SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT UNDER TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): August 6, 1997
Commission File Number: 0-25386
FX ENERGY, INC.
(Exact Name of Registrant as Specified in its Charter)
NEVADA 87-0504461
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3006 HIGHLAND DRIVE
SUITE 206
SALT LAKE CITY, UTAH 84106
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(Address of Principal Executive (Zip Code)
Offices)
Registrant's Telephone Number, including Area Code:
(801) 486-5555
N/A
(Former name, former address, and formal fiscal year, if changed since
last report)
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ITEM 5. OTHER EVENTS
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FX Energy, Inc. ("FX Energy" or the "Company") announced on August 6, 1997, that
it has signed an agreement with Apache Corporation expanding the FX
Energy/Apache venture in Poland from 2 million acres to approximately 5.5
million acres. Under the agreement, Apache will operate all of the acreage with
a 50% interest. The Polish National Oil Company has the option of joining in
the new blocks as a one-third interest owner.
This new agreement incorporates the 2 million acres covered under an April 18,
1997, agreement between the companies and 16 new concession blocks covering
approximately 3.5 million acres that FX Energy was awarded on July 18, 1997, by
the Minister of Environmental Protection, Natural Resources and Forestry of
Poland.
Apache will fund the work commitment on the 16 new blocks, which includes five
wells and 1,150 km of seismic surveys during the first three years. This is in
addition to Apache's two well and 600 km seismic commitment under the April
agreement on the 2 million-acre Lubex concession area. Apache has announced
that it will open an office in Warsaw in October of this year.
FX Energy produces oil from fields in Montana and Nevada and is actively
pursuing other oil and gas opportunities in Poland and the western United
States. Its shares are traded on the Nasdaq National Market System.
Apache Corporation is a large oil and gas independent company with operations in
North America, Egypt, Western Australia, Poland, the People's Republic of China,
Indonesia, and Cote d'Ivoire. Its shares are traded on the New York and Chicago
stock exchanges.
For a discussion of the contingencies and uncertainties to which information
respecting future events is subject, see FX Energy's 1996 annual report on Form
10-KSB and other SEC reports.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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The following is filed as an exhibit to this report:
SEC
Item No. Reference No. Title of Document
10 10.01 Participation Agreement dated effective as of April 16,
1997, between Apache Overseas, Inc., and FX Energy,
Inc., pertaining to the Lublin Area Concessions.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 8, 1997 FX ENERGY, INC.
By /s/ Scott J. Duncan, Vice President
4
PARTICIPATION AGREEMENT
This Participation Agreement (this "Agreement"), is entered into effective as of
April 16, 1997, by and between FX Energy, Inc., a Nevada corporation ("FXEN"),
and APACHE Overseas, Inc., a Delaware corporation ("APACHE").
RECITALS
A.FXEN, through one or more subsidiaries, is the holder of certain rights to
explore for and exploit natural gas and oil (the "Hydrocarbon Rights") in
certain lands in eastern Poland in the vicinity of the city of Lublin
pursuant to several Mining Usufruct Agreements.
B.APACHE wishes to acquire an undivided beneficial interests in the Hydrocarbon
Rights and FXEN is willing to transfer such interests to APACHE and to grant
operational control of the Hydrocarbon Rights to APACHE, all on the terms and
conditions set forth herein. APACHE and FXEN intend to accomplish this by
arranging for one or more Polish commercial partnerships, each comprised of
one Polish limited liability company wholly owned by APACHE and one wholly
owned by FXEN, to hold the Usufructs. However, APACHE and FXEN acknowledge
that they may need to utilize some other method, or other entities, in light
of applicable circumstances and regulatory and tax considerations.
C.The parties have agreed to cooperate fully with each other in order to
accomplish their common primary goals to share the Hydrocarbon Rights and to
expedite the exploration and exploitation thereof under the operational
control of APACHE. If and to the extent the applicable law and regulatory
structure permit from time to time, and so long as the same can be
accomplished without adverse tax or other consequences, the parties will work
together to transfer ownership of the Hydrocarbon Rights into separate and
several ownership.
