AGREEMENT
Dated Effective as of January 1, 1999
Between
APACHE OVERSEAS, INC.
and
FX ENERGY, INC.
Pertaining to Oil & Gas Operations in Poland
AGREEMENT
This Agreement (this "Agreement"), is entered into effective as of January 1,
1999, by and between FX Energy, Inc., a Nevada corporation, and its subsidiaries
and affiliates through which it owns interests and carries out activities in
Poland (collectively, "FXEN"), and APACHE Overseas, Inc., a Delaware corporation
, and its subsidiaries and affiliates through which it owns interests and
carries out activities in Poland (collectively, "APACHE").
RECITALS
A.FXEN and APACHE hold certain rights to explore for and exploit natural gas
and oil in certain lands in the Republic of Poland and have been conducting
exploration operations in Poland pursuant to various agreements.
B.In light of their experience working together in Poland, FXEN and APACHE now
wish to broaden their area of common interests and operations in Poland and
modify certain provisions of their existing agreements to conform more
closely with actual operational experience.
NOW, THEREFORE, in consideration of the foregoing recitals, which are
incorporated herein by this reference, and for other good and valuable
consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.
ARTICLE 1. AREA OF MUTUAL INTEREST
FXEN and APACHE hereby establish an area of mutual interest ("AMI") consisting
of all lands within the Republic of Poland except FXEN's Baltic concession. The
AMI shall expire three years after the effective date of this Agreement unless
extended from year to year by mutual agreement. The parties plan to cooperate in
the selection and acquisition of additional hydrocarbon interests in Poland.
However, if either party acquires a hydrocarbon interest of any kind within the
AMI in which the other party is not an equal participant, then the acquiring
party shall, within 20 days after execution of an agreement therefor, offer the
same to the non-acquiring party for the latter's participation on a "ground
floor" 50%/50% basis, subject to proportional reduction if and to the extent of
any POGC or other third party participation. The provisions of this article 1
specifically supersede: (i) article 4 of the Lublin Participation Agreement
(defined below in article 3); (ii) article 4 of the Pomeranian Participation
Agreement (defined below in article 5); and (iii) article 4 of the Carpathian
Participation Agreement (defined below in article 6).
ARTICLE 2. INTERESTS IN WARSAW WEST AREA
APACHE hereby agrees to take such actions and execute such documents as may be
necessary or appropriate so that APACHE and FXEN each shall own directly or
indirectly through one or more affiliates a 50% beneficial interest in the
"Warsaw West Usufruct" which covers all or part of the following blocks: 211,
212, 213, 214, 231, 232, 233, 234, 251, 252, 253, 254, and 274. Subject to
article 7 of this Agreement, FXEN shall pay 50% of all costs incurred hereafter
in connection with the Warsaw West Usufruct, but shall not be required to
reimburse any costs already incurred. The rights and obligations of FXEN and
APACHE in the Warsaw West Usufruct shall be governed by application, mutatis
mutandis, of the provisions of the Lublin Participation Agreement (defined below
in article 3), except for articles 2 and 4 thereof.
ARTICLE 3. INTERESTS IN THE LUBLIN AREA
APACHE and FXEN have an existing agreement, that certain Participation Agreement
dated effective as of April 16, 1997, between Apache Overseas, Inc., and FX
Energy, Inc., pertaining to the Lublin Area Concessions (the "Lublin
Participation Agreement"). APACHE and FXEN hereby amend article 1.5 of the
Lublin Participation Agreement by deleting the words", except with respect to
the Lubex Usufruct, where only the interest of FXEN shall be reduced thereby".
The effect of this amendment is that the interests of APACHE and FXEN will be
reduced in equal proportions to the extent POGC exercises its option to
participate in any of the lands covered by the "Lubex Usufruct". APACHE and
FXEN hereby amend article 2.6 of the Lublin Participation Agreement by deleting
the second full sentence. The effect of this amendment is to eliminate the now
superfluous provision for compensatory payment to FXEN in the event of a
disproportionate reduction in its interest in the "Lubex Usufruct".
ARTICLE 4. OBLIGATIONS IN LUBLIN AREA
APACHE and FXEN hereby amend article 2.3 of the Lublin Participation Agreement
by replacing the last sentence in its entirety with the following: "Apache shall
spud at least two of the First Phase Required Wells on or before December 31,
1998, at least two more on or before June 30, 1999, and the remaining three on
or before December 31, 1999." This amendment shall be effective for all purposes
as of April 16, 1997, the effective date of the Lublin Participation Agreement.
