Document:

Exhibit 10.29

                                 FX ENERGY, INC.

                        1998 STOCK OPTION AND AWARD PLAN

         FX ENERGY, INC., a Nevada corporation (the "Company"), hereby adopts
this "FX Energy, Inc., 1998 Stock Option and Award Plan" (the "Plan"), effective
as of the 10th day of November, 1998, under which options to acquire stock of
the Company or bonus stock may be granted from time to time to employees,
officers, and directors, of the Company or its subsidiaries. In addition, at the
discretion of the Board of Directors or other administrator of this Plan,
options to acquire stock of the Company or bonus stock may from time to time be
granted under this Plan to other individuals who contribute to the success of
the Company or its subsidiaries but who are not employees, officers, or
directors of the Company, all on the terms and conditions set forth herein.

         1. Purpose of the Plan. The Plan is intended to aid the Company in
maintaining and developing a management team, attracting qualified executives
and employees capable of assisting in the future success of the Company, and
rewarding those individuals who have contributed to the success of the Company.
It is designed to aid the Company in retaining the services of executives and
employees and in attracting new personnel when needed for future operations and
growth and to provide such personnel with an incentive to remain employees of
the Company, to use their best efforts to promote the success of the Company's
business, and to provide them with an opportunity to obtain or increase a
proprietary interest in the Company. It is also designed to permit the Company
to reward those individuals who are not employees of the Company but who are
perceived by management as having contributed to the success of the Company or
who are important to the continued business and operations of the Company. The
above aims will be effectuated through the granting of options ("Options") to
purchase shares of common stock of the Company, par value $0.001 per share (the
"Stock"), or the granting of awards of bonus stock ("Stock Awards"), all subject
to the terms and conditions of this Plan. It is intended that the Options issued
pursuant to this Plan include, when designated as such at the time of grant,
options which qualify as Incentive Stock Options ("Incentive Options") within
the meaning of section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any amendment or successor provision of like tenor. If the Company
has a class of securities registered under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), it is intended that Options or Stock Awards
granted pursuant to this Plan qualify for the exemption provided for in Rule
16b-3 promulgated under the Exchange Act ("Rule 16b-3") or any amendment or
successor rule of like tenor when granted in accordance with the provisions of
such rule.

         2. Shareholder Approval. The Plan shall become effective immediately on
adoption by the Board of Directors of the Company (the "Board") and awards under
the Plan can be made at that time or at any subsequent time. The Plan shall be
submitted to the Company's shareholders in the manner set forth below:

                  (a) Within 12 months after the Plan has been adopted by the
         Board, the Plan shall be submitted for approval by those shareholders
         of the Company who are entitled to vote on such matters at a duly held
         shareholders' meeting or approved by the unanimous written consent of
         the holders of the issued and outstanding Stock of the Company. If the
         Plan is presented at a shareholders' meeting, it shall be approved by
         the affirmative vote of the holders of a majority of the issued and
         outstanding Stock in attendance, in person or by proxy, at such
         meeting. Notwithstanding the foregoing, the Plan may be approved by the
         shareholders in any other manner not inconsistent with the Company's
         articles of incorporation and bylaws, the applicable provisions of
         state corporate laws, and the applicable provisions of the Code and
         regulations adopted thereunder.

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                  (b) In the event the Plan is so approved, the secretary of the
         Company shall, as soon as practicable following the date of final
         approval, prepare and attach to this Plan certified copies of all
         relevant resolutions adopted by the shareholders and the Board.

                  (c) Failure to obtain shareholder approval on or before the
         date that is twelve months subsequent to the adoption of this Plan by
         the Board shall not invalidate this Plan or affect awards previously
         granted under the Plan; provided that none of the Options issued under
         this Plan will qualify as Incentive Options.

         3. Administration of the Plan. Administration of the Plan shall be
determined by the Board. Subject to compliance with applicable provisions of the
governing law, the Board may delegate administration of the Plan or specific
administrative duties with respect to the Plan, on such terms and to such
committees of the Board as it deems proper. Any Option or Stock Award approved
by the Board shall be approved by a majority vote of those members of the Board
in attendance at a meeting at which a quorum is present. Any Option or Stock
Award approved by a committee designated by the Board shall be approved as
specified by the Board at the time of delegation. The interpretation and
construction of the terms of the Plan by the Board or duly authorized committee
shall be final and binding on all participants in the Plan absent a showing of
demonstrable error. No member of the Board or duly authorized committee shall be
liable for any action taken or determination made in good faith with respect to
the Plan.

         The Board's or duly authorized committee's determination under the Plan
(including without limitation determinations of the persons to receive Options
or Stock Awards, the form, amount, and timing of such Options or Stock Awards,
the terms and provisions of such Options or Stock Awards, and the agreements
evidencing same) need not be uniform and may be made by the Board or duly
authorized committee selectively among persons who receive, or are eligible to
receive, Options or Stock Awards under the Plan, whether or not such persons are
similarly situated.

         4. Shares of Stock Subject to the Plan. A total of 500,000 shares of
Stock may be subject to, or issued pursuant to, Options or Stock Awards granted
under the terms of this Plan. Any shares subject to an Option or Stock Award
under the Plan, which Option or Stock Award for any reason expires or is
forfeited, terminated, or surrendered unexercised as to such shares, shall be
added back to the total number of shares reserved for issuance under the terms
of this Plan. If any right to acquire Stock granted under the Plan is exercised
by the delivery of shares of Stock or the relinquishment of rights to shares of
Stock, only the net shares of Stock issued (the shares of Stock issued less the
shares of Stock surrendered) shall count against the total number of shares
reserved for issuance under the terms of this Plan.

         5. Reservation of Stock on Granting of Option. At the time of granting
any Option under the terms of this Plan, there will be reserved for issuance on
the exercise of the Option the number of shares of Stock of the Company subject
to such Option. The Company may reserve either authorized but unissued shares or
issued shares that have been reacquired by the Company.

         6. Eligibility. Options or Stock Awards under the Plan may be granted
to employees, including officers and directors, of the Company or its
subsidiaries, as may be existing from time to time, and to other individuals who
are not employees of the Company as may be deemed in the best interest of the
Company by the Board or duly authorized committee. Such Options or Stock Awards
shall be in the amounts, and shall have the rights and be subject to the
restrictions, as may be determined by the Board or duly authorized committee at
the time of grant, all as may be within the general provisions of this Plan.

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         7. Term of Options and Certain Limitations on Right to Exercise.

                  (a) Each Option shall have the term established by the Board
         or duly authorized committee at the time the Option is granted but in
         no event may an Option have a term in excess of ten years.

                  (b) The term of the Option, once it is granted, may be reduced
         only as provided for in this Plan or under the written provisions of
         the Option.

                  (c) Unless otherwise specifically provided by the written
         provisions of the Option, no holder or his or her legal representative,
         legatee, or distributee will be, or shall be deemed to be, a holder of
         any shares subject to an Option unless and until the holder exercises
         his or her right to acquire all or a portion of the Stock subject to
         the Option and delivers the required consideration to the Company in
         accordance with the terms of this Plan and the Option and then only to
         the extent of the number of shares of Stock acquired. Except as
         specifically provided in this Plan or as otherwise specifically
         provided by the written provisions of the Option, no adjustment to the
         exercise price or the number of shares of Stock subject to the Option
         shall be made for dividends or other rights for which the record date
         is prior to the date the Stock subject to the Option is acquired by the
         holder.

                  (d) Options under the Plan shall vest and become exercisable
         at such time or times and on such terms as the Board or duly authorized
         committee may determine at the time of the grant of the Option.

                  (e) Options granted under the Plan shall contain such other
         provisions, including, without limitation, further restrictions on the
         vesting and exercise of the Option, as the Board or duly authorized
         committee shall deem advisable.

                  (f) In no event may an Option be exercised after the
         expiration of its term.

