the
understanding that should Seismic Costs, as defined herein, exceed $13,500,000
(the "Target Costs"), ZEI and FX shall jointly bear all Seismic Costs in excess
of Target Costs. The Seismic Funds shall be advanced by FX according to the
schedule described in Section 2.
The Seismic Funds shall be applied by ZEI as follows:
a. To ZEI as reimbursement for the expenses, including bonus, incurred to
date in acquisition of the Exclusive Seismic Permit; then
b. toward costs incurred by ZEI in acquiring and processing Program Data,
including:
i. acquisition of proprietary seismic data, including, without
limitation, the seismic data required under the Exclusive Seismic
Permit, including quality control expenses and feasibility tests
prior to commencement of acquisition of seismic data;
ii. obtaining permits to acquire seismic data;
iii. payments for options to obtain seismic data, and out of pocket
costs incident thereto, including the state permit for 51,350
acres, (to the extent such permit is not reimbursed under the
other provisions hereof);
iv. seismic processing and reprocessing costs;
v. licensing of seismic data owned by third parties;
vi. third party legal and professional expenses relating to the
Exclusive Seismic Permit, or the acquisition or processing of
Program Data;
vii. weather insurance, as applicable for non-turnkey agreements;
viii. turnkey contracts;
ix. damages paid by ZEI to landowners for damages to lands or
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possessions;
x. the cost of legal defense, judgments, and settlements relating to
any claim or cause of action brought by a land or mineral owner
relating to or arising out of the acquisition of seismic data
hereunder;
xi. the cost of transmission or transportation of data from field to
office and insurance costs associated therewith;
xii. any other third party expense reasonably incurred by ZEI in
connection with the items enumerated under this Section.
c. toward costs incurred by ZEI in acquiring permits, options to lease
lands within the AMI, and leases of lands within the AMI when
necessary including:
i. bonus and other payments made to parties for such options;
ii. out-of-pocket costs incurred by ZEI in obtaining such options,
e.g., landman costs, broker expenses, abstract charges, etc.;
iii. third party legal, accounting, and professional expenses
incurred in obtaining such options, both in examination of title
and in negotiating options;
iv. any other third party expense reasonably incurred by ZEI in
connection with the items enumerated under this Section.
The term "Seismic Costs" shall include all items referred to in this
Section 1.
2. SEISMIC FUNDS
-------------
FX shall pay the Seismic Funds to ZEI for deposit in the segregated
account described in Section 12.a on the following schedule.
DATE AMOUNT
---- ------
1996-05-15 $3,000,000.00
1996-06-30 1,000,000.00
1996-07-30 1,000,000.00
1996-08-30 1,000,000.00
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1996-09-30 2,000,000.00
1996-10-30 1,000,000.00
1996-11-30 1,000,000.00
1996-12-30 1,000,000.00
1997-01-30 1,000,000.00
1997-02-28 1,500,000.00
Should FX fail to make the initial advance by May 15, 1996, this agreement
shall terminate and be of no further force or effect.
3. EXCESS SEISMIC COSTS DUE TO TURNKEY CONTRACTS
---------------------------------------------
The parties anticipate that ZEI may enter into one or more turnkey
contracts. The parties estimate that the premium required for turnkey contracts
may bring total Seismic Costs to $15,000,000. Should turnkey costs cause
Seismic Costs to exceed the Target Costs, the parties agree:
(i) In lieu of FX bearing 100% of Seismic Costs up to $13,500,000, FX
shall bear 100% of Seismic Costs up to $13,000,000.
(ii) FX and ZEI shall bear Seismic Costs between $13,000,000 and
$15,000,000 equally; and
(iii)Any Seismic Costs in excess of $15,000,000 shall be borne equally.
4. DAMAGES TO THE STATE OF LOUISIANA UNDER THE EXCLUSIVE SEISMIC PERMIT
--------------------------------------------------------------------
The Exclusive Seismic Permit requires the payment of liquidated and
other damages in certain situations. Should such be required, the parties agree
that such damages shall be borne equally by FX and ZEI.