ARTICLE 5. OBLIGATIONS IN POMERANIAN AREA
FXEN acknowledges that APACHE made an effective election to join in the
Pomeranian Usufruct in accordance with that certain Participation Option
Agreement dated effective as of February 27, 1998, between Apache Overseas,
Inc., and FX Energy, Inc., pertaining to the Pomeranian Area Concession (the
"Pomeranian Participation Agreement"). In light of APACHE's grant to FXEN with
respect to the Warsaw West Usufruct, FXEN hereby agrees to forego the special
disproportionate payments that otherwise would be required of APACHE after the
date of this Agreement. Specifically, the parties agree to amend the Pomeranian
Participation Agreement by deleting article 2 thereof in its entirety. Subject
to article 7 of this Agreement, FXEN shall pay 50% of all costs incurred
hereafter in connection with the Pomeranian Usufruct, but shall not be required
to reimburse any costs already incurred. FXEN hereby acknowledges that the
condition subsequent specified in the final sentence of article 1.4 of the
Pomeranian Participation Agreement has been satisfied.
ARTICLE 6. OBLIGATIONS IN CARPATHIAN AREA
APACHE and FXEN have an existing agreement, that certain Participation Agreement
dated effective as of February 27, 1998, between Apache Overseas, Inc., and FX
Energy, Inc., pertaining to the Western Carpathian Concession (the "Carpathian
Participation Agreement"). APACHE and FXEN hereby amend article 2.3 of the
Carpathian Participation Agreement by replacing the last sentence in its
entirety with the following: "Apache shall spud the first two Required Earning
Wells in the Western Carpathian Usufruct on or before December 31, 2000, and the
remaining Required Earning Well in the Western Carpathian Usufruct on or before
June 30, 2001."
ARTICLE 7. OVERHEAD OBLIGATIONS
Notwithstanding anything to the contrary in this Agreement or in any other prior
agreement by which FXEN and APACHE are bound, FXEN shall have no obligation to
pay any overhead incurred during 1999 in connection with APACHE's operations in
Poland. Beginning January 1, 2000, FXEN shall pay its proportionate share of
APACHE's net overhead in Poland except that such obligation shall not commence
in connection with the Lublin and Carpathian project areas until APACHE has
completed its earning requirements.
ARTICLE 8.
FXEN has agreed in articles 4 and 6 hereof to allow additional time for APACHE
to drill the required wells in the Lublin and Carpathian Usufructs, and APACHE
and FXEN have agreed in article 1 to an AMI covering Poland. These provisions
allow the operator to allocate time and resources to evaluating the best
opportunities available to the parties regardless of where in Poland they may be
located. This will encourage pursuit of the most promising prospects available,
and it may happen that the parties will wish to drill a well which could not be
considered one of the Required Wells. In such event, FXEN shall have the right
to elect to be carried in such well in lieu of its right to be carried in one of
the remaining Required Wells.
ARTICLE 8. FURTHER ASSURANCE
The parties agree to execute and deliver to each other all such additional
documents and instruments and do all such further acts and things as may be
reasonably requested by any party to effectively carry out the intent of this
Agreement.
ARTICLE 9. AMENDMENT; PRIOR AGREEMENTS
This Agreement may only be altered, varied or amended by written instrument
executed by all the parties. To the extent of any conflicts or inconsistencies,
and only to such extent, this Agreement supersedes all prior agreements between
FXEN and APACHE.
ARTICLE 10. NOTICES
Any notice required to be given pursuant to this Agreement shall be in writing
and shall be given by delivering the same by hand at, or by sending the same by
prepaid first class post (confirmed by telefax/facsimile) or telefax/facsimile
to, the relevant address set out below or such other addresses as any party
wishing to change its address may notify to the other party from time to time.
Any such notice given as aforesaid shall be deemed to have been given or
received at the time of delivery (if delivered by hand), the first working day
next following the day of sending (if sent by facsimile) and the first working
day next following the day of receipt (if sent by post).
Andy Pierce, COO Floyd R. Price, President
FX Energy, Inc. APACHE Overseas, Inc.
3006 Highland Drive, Suite 206 2000 Post Oak Boulevard
Salt Lake City, UT 84106 Houston, TX 77056-4400
Telephone: 1-801-486-5555 Telephone: 1-713-296-6000
Fax: 1-801-486-5575 Fax: 1-713-296-6451
ARTICLE 11. TERMINATION
In the event of termination of this Agreement for any reason, such termination
shall be without prejudice to any rights, liabilities and obligations accrued or
outstanding at the date of termination or otherwise arising in respect of
operations carried out prior to such termination.
ARTICLE 12. GOVERNING LAW/ARBITRATION
12.1 The laws of Texas shall govern the validity, construction, interpretation,
and effect of this Agreement, excluding any choice of law rules which would
otherwise require the application of laws of any other jurisdiction.
12.2 Any dispute arising in connection with this Agreement shall be exclusively
and finally settled by arbitration in Houston in accordance with the Rules
of the American Arbitration Association, which shall be the appointing
authority in case of need.
The arbitration panel shall render its decisions in writing, and such written
decisions and conclusions with respect to the disputes so settled shall be final
and binding on the parties to the arbitration proceeding, and confirmation and
enforcement of the awards so rendered may be obtained and entered in any court
having jurisdiction thereof.
In WITNESS whereof the parties have caused this Agreement to be executed by
their duly authorized representatives the day month and year first above
written.
FX Energy, Inc. Apache Overseas, Inc.
By:/s/ Andrew W. Pierce By:/s/ Floyd R. Price