SALES AGENCY AGREEMENT

 

Exhibit 1.01

 

 

                                 FX ENERGY, INC.

                             SALES AGENCY AGREEMENT

 

August 10, 2004

 

 

Great American Investors, Inc.

6025 Metcalf Lane

Overland Park, Kansas 66202

 

Ladies and Gentlemen:

 

FX Energy, Inc., a Nevada corporation (the "Company"), proposes to sell (the

"Offering"), upon the terms and subject to the conditions of this Agreement, to

certain investors having certain contractual anti-dilution rights in connection

with their purchase of shares of 2003 Series Convertible Preferred Stock and

related warrants, their legal successors in interest and certain others

(collectively, the "Investors"). The Company desires to engage as its sales

agent Great American Investors, Inc. (the "Sales Agent") in connection with such

the issuance and sale, on a best efforts basis, as agent and not as principal,

of an aggregate of 950,000 shares (the "Offered Shares") of the Company's common

stock, par value $0.001 per share ("Common Stock").

 

1.        Registration Statement and Prospectus. A registration statement (File

         No. 333-80489) on Form S-3 relating to the Common Stock, and such

         amendments to such registration statement as may have been required to

         the date of this Agreement, has been prepared by the Company under the

         provisions of the Securities Act of 1933, as amended (the "Securities

         Act"), and the rules and regulations (collectively referred to as the

         "Rules and Regulations") of the Securities and Exchange Commission (the

         "Commission") thereunder, and has been filed with the Commission. Such

         registration statement, including any documents incorporated therein by

         reference and any exhibits, financial statements and schedules thereto,

          together with any registration statement filed pursuant to Rule 462(b),

         is herein referred to as the "Registration Statement." The form of

         prospectus to be included in the Registration Statement, as

         supplemented by any preliminary prospectus supplement or definitive

         prospectus supplement relating to the offering of the Offered Shares

         and filed by the Company with the Commission pursuant to Rule 424(b),

         are herein referred to collectively as the "Prospectus." Any reference

         herein to the Registration Statement or the Prospectus shall be deemed

         to refer to and include the documents incorporated by reference

         therein, as of the date of such Registration Statement or Prospectus,

         as the case may be, and, in the case of any reference herein to any

         Prospectus, also shall be deemed to include any documents incorporated

         by reference therein, and any supplements or amendments relating to the

         Offered Shares being issued and sold pursuant hereto, filed with the

         Commission under Rule 424(b), and prior to the termination of the

         offering of the Offered Shares by the Sales Agent.

 

2.        Representations and Warranties. The Company hereby makes the following

         representations and warranties to the Sales Agent:

 

         (a) Effectiveness of Registration Statement. The Registration Statement

         has been declared effective as of June 30, 1999, by the Commission.

         Neither the Commission nor any state regulatory authority has issued

         any order preventing or suspending the use of the Registration

         Statement or the Prospectus and no proceedings for a stop order

         suspending the effectiveness of the Registration Statement have been

         instituted, or, to the Company's knowledge, are threatened.

 

         (b) Accuracy and Completeness of Registration Statement. The

         Registration Statement contains and the Prospectus and any amendments

         or supplements thereto conforms or will conform, as the case may be, as

         of their dates, in all material respects with the requirements of the

         Securities Act and the Rules and Regulations. The documents

         incorporated or deemed to be incorporated by reference in the

 

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         Prospectus, at the time they were or hereafter are filed with the

         Commission, complied and will comply, as the case may be, in all

         material respects with the applicable requirements of the Securities

         Exchange Act of 1934, as amended (the "Exchange Act"), and the Rules

         and Regulations promulgated thereunder. Neither the Registration

         Statement nor any amendment thereto, and neither the Prospectus nor any

         supplement thereto, including any documents incorporated by reference

         therein, contains or will contain, as the case may be, any untrue

         statement of a material fact or omits or will omit, as the case may be,

         to state any material fact required to be stated therein or necessary

         to make the statements therein, in light of the circumstances under

         which they were made, not misleading; provided, however, that the

         Company makes no representations or warranties as to information

         contained in or omitted from the Registration Statement or the

         Prospectus, in reliance upon, and in conformity with, written

         information furnished to the Company by or on behalf of the Sales

         Agent, specifically for use in the preparation thereof.

 

         (c) State Securities Laws. The Company (or at the Company's request,

         counsel to the Sales Agent) will prepare and file the necessary

         documents so that offers and sales of the Offered Shares may be made in

         those jurisdictions in the United States in which Investors reside, as

         advised by the Sales Agent prior to any offering in such state.