5. DISCONTINUANCE OF SEISMIC FUND PAYMENTS
---------------------------------------
a. Should FX fail to make a Seismic Fund payment within thirty days
of the date due (a "Discontinuance"),
the parties shall proceed as follows:
i. The obligation of FX to make additional Seismic Fund payments
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shall terminate, as well as the right of FX to make such
payments.
ii. ZEI shall, individually, or with the cooperation or assistance of
one or more companies, complete acquiring or processing Program
Data; provided however, it shall incur no liability to FX for
failing to do so.
iii. At such time as ZEI acquires an interest in a lease covering a
portion of the Initial Prospect Lands (which may be acquired by
direct lease, assignment from an existing lease, or acquiring a
farmout), ZEI shall determine the aggregate amount of Seismic
Costs incurred to that date.
iv. FX shall be entitled to a prospect ownership interest (the "FX
Prospect Interest") which, expressed as a percentage, is equal to
the Seismic Funds FX paid divided by twice the total Seismic
Funds expended. Thus a contribution of $3.0 of Seismic Funds by
FX when total Seismic Costs were $12.0 million entitle FX to a FX
Prospect Interest equal to 12.5%.
b. Where ZEI itself, following a Discontinuance, contributes funds that
otherwise would be provided by FX under the terms hereof, ZEI shall be
entitled to receive back such funds, together with interest thereon at
the prime interest rate, from revenues attributable to the FX Prospect
Interest (including, without limitation, any working interest or
overriding royalty interest revenues from production or front end
proceeds attributable to such interest when owned by FX under the
applicable operating agreement or proceeds from the sale or license of
seismic data).
c. Subject to the provision immediately below, if a Discontinuance
occurs, and ZEI does not itself fund the deficient Seismic Costs, ZEI
may sell, trade, farm-out, lease, sublease or otherwise trade
(collectively, a "Trade") the aggregate (i.e., both that of ZEI and
FX) prospect interests to any party on arms' length terms. For this
purpose the aggregate prospect interests includes all seismic data
acquired hereunder, and revenues from a Trade include seismic data
sale or license proceeds. Any revenues accruing from a Trade shall be
applied toward the cost of completing the project contemplated
hereunder.
.
d. Should ZEI do a Trade and FX have funded $8,000,000 or more prior to
the Discontinuance, then the parties shall treat FX as having earned a
vested prospect ownership interest of 25%, which shall be treated
under the applicable operating agreement and not subject to any Trade,
and any revenues from a Trade, which would in this instance cover a
75% prospect ownership interest, shall be shared 33 1/3% by FX and 66
2/3% by ZEI.
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6. PROSPECTS
---------
As used herein, "prospect" shall mean a block of acreage suitable for
exploration, including leasehold, operating, nonoperating, mineral and royalty
interests, licenses, permits, and contract rights relating thereto.
Upon acquisition of the Program Data, ZEI shall evaluate such data for
prospects. Prospects found during the initial review of such seismic data are
hereinafter referred to as the "Prospects."
7. PROSPECT DEVELOPMENT
--------------------
a. Prospect Preparation
ZEI will prepare the Prospects for evaluation, which shall include,
among other things, the following:
i. examination of land and lease titles to determine lands and
leases available for lease or farmout;
ii. leasing of lands within the Prospect perimeters, and, where such
lands are under lease, acquiring farmouts;
iii. geological and geophysical interpretation;
iv. mapping; and
v. permitting.
b. Operating Agreement for Prospects
Each Prospect will be drilled and operated under an operating
agreement in the form of that attached hereto as Exhibit "C" (the "Default
Operating Agreement"). Each such operating agreement shall cover the
Prospect Lands for the applicable Prospect. The parties acknowledge that
for one or more of the Prospects, third parties may participate in the
drilling of wells. Such parties may request changes in the applicable
operating agreement. ZEI and FX agree to negotiate changes as may be
requested in good faith. On one or more Prospects, ZEI may itself not wish
to act as operator. In such event ZEI may designate a qualified third
party to act as operator of the Prospect.
In the event of any inconsistency or conflict between the terms and
provisions of this Agreement and of the operating agreement covering any
Prospect or other prospect developed hereunder, the terms and provisions of
this Agreement shall prevail.
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c. Notice to FX of Completion of Prospect Assembly and Development
ZEI will notify FX when a Prospect's assembly and development is
complete. Subject to any applicable restrictions imposed in
confidentiality agreements or license agreements, ZEI will make available
to FX in ZEI's office all seismic materials, maps, geological reports
leases, farmout agreements or other materials in its possession reasonably
relevant to a decision to participate in the drilling of the Prospect test
well and prospect. ZEI shall give FX access to ZEI's 3D work stations
during normal business hours as necessary or appropriate to allow FX to
evaluate 3D seismic data relevant to the prospect.