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.
DEFINITIONS
"Interest Transfer Documents" shall have the meaning given in Article 1.4.
"Participation Interest(s) shall have the meaning described in Article 1.5.
"Hydrocarbon Concession Block(s)" refers to one or more of the 480 numbered
rectangular areas, each encompassing approximately 1,000 square kilometers,
which in the aggregate comprise a grid promulgated by the Bureau of Geological
Concessions for the purpose of identifying hydrocarbon concession areas.
"First Phase Required Well(s)" shall have the meaning given in Article 2.3.
"First 3-Year Exploration Phase" shall have the meaning given in the applicable
Usufruct.
"AMB Usufruct Area" refers to lands covered by the AMB Usufruct in one or more
of the following eight Hydrocarbon Concession Blocks: no. 319, 320, 339, 340,
359, 360, 379, 380.
"AMB Usufruct" means that certain Mining Usufruct Agreement dated July 18, 1997,
between AMB Production Company Sp. z o.o. and Company, Commercial Partnership,
and the State Treasury of the Republic of Poland, represented by the Minister of
Environmental Protection, Natural Resources and Forestry in his capacity as
Concession Authority covering Hydrocarbon Rights in all or designated portions
of those lands comprising the AMB Usufruct Area.
"AMB&Gasex Usufruct Area" refers to lands covered by the AMB&Gasex Usufruct in
one or more of the following seven Hydrocarbon Concession Blocks: no. 257, 258,
277, 278, 297, 317, 318.
"AMB&Gasex Usufruct" means that certain Mining Usufruct Agreement dated July 18,
1997, between AMB Production Company Sp. z o.o. and Gasex Production Company Sp.
z o.o., Commercial Partnership, and the State Treasury of the Republic of
Poland, represented by the Minister of Environmental Protection, Natural
Resources and Forestry in his capacity as Concession Authority covering
Hydrocarbon Rights in all or designated portions of those lands comprising the
AMB&Gasex Usufruct Area.
"Gasex Usufruct Area" refers to lands covered by the Gasex Usufruct in
Hydrocarbon Concession Block no. 298.
"Gasex Usufruct" means that certain Mining Usufruct Agreement dated July 18,
1997, between Gasex Production Company Sp. z o.o. and Company, Commercial
Partnership, and the State Treasury of the Republic of Poland, represented by
the Minister of Environmental Protection, Natural Resources and Forestry in his
capacity as Concession Authority covering Hydrocarbon Rights in all or
designated portions of those lands comprising the Gasex Usufruct Area.
"Lubex Usufruct Area" refers to lands covered by the Lubex Usufruct in one or
more of the following eight Hydrocarbon Concession Blocks: no. 255, 275, 295,
296, 316, 336, 337, and 338.
"Lubex Usufruct" means that certain Mining Usufruct Agreement dated December 22,
1996, between Lubex Petroleum Company Sp. z o.o. and the State Treasury of the
Republic of Poland, represented by the Minister of Environmental Protection,
Natural Resources and Forestry in his capacity as Concession Authority covering
Hydrocarbon Rights in all or designated portions of those lands comprising the
Lubex Usufruct Area.
"FX Usufruct Area" refers to the AMB Usufruct Area, the AMB&Gasex Usufruct Area,
the Gasex Usufruct Area, and the Lubex Usufruct Area.
"FX Usufruct(s)" refers to one or more of the following: the AMB Usufruct, the
AMB&Gasex Usufruct, the Gasex Usufruct and the Lubex Usufruct.
ARTICLE 1. MANNER OF OWNERSHIP AND TRANSFER OF INTERESTS
1.1 The parties acknowledge that this Agreement is intended to describe the
principal financial, business and operational terms and conditions of their
association in connection with the Hydrocarbon Rights.