 

         (d) Description of Common Stock. The Common Stock conforms to all

         statements relating thereto contained in the Registration Statement or

         the Prospectus.

 

         (e) Conduct of Business. The Company is not, and does not intend to

         conduct its business in a manner in which it would be, an "investment

         company" as defined in Section 3(a) of the Investment Company Act of

         1940 (the "Investment Company Act").

 

         (f) No Third-Party Rights to Registration. No person or entity has the

          right to require registration of shares of Common Stock or other

         securities of the Company because of the filing or effectiveness of the

         Registration Statement, except such persons or entities from whom

         written waivers of such rights have been received prior to the date

         hereof.

 

         (g) Nasdaq Authorization for Quotation. The Common Stock, including the

         Offered Shares, is registered pursuant to Section 12(g) of the Exchange

         Act, has been listed on the Nasdaq SmallCap Market, and has been

         approved for listing on the Nasdaq National Market effective August 10,

         2004. The Company has taken no action designed to terminate, or likely

         to have the effect of terminating, the registration of the Common Stock

         under the Exchange Act or delisting the Common Stock from the Nasdaq

         National Market, nor has the Company received any notification that the

         Commission or Nasdaq is contemplating terminating such registration or

         listing. The Company is not aware of any facts or circumstances that

         might reasonably be expected to give rise to any of the foregoing.

 

         (h) Subsidiaries. Except as set forth on exhibit 21 to the most recent

         report on Form 10-K included in the SEC Documents as defined in Section

         2(n) herein, the Company does not have any subsidiaries engaged in

         active operations, owning material assets, or having material

         liabilities and does not own or control, directly or indirectly, and

         interest in any other corporation, association or other business

         entity.

 

         (i) Organization. The Company is duly organized and validly existing in

         good standing under the laws of the jurisdiction of its organization.

         The Company has full power and authority to own, operate and occupy its

         properties and to conduct its business as presently conducted and as

         described in the documents filed by the Company under the Exchange Act

         since the end of its most recently completed fiscal year through the

         date hereof, including its most recent report on Form 10-K included in

         the SEC Documents as defined in Section 2(n) herein, and is registered

         or qualified to do business and in good standing in each jurisdiction

         in which the nature of the business conducted by it or the location of

         the properties owned or leased by it requires such qualification and

         where the failure to be so qualified would have a material adverse

         effect upon the condition (financial or otherwise), earnings, business

         or business prospects, properties or operations of the Company,

         considered as one enterprise (a "Material Adverse Effect"), and no

         proceeding has been instituted in any such jurisdiction revoking,

         limiting or curtailing, or seeking to revoke, limit or curtail, such

         power and authority or qualification.

 

         (j) Due Authorization and Valid Issuance. The Company has all requisite

         power and authority to execute, deliver and perform its obligations

         hereunder (including its obligation to issue, sell and deliver the

         Offered Shares), and this Agreement has been duly authorized and

         validly executed and delivered by the Company and constitutes a legal,

         valid and binding agreement of the Company enforceable against the

         Company in accordance with its terms, except as rights to indemnity and

         contribution may be limited by state or federal securities laws or the

         public policy underlying such laws, except as enforceability may be

 

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         limited by applicable bankruptcy, insolvency, reorganization,

         moratorium or similar laws affecting creditors' and contracting

         parties' rights generally, and except as enforceability may be subject

         to general principles of equity (regardless of whether such

          enforceability is considered in a proceeding in equity or at law). The

         Offered Shares will, upon issuance and payment therefor pursuant to the

         terms of this Agreement, be duly authorized, validly issued, fully-paid

         and nonassessable.

 

         (k) Noncontravention. The execution, delivery and performance of this

         Agreement and the consummation of the transactions herein contemplated

         will not (i) conflict with or constitute a violation of, or default

          (with the passage of time or otherwise) under (1) any material bond,

         debenture, note or other evidence of indebtedness, lease, contract,

         indenture, mortgage, deed of trust, loan agreement, joint venture or

         other agreement or instrument to which the Company is a party or by

         which its properties are bound, (2) the charter, bylaws or other

         organizational documents of the Company, or (3) any law, administrative

         regulation, ordinance or order of any court or governmental agency,

         arbitration panel or authority applicable to the Company or by which

         its properties are bound, except in the case of clauses (1) and (3) for

         any such conflicts, violations or defaults that are not reasonably

         likely to have a Material Adverse Effect, or (ii) result in the

         creation or imposition of any lien, encumbrance, claim, security

         interest or restriction whatsoever upon any of the material properties

         or assets of the Company or an acceleration of indebtedness pursuant to

         any obligation, agreement or condition contained in any material bond,

         debenture, note or any other evidence of indebtedness or any material

         indenture, mortgage, deed of trust or any other agreement or instrument

         to which the Company is a party or by which it is bound or to which any

         of the material property or assets of the Company is subject. No

         consent, approval, authorization or other order of, or registration,

         qualification or filing with, any regulatory body, administrative

         agency, or other governmental body in the United States or any other

         person is required for the execution and delivery of the Agreement and

          the valid issuance and sale of the Common Stock to be sold pursuant to

         the Agreement, other than such as have been made or obtained, and

         except for any post-closing securities filings or notifications

         required to be made under federal or state securities laws.