8. PROSPECT EXPENSES
-----------------
a. Program expenses ("Prospect Expenses") are to be borne equally
by ZEI and FX and include the following costs of preparing the
Prospects for evaluation, development, and drilling:
i. lease bonuses and brokerage for additional leases wholly or
partly within the Prospect Lands;
ii. delay or shut in rental payments on leases or interests acquired
hereunder;
iii. third party legal and professional expenses relating to the
acquisition or maintenance of leases or farmouts;
iv. any other third party expense reasonably incurred by ZEI in
connection with the items enumerated under this Section or in
Section 7;
v. engineering costs
provided, however, if FX fails to pay the full amount of the Target
Costs, FX shall bear a percentage of the Prospect Expenses equal to
its FX Prospect Interest. FX shall have the opportunity to
participate for a working interest in Prospect leases and farmouts
equal to its FX Prospect Interest.
b. Should FX fail to pay Prospect Expenses within thirty days of receipt
of a billing therefor, and ZEI demand payment of such Prospect
Expenses by written demand delivered by certified mail, return receipt
requested, and FX not pay the delinquent Prospect Expenses within
fifteen (15) days of receipt of the certified mail demand; then
i. FX shall have no liability for such Prospect Expenses;
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ii. FX shall be deemed to have declined to participate in the
Prospect in question; and
iii. FX shall promptly, upon request, quitclaim to ZEI any interest
it has or might have in the Prospect in question.
9. PROSPECT TEST WELL
------------------
For a period of ninety days following ZEI's delivery of the notice
provided in Section 7.c advising that a Prospect's assembly and development is
complete, ZEI shall have the exclusive right to propose a well. Thereafter,
either party may propose a well. The proposing party shall include the
following information with its notice:
a. the spud date scheduled for the initial test well on the Prospect,
which shall not be less than 90 days from the date of notice (subject
to rig availability) unless a farmout requirement or lease termination
necessitates a shorter period;
b. the target formation;
c. an AFE for the test well, with dry hole and completion costs shown;
d. whether the well is recommended to be drilled on a turnkey, daywork,
or footage basis;
e. an estimated economic evaluation of the Prospect; and
f. the Default Operating Agreement for signature, revised to include the
legal description of the Prospect in question.
10. NON-PROPOSING PARTY'S ELECTION TO PARTICIPATE
---------------------------------------------
Within 30 days of its receipt of the notice described in Section 9
above, the non-proposing party shall advise the proposing party of the working
interest, if any, with which the non-proposing party will either take itself or
sell to a third party. If the aggregate working interest for which the non-
proposing party will either itself participate or sell to a third party is less
than the working interest owned by the non-proposing party, the non-proposing
party shall assign the balance of its working interest to proposing party or its
designee. Such assignment shall be in the form of that attached hereto as
Exhibit "D" (the "Assignment"). As provided in the Assignment, the non-
proposing party will reserve a 2% of 8/8ths overriding royalty until payout, as
therein defined, together with an option to convert said overriding royalty
interest to a 20% of 8/8ths working interest at payout, both the overriding
royalty and working interest to be proportionately reduced to reflect the
working interest assigned.
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Any consideration received by a party for the sale or farming out of a
portion of its working interest shall be solely for such party's account.
Should a non-proposing party fail to assign its excess interest under the
Assignment prior to ten days before the scheduled spud date, the excess interest
will be drilled subject to the non-consent provisions of the Default Operating
Agreement, which provides for a forfeiture of interest on Exploratory
Operations, as defined therein.
11. ZEI'S OBLIGATIONS
-----------------
Without further consideration, ZEI shall undertake the following:
a. to provide all management and administration necessary to prepare the
Prospects for drilling, as more fully described under Section 7.a;
b. all bonding requirements necessary to maintain leases acquired
pursuant hereto;
c. geophysical and geological evaluations of the Prospects; and
d. estimated economic evaluations of the Prospects.
Notwithstanding the foregoing, FX shall reimburse ZEI for one-half the cost
of bonding a Lease at the time ZEI delivers an assignment of an interest in the
Lease to FX.
ZEI shall have the sole authority to determine the specifications of
acquiring, processing, and reprocessing seismic data and well logs. Further,
ZEI has the option of performing all or partial sequencing of the seismic data
or well log processing utilizing its own facilities.