1.2 The parties agree to cooperate fully with each other in selecting a
structure which, in their best judgment, will best implement the terms
contained herein while minimizing the tax costs, administrative overhead
and operational complexity of their association. If and to the extent
possible, either at the outset or from time to time during their
association, the parties will use their commercially reasonable best
efforts to utilize a structure which most closely resembles the usual oil
industry method of operating under a joint operating agreement with several
rather than joint ownership of the Hydrocarbon Rights. As of the date of
this Agreement, the parties intend to arrange for one or more Polish
commercial partnerships, each comprised of one Polish limited liability
company owned (through one or more subsidiaries) by APACHE and one Polish
limited liability company owned (through one or more subsidiaries) by FXEN,
to hold the Usufructs.
1.3 The operating documents described in Article 3 are expected to govern the
actions, rights and obligations of the parties. However, for the reasons
set forth above in this Article 1, the parties may elect or be required to
use alternative documents, methods or structures. For example, an
obligation to "pay" might ultimately be changed into an obligation to make
an unsecured loan repayable only out of production revenue. Similarly, the
names used herein, "APACHE", "FXEN" and "POGC", shall be deemed to mean the
entities defined above and/or other entities used or created to serve in
their stead to implement the purposes of this Agreement.
1.4 Subject to the foregoing, each party shall (or shall cause the its
applicable affiliate to) execute such documents and instruments (the
"Interest Transfer Documents") as may be necessary or appropriate in order
that APACHE and FXEN each initially shall own, directly or indirectly
through one or more affiliates, by creation of a partnership, by assignment
of interest in the Usufruct, or by any other reasonable method, a 50%
beneficial interest in each of the FX Usufructs. APACHE's full and timely
performance of the obligations set forth in Article 2 below shall be a
condition subsequent to its ownership of its beneficial interest in the FX
Usufructs.
1.5 FXEN and APACHE acknowledge that POGC has or will have an option to acquire
or earn a beneficial interest in the FX Usufructs. Such option shall be
subject to a mutually acceptable agreement. To the extent POGC exercises
such option, the interest acquired or earned by POGC shall reduce the
interests of both FXEN and APACHE in equal proportions, except with respect
to the Lubex Usufruct, where only the interest of FXEN shall be reduced
thereby. The beneficial interest of FXEN, APACHE or POGC at any given time
in each FX Usufruct is referred to herein as such party's "Participation
Interest".
1.6 FXEN will promptly cause 100% of the shares of Lubex Petroleum Company Sp.
z o.o. ("Lubex") to be transferred to APACHE or its designated affiliate.
FXEN will promply cause each of the three partnerships which currently own
a Usufruct in the FXEN Usufruct area to transfer to Apache's chosen
affiliate a 50% interest in such partnership and in the underlying
Usufruct.
ARTICLE 2. PARTICIPATION OBLIGATIONS
2.1 Within fifteen (15) days of execution of this Agreement APACHE will pay to
FXEN a one-time fee of $450,000 (less the $150,000 already paid).
2.2 APACHE will pay all amounts referred to in each of the FX Usufructs that
are required to maintain such Usufruct in full force and effect during the
First Three-year Exploration Period, consisting of the one-time mining
usufruct fee, the concession fees, and the annual training fees.
2.3 APACHE hereby commits to drill, test, and complete or abandon, and will pay
all of the APACHE and FXEN Participation Interest share of all costs of
drilling, testing, and completing or abandoning each of the six wells
required under the FX Usufructs during the applicable First 3-Year
Exploration Phase plus a seventh well in a Lubex Usufruct Area (such seven
wells are referred to herein as the "First Phase Required Wells"). Each of
the First Phase Required Wells shall be an exploratory well and not an
appraisal or development well, and shall be drilled to a depth sufficient
to test Carboniferous or Devonian or deeper formations, estimated at a
depth of 2,000 to 3,000 meters. APACHE will have the ultimate decision in
selecting the drilling location of each First Phase Required Well. Apache
shall spud at least two of the First Phase Required Wells before July 1,
1998, at least two more before December 31, 1998, and the remaining three
before July 1, 1999.