 

         (l) No Violation. The Company is not in violation of its charter,

         bylaws or other organizational document, or in violation of any law,

         administrative regulation, ordinance or order of any court or

         governmental agency, arbitration panel or authority applicable to the

         Company, which violation, individually or in the aggregate, would be

         reasonably likely to have a Material Adverse Effect, or is in default

         (and there exists no condition that, with the passage of time or

         otherwise, would constitute a default) in any material respect in the

         performance of any bond, debenture, note or any other evidence of

         indebtedness, indenture, mortgage, deed of trust or any other material

         agreement or instrument to which the Company is a party or by which the

         Company is bound or by which the properties of the Company are bound,

         that would be reasonably likely to have a Material Adverse Effect. The

         business of the Company and its subsidiaries is not being conducted,

         and shall not be conducted so long as the investors own any of the

         Common Stock, in violation of any law, ordinance, rule, regulation,

          order, judgment or decree of any governmental entity, court or

         arbitration tribunal, except for possible violations, the sanctions for

         which either singly or in the aggregate, would not have a Material

         Adverse Effect.

 

          (m) Capitalization. The prospectus accurately sets forth the

         capitalization of the Company. The Offered Shares to be sold pursuant

         to the Prospectus have been duly authorized, and when issued and paid

         for in accordance with the terms of the Prospectus will be duly and

         validly issued, fully paid and nonassessable. The outstanding shares of

         capital stock of the Company have been duly and validly issued and are

         fully paid and nonassessable, have been issued in compliance with all

         applicable federal and state securities laws, and were not issued in

         violation of any preemptive rights or similar rights to subscribe for

         or purchase securities. Except as set forth on in the SEC Documents,

         there are no other outstanding rights (including preemptive or

         anti-dilution rights), warrants or options to acquire, or instruments

         convertible into or exchangeable for, any unissued shares of capital

         stock or other equity interest in the Company, or any contract,

         commitment, agreement, understanding or arrangement of any kind to

         which the Company is a party or of which the Company has knowledge and

         relating to the issuance or sale of any capital stock of the Company,

         any such convertible or exchangeable securities or any such rights,

         warrants or options. Without limiting the foregoing, except as set

         forth in the SEC Documents, no preemptive right, anti-dilution right,

         co-sale right, right of first refusal, registration right, or other

         similar right exists respecting the Common Stock or the issuance and

         sale thereof. No further approval or authorization of any stockholder,

         the Board of Directors of the Company or of a third party is required

         for the issuance and sale of the Common Stock. Except as set forth in

         the SEC Documents, there are no stockholders agreements, voting

         agreements or other similar agreements respecting the Common Stock to

         which the Company is a party or, to the knowledge of the Company,

         between or among any of the Company's stockholders. Except as set forth

         in the SEC Documents, the Company does not have any so-called

         stockholder rights plan or "poison pill" and there are no

 

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         "shark-repellant" charter or bylaw provisions or so-called "state

         anti-takeover" statutes applicable, in any case, to all or any portion

         of the transactions contemplated by the Agreements, including the

         issuance of the Common Stock.

 