12. ACCOUNTING OF SEISMIC FUNDS
---------------------------
a. Segregated Account
For ease of accounting, ZEI shall segregate the Seismic Funds into a
separate account (the "Seismic Fund Account"). Such account shall be
styled to put third parties on notice that the funds are held for the joint
account of FX and ZEI. Except where impractical, all Seismic Costs shall
be withdrawn directly from the Seismic Fund Account.
b. Accounting
Not less than 45 days after the end of each calendar quarter, ZEI
shall
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give FX a detailed accounting of all funds withdrawn from the Seismic
Fund Account. ZEI shall furnish documentation supporting Seismic Fund
expenditures to FX upon request.
c. Right to Audit
FX shall have such rights of audit as are available to a non-operator
under the Default Operating Agreement.
d. Internally Generated Statements
Prior to the end of each month ZEI shall forward to FX internally
prepared statements for the prior month showing revenues and expenses
charged to the Seismic Fund Account.
e. Joint Signature Account
Should the timing of Seismic Costs and payment of the Seismic Funds be
such that the Seismic Fund Account would have in excess of $2,000,000 at
one time, ZEI and FX shall jointly deposit the excess funds (i.e., those
over $2,000,000) into a joint signature account.
13. RECORD TITLE
------------
a. ZEI shall obtain title to leases acquired pursuant hereto (the
"Leases"). ZEI shall assign to FX its leasehold interest in a
Lease utilizing the form of assignment provided herein. Such
assignment shall be delivered after FX has paid all Prospect
Expenses billed to it hereunder and:
i. a well is ready for drilling; or
ii. front end costs have been paid to ZEI by a third party working
interest owner, or
iii. a farmout of the prospect has been signed.
b. Each of ZEI and FX agree not to pledge, mortgage, or hypothecate any
Lease without the consent of the other prior to the time a well is
spudded on such Lease or a unit containing such Lease. Each of ZEI
and FX further agree not to pledge, mortgage or hypothecate any
seismic data obtained hereunder.
14. AREA OF MUTUAL INTEREST
-----------------------
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The parties hereby designate an Area of Mutual Interest ("AMI"). The
AMI shall encompass the Initial Prospect Lands. Should ZEI acquire as a Seismic
Cost data covering lands outside the Initial Prospect Lands, the AMI shall be
deemed enlarged to cover all lands covered by such seismic data. Any interest
taken by either party after May 16, 1996 and prior to May 15, 2001 in an oil and
gas lease, exploration option, operating agreement, farm-in, deed coupled with
mineral interest, or any similar agreement which creates or effects an interest
in hydrocarbons in lands within the AMI (an "Interest"), or acquisition of a
contractual right to acquire an Interest, shall be deemed taken for development
under this agreement. The party acquiring an Interest shall, within thirty (30)
days of the time of such acquisition, notify, in writing, the non-acquiring
party. The notice shall describe the interest and set forth the terms of such
acquisition, the consideration paid, any other acquisition costs, and other
obligations assumed. The non-acquiring party will then have the right, within
thirty (30) days of the receipt of such notice, to elect in writing to receive
an assignment of one half (or, if smaller, its working interest ownership
determined by the FX Prospect Interest, as applicable) of each such acquired
Interest and the obligations connected therewith. If the non-acquiring party
elects to take such an assignment, the non-acquiring party shall tender to the
acquiring party, at the time it gives notice of its election, its share of the
consideration and acquisition costs actually paid by the acquiring party, and in
consideration thereof, shall receive an assignment of its share of the Interest
with covenants of special warranty. The failure to make such election and to
tender its share of the consideration and costs within such thirty (30) day
period shall constitute a waiver of the non-acquiring party's right to receive
such an interest. During such thirty (30) day notice period, the non-acquiring
party shall have the right to inspect all leases, documents, title information,
and contracts reflecting the interest to be acquired.
15. SEISMIC DATA
------------
a. Licensed Data
When licensing data for use in evaluation of the Prospects, ZEI shall
endeavor to secure a joint license which would allow FX and ZEI to use the
licensed data independently. However, if a joint license can be obtained
only by the payment of an additional premium, ZEI shall license such data
with only itself as the licensee.
b. Marketing of Proprietary Data
ZEI will acquire proprietary seismic data in its prospect development
program. Absent the agreement of both parties, such data shall not be
marketed to third parties. FX shall own an interest in such seismic data
equal to the FX Prospect Interest and ZEI the own the remaining interest in
such data.