2.4 APACHE will pay all of the APACHE and FXEN Participation Interest share of
all costs in connection with the acquisition and processing of: (a) not
less than the minimum amount of seismic required under each of the FX
Usufructs, and (b) all seismic acquired or processed in each individual FX
Usufruct Area until such time as the last of the First Phase Required Wells
applicable to such individual FX Usufruct has been drilled and completed or
abandoned. Notwithstanding the foregoing, FXEN will share the cost of a
portion of the initial seismic program pertaining to the Lubex Usufruct as
described in Exhibit B to the Geophysical Contract between Lubex and
Geofizyka Krakow dated May 15, 1997 as follows:
a. APACHE shall be solely responsible for all of the cost of such
seismic as is accepted by the Bureau of Geological Concessions in
satisfaction of the earning requirements under FX Usufructs other than
the Lubex Usufruct;
b. APACHE shall be solely responsible for all of the cost of the
remainder of the seismic pertaining to the Lubex blocks up to a maximum
of 500 km within the Lubex blocks.
c. FXEN shall reimburse 50% of the cost of any remainder.
2.5 APACHE will pay all of the APACHE and FXEN Participation Interest share of
all costs of every kind connected with the ownership, administration and
operation of each individual FX Usufruct until such time as the last of the
First Phase Required Wells applicable to such individual FX Usufruct has
been drilled and completed or abandoned. After the last of the wells
required to be drilled according to the terms of a particular Usufruct(in
the Lubex Usufruct two wells shall be required) has been drilled and
completed or abandoned in that Usufruct, FXEN shall pay its participation
share of all costs relating to that Usufruct of ownership, administration
and operation including drilling and seismic but excluding costs to be paid
by Apache pursuant to Article 2.2 during the First Three-Year Exploration
Period. To the extent APACHE authorizes or requests FXEN personnel to
assist APACHE in initiating relations and operational interactions in
Poland pursuant to an agreed budget, the cost will be borne by the joint
account.
2.6 To the extent POGC pays for any of the items described in Article 2.2
through 2.5 above, APACHE's costs will be reduced by an equal amount. In
the event POGC acquires an interest in the Lubex Usufruct and thereby
reduces the Participation Interest of FXEN (and not APACHE) therein, APACHE
will compensate FXEN for such disproportionately reduced interest at the
rate of $40,000 for each 1% interest taken by POGC, payable within 20 days
of POGC's option exercise. In the event FXEN and APACHE elect to carry
POGC's interest in a well in order to earn into POGC's Ciecierzyn
exploitation area, whether or not such carried well is the First Phase
Required Well in the Gasex Usufruct Area, the cost of such carried interest
shall be borne equally by APACHE and FXEN.
2.7 APACHE shall pay the amount due under paragraph 2.1 above by wire transfer
to the account of FXEN at Bank One Texas, NA, in Houston, Texas. APACHE
shall pay the amounts required under paragraphs 2.2 through 2.5 in an
appropriate and timely manner.
2.8 If permission to acquire seismic is not granted within 30 days after a
properly completed application is submitted, or if permission to drill a
First Phase Required Well is not granted within 60 days after a properly
completed application is submitted, then the requirement herein to spud the
applicable First Phase Required Well shall be extended for a number of days
equal to such excess delay. If impenetrable strata or other cause prevents
drilling to required depth, a substitute well may be drilled by an
appropriately extended deadline. If any other event or circumstance beyond
the control of APACHE should cause a delay, then the time for performance
shall be appropriately extended.
ARTICLE 3. CONDUCT AND CONTROL OF OPERATIONS
3.1 The parties intend for APACHE to have ultimate responsibility for the
conduct and control of operations. The parties also anticipate that one or
more Polish commercial partnerships comprised of Lubex and one or more
other Polish limited liability companies to be designated will be the sole
owner of the FX Usufructs, and that FXEN and APACHE will hold their
respective interests via direct or indirect equity ownership in Lubex and
such other limited liability company. Accordingly, the parties will
promptly prepare Partnership Agreements, Joint Operating Agreements and
Accounting Procedures (collectively with this Agreement, the "Operating
Documents"). In the event the anticipated structure or parties are
changed, the Operating Documents shall be changed accordingly.