                  (g) Unless otherwise specifically provided by the written
         provisions of an Option granted pursuant to this Plan, upon receipt of
         (i) any request that the exercise of the Option or the resale of any
         shares of Stock issued or to be issued on exercise of such Option will
         be registered under the Securities Act; or (ii) any notice of exercise
         of the Option pursuant to its terms, in lieu of any obligation to
         effect any registration with respect to the Options or shares of Stock
         issuable on such Option or in lieu of delivering shares of Stock on the
         exercise of the Option, the Company may, within five business days of
         receipt of such request to register or notice of exercise, purchase, in
         whole or in part, such Options from the Optionee at an amount in cash
         equal to the difference between (a) the then current fair market value
         (as defined below) of the Stock on the day of such repurchase and (b)
         the exercise price in effect on such day. In order to exercise such
         right, the Company must provide written notice to the optionee at least
         five days prior to the date that the Company proposes to repurchase
         such Options. For purposes of this section, the fair market value of
         the Stock shall be determined by the Board or duly authorized committee
         based on the closing price for the Stock as quoted on a registered
         national securities exchange or, if not listed on a national exchange,
         the Nasdaq Stock Market ("Nasdaq"), on the trading day immediately
         preceding the date that the Company provides notice of its intent to
         repurchase the Options, or, if not listed on such an exchange or
         included on Nasdaq, the closing price for the Stock as determined by
         the Board or duly authorized committee through any other reliable means
         of determination available on the close of business on the trading day
         last preceding the date of providing the notice.

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         8. Exercise Price. The exercise price of each Option issued under the
Plan shall be determined by the Board or duly authorized committee on the date
of grant.

         9. Payment of Exercise Price. The exercise of any Option shall be
contingent on receipt by the Company of cash, certified bank check to its order,
or other consideration acceptable to the Company; provided that, at the
discretion of the Board or duly authorized committee, the written provisions of
the Option may provide that payment can be made in whole or in part in shares of
Stock of the Company that have been owned by the optionee for more than six
months or by the surrender of Options to acquire Stock from the Company that
have been held for more than six months, which Stock or Options shall be valued
at their then fair market value as determined by the Board or duly authorized
committee. Any consideration approved by the Board or duly authorized committee
that calls for the payment of the exercise price over a period of more than one
year shall provide for interest, which shall not be included as part of the
exercise price, that is equal to or exceeds the imputed interest provided for in
section 483 of the Code or any amendment or successor section of like tenor.

         10. Withholding. If the grant of a Stock Award or the grant or exercise
of an Option pursuant to this Plan, or any other event in connection with any
such grant or exercise, creates an obligation to withhold income and employment
taxes pursuant to the Code or applicable state or local laws, such obligation
may, at the discretion of the Board or duly authorized committee at the time of
the grant of the Option or Stock Award and to the extent permitted by the terms
of the Option or Stock Award and the then governing provisions of the Code and
the Exchange Act, be satisfied (i) by the holder of the Option or Stock Award
delivering to the Company an amount of cash equal to such withholding
obligation; (ii) by the Company withholding from any compensation or other
amount owing to the holder of the Option or Stock Award the amount (in cash,
Stock, or other property as the Company may determine) of the withholding
obligation; (iii) by the Company withholding shares of Stock subject to the
Option or Stock Award with a fair market value equal to such obligation; or (iv)
by the holder of the Option or Stock Award either delivering shares of Stock
that have been owned by the holder for more than six months or canceling Options
or other rights to acquire Stock from the Company that have been held for more
than six months with a fair market value equal to such requirements. In all
events, delivery of shares of Stock issuable on exercise of the Option or on
grant of the Stock Award shall be conditioned upon and subject to the
satisfaction or making provision for the satisfaction of the withholding
obligation of the Company resulting from the grant or exercise of the Option,
grant of the Stock Award, or any other event. The Company shall be further
authorized to take such other action as may be necessary, in the opinion of the
Company, to satisfy all obligations for the payment of such taxes.

         11. Incentive Options--Additional Provisions. In addition to the other
restrictions and provisions of this Plan, any Option granted hereunder that is
intended to be an Incentive Option shall meet the following further
requirements:

                  (a) The exercise price of an Incentive Option shall not be
         less than the fair market value of the Stock on the date of grant of
         the Incentive Option as determined by the Board or duly authorized
         committee based on the closing price for the Stock as quoted on a
         registered national securities exchange or, if not listed on a national
         exchange, the Nasdaq Stock Market ("Nasdaq"), over the five-day trading
         period immediately prior to the date of grant of such Incentive Option,
         or, if not listed on such an exchange or included on Nasdaq, the
         closing price for the Stock as determined by the Board or duly
         authorized committee through any other reliable means of determination
         available on the close of business on the trading day last preceding
         the date of grant of such Incentive Option and permitted by the
         applicable provisions of the Code.

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                  (b) No Incentive Option may be granted under the Plan to any
         individual that owns (either of record or beneficially) Stock
         possessing more than 10% of the combined voting power of the Company or
         any parent or subsidiary corporation unless both the exercise price is
         at least 110% of the fair market value of the Stock on the date the
         Option is granted and the Incentive Option by its terms is not
         exercisable more than five years after the date it is granted.

                  (c) Incentive Options may be granted only to employees of the
         Company or its subsidiaries and only in connection with that employee's
         employment by the Company or a subsidiary. Notwithstanding the above,
         directors and other individuals who have contributed to the success of
         the Company or its subsidiaries may be granted Incentive Options under
         the Plan, subject to, and to the extent permitted by, applicable
         provisions of the Code and regulations promulgated thereunder, as they
         may be amended from time to time.

                  (d) The aggregate fair market value (determined as of the date
         the Incentive Option is granted) of the shares of Stock with respect to
         which Incentive Options are exercisable for the first time by any
         individual during any calendar year under the Plan (and all other plans
         of the Company and its subsidiaries) may not exceed $100,000.

                  (e) No Incentive Option shall be transferable other than by
         will or the laws of descent and distribution and shall be exercisable,
         during the lifetime of the optionee, only by the optionee to whom the
         Incentive Option is granted.

                  (f) No individual acquiring shares of Stock pursuant to any
         Incentive Option granted under this Plan shall sell, transfer, or
         otherwise convey the Stock until after the date that is both two years
         after the date the Incentive Option was granted and one year after the
         date the Stock was acquired pursuant to the exercise of the Incentive
         Option. If any individual makes a disqualifying disposition, he or she
         shall notify the Company within 30 days of such transaction.

                  (g) No Incentive Option may be exercised unless the holder
         was, within three months of such exercise, and had been since the date
         the Incentive Option was granted, an eligible employee of the Company
         as specified in the applicable provisions of the Code, unless the
         employment was terminated as a result of the death or disability (as
         defined in the Code and the regulations promulgated thereunder as they
         may be amended from time to time) of the employee or the employee dies
         within three months of the termination. In the event of termination as
         a result of disability, the holder shall have a one year period
         following termination in which to exercise the Incentive Option. In the
         event of death of the holder, the Incentive Option must be exercised
         within six months after the issuance of letters testamentary or
         administration or the appointment of an administrator, executor, or
         personal representative, but not later than one year after the date of
         termination of employment. An authorized absence or leave approved by
         the Board or duly authorized committee for a period of 90 days or less
         shall not be considered an interruption of employment for any purpose
         under the Plan.

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                  (h) All Incentive Options shall be deemed to contain such
         other limitations and restrictions as are necessary to conform the
         Incentive Option to the requirements for "incentive stock options" as
         defined in section 422 of the Code, or any amendment or successor
         statute of like tenor.

All of the foregoing restrictions and limitations are based on the governing
provisions of the Code as of the date of adoption of this Plan. If at any time
the Code is amended to permit the qualification of an Option as an incentive
stock option without one or more of the foregoing restrictions or limitations or
the terms of such restrictions or limitations are modified, the Board or duly
authorized committee may grant Incentive Options, and may modify outstanding
Incentive Options in accordance with such changes, all to the extent that such
action by the Board or duly authorized committee does not disqualify the Options
from treatment as incentive stock options under the provisions of the Code as
may be amended from time to time.