Notwithstanding the ownership in the seismic data described above, if
FX funds the entire seismic acquisition program contemplated hereunder,
then until
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such time, if any, as proceeds from the sale or license of proprietary
seismic data equal Seismic Funds advanced by FX, FX shall receive all
proceeds from any license or sale of proprietary seismic data. After such
proceeds equal the Seismic Funds advanced by FX, any further proceeds shall
be shared equally by ZEI and FX.
16. GENERAL PROVISIONS
------------------
a. Additional Documents
The parties agree to execute such further documents as may be
necessary or appropriate to more fully reflect the agreements and
understandings reflected herein.
b. Amendment.
This Agreement may be amended only by an instrument signed by the
party against whom such amendment is sought to be enforced.
c. Arbitration.
Subject to any restriction imposed by law on agreements for compulsory
arbitration, the parties agree that any controversy or dispute arising out
of, in connection with, or related to this Agreement, any provision or
breach thereof, or any transaction contemplated hereby shall be submitted
to and settled by binding and conclusive arbitration before a panel of
three (3) arbitrators in Houston, Texas in accordance with the applicable
rules of the American Arbitration Association (or any other form of
arbitration agreed to by the parties) then in effect; provided, however,
that only actual damages and attorney fees of the prevailing party
reasonably incurred in connection with the arbitration proceeding shall be
awarded in connection therewith. Judgment on any award rendered pursuant
to any such arbitration proceeding may be entered in any court, Federal or
state, having jurisdiction thereof, and the parties shall be deemed to have
waived their right to any form of appeal of such award to the extent
permitted by law.
d. Assignment
This agreement may be assigned in whole or part by FX with the
approval of ZEI, which approval shall not be unreasonably denied.
e. Successors and Assigns.
Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto.
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f. Consequential Damages.
Neither party hereto shall be liable to the other for special,
indirect, consequential or incidental damages resulting from or arising out
of this Agreement or the obligations contemplated hereunder, including, but
not limited to, loss of production, loss of anticipated profits or business
interruptions, however same may be caused.
g. Contractual Liabilities
Should ZEI incur a contractual liability to a third party in
performing its undertakings hereunder, such contractual liability shall be
treated as a Prospect Expense. Should ZEI incur a tort liability to a
third party in performing its undertakings hereunder, and such liability be
a result of gross negligence or willful malfeasance, such liability, and
all attorneys fees and expenses relating thereto, shall be solely for ZEI's
account. Should ZEI incur a tort liability to a third party in performing
its undertakings hereunder, and such liability not be a result of gross
negligence or willful malfeasance, such liability, and all attorneys fees
and expenses relating thereto, shall be borne equally by FX (or its
assigns) and ZEI.
h. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
i. WAIVER OF CONSUMER RIGHTS
-------------------------
(Texas Deceptive Trade Practices Act)
It is the belief of the parties that this agreement is exempt from the
provisions of the Texas Deceptive Trade Practices-Consumer Protection Act
(the "Act"). Should, however, the Act be construed to not exempt this
transaction, the following waiver shall apply. For the purpose of the
following waiver, ZEI is deemed the Seller and FX the Purchaser:
PURCHASER REPRESENTS AND STIPULATES TO SELLER THAT:
(I) THE PURCHASER IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION;
(II) THE PURCHASER IS REPRESENTED BY LEGAL COUNSEL IN SEEKING OR ACQUIRING
THE GOODS OR SERVICES WHICH IT ACQUIRES UNDER THIS AGREEMENT; AND
(III) CONSUMER'S LEGAL COUNSEL WAS NOT DIRECTLY OR INDIRECTLY IDENTIFIED,
SUGGESTED, OR SELECTED BY SELLER OF AN AGENT OF THE SELLER.
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(IV) I (THE PURCHASER) WAIVE MY RIGHTS UNDER THE DECEPTIVE TRADE
PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., BUSINESS &
COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS.
AFTER CONSULTATION WITH AN ATTORNEY OF MY OWN SELECTION, I VOLUNTARILY
CONSENT TO THIS WAIVER."
j. Due Authorization.
Each party hereto represents that the execution, delivery and performance
of this Agreement by such party has been duly authorized by all necessary
corporate action.
k. Entire Agreement.