3.2 The Operating Documents shall be deemed to apply to all operations carried
out hereunder, including the First Phase Required Wells and the seismic
acquisition referred to in Article 2. FXEN and APACHE shall comply with
the requirements of the Operating Documents in the conduct of such
operations, except as specifically superseded by the terms of this
Agreement. FXEN and APACHE shall cooperate fully so as to enable APACHE's
personnel to manage the conduct and control of operations.
3.3 The Operating Documents shall contain provisions that are considered usual
or standard in the industry in operations of this kind; provided, that the
following specific substantive provisions (or functional equivalent) shall
be contained in the Operating Documents:
(a) Neither APACHE nor FXEN will charge the joint account for home
office general or administrative expenses, nor will they or the operator
charge the joint account a "drilling well rate" "producing well rate" or
"construction rate" or similar charge in lieu of overhead, but each may
charge the joint account for technical personnel while engaged in
operations; general or administrative expenses incurred in Poland shall
be charged to the joint account.
(b) The parties agree to cooperate in sharing information and finding
the best methods to market production of oil or gas.
(c) Each party to the Operating Documents, in proportion to its
interest therein, shall have the right (but not the obligation) to
participate on a "ground floor" basis in the construction, operation, and
ownership of any gathering line or processing facility proposed by any
other party thereto to be used in connection with production from lands
subject to the Operating Documents.
(d) FXEN and APACHE shall have the right of access at all reasonable
times and at their respective sole risk and expense to the seismic and
other operations and to the location of the First Phase Required Wells
and/or the drilling operations provided they give reasonable notice of
the date such access is required and identify the representatives to
whom such access is to be granted.
(e) The Operating Documents shall provide for prior AFE approval of
all operations or construction anticipated to cost more than $200,000
and shall provide for prepayment or "cash calls" at the request of the
operator.
(f) The Operating Documents shall not contain a "challenge of operator"
provision, but shall provide for change, replacement or resignation of
operator (or of the party in control of the operator) only in the usual
circumstances (eg. bankruptcy, failure to comply with Usufruct terms,
reduction of interest below 15%, etc.).
(g) The "sole risk" or "non-consent" penalty contained in the Operating
Documents shall provide a 400% penalty in connection with development
wells and a complete loss of interest in the productive reservoir in
connection with non-development wells. In any FX Usufruct Area Block
not drilled during the First 3-year Exploration Period, the non-consent
penalty for the first well drilled in such Exploration Block during the
Second 3-year Exploration Period shall be complete loss of interest in
the Exploration Block in question, unless each party elects to drill its
own sole risk well. There shall be a limit of four sole risk
development wells per year and two sole risk non-development wells per
year during the first three years, and double those numbers in the
second three years.
(h) The Operating Documents shall provide that an operating committee
comprised of representatives of each participating party shall meet from
time to time and shall prepare an annual budget and schedule of
operations. Decisions shall be by majority interest and "deadlocks"
shall be "resolved" by sole risk or non-consent provisions.
(i) The Operating Documents shall provide that Polish contractors shall
be utilized preferentially if they are reasonably competitive in terms
of cost, availability, quality of work and speed of operation.
(j) The Operating Documents shall not contain a preferential right to
purchase provision, but shall provide for 60 days' prior notice to
afford an opportunity to make a competitive offer.
(k) The Operating Documents shall provide that, with respect to any
payments required to be made to any agency of the government of the
Republic of Poland or to the Polish Oil and Gas Company ("POGC"), if
evidence of payment has not been received by FXEN seven days prior to
the due date then FXEN shall have the right, but not the obligation, to
make such payment and to receive reimbursement (plus interest at the
Accounting Procedure rate) from the operator or other responsible party.
ARTICLE 4. AREA OF MUTUAL INTEREST
4.1 FXEN and Apache hereby establish an area of mutual interest ("AMI")
consisting of the "Carpathian Study Area" which FXEN has under discussion
with the relevant Government authorities. The AMI shall expire two years
after the effective date of this Agreement unless extended by mutual
agreement.