         12. Awards to Directors and Officers. To the extent the Company has a
class of securities registered under the Exchange Act, Options or Stock Awards
granted under the Plan to directors and officers (as used in Rule 16b-3
promulgated under the Exchange Act or any amendment or successor rule of like
tenor) intended to qualify for the exemption from section 16(b) of the Exchange
Act provided in Rule 16b-3 shall, in addition to being subject to the other
restrictions and limitations set forth in this Plan, be made as follows:

                  (a) A transaction whereby there is a grant of an Option or
         Stock Award pursuant to this Plan must satisfy one of the following:

                           (i) The transaction must be approved by the Board or
                  duly authorized committee composed solely of two or more
                  non-employee directors of the Company (as defined in Rule
                  16b-3);

                           (ii) The transaction must be approved or ratified, in
                  compliance with section 14 of the Exchange Act, by either: the
                  affirmative vote of the holders of a majority of the
                  securities of the Company present or represented and entitled
                  to vote at a meeting of the shareholders of the Company held
                  in accordance with the applicable laws of the state of
                  incorporation of the Company; or, if allowed by applicable
                  state law, the written consent of the holders of a majority,
                  or such greater percentage as may be required by applicable
                  laws of the state of incorporation of the Company, of the
                  securities of the Company entitled to vote. If the transaction
                  is ratified by the shareholders, such ratification must occur
                  no later than the date of the next annual meeting of
                  shareholders; or

                           (iii) The Stock acquired must be held by the officer
                  or director for a period of six months subsequent to the date
                  of the grant; provided that if the transaction involves a
                  derivative security (as defined in section 16 of the Exchange
                  Act), this condition shall be satisfied if at least six months
                  elapse from the date of acquisition of the derivative security
                  to the date of disposition of the derivative security (other
                  than on exercise or conversion) or its underlying equity
                  security.

                  (b) Any transaction involving the disposition by the Company
         of its securities in connection with Options or Stock Awards granted
         pursuant to this Plan shall:

                           (i) be approved by the Board or duly authorized
                  committee composed solely of two or more non-employee
                  directors (as defined in Rule 16b-3); or

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                           (ii) be approved or ratified, in compliance with
                  section 14 of the Exchange Act, by either: the affirmative
                  vote of the holders of a majority of the securities of the
                  Company present, or represented, and entitled to vote at a
                  meeting duly held in accordance with the applicable laws of
                  the state of incorporation of the Company or, if allowed by
                  applicable state law, the written consent of the holders of a
                  majority, or such greater percentage as may be required by
                  applicable laws of the state of incorporation of the Company,
                  of the securities of the Company entitled to vote; provided
                  that such ratification occurs no later than the date of the
                  next annual meeting of shareholders.

All of the foregoing restrictions and limitations are based on the governing
provisions of the Exchange Act and the rules and regulations promulgated
thereunder as of the date of adoption of this Plan. If at any time the governing
provisions are amended to permit an Option to be granted or exercised or Stock
Award to be granted pursuant to Rule 16b-3 or any amendment or successor rule of
like tenor without one or more of the foregoing restrictions or limitations, or
the terms of such restrictions or limitations are modified, the Board or duly
authorized committee may award Options or Stock Awards to directors and
officers, and may modify outstanding Options or Stock Awards, in accordance with
such changes, all to the extent that such action by the Board or duly authorized
committee does not disqualify the Options or Stock Awards from exemption under
the provisions of Rule 16b-3 or any amendment or successor rule of similar
tenor.

         13. Stock Appreciation Rights and Other Tandem Rights. The Board or
duly authorized committee, at the time of granting any award under the terms of
this Plan, shall have the authority to grant stock appreciation rights or other
tandem rights with respect to all or some of the shares of Stock covered by such
award pursuant to which the holder shall have the right to surrender all or part
of such award and thereby exercise the tandem rights; provided, however, that
the holder shall not have such right to surrender and obtain payment during the
first six months of the term of the award, except in the event of death or
disability of the holder during such six-month period. Any payment under the
terms of the tandem rights may be made by the Company, at the discretion of the
Board or duly authorized committee as set forth in the written award, in Stock
(at its fair market value on the date of the notice of exercise, as determined
by the Board or committee) or in cash, or partly in Stock and partly in cash, as
the Company may determine. Any stock appreciation rights or other tandem rights
granted under the terms of this section may be exercised only when, and only to
the extent that, the holder is entitled to exercise all or a portion of the
underlying award. The terms of any stock appreciation or other rights granted
shall, within the provisions of this Plan, be established by the Board or
committee at the time of grant, and any rights created thereby can only be
transferred in connection with the transfer of the underlying award. Stock
appreciation rights may only be exercised at a time when the fair market value
of the Stock subject to the award exceeds the exercise price of the award.

         14. Stock Awards. The Board or duly authorized committee may grant
Stock Awards to individuals eligible to participate in this Plan, in the amount,
and subject to the provisions determined by the Board or duly authorized
committee. The Board or duly authorized committee shall notify in writing each
person selected to receive a Stock Award hereunder as soon as practicable after
he or she has been so selected and shall inform such person of the number of
shares he or she is entitled to receive, the approximate date on which such
shares will be issued, and the Forfeiture Restrictions applicable to such
shares. (For purposes hereof, the term "Forfeiture Restrictions" shall mean any
prohibitions against sale or other transfer of shares of Stock granted under the
Plan and the obligation of the holder to forfeit his or her ownership of or

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right to such shares and to surrender such shares to the Company on the
occurrence of certain conditions.) The Board or duly authorized committee may,
at its discretion, require the payment in cash to the Company by the award
recipient of the par value of the Stock. The shares of Stock issued pursuant to
a Stock Award shall not be sold, exchanged, transferred, pledged, hypothecated,
or otherwise disposed of during such period or periods of time which the Board
or duly authorized committee shall establish at the time of the grant of the
Stock Award. If a Stock Award is made to an employee of the Company or its
subsidiaries, the employee shall be obligated, for no consideration other than
the amount, if any, of the par value paid in cash for such shares, to forfeit
and surrender such shares as he or shall have received under the Plan which are
then subject to Forfeiture Restrictions to the Company if he or she is no longer
an employee of the Company or its subsidiaries for any reason; provided that in
the event of termination of the employee's employment by reason of death or
total and permanent disability, the Board or duly authorized committee, in its
sole discretion, may cancel the Forfeiture Restrictions. Certificates
representing shares subject to Forfeiture Restrictions shall be appropriately
legended as determined by the Board or duly authorized committee to reflect the
Forfeiture Restrictions, and the Forfeiture Restrictions shall be binding on any
transferee of the shares.

         15. Assignment. At the time of grant of an Option or Stock Award, the
Board or duly authorized Committee, in its sole discretion, may impose
restrictions on the transferability of such Option or Stock Award and provide
that such Option shall not be transferable other than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined in the Code and that, except as permitted by the foregoing, such Options
or Stock Awards, granted under the Plan and the rights and privileges thereby
conferred shall not be transferred, assigned, pledged, or hypothecated in any
way (whether by operation of law or otherwise), and shall not be subject to
execution, attachment, or similar process. On any attempt to transfer, assign,
pledge, hypothecate, or otherwise dispose of the Option or Stock Award, or of
any right or privilege conferred thereby, contrary to the provisions thereof, or
on the levy of any attachment or similar process on such rights and privileges,
the Option or Stock Award and such rights and privileges shall immediately
become null and void.

         16. Additional Terms and Provisions of Awards. The Board or duly
authorized committee shall have the right to impose additional limitations on
individual awards under the Plan. For example, and without limiting the
authority of the Board or duly authorized committee, an individual award may be
conditioned on continued employment for a specified period or may be voided
based on the award holder's gross negligence in the performance of his or her
duties, substantial failure to meet written standards established by the Company
for the performance of his or her duties, criminal misconduct, or willful or
gross misconduct in the performance of his or her duties. In addition, the Board
or duly authorized committee may establish additional rights in the holders of
individual awards at the time of grant. For example, and without limiting the
authority of the Board or duly authorized committee, an individual award may
include the right to immediate payment of the value inherent in the award on the
occurrence of certain events such as a change in control of the Company, all on
the terms and conditions set forth in the award at the time of grant. The Board
or duly authorized committee may, at the time of the grant of the Option or
Stock Award, establish any other terms, restrictions, or provisions on the
exercise of an Option or the holding of Stock subject to the Stock Award as it
deems appropriate. All such terms, restrictions, and provisions must be set
forth in writing at the time of grant in order to be effective.

