Exhibit 10.65
[Rolls-Royce Power Ventures Limited letterhead]
6th February 2003
FX Energy, Inc.
3006 Highland Drive
Suite 206
Salt Lake City Utah 84106
Attention David Pierce
Dear Sirs,
Re: Heads of Terms
We refer to the 9.5% Convertible Secured Note (together with the terms and
conditions attached thereto, the "Note") dated March 9, 2001 in the amount of
US$5,000,000 and delivered to Rolls-Royce Power Ventures Ltd ("RRPV") by FX
Energy Inc. (the "Borrower").
You have requested that RRPV agree to certain amendments to the Note, including
an extension of the maturity date. We have considered your request and we are
pleased to offer the following terms for your consideration.
1. Subject to agreement on the following terms and conditions, RRPV will
extent the maturity date of the Note from March 9, 2003 until May 31,
2003.
2. The Borrower will be required to apply forty percent (40%) of the gross
proceeds of any equity or debt offerings by the Borrower to the
prepayment of the Note.
3. If the amount so prepaid is not less than US$2,000,000, the maturity
date of the Note will be extended until December 30, 2003.
4. The interest rate applicable to the Note shall increase to 12% with
effect from 9 March 2003.
5. The Borrower shall pay RRPV an extension fee in the amount of
US$100,000, which fee shall be payable on the earlier of (a) the
closing of an equity or debt offering by the Borrower and (b) May 31,
2003.
6. The Borrower will cause its wholly-owned subsidiary, FX Energy Poland
Sp. z o.o. ("FXEP") to assign to RRPV its rights to receive any
payments pursuant to the Farmout Agreement dated January 9, 2003, (the
"CalEnergy Agreement") between FXEP and CalEnergy Power (Polska) Sp. z
o.o. ("CalEnergy"). FXEP will be permitted to retain a portion of the
payments made by CalEnergy, which are required to reimburse Polish Oil
and Gas ("POGC") for the costs of drilling wells and/or conducting
geological or geophysical work on behalf of FXEP and CalEnergy, subject
to RRPV reviewing a copy of the CalEnergy Agreement and subject to such
costs being identifiable and separable from any amounts FXEP would
otherwise be permitted to retain. RRPV will apply any payment received
pursuant to such assignment to the prepayment of the Note.
7. The period during which RRPV will have the right to convert all or part
of the outstanding principal payable by the Borrower on the Note into
Shares (as such term is defined in the Note) shall be extended until
December 30, 2003. In addition, the Conversion Price (as such term is
defined in the Note) will be the closing price of the Borrower's common
stock trading on NASDAQ on the day prior to the signing of the
agreement amending the Note.
8. The Borrower will be required to pledge, or cause its affiliates to
pledge, to RRPV any rights to new concession areas granted to the
Borrower or any of its affiliates by the Polish Oil and Gas Company
("POGC").
9. (a) RRPV will agree to amend the Security Agreements (as such term is
defined in the Note) to release its lien on the rights and receivables
of FXEP arising out of the Relevant Agreements (as such term is defined
in each of the Security Agreements) insofar as such lien otherwise
would attach to the interest in the rights and receivables of FXEP to
be earned by CalEnergy under the CalEnergy Agreement; provided that (i)
the interest to be earned by CalEnergy does not exceed [50%] of the
rights and receivables of FXEP arising out of the Relevant Agreements
and (ii) the terms of the CalEnergy Agreement are acceptable to RRPV.
(b) RRPV will make such release with respect to the interest to be
earned by CalEnergy by drilling the first well at the time when the
agreement to amend the Note is executed. RRPV will make such release
with respect to the interest to be earned by CalEnergy by drilling the
second well when the Borrower (i) notifies RRPV that CalEnergy