4.2 FXEN shall unless otherwise agreed have primary responsibility to apply for
acreage within the AMI, for the benefit of the parties to the extent set
out below in this Article 4. Apache agrees that it will not directly or
indirectly acquire or seek to acquire any Hydrocarbon Rights within the AMI
unless FXEN shall have indicated in writing in response to a notice from
Apache under Article 4.3 below that FXEN does not wish to participate in a
given application. In such event, Apache shall be at liberty to apply for
the acreage in question without further notice to FXEN, and FXEN shall not
compete with Apache's application.
4.3 If Apache considers that application should be made for a given parcel of
acreage within the AMI it shall so inform FXEN in writing, and FXEN shall
respond in writing within 20 days after receipt of Apache's notice
indicating whether or not it wishes to participate in the application. If
FXEN wishes to so participate or if FXEN considers on its own motion that
certain acreage within the AMI should be applied for, FXEN shall promptly
apply for the acreage in question on such terms as it thinks fit.
4.4 After acquiring acreage within the AMI pursuant to Article 4.3 above, FXEN
shall within 20 days after execution of a Usufruct agreement for a given
parcel of acreage offer the same to Apache for the latter's participation
on terms which shall be considered appropriate by FXEN.
4.5 Apache shall have 20 days after receipt of FXEN's notice referred to in
Article 4.4 to respond in writing indicating whether it wishes to acquire
the offered interest. If within the said period of 20 days Apache shall
not have made a written election to participate on the offered terms, FXEN
shall be at liberty to offer participation to other parties, but only on
terms no more favorable than those offered to Apache. If FXEN chooses to
offer or accept more favorable terms to or from other parties, it shall
first offer such more favorable terms to Apache for response within a
further period of 20 days as set out above.
4.6 This Article 4 shall apply only to the initial application for and
obtaining of Hydrocarbon Rights by the parties, directly or indirectly,
from the government of the Republic of Poland or POGC, or any affiliate,
division or unit of either of them. This Article 4 shall not apply to any:
(a) interests which either party may offer or transfer more than two
years after the initial acquisition thereof; or
(b) interests which either party may offer or transfer at any time to
POGC or to any affiliate, division or unit of POGC.
ARTICLE 5. PROTECTION ACREAGE
FXEN and APACHE hereby establish an area of mutual interest ("Halo") consisting
of all lands surrounded by the FX Usufruct Area and all lands within 5
kilometers of the exterior boundaries of the FX Usufruct Area. The Halo shall
expire two years after the effective date of this Agreement unless extended by
mutual agreement. After acquiring acreage within the Halo, the acquiring party
shall within 20 days after execution of a Usufruct or other agreement for a
given parcel of acreage offer the same to non-acquiring party for the latter's
participation on a "ground floor" 50%/50% basis. FXEN and Apache shall consider
asking or not asking POGC to join as they shall mutually agree.
ARTICLE 6. INFORMATION AND CONFIDENTIALITY
6.1 All information and data (geophysical, geological, engineering, production
marketing or otherwise) acquired or developed by the parties under this
Agreement in connection with joint operations hereunder shall be kept
confidential by the parties unless the release of such information to a
third party is agreed upon by the parties or until such information or data
otherwise becomes public information other than through breach by any of
the parties of the provisions of this Article. Such confidential data and
information shall not be traded, sold, exchanged or disclosed to others
except:
(a) to an affiliate for its use only, subject to the disclosing party
being responsible for such affiliate maintaining the confidentiality of
the data and information so disclosed, or
(b) as required by law or by any stock exchange on which the shares of a
party or an affiliate of a party are listed, or
(c) to a bona fide prospective purchaser or assignee, or
(d) to outside professional consultants of a party, provided that such
party shall promptly inform the other parties of the names of such
professional consultants, or
(e) to contractors by the operator if disclosure is necessary in
connection with the conduct of joint operations, or
(f) to financial institutions and investment banks and their consultants
where and to the extent such disclosure is necessary in connection with
financing arrangements.
Disclosures pursuant to (c), (d), (e) and (f), above, shall be made only
under written agreement of the party to whom disclosure is made not to
disclose for the period specified in Article 6.2 except as required by law.
The foregoing obligations shall remain binding on a party and its
affiliates after it ceases to be a party hereto.