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         17. Dilution or Other Adjustments. Unless otherwise specifically
provided by the written provisions of an Option granted pursuant to this Plan,
in order to prevent dilution of the rights under any Option granted pursuant to
this Plan, the Plan and any Options and Stock Awards shall be subject to
appropriate adjustment as follows:

                  (a) In the event the Company shall declare a dividend or make
         any other distribution on any capital stock of the Company payable in
         Stock, rights to purchase Stock, or securities convertible into Stock
         or shall subdivide its outstanding shares of Stock into a greater
         number of shares or combine such outstanding Stock into a smaller
         number of shares, then in each such event, the aggregate number of
         shares of Stock then subject to the Plan shall be increased or
         decreased by the same proportion and the number of shares of Stock then
         covered by each outstanding Option granted hereunder shall be adjusted
         so that each such Option shall be exercisable to purchase the kind and
         number of shares of Stock or other securities of the Company which the
         holder would have owned or have been entitled to receive after the
         happening of any of the events described above, had such Option been
         exercised immediately prior to the happening of such event or any
         record date with respect thereto. Whenever the number of shares of
         Stock purchasable on the exercise of Options granted hereunder are
         adjusted pursuant to this subparagraph, the exercise price of each such
         Option shall be adjusted by multiplying the exercise price per share
         immediately prior to such adjustment by a fraction (calculated to four
         decimal places), the numerator of which shall be the number of shares
         purchasable on the exercise of such Option immediately prior to such
         adjustment and the denominator of which shall be the number of shares
         so purchasable immediately thereafter. Shares awarded under the terms
         of a Stock Award, whether or not then subject to Forfeiture
         Restrictions, shall be entitled to the same rights as other issued and
         outstanding shares of Stock, including distributions pursuant to a
         stock split or dividend or reduction pursuant to a combination or
         consolidation, although any additional shares of Stock issued to the
         holder of a Stock Award shall be subject to the same Forfeiture
         Restrictions as the Stock Award.

                  (b) In the event the Company shall declare a dividend or make
         any other distribution to the holders of its Stock, payable in evidence
         of its indebtedness or assets or capital stock (excluding cash
         dividends or distributions made out of current or retained earnings) or
         rights or warrants to subscribe for securities, other than as referred
         to above, then in each such case the exercise price per share of each
         Option granted hereunder shall be adjusted to be equal to the exercise
         price theretofore applicable prior to any such adjustment multiplied by
         a fraction (calculated to four decimal places), the numerator of which
         shall be the current market price per share of Stock on the record date
         for such distribution less the then fair market value (as reasonably
         determined by the Board) of the evidence of its indebtedness or assets
         or capital stock so distributed applicable to one share of Stock and
         the denominator of which shall be the current market price per share of
         Stock. Shares issued under a Stock Award, whether or not subject to
         Forfeiture Restrictions, shall be treated as issued and outstanding
         although any distributions with respect to the shares awarded under the
         Stock Award shall be subject to the Forfeiture Restrictions then
         applicable to such shares and may be held by the Company or otherwise
         subject to restrictions on transfer until the expiration of the
         Forfeiture Restrictions.

                                      -9-
<PAGE>

                  (c) In the event that any capital reorganization or
         reclassification of the capital stock of the Company, consolidation or
         merger of the Company with another entity, or sale of all or
         substantially all of the Company's assets to another entity shall be
         effected in such a way that holders of Stock shall be entitled to
         receive stock or securities of any other entity or other assets with
         respect to or in exchange for Stock, other than as referred to above,
         then, as a condition of any such reorganization, reclassification,
         consolidation, merger, or sale, lawful adequate provisions shall be
         made whereby the holders of any Option granted hereunder shall
         thereafter have the right to acquire and receive on exercise of such
         Option such shares of stock, securities, or other assets as would have
         been issuable or payable (as part of the reorganization,
         reclassification, consolidation, merger, or sale) with respect to or in
         exchange for such number of outstanding shares of Stock as would have
         been received on exercise of such Option immediately before such event.
         In any such case, appropriate provision shall be made with respect to
         the rights and interests of the holders of each Option to the end that
         the provisions thereof (including without limitations provisions for
         adjustments of the exercise price and for the number of shares issuable
         on exercise of the Option) shall thereafter be applicable in relation
         to any shares of stock, securities, or assets thereafter deliverable on
         the exercise of the Option. In order to effect the foregoing, the
         Company may require, as a condition to such transaction, that the
         holder of any Option granted hereunder be granted an option of
         substantially like tenor to purchase equity securities of such other
         entity so that the optionee shall be entitled to purchase the kind and
         number of shares of common stock or other securities of such entity
         which it would have been entitled to receive after the happening of any
         of the events described above, had the Option been exercised
         immediately prior to the happening of such event or any record date
         with respect thereto. In the event that the exercise price of any
         Option granted hereunder is adjusted pursuant to subparagraph (b) of
         this section, the aggregate exercise price of any new option granted
         pursuant to this subparagraph (c) shall be equal to the difference
         between the aggregate exercise price of such Option immediately prior
         to adjustment pursuant to subparagraph (b) of this section and the
         aggregate adjusted exercise price immediately following such
         adjustment. Shares awarded under a Stock Award shall be treated as
         issued and outstanding, whether or not subject to Forfeiture
         Restrictions, although any Stock, assets, or other rights distributed
         shall be subject to the Forfeiture Restrictions governing the shares
         awarded under the Stock Award and, at the discretion of the Board or
         duly authorized committee, may be held by the Company or otherwise
         subject to restrictions on transfer by the Company until the expiration
         of such Forfeiture Restrictions. The Company will not effect any such
         consolidation, merger, or sale unless prior to the consummation thereof
         the successor corporation resulting from such consolidation or merger
         or the corporation purchasing such assets shall assume, by written
         instrument mailed or delivered to the holders of each Option granted
         hereunder at the last address of the holder appearing on the books of
         the Company, the obligation to deliver to each such holder such shares
         of stock, securities, or assets as, in accordance with the foregoing
         provisions, that such holder may be entitled to acquire on exercise of
         such Option. Shares awarded under a Stock Award shall be treated as
         issued and outstanding, whether or not subject to Forfeiture
         Restrictions.

                  (d) In the event of a merger or consolidation of the Company
         with or into another corporation or the sale of all or substantially
         all of their assets as a result of which a number of shares of common
         stock of the surviving or purchasing corporation greater or lesser than
         the number of shares of Stock outstanding immediately prior to such
         merger, consolidation, or purchase are issuable to holders of Stock,
         then the exercise price and number of shares issuable on exercise of
         each Option granted hereunder shall be adjusted in the same manner as
         though there was a subdivision or combination of the outstanding shares
         of Stock.

                                      -10-
<PAGE>

                  (e) Adjustments pursuant to this provision shall be made
         whenever any event described herein occurs and shall become effective
         on the date of the triggering event retroactive to the record date for
         the determination of shareholders entitled to receive any distribution.
         Whenever the number of shares of Stock purchasable on the exercise of
         any Option granted hereunder or the exercise price of any Option are
         adjusted, the Company shall cause to be promptly mailed by first class
         mail, postage prepaid, to the holders of each Option notice of such
         adjustment or adjustments and shall deliver a resolution of the Board
         setting forth the number of shares purchasable on exercise of the
         Option and the exercise price thereof after such adjustment, setting
         forth a brief statement of the facts requiring such adjustment,
         together with the computation by which such adjustment was made. Such
         resolution, in the absence of manifest error, shall be conclusive
         evidence of the correctness of adjustment.

                  (f) All adjustments pursuant to this section shall be made by
         the Board, which shall be binding on each optionee in the absence of
         demonstrable error. In the event the Board determines that the
         adjustment provided for above is unduly difficult or expensive to
         effect because of difficulties of valuation, the Board may, at its
         option and as an alternative to the adjustment, cause the Company to
         distribute and place in escrow for the optionee that portion of such
         dividend or distribution which the optionee would have received had it
         exercised the Option before the declaration of the dividend or the
         making of the distribution. Upon exercise of an Option, the optionee
         shall receive its portions of the dividend, distribution, or rights.