         (n) Reporting Status. Since December 31, 2003, the Company has timely

         filed all reports, schedules, forms, statements and other documents

         required to be filed by it with the Commission pursuant to the

         reporting requirements of the Exchange Act (all of the foregoing filed

         after December 31, 2003, and all exhibits included therein and

         financial statements and schedules thereto and documents incorporated

         by reference therein, being referred to herein as the "SEC

         Documents")). True and complete copies of the SEC Documents are

         available to the Sales Agent on the Electronic Data Gathering,

         Analysis, and Retrieval ("EDGAR") system of the Commission. As of their

         respective dates, the SEC Documents complied in all material respects

         with the requirements of the Exchange Act and the Rules and Regulations

         of the Commission promulgated thereunder applicable to the SEC

         Documents, and none of the SEC Documents, at the time they were filed

         with the Commission, contained any untrue statement of a material fact

         or omitted to state a material fact required to be stated therein or

         necessary in order to make the statements therein, in light of the

         circumstances under which they were made, not misleading, except to the

         extent corrected by a subsequent SEC Document. None of the statements

         made in any such SEC Documents is currently required to be updated or

         amended under applicable law (except for such statements as have been

         amended or updated by subsequent SEC Documents prior to the date of

         this Agreement). The SEC Documents contain or incorporate by reference

         a complete and accurate list of all material undischarged written or

         oral contracts, agreements, leases or other instruments to which the

         Company or any subsidiary is a party, or by which the Company or any

         subsidiary is bound, or to which any of the properties or assets of the

         Company or any subsidiary is subject, and that are required by the

         Rules and Regulations promulgated under the Exchange Act to be included

         as exhibits to the SEC Documents (each a "Contract"). None of the

         Company, its subsidiaries or, to the best knowledge of the Company, any

         of the other parties thereto, is in breach or violation of any

         Contract, which breach or violation would have a Material Adverse

         Effect. No event, occurrence or condition exists that, with the lapse

         of time, the giving of notice, or both, or the happening of any further

         event or condition, would become a breach or default by the Company or

         its subsidiaries under any Contract, which breach or default would have

         a Material Adverse Effect.

 

         (o) Legal Proceedings. There is no action, suit, proceeding, or to the

         knowledge of the Company or any of its subsidiaries, inquiry or

         investigation before or by any court, public board, governmental agency

         or authority, or self-regulatory organization or body pending or, to

         the knowledge of the Company or any of its subsidiaries, threatened

         against or affecting the Company, any of its subsidiaries, or any of

         their respective directors or officers in their capacities as such,

         wherein an unfavorable decision, ruling or finding would have a

         Material Adverse Effect or would adversely affect the Offering or that

         would adversely affect the validity or enforceability of, or the

         authority or ability of the Company to consummate the Offering. The

         Company and its subsidiaries are unaware of any facts that could give

         rise to a claim or proceeding that, if asserted or conducted with

         results unfavorable to the Company or any of its subsidiaries, could

         have a Material Adverse Effect.

 

         (p) No Manipulation of Stock. The Company has not taken and will not,

         in violation of applicable law, take any action designed to or that

         might reasonably be expected to cause or result in stabilization or

         manipulation of the price of the Company's Common Stock to facilitate

         the sale or resale of the Common Stock.

 

         (q) Environmental. Except as would not, individually or in the

          aggregate, result in a Material Adverse Effect (i) the Company is not

         in violation of any applicable federal, state, provincial, local or

         foreign law or regulation relating to pollution or protection of human

         health or the environment (including ambient air, surface water,

         groundwater, land surface or subsurface strata) or wildlife, including

         without limitation, laws and regulations relating to emissions,

         discharges, releases or threatened releases of chemicals, pollutants,

         contaminants, wastes, toxic substances, hazardous substances, petroleum

         and petroleum products (collectively, "Materials of Environmental

         Concern"), or otherwise relating to the manufacture, processing,

         distribution, use, treatment, storage, disposal, transport or handling

         of Materials of Environmental Concern (collectively, "Environmental

         Laws"), which violation includes, but is not limited to, noncompliance

         with any permits or other governmental authorizations required for the

         operation of the business of the Company under applicable Environmental

         Laws, or noncompliance with the terms and conditions thereof, nor has

         the Company received any written communication, whether from a

         governmental authority, citizens group, employee or otherwise, that

         alleges that the Company is in violation of any Environmental Law; (ii)

         there is no claim, action or cause of action filed with a court or

 

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         governmental authority, no investigation respecting which the Company

         has received written notice, and no written notice to the Company by

         any person or entity alleging potential liability for investigatory

         costs, cleanup costs, governmental responses costs, natural resources

         damages, property damages, personal injuries, attorneys' fees or

         penalties arising out of, based on or resulting from the presence, or

         release into the environment, of any Material of Environmental Concern

         at any location owned, leased or operated by the Company, now or to the

         Company's knowledge, in the past (collectively, "Environmental

          Claims"), pending or, to the best of the Company's knowledge,

         threatened against the Company or any person or entity whose liability

         for any Environmental Claim the Company has retained or assumed either

         contractually or by operation of law; and (iii) to the best of the

         Company's knowledge, there are no past or present actions, activities,

         circumstances, conditions, events or incidents, including the release,

         emission, discharge, presence or disposal of any Material of

         Environmental Concern, that reasonably could result in a violation of

         any Environmental Law or form the basis of a potential Environmental

         Claim against the Company or against any person or entity whose

          liability for any Environmental Claim the Company has retained or

         assumed either contractually or by operation of law.