6.2 The term during which information and data is to be kept secret and
confidential shall coincide with the term of this Agreement or for a period
of three years from the effective date of this Agreement, whichever is
later. For purposes of this Article 6 the term "party" shall include an
affiliate of a party.
6.3 The parties hereto agree to strictly observe and abide by the terms and
conditions governing data received by any of them from the government of
the Republic of Poland or from POGC or from any affiliate, division or unit
thereof.
ARTICLE 7. 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 8. ASSIGNMENT
8.1 Each of the parties may assign or transfer the whole or any part of its
interest in accordance with the terms of the Usufruct Agreement and the
Operating Documents provided that any assignee or transferee is a
financially responsible party and shall as a condition to such assignment
agree in writing to become a party to the Operating Documents and fulfill
the obligations of the assignor under this Agreement to the extent that
they are not fulfilled by assignor.
8.2 Neither party hereto shall sell or transfer its interest herein (other than
to a close affiliate or POGC) without first giving the other party hereto
60 days' prior notice of proposed sale in order to afford an opportunity to
make a competitive offer. No sale or other transfer (other than to a close
affiliate) shall convey a right to control operations or a right to benefit
from the terms referred to in Article 3.3(a).
8.3 The provisions of this Agreement shall inure to the benefit of and be
binding on the successors and permitted assignees of the parties.
ARTICLE 9. AMENDMENT: PRIOR AGREEMENTS
This Agreement may only be altered, varied or amended by written instrument
executed by all the parties. This agreement supercedes all prior agreements
between FXEN and Apache.
ARTICLE 10. RELATIONSHIP
10.1 The parties intend to create a Polish commercial partnership to carry out
the activities contemplated herein, but nothing in this Agreement shall be
construed as creating any other partnership of any kind, or association, or
trust, or as imposing upon any party any duty, obligation or liability of a
partnership nature and each party shall be individually and severally
responsible hereunder only for its obligations as set out in this
Agreement.
10.2 Those parties subject to the taxing jurisdiction of the United States of
America agree to elect, under Section 761 (a) of the Internal Revenue Code
of 1986, as amended (the "Code"), to be excluded from all of the
provisions of Subchapter K of Chapter 1, Subtitle A of the Code.
10.3 Notwithstanding anything to the contrary contained in this Agreement, a
party not subject to the income tax laws of the United States of America
shall not be required to do or execute anything which might subject it or
its income to any United States of America tax and nothing contained in
this Agreement shall constitute or shall be construed as constituting a
submission by any party to the taxation jurisdiction of the United State of
America.
ARTICLE 11. 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: 1-713-296-6450
ARTICLE 12. 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 13. GOVERNING LAW/ARBITRATION
13.1 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.
13.2 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.
ARTICLE 14. REPRESENTATIONS AND WARRANTIES
FXEN represents and warrants that:
14.1 Lubex is validly incorporated, in good standing and not delinquent in any
material respect in its compliance with Polish tax and other laws
applicable to the conduct of its business; Lubex is properly qualified in
Poland to conduct the oil and gas exploration business in Poland.
14.2 The FX Usufructs are in full force and effect, are owned solely by
subsidiaries of FXEN free of any liens, claims or encumbrances and FXEN and
its subsidiaries to date have complied with all applicable terms and
conditions.
14.3 An application has been properly made, in Lubex' name, for Concessions
covering the entirety of the area covered by the Lubex Usufruct.
14.4 FXEN owns all the issued and outstanding shares of Lubex and there are no
agreements or commitments to issue more shares, and no pledges or liens
affecting Lubex or any or its assets, except funds advanced by FXEN.
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.
Signed this 6th day of August, 1997 Signed this 6th day of August, 1997
FX Energy, Inc. APACHE Overseas, Inc.
By: /s/ Andrew W. Pierce, President By: /s/ Floyd R. Price
The undersigned Lubex Petroleum Company Sp. z o.o. does hereby ratify and give
its consent to the foregoing.
Lubex Petroleum Company Sp. z o.o.
By: /s/ Andrew W. Pierce