                  (g) No adjustments shall be made to the Exercise Price or the
         number of shares of Stock issuable on exercise of any Option granted
         hereunder:

                           (i) in connection with the issuance of any shares of
                  Stock, securities, or other assets on the exercise of any such
                  Option;

                           (ii) in connection with the issuance of any shares of
                  Stock, securities or other assets on the exercise or
                  conversion of any rights, options, warrants, or other right or
                  convertible securities containing the right to purchase or
                  acquire Stock;

                           (iii) in connection with the issuance of additional
                  shares of Stock, securities, or other assets on account of the
                  anti-dilution provisions contained in or relating to any
                  Option granted hereunder or any other option, warrant, or
                  right to acquire Stock;

                           (iv) in connection with the purchase or other
                  acquisition by the Company of any shares of Stock, evidences
                  of its indebtedness or assets, or rights, options, warrants,
                  or convertible securities containing the right to subscribe
                  for or purchase Common Stock;

                                      -11-
<PAGE>

                           (v) the sale or issuance by the Company of any shares
                  of Stock, evidences of its indebtedness or assets, or rights,
                  options, warrants, or convertible securities containing the
                  right to subscribe for or purchase Stock or other securities
                  pursuant to options, warrants, or other rights to acquire
                  Stock or other securities; or

                           (vi) if such adjustment would require a change of
                  less than 1% in the number of shares purchasable on the
                  exercise of such Option; provided, however, that any
                  adjustments that would otherwise be required to be made but
                  for this subsection shall be carried forward and taken into
                  account in any subsequent adjustment.

         18. Options or Stock Awards to Foreign Nationals. The Board or duly
authorized committee may, in order to fulfill the purposes of this Plan and
without amending the Plan, grant Options or Stock Awards to foreign nationals or
individuals residing in foreign countries that contain provisions, restrictions,
and limitations different from those set forth in this Plan and the Options or
Stock Awards made to United States residents in order to recognize differences
among the countries in law, tax policy, and custom. Such grants shall be made in
an attempt to provide such individuals with essentially the same benefits as
contemplated by a grant to United States residents under the terms of this Plan.

         19. Listing and Registration of Shares. Unless otherwise expressly
provided on the granting of an award under this Plan, the Company shall have no
obligation to register any securities issued pursuant to this Plan or issuable
on the exercise of Options granted hereunder. Each award shall be subject to the
requirement that if at any time the Board or duly authorized committee shall
determine, in its sole discretion, that it is necessary or desirable to list,
register, or qualify the shares covered thereby on any securities exchange or
under any state or federal law, or obtain the consent or approval of any
governmental agency or regulatory body as a condition of, or in connection with,
the granting of such award or the issuance or purchase of shares thereunder,
such award may not be made or exercised in whole or in part unless and until
such listing, registration, consent, or approval shall have been effected or
obtained free of any conditions not acceptable to the Board or duly authorized
committee.

         20. Expiration and Termination of the Plan. The Plan may be abandoned
or terminated at any time by the Board or duly authorized committee except with
respect to any Options or Stock Awards then outstanding under the Plan. The Plan
shall otherwise terminate on the earlier of the date that is: (i) ten years
after the date the Plan is adopted by the Board; or (ii) ten years after the
date the Plan is approved by the shareholders of the Company.

         21. Form of Awards. Awards granted under the Plan shall be represented
by a written agreement which shall be executed by the Company and which shall
contain such terms and conditions as may be determined by the Board or duly
authorized committee and permitted under the terms of this Plan. Option
agreements evidencing Incentive Options shall contain such terms and conditions,
among others, as may be necessary in the opinion of the Board or duly authorized
committee to qualify them as incentive stock options under section 422 of the
Code or any amendment or successor statute of like tenor.

         22. No Right of Employment. Nothing contained in this Plan or any
Option or Stock Award shall be construed as conferring on a director, officer,
or employee any right to continue or remain as a director, officer, or employee
of the Company or its subsidiaries.

                                      -12-
<PAGE>

         23. Leaves of Absence. The Board or duly authorized committee shall be
entitled to make such rules, regulations, and determinations as the Board or
duly authorized committee deems appropriate under the Plan in respect of any
leave of absence taken by the recipient of any Option or Stock Award. Without
limiting the generality of the foregoing, the Board or duly authorized committee
shall be entitled to determine (a) whether or not any such leave of absence
shall constitute a termination of employment within the meaning of the Plan, and
(b) the impact, if any, of any such leave of absence on any Option or Stock
Award under the Plan theretofore made to any recipient who takes such leave of
absence.

         24. Amendment of the Plan. The Board or duly authorized committee may
modify and amend the Plan in any respect; provided, however, that to the extent
such amendment or modification would cause the Plan to no longer comply with the
applicable provisions of the Code with respect to Incentive Options, such
amendment or modification shall also be approved by the shareholders of the
Company. Subject to the foregoing and, if the Company is subject to the
provisions of 16(b) of the Exchange Act, the limitations of Rule 16b-3
promulgated under the Exchange Act or any amendment or successor rule of like
tenor, the Plan shall be deemed to be automatically amended as is necessary (i)
with respect to the issuance of Incentive Options, to maintain the Plan in
compliance with the provisions of section 422 of the Code, and regulations
promulgated thereunder from time to time, or any amendment or successor statute
thereto, and (ii) with respect to Options or Stock Awards granted to officers
and directors of the Company, to maintain the awards made under the Plan in
compliance with the provisions of Rule 16b-3 promulgated under the Exchange Act
or any amendment or successor rule of like tenor.

                                                ATTEST:

                                                /s/ Scott Duncan
                                               ---------------------------------
                                                Scott Duncan, Secretary

                             SECRETARY'S CERTIFICATE

         The undersigned, the duly constituted and elected secretary of FX
Energy, Inc., hereby certifies that a duly constituted meeting of the
shareholders held on May 4, 1999, pursuant to notice and at which a quorum was
present in accordance with the requirements of law and the Company's articles of
incorporation and bylaws, the foregoing FX Energy, Inc. 1998 Stock Option and
Award Plan was approved by the affirmative vote of the holders of a majority of
the shares of Common Stock in attendance, in person or by proxy, at such
meeting.

         DATED this 4th day of May, 1999.

                                                 /s/ Scott Duncan
                                                --------------------------------
                                                 Scott Duncan, Secretary

                                      -13-Exhibit 10.42

                         EXECUTIVE EMPLOYMENT AGREEMENT

         THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is entered into
April 18, 1997, to take effect the 18th day of April, 1997 (the "Effective
Date"), by and between FX Energy, Inc., a Nevada corporation (the "Employer"),
and SCOTT J. DUNCAN (the "Executive").

                                    RECITALS:

         WHEREAS, the Executive desires employment as an employee of the
Employer, and the Employer desires to employ the Executive, under the terms and
conditions hereof.

         NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:

                                    ARTICLE I
                          ASSOCIATION AND RELATIONSHIP

         1.1 Nature of Employment. The Employer hereby employs the Executive and
the Executive hereby accepts employment from the Employer upon the terms and
conditions set forth herein.

         1.2 Full Time Services. The Executive shall devote his full working
time, attention, and services to the business and affairs of the Employer and
shall not, without the Employer's written consent, be engaged during the term of
this Agreement in any other substantial business activity other than normal
investment activities, whether or not such business activity is pursued for
gain, profit, or other pecuniary advantages, that significantly interferes or
conflicts with the reasonable performance of his duties hereunder.

         1.3 Duties. During the term of this Agreement, the Executive shall be
employed by the Employer and shall initially occupy the office of Vice-President
and shall serve as Employer's Treasurer. The Executive agrees to serve in such
offices or positions with the Employer or any subsidiary of the Employer and
such substitute or further offices or positions of substantially consistent rank
and authority as shall, from time to time, be determined by the Employer's board
of directors. The Executive agrees to perform such duties appropriate for an
executive officer of Employer as may be assigned to him from time to time by the
Employer and as described in the Employer's bylaws. The Employer shall direct,
control, and supervise the duties and work of the Executive.

         1.4 Satisfaction of Employer. The Executive agrees that he will, at all
times faithfully, promptly, and to the best of his ability, experience, and
talent, perform all of the duties that may be required of him pursuant to the
express and implicit terms hereof. Such duties shall be rendered at Salt Lake
City, Utah, and, on a temporary basis, at such other place or places as the
interests, needs, business, and opportunities of the Employer shall require or
make advisable; provided, however, that Executive shall not be required to move
his residence from Salt Lake City, Utah without the mutual consent of the
Employer and the Executive.

         1.5 Compliance with Rules. The Executive shall observe and comply with
the rules and regulations of the Employer respecting its business and shall
carry out and perform orders, directions, and policies of the Employer as they
may be from time to time communicated to the Executive either orally or in
writing. The Executive shall further observe and comply with all applicable
rules, regulations, and laws governing the business of Employer.