This Agreement, including the schedules and exhibits hereto constitutes
the entire Agreement, and supersedes all other prior agreements,
understandings, representations and warranties both written and oral, among
the parties, with respect to the subject matter hereto.
l. Force Majeure
In the event that any party is rendered unable, in whole or in part, by
force majeure to carry out its obligations under this Agreement (other than
the obligation to make payments of money due), upon such party giving notice
and reasonably full particulars of such force majeure in writing to the
other party within a reasonable time after the occurrence of the cause
relied upon, the obligations of the party giving such notice, so far as they
are affected by such force majeure, shall be suspended during the
continuance of any inability so caused, but for no longer period; and the
cause of the force majeure as far as possible shall be remedied with all
reasonable dispatch. The term "force majeure" as employed herein shall mean
an act of God, strike, lockout or other industrial disturbance, war,
blockade, riot, lightning, fire, storm, flood, explosion, governmental
restraint and any other cause whether of the kind herein enumerated, or
otherwise, not reasonably within the control of the party claiming
suspension. The settlement of strikes, lockouts and other labor
difficulties shall be entirely within the discretion of the party having the
difficulty. The above requirement that any force majeure shall be remedied
with all reasonable dispatch shall not require the settlement of labor
difficulties by acceding to the demands of opponents therein when such
course is inadvisable in the discretion of the party having the difficulty.
m. Governing Law
Except as otherwise required by mandatory provisions of applicable law,
this Agreement shall be governed by and construed in accordance with the
laws of
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the State of Texas, without reference to principles of conflicts of
law.
n. Headings.
Section headings in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any
other purpose.
o. Relationship of the parties
The parties to this Agreement are independent contractors. There is no
relationship of agency, partnership, joint venture, employment, or franchise
between the parties in any way. Neither party nor its employees has the
authority to bind or commit the other party in any way or to incur any
obligation on its behalf.
p. Notices
Any notice or report herein required or permitted to be given shall be
addressed to the parties as follows:
If to FX:
FX Energy, Inc.
237 Park Avenue, Suite 2100
New York, NY 10017
Tel: 212 551 3550
Fax: 212 490 0131
If to ZEI:
Zydeco Exploration, Inc.
Suite 1160
333 North Sam Houston Parkway East
Houston, Texas 77060-2403
Tel: 713 820 2481
Fax: 713 820 6054
Any notice required to be given hereunder shall be sufficient if in
writing, and sent by nationally recognized overnight courier service, hand
delivery, telecopy or registered mail (return receipt requested and first-
class postage prepaid), addressed to the address first set forth above for
each party (or to such other address as any party shall specify by written
notice so given), and shall be deemed to have been delivered as of the date
sent.
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q. Performance Standards
In performing their duties or exercising their rights hereunder, one party
shall be liable to the other only for gross negligence or willful
malfeasance. It is not the intent that either party have a fiduciary
obligation to the other, any such obligation being expressly waived and
disclaimed.
r. Severability
If any part of this Agreement is found invalid or unenforceable, that part
will be amended to achieve as nearly as possible the same economic effect as
the original provision and the remainder of this Agreement will remain in
full force.
s. Statute of limitations.
No action arising under this Agreement may be brought at any time more
than thirty six (36) months after discovery or acquisition of knowledge of
the facts upon which the cause of action is based occurred.
t. Tax Matters
As to all operations hereunder, the parties hereto shall be subject to and
shall comply and abide with the tax election provisions set out in Exhibit
"E" attached hereto and made a part hereof for all purposes.
u. Third Party Beneficiary.
This Agreement is not intended to benefit or to create any obligations to,
or rights in respect of, any persons other than the parties hereto, and
their respective legal representatives, heirs or estates.
v. Time
Time is of the essence in all matters pertaining to this Agreement.
w. Titles
The parties acknowledge that the determination of adequate or marketable
title to Louisiana lands and leases is, to a great extent, subjective. As
to any option, permit, or land or lease acquired hereunder, ZEI shall make
all title materials in its possession available to FX upon request. ZEI
makes no warranty or representation that the title of any party granting any
option, permit, land or lease hereunder is adequate, good, or marketable.
Further, ZEI shall have no liability to FX of any nature upon the total or
partial failure of title to any option, permit, land or lease acquired
hereunder.
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IN WITNESS WHEREOF, this Exploration Agreement is executed as of the date
first above written.
ZYDECO EXPLORATION, INC.
By: /s/ Sam B. Myers, Jr.
-----------------------------------
Sam Myers, President
FX ENERGY, INC.
/s/ William D. Forster
By: William D. Forster
Its: President_________________________
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