 

         (r) Intellectual Property. The Company owns, possesses or has pending,

         or licenses or otherwise has the right to use all patents, patent

         applications, trademarks, trademark applications, trade names, service

         marks, copyrights, copyright applications, franchises, licenses,

         inventions, trade secrets and other intangible properties and assets

         described in the Prospectus (all of the foregoing being collectively

         herein called "Intangibles"), and such Intangibles, if applicable, are

         in good standing and uncontested. Other than the Intangibles described

         in the Prospectus, the Company is unaware of any other Intangibles

         necessary for the conduct of its business as now conducted or as

         proposed to be conducted. The Company has not infringed, is not

         infringing, nor has it received any notice of infringement respecting

         asserted Intangibles of others. To the knowledge of the Company, there

         is no infringement by others of Intangibles of the Company.

 

         (s) Foreign Corrupt Practices. Neither the Company nor any of its

         subsidiaries has, nor any director, officer, agent, employee or other

         person acting on behalf of the Company or any subsidiary has in the

         course of his actions for or on behalf of the Company, used any

         corporate funds for any unlawful contribution, gift, entertainment or

         other unlawful expenses relating to political activity; made any direct

         or indirect unlawful payment to any foreign or domestic government

         official or employee from corporate funds; violated or is in violation

         of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as

         amended; or made any bribe, rebate, payoff, influence payment, kickback

         or other unlawful payment to any foreign or domestic government

         official or employee. Without limiting the generality of the foregoing,

         the Company and its subsidiaries have not directly or indirectly made

         or agreed to make (whether or not said payment is lawful) any payment

         to obtain, or respecting, sales other than usual and regular

         compensation to its or their employees and sales representatives

         respecting such sales.

 

         (t) Internal Accounting Controls. The Company and each of its

          subsidiaries maintains a system of internal accounting controls

         sufficient to provide reasonable assurance that (i) transactions are

         executed in accordance with management's general or specific

         authorizations, (ii) transactions are recorded as necessary to permit

         preparation of financial statements in conformity with generally

         accepted accounting principles and to maintain asset accountability,

         (iii) access to assets is permitted only in accordance with

         management's general or specific authorization, and (iv) the recorded

         accountability for assets is compared with the existing assets at

         reasonable intervals and appropriate action is taken respecting any

         differences. The Company has established disclosure controls and

         procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))

         for the Company and designed such disclosure controls and procedures to

         ensure that material information relating to the Company, including its

         subsidiaries, is made known to the certifying officers by others within

         those entities, particularly during the period in which the Company's

         Form 10-K or 10-Q, as the case may be, is being prepared. The Company's

         certifying officers have evaluated the effectiveness of the Company's

         controls and procedures as of the end of the period covered for such

         report. The Company presented in its most recently filed Form 10-K or

         Form 10-Q, as the case may be, the conclusions of the certifying

         officers about the effectiveness of the disclosure controls and

         procedures based on their evaluations as of the end of the period

         covered by such report. Since the end of the period covered by such

         report, there have been no significant changes in the Company's

         internal controls (as such term is used in Item 307(b) of Regulation

         S-K under the Exchange Act) or, to the Company's knowledge, in other

         factors that could significantly affect the Company's internal

         controls.

 

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         (u) Financial Statements. The financial statements, together with the

         related notes and schedules, set forth or incorporated by reference in

         the Prospectus and in the Registration Statement fairly present, on the

         basis stated in the Registration Statement, the financial condition and

         the results of operations of the Company at the respective dates or for

         the respective periods therein specified. Such statements and related

         notes and schedules have been prepared in accordance with generally

         accepted accounting principles applied on a consistent basis, except

         that interim financial statements do not contain all of the notes

         required by generally accepted accounting principles to be included in

         audited financial statements and are subject to normal year-end audit

         adjustments, and as otherwise may be set forth in the Prospectus.

 

         (v) Independent Auditors. PricewaterhouseCoopers, LLP has expressed its

         opinions on the audited financial statements and related schedules

         included in the Registration Statement and the Prospectus and is an

         independent public accountant as required by the Securities Act and the

         Rules and Regulations.

 

         (w) Material Contracts. The Company has performed all material

         obligations required to be performed by it through the date hereof

         under all contracts required by Item 601(b)(10) of Regulation S-K under

         the Securities Act to be filed as exhibits to the Registration

         Statement, and neither the Company nor, to the knowledge of the

         Company, any other party to such contract is in default under or in

         breach of any such obligations, except respectin