                                       1
<PAGE>

         1.6 Fees for Services. All income or other compensation generated by
the Executive other than from the Employer for any services performed by him
during the term of this Agreement in connection with the business of the
Employer, including, but not limited to, management fees, consulting fees,
advisory fees, commissions, or similar items, shall belong to the Employer
whether paid to the Employer or to the Executive, either directly or indirectly,
or an affiliate of the Executive. The Executive agrees to remit to the Employer
any such income or other compensation received by him or his affiliates within
ten (10) days after receipt of such income or other compensation. The Executive
agrees, upon request by the Employer, to render an accounting of all
transactions relating to his business endeavors related to the business of the
Employer during the term of his employment hereunder.

                                   ARTICLE II
                            COMPENSATION AND BENEFITS

         2.1 Compensation. For all services rendered by the Executive pursuant
to this Agreement, the Employer shall compensate the Executive as follows:

                  (a) Salary. The Executive shall be paid in accordance with the
         normal payroll practice of the Employer annual compensation in the
         amount of $90,000.

                  (b) Salary Escalation. At the beginning of each year, the
         annual salary payable to the Executive pursuant to Section 2.1(a) above
         shall automatically be increased as the board of directors or the
         designated compensation committee thereof may deem appropriate,
         provided however, in no event shall this annual increase be less than
         7.5% of the annual salary amount for the previous year. In addition,
         the rate of salary may be further or otherwise increased at any time
         and in such amount as the board of directors or the designated
         compensation committee thereof may determine appropriate, based on
         results of operations, increased activities of the Employer, or such
         other factors as the board of directors or the designated compensation
         committee thereof may deem appropriate.

                  (c) Bonus. The Employer shall pay the Executive a cash bonus
         in the amount of $100,000 if, prior to the end of the Employer's 1996
         fiscal year, the Employer shall have paid off (with funds other than
         proceeds from other debt financing) the revolving loan owed to Bank One
         Texas, N.A., in the maximum principal amount of $5,000,000, under the
         terms of that certain Loan Agreement dated June 7, 1994. The Employer
         shall provide the Executive with additional incentive compensation in
         the form of cash bonuses not less often than once each year during the
         term of this Agreement. The amount of such bonuses shall be determined
         in the sole discretion of the board of directors of the Employer or the
         designated compensation committee thereof taking into consideration the
         growth and profitability of the Employer, the relative contribution by
         the Executive to the business of the Employer, the economy in general,
         and such other factors as the board of directors or designated
         compensation committee deems relevant.

                  (d) Other Benefits. The Employer shall additionally provide to
         the Executive incentive, retirement, pension, profit sharing, stock
         option, health, medical, or other employee benefit plans which are
         consistent with and similar to such plans provided by the Employer to
         its employees generally. All costs of such plans shall be an expense of
         the Employer and shall be paid by Employer.

                                       2
<PAGE>

         2.2 Continuation of Compensation During Disability. If the Executive is
unable to perform his services by reason of disability due to illness or
incapacity for a period of more than six consecutive months, the compensation
thereafter payable to him during the next succeeding consecutive three-month
period shall be one-half of the compensation provided for in Section 2.1(a)
hereof, and during the following consecutive three-month period shall be
one-fourth of the salary provided for in Section 2.1(a); provided, however, that
no such compensation shall be payable after the termination of this Agreement.
During such initial six consecutive month period of disability, the Executive
shall be entitled to receive incentive compensation at the same annual rate as
incentive compensation, if any, earned with respect to the Employer's fiscal
year last preceding the date such illness or incapacity commenced.
Notwithstanding the foregoing, if such illness or incapacity does not cease to
exist within the 12 consecutive month period provided herein, the Executive
shall not be entitled to receive any further compensation from the Employer and
the Employer may thereupon terminate this Agreement. For purposes of this
Agreement, the Executive is "disabled" when he is unable to continue his normal
duties of employment, by reason of a medically determined physical or mental
impairment. In determining whether or not the Executive is disabled, the
Employer may rely upon the opinion of any doctor or practitioner of any
recognized field of medicine or psychiatric practice selected jointly by the
Employer and Executive and such other evidence as the Employer deems necessary.

         2.3 Working Facilities. The Employer shall provide to the Executive at
the Employer's principal executive offices suitable executive offices and
facilities appropriate for his position and suitable for the performance of his
responsibilities.

         2.4 Vacations and Meetings. The Executive shall be entitled each year
to a paid vacation of at least four (4) weeks and to attendance at appropriate
meetings and conventions of such duration and at such time as may be in
accordance with the Employer's policy. Vacations shall be taken by the Executive
at a time and with starting and ending dates mutually convenient to the Employer
and the Executive. Vacations or portions of vacations not used in one employment
year shall carry over to the succeeding employment year, but shall thereafter
expire if not used within such succeeding year.

         2.5 Expenses. The Employer will reimburse the Executive for expenses
incurred in connection with the Employer's business, including expenses for
travel, lodging, meals, beverages, entertainment, and other items. The Executive
shall provide the following for all expenses for which the Executive desires
reimbursement:

                  (a) A report in which the Executive has recorded at or near
         the time each expenditure was made: (i) the amount of the expenditure;
         (ii) the time, date, place and designation of the type of
         entertainment, travel or other expense; (iii) the business reason for
         the expenditure and the nature of the business benefit derived or
         expected to be derived as a result of the expenditure; and (iv) the
         names, occupations, addresses and other information concerning each
         person who was entertained sufficient to establish the business
         relationship to the Employer; and

                  (b) Documentary evidence (such as receipts or paid bills),
         which states sufficient information to establish the amount, date,
         place and the essential character of the expenditure, for each
         expenditure: (i) of twenty-five dollars ($25.00) or more (except for
         transportation charges if not readily available); and (ii) for lodging
         while traveling away from home.

         2.6 Dues and Club Memberships. The Employer shall assume and pay
reasonable dues of the Executive in local, state, and national societies and
associations, and in such other clubs and organizations, as shall be approved
and authorized by the Employer.

                                       3
<PAGE>

         2.7 Payroll Taxes. The Employer shall withhold from the Executive's
compensation hereunder all federal and state payroll taxes and income taxes on
compensation paid to the Executive and shall provide an accounting to the
Executive for such amounts withheld.

                                   ARTICLE III
                COVENANT TO NOT DISCLOSE CONFIDENTIAL INFORMATION

         3.1 Definition of Confidential Information. For purposes of this
Agreement, the term "Confidential Information" does not apply to information
generally available to the public or to businesses in the oil and gas
exploration and development industry, but otherwise shall mean information in
written or electronic form under the care or custody of Executive as a direct or
indirect consequence of or through his employment with the Employer, including,
but not limited to, the special proprietary and economic information regarding
the business, methods, and operation of the Employer that is designated by the
Employer as "Limited," "Private," or "Confidential" or similarly designated or
for which there is any reasonable basis to be believed is, or which appears to
be, treated by the Employer as confidential.

         3.2 Protection of Goodwill. The Executive acknowledges that in the
course of carrying out, performing, and fulfilling his responsibilities to the
Employer, the Executive will be given access to and be entrusted with
Confidential Information relating to the Employer's business. The Executive
recognizes that (i) the goodwill of the Employer depends upon, among other
things, its keeping the Confidential Information confidential and that
unauthorized disclosure of the Confidential Information would irreparably damage
the Employer; and (ii) disclosure of any Confidential Information to competitors
of the Employer or to the general public would be highly detrimental to the
Employer. The Executive further acknowledges that in the course of performing
his obligations to the Employer he will be a representative of the Employer to
many clients or other persons and, in some instances, the Employer's primary
contact with such clients or other persons, and as such will be responsible for
maintaining or enhancing the business and/or goodwill of the Employer with those
clients or other persons.

         3.3 Covenants Regarding Confidential Information. In further
consideration of the employment of the Executive by the Employer and in
consideration of the compensation to be paid to the Executive during his
employment, the Executive hereby agrees as follows:

                  (a) Nondisclosure of Confidential Information. The Executive
         will not, during his employment with the Employer or at any time after
         termination of his employment, irrespective of the time, manner, or
         cause of termination, use, disclose, copy, or assist any other person
         or firm in the use, disclosure, or copying, of any Confidential
         Information.

