AGREEMENT

AGREEMENT

        THIS AGREEMENT (“Agreement”) is made effective this 1st day of December 2001 by XXXXXXX RESOURCES, LLC, a Colorado limited liability company (“Xxxxxxx”) and FAN ENERGY INC., a Nevada corporation (“Fan”) and is made with reference to the following agreed facts.

RECITALS

        X.     Xxxxxxx is owned and controlled by Xxxxxx X. Xxxxxxx Xx., who is, a director and a substantial stockholder of Fan.

        B.     Fan has been engaged in the oil and natural gas business, including acquiring interests in oil and gas properties, exploring and drilling exploratory and development xxxxx and other related activities. Fan acquired its interest in its various oil and gas properties in transactions approved by the Board of Directors of Fan from an entity controlled by Xxxxxxx.

        C.     Fan has determined to pursue other areas of business and to leave the oil and natural gas business. Xxxxxxx is engaged on his own behalf in the oil and natural gas business and has offered to acquire from Fan all of its right, title and interest in and to all of its oil and gas properties and related assets which are located in the states of California and Wyoming. The parties intend to set forth the terms pursuant to which Fan shall transfer all of its interests in its various oil and gas properties to Xxxxxxx.

        NOW, THEREFORE, in consideration of the matters recited above and other good and valuable consideration, including the payments and undertakings set forth in this agreement, the receipt and sufficiency of which is mutually acknowledged, Fan and Xxxxxxx hereby agree as follows:

        1.     Identity of Fan’s Oil and Gas Properties. The identity and description of each property in which Fan holds an ownership interest is set forth on Exhibit A attached hereto and incorporated herein by reference (hereafter the “Fan Oil and Gas Properties’).

        2.     Agreement to Sell. Fan hereby agrees to sell, and Xxxxxxx agrees to purchase the Fan Oil and Gas Properties for the considered described in this Agreement.

        3.     Acquisition Price. As consideration for the acquisition of the Fan Oil and Gas Properties, Xxxxxxx agrees as follows:

        (a)     Xxxxxx X. Xxxxxxx Xx. Shall surrender and return to Fan a total of restricted 378,885 shares of the common stock of Fan (the “Shares”). The Shares shall be delivered to Fan fully endorsed and Fan shall be authorized to surrender the certificate representing the Shares to the transfer agent of Fan with directions to surrender and cancel the Shares after which time they shall no longer be issued nor outstanding.

        (b)     Xxxxxxx shall assume all obligations of Fan heretofore or hereafter incurred in connection with the Fan Oil and Gas Properties, specifically including all obligations to pay operating expenses, expenses to plug an abandoned oil and gas well leasehold expenses, exploration expenses, taxes, or any other expenses or obligations whatsoever, specifically including any environmental remediation expenses which might be deemed to have been incurred or to exist relating to the operation or ownership of any interests in the Fan Oil and Gas Properties. The parties intend that, in addition to other unknown obligations, the obligations to be assumed by Xxxxxxx shall include the obligations and liabilities summarized on Exhibit B attached hereto and incorporated herein by reference.

        4.     Effective Date of Transfer. The parties agree that the Fan Oil and Gas Properties shall be deemed to have been assigned and transferred to Xxxxxxx effective as of December 1, 2001. Fan and Xxxxxxx shall account to one another regarding any revenue deemed to have been generated by production from the Fan Oil and Gas Properties prior to the effective date, obligations to pay operating expenses and other liabilities and costs incurred in connection with operation or ownership of the Fan Oil and Gas Properties consistent with the intentions of this paragraph, it being the intention of the parties that all revenue generated by the Fan Oil and Gas Properties prior to the effective date of the transfer shall be retained by the operator of the properties and applied toward outstanding obligations owed by Fan to such operator, and Fancier shall be obligated to the operator to pay to the operator all amounts remaining unpaid by Fan as of the effective date.

        5.     Representations of Fan. Fan represents to Xxxxxxx that it has good and valid title to the Fan Oil and Gas Properties as described on Exhibit A and that it is authorized to transfer and assign its interest in the Fan Oil and Gas Properties to Xxxxxxx in accordance with this Agreement.

        6.     Xxxxxxx Representations to Fan. Xxxxxxx represents to Fan that all information concerning the Fan Oil and Gas Properties and all other properties in which Fan may be deemed to hold or have earned an ownership interest has been disclosed to the Board of Directors of Fan, that Xxxxxxx is not aware of any unknown discovery or other value attributable to the Fan Oil and Gas Properties not previously disclosed and that Xxxxxxx is authorized and empowered to acquire the Fan Oil and Gas Properties in accordance with the terms of this Agreement.

        7.     Closing. The transaction shall be deemed to have been completed effective December 1, 2001, subject to Closing. In order to close the transaction Xxxxxx X. Xxxxxxx Xx. shall deliver one or more certificates representing 378,885 shares. At such time, Xxxxxxx shall also deliver to Fan, an assignment, in a form acceptable to Xxxxxxx, pursuant to which 100% of Fan’s right, title and interest in and to the Fan Oil and Gas Properties shall be transferred from Fan to Xxxxxxx.

        8.     Further Assurances. The parties agree that, upon the reasonable written request of the other party, such documents as reasonably be required to effectuate the intentions of the parties with respect to assignment and transfer of the Fan Oil and Gas Properties to Xxxxxxx and payment of Fan’s obligations and liabilities with respect thereto by Xxxxxxx, shall be signed and delivered.

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        9.     Governing Law. This Agreement shall be governed by and construed according to the laws of the state of Colorado.

        IN WITNESS WHEREOF these presents are executed as of the day and year first above written.

FAN ENERGY INC.


By _________________________________
       Authorized Officer

XXXXXXX RESOURCES, LLC,
a Colorado limited liability company


By _________________________________
       Xxxxxx X. Xxxxxxx Xx., Manager

Agreed to and accepted:


__________________________________
Xxxxxx X. Xxxxxxx Xx.

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