                  (b) Return of Confidential Information. All files, records,
         documents, drawings, equipment, and similar items, whether in written
         or electronic form, relating to the business of the Employer, whether
         prepared by the Executive or otherwise coming into his possession,
         shall remain the exclusive property of the Employer and shall not be
         removed from the premises of the Employer, except where necessary in
         carrying out the business of the Employer, without the prior written
         consent of the Employer. Upon termination of the Executive's
         employment, the Executive agrees to deliver to the Employer all
         Confidential Information and all copies thereof along with any and all
         other property belonging to the Employer whatsoever.

                                       4
<PAGE>

                                   ARTICLE IV
                            ENFORCEMENT OF COVENANTS

         4.1 Relief. The Executive agrees that a breach or threatened breach on
his part of any covenant contained in this Agreement will cause such damage to
the Employer as will be irreparable and for that reason, the Executive further
agrees that the Employer shall be entitled as a matter of right to an injunction
out of any court of competent jurisdiction restraining any further violation of
such covenants by the Executive, his employers, employees, partners, or agents.
The right to injunction shall be cumulative and in addition to whatever other
remedies the Employer may have, including, specifically, recovery of damages.

         4.2 Survival of Covenants. Subject to Article V below, in the event the
Executive's employment relationship with the Employer is terminated, with or
without cause, the covenants contained in Article III above shall survive for a
period of one year after such termination.

                                    ARTICLE V
                              TERM AND TERMINATION

         5.1 Term. Except as provided herein, the term of this Agreement shall
be for a period of three (3) years commencing on the Effective Date and shall
automatically be extended for an additional one (1) year upon each anniversary
date of the Effective Date unless otherwise terminated pursuant to the terms
hereof.

         5.2 Termination. The Executive's employment hereunder may be terminated
without any breach of this Agreement only under the following circumstances:

                  (a) Termination for Cause. The Employer shall have the right,
         without further obligation to the Executive other than for compensation
         previously accrued, to terminate this Agreement for cause ("Cause") by
         showing that (i) the Executive has materially breached the terms
         hereof; (ii) the Executive, in the determination of the board, has been
         grossly negligent in the performance of his duties; (iii) the Executive
         has substantially failed to meet written standards established by the
         Employer for the performance of his duties; (iv) the Executive has
         engaged in material willful or gross misconduct in the performance of
         his duties hereunder; or (v) a final non-appealable conviction of or a
         plea of guilty or nolo contendere by the Executive to a felony or
         misdemeanor involving fraud, embezzlement, theft, or dishonesty or
         other criminal conduct against the Employer. Notwithstanding the
         foregoing, the Executive shall not be deemed to have been terminated
         for Cause, without (x) reasonable notice to the Executive setting forth
         the reasons for the Employer's intention to terminate for Cause; (y) an
         opportunity for the Executive, together with his counsel, to be heard
         before the full board of directors of the Employer; and (z) delivery to
         the Executive of written notice of termination setting forth the
         finding that in the good faith opinion of the board of directors the
         Executive was guilty of Cause and specifying the particulars thereof in
         detail.

                  (b) Termination upon Death or Disability of the Executive.
         This Agreement shall terminate immediately upon the Executive's death
         or upon the disability of the Executive after termination of pay as set
         forth in Section 2.2.

                  (c) Termination Upon Change of Control. Notwithstanding any
         provision of this Agreement to the contrary, the Executive may
         terminate this Agreement, but not the covenant not to disclose
         information set forth in Article III, upon the happening of any of the
         following events:

                                       5
<PAGE>

                           (i) The sale by the Employer of substantially all of
                  its assets to a single purchaser or to a group of associated
                  purchasers;

                           (ii) The sale, exchange, or other disposition to a
                  single person or group of persons under common control in one
                  transaction or series of related transactions resulting in
                  such person or persons owning, directly or indirectly, greater
                  than twenty-five percent (25%) of the combined voting power of
                  the outstanding shares of the Employer's common stock;

                           (iii) More than fifty percent (50%) of the members of
                  the board of directors of the Employer shall be persons who
                  are neither nominated for election by the board or an
                  authorized committee of the board nor elected by the board;

                           (iv) The decision by the Employer to terminate its
                  business and liquidate its assets; or

                           (v) The merger or consolidation of the Employer in a
                  transaction in which the shareholders of the Employer
                  immediately prior to such merger or consolidation receive less
                  than fifty percent (50%) of the outstanding voting shares of
                  the new or continuing corporation.

         In the event the Executive does not elect to terminate this Agreement
         upon the happening of any of the events noted above, and as a result of
         such event, the Employer is not the surviving entity, then the
         provisions of this Agreement shall inure to the benefit of and be
         binding upon the surviving or resulting entity. If as a result of the
         merger, consolidation, transfer of assets, or other event listed above,
         the duties of the Executive are increased, then the compensation of the
         Executive provided for in Section 2.1 of this Agreement shall be
         reasonably adjusted upward to compensate for the additional duties and
         responsibilities assumed.

                  (d) Termination by Executive for Cause. The Executive shall
         have the right to terminate this Agreement in the event of (i) the
         Employer's intentional breach of any covenant or term of this
         Agreement, but only if the Employer fails to cure such breach within
         twenty (20) days following the receipt of notice by Executive setting
         forth the conditions giving rise to such breach; (ii) an assignment to
         the Executive of any duties inconsistent with, or a significant change
         in the nature or scope of, the Executive's authorities or duties from
         those authorities and duties held by the Executive as of the date
         hereof and as increased from time to time; or (iii) the failure by the
         Executive to obtain the assumption of the commitment to perform this
         Agreement by any successor corporation.

         5.3 Termination Payments.

                  (a) Termination Other than for Cause. In the event that the
         Executive's employment is terminated by the Employer during the term
         hereof for reasons other than Cause as defined in Section 5.2(a) or the
         Executive terminates this Agreement in accordance with Section 5.2(c)
         or Section 5.2(d), the Employer shall:

                           (i) Pay to Executive all amounts accrued through the
                  date of termination, any unreimbursed expenses incurred
                  pursuant to Section 2.5 of this Agreement, and any other
                  benefits specifically provided to the Executive under any
                  benefit plan.

                                       6
<PAGE>

                           (ii) Pay to Executive an amount equal to one and
                  one-half times Executive's then current annual salary.

                           (iii) At the election of Executive, pay to Executive
                  an amount equal to the number of shares subject to such
                  holder's unexercised options, whether or not vested, times the
                  amount by which the "Fair Market Value" of the Employer's
                  common stock exceeds the exercise price of such options. Fair
                  Market Value shall mean the closing price for such stock on
                  the close of business on the trading day last preceding the
                  date of such termination as quoted on a registered national
                  securities exchange or, if not listed on such an exchange, the
                  Nasdaq Stock Market ("Nasdaq") of the National Association of
                  Securities Dealers, Inc., or, if not listed on such an
                  exchange or included on Nasdaq, the closing price (or, if no
                  closing price is available from sources deemed reliable by the
                  Company, the closing bid quotation) for such stock as
                  determined by the Company through any other reliable means of
                  determination available on the close of business on the
                  trading day last preceding the date of such termination. If
                  the Executive elects to receive payment as provided above for
                  Executive's unexercised options, on payment to the Executive
                  of the amount due from the Employer, the rights to exercise
                  options with respect to which he has received payment shall
                  terminate. If Executive elects not to receive payment as
                  provided above for Executive's unexercised options, all
                  forfeiture restrictions governing stock or options held by the
                  Executive shall immediately terminate and such common stock
                  and shall be fully vested and held free from forfeiture by the
                  Executive.

                           (iv) Maintain in full force and effect, for the
                  continued benefit of the Executive for the number of years
                  (including partial years) remaining in the term of employment
                  hereunder, all employee benefit plans and programs in which
                  the Executive was entitled to participate immediately prior to
                  the date of termination, provided that the Executive's
                  continued participation is possible under the general terms
                  and provisions of such plans and programs. In the event that
                  the participation of Executive and his family in the
                  Employer's group health plan and/or life insurance program is
                  barred, the Employer shall provide the Executive and his
                  family with benefits substantially similar to those which the
                  Executive would otherwise have been entitled to receive under
                  such plan and program from which his continued participation
                  is barred.

                           (v) Notwithstanding the foregoing, in no event shall
                  the aggregate amount of payments made under this Agreement on
                  account of any termination occurring as a result of a change
                  in control of the Employer exceed the aggregate present value
                  of three times the "Base Salary Amount" less $1.00. For
                  purposes hereof, the term "Base Salary Amount" shall mean the
                  average annualized compensation income from the Employer in
                  the Executive's gross income for federal income tax purposes
                  over the five years preceding the year in which the change in
                  control of the Employer occurred or, in the event Executive
                  has not been employed by Employer for at least five years, the
                  average of such annualized compensation income for the number
                  of years that Executive has been employed by Employee. This
                  paragraph shall be interpreted consistent with Section 280G of
                  the Internal Revenue Code of 1986, as amended, and any
                  Treasury Regulations thereunder.

                                       7
<PAGE>

                  (b) Termination upon Death of the Executive. If the Executive
         dies during the term of this Agreement, the Employer shall pay to the
         estate of the Executive the following:

                           (i) All amounts accrued through the date of
                  termination, any unreimbursed expenses incurred pursuant to
                  Section 2.5 of this Agreement, and any other benefits
                  specifically provided to the Executive under any benefit plan;
                  and

                           (ii) In six equal monthly installments commencing on
                  the first day of the month immediately following the month in
                  which the Executive dies, an amount equal to one year's then
                  current salary provided for in Section 2.1(a) of this
                  Agreement, and payment of the pro rata portion of the
                  incentive compensation which would have been payable pursuant
                  to Section 2.1(c), based upon the number of full months of his
                  employment during the year of his death.

                  (c) Termination for Cause or Termination by the Executive. If
         the Executive terminates this Agreement for any reason other than in
         accordance with the provisions of Section 5.2(d) of this Agreement, or
         if the Employer terminates this Agreement on account of Cause, the
         Employer shall deliver to the Executive, within ninety (90) days
         following the effective date of such termination, all amounts accrued
         through the date of termination, any unreimbursed expenses incurred
         pursuant to Section 2.5 of this Agreement, and any other benefits
         specifically provided to the Executive under any benefit plan. The
         Employer shall have no further obligation to Executive.

         5.4 Resignation upon Termination. Upon the termination of this
Agreement for any reason, the Executive hereby agrees to resign from all
positions held in the Employer or an affiliate of the Employer, including
without limitation any position as a director, officer, agent, trustee or
consultant of the Employer or any affiliate of the Employer.

                                   ARTICLE VI
                                  MISCELLANEOUS

         6.1 Exit Interview. To insure a clear understanding of this Agreement,
including but not limited to the protection of the Employer's business
interests, the Executive agrees, at no additional expense to the Executive, to
engage in an exit interview with the Employer at a time and place designated by
the Employer.

         6.2 Severability. If any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect the validity and enforceability of any other provisions hereof.
Further, should any provisions within this Agreement ever be reformed or
rewritten by a judicial body, those provisions as rewritten shall be binding
upon the Employer and the Executive.

         6.3 Right of Setoff. The Employer and Executive shall each be entitled,
at its option and not in lieu of any other remedies to which it may be entitled,
to set off any amounts due from the other or any affiliate of the other against
any amount due and payable by such person or any affiliate of such person
pursuant to this Agreement or otherwise.

                                       8
<PAGE>

         6.4 Representations and Warranties of the Executive. The Executive
represents and warrants to the Employer that (a) the Executive understands and
voluntarily agrees to the provisions of this Agreement; (b) the Executive is not
aware of any existing medical condition which might cause him to be or become
unable to fulfill his duties under this Agreement; and (c) the Executive is free
to enter into this Agreement and has no commitment, arrangement or understanding
to or with any third party that restrains or is in conflict with this Agreement
or that would operate to prevent the Executive from performing the services to
the Employer that the Executive has agreed to provide hereunder.

         6.5 Succession. This Agreement and the rights and obligations hereunder
shall be binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, and shall also bind and inure to the benefit
of any successor of the Employer by merger or consolidation or any assignee of
all or substantially all of its property.

         6.6 Assignment. Except to any successor or assignee of the Employer as
provided in Section 6.5, neither this Agreement nor any rights or benefits
hereunder may be assigned by either party hereto without the prior written
consent of the other party. Neither the Executive, the Executive's spouse, the
Executive's designated contingent beneficiary, nor their estates shall have any
right to anticipate, encumber, or dispose of any payment due under this
Agreement. Such payments and other rights are expressly declared nonassignable
and nontransferable, except as specifically provided herein.

         6.7 Reimbursement of Expenses. In the event that it shall be necessary
or desirable for the Executive to retain legal counsel and/or incur other costs
and expenses in connection with the enforcement of any and all of the
Executive's rights under this Agreement, the Executive shall be entitled to
recover from the Employer reasonable attorneys' fees, costs, and expenses
incurred by the Executive in connection with the enforcement of said rights.
Payment shall be made to the Executive by the Employer at the time such
attorneys' fees, costs, and expenses are incurred by the Executive. If, however,
the Executive does not prevail in such enforcement action, the Executive shall
repay any such payments to the Employer and shall reimburse the Employer for
reasonable attorneys' fees, costs and expenses incurred by the Employer in
connection with such action. Further, the Executive shall reimburse the Employer
for any attorneys' fees and all other costs and expenses incurred by the
Employer in any action brought by the Employer relating to the enforcement of
this Agreement in which the Employer is the prevailing party. Fees payable
hereunder shall be in addition to any other damages, fees, or amounts provided
for herein.

         6.8 Indemnification. The Employer shall indemnify the Executive and
hold the Executive harmless from liability for acts or decisions made by the
Executive while performing services for the Employer to the greatest extent
permitted by applicable law. The Employer shall use its best efforts to obtain
coverage for the Executive under any insurance policy now in force or hereafter
obtained during the term of this Agreement insuring officers and directors of
the Employer against such liability. The Executive agrees to indemnify and to
hold the Employer harmless from any and all damages, losses, claims,
liabilities, costs, or expenses arising from the Executive's acts or omissions
in violation of his duties under this Agreement which constitute fraud, gross
negligence, or willful and knowing violations of the terms of this Agreement.

         6.9 Notices. Any notices or other communications required or permitted
under this Agreement shall be sufficiently given if personally delivered, if
sent by facsimile or telecopy transmission or other electronic communication
confirmed by sending a copy thereof by United States mail, if sent by United
States mail, registered or certified, postage prepaid, or if sent by prepaid

                                       9
<PAGE>

overnight courier addressed as set forth on the signature page hereto or such
other addresses as shall be furnished in writing by any party in the manner for
giving notices hereunder, and any such notice or communication shall be deemed
to have been given as of the date so delivered or sent by facsimile or telecopy
transmission or other electronic communication, one day after the date so sent
by overnight courier, or three days after the date of deposit in the United
States mail.

         6.10 Entire Agreement. This Agreement contains the entire Agreement
between the parties hereto with respect to the subject matter contained herein.
No change, addition, or amendment shall be made except by written agreement
signed by the parties hereto.

         6.11 Waiver of Breach. The failure by any party to insist upon the
strict performance of any covenant, duty, agreement, or condition of this
Agreement or the failure to exercise any right or remedy consequent upon a
breach hereof shall not constitute a waiver of any such breach or of any
covenant, agreement, term, or condition and the waiver by either party hereto of
a breach of any provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach by any party.

         6.12 Multiple Counterparts. This Agreement has been executed in a
number of identical counterparts, each of which for all purposes is to be deemed
an original, and all of which constitute, collectively, one agreement. In making
proof of this Agreement, it shall not be necessary to produce or account for
more than one such counterpart.

         6.13 Descriptive Headings. In the event of a conflict between titles to
articles and paragraphs and the text, the text shall control.

         6.14 Governing Law. The laws of the state of Utah shall govern the
validity, construction, enforcement, and interpretation of this Agreement.

         Signed and delivered to be effective as of the Effective Date set forth
above.

                                                       EMPLOYER:

Address:                                               FX ENERGY, INC.
3006 Highland Drive, Suite 206
Salt Lake City, Utah  84106
                                                       By:  /s/ David N. Pierce
                                                           ---------------------
                                                       Name:  David N. Pierce
                                                       Title: CEO

Address:                                               EXECUTIVE:
________________
________________
                                                       /s/ Scott J. Duncan
                                                       -------------------------
                                                       Scott J. Duncan

                                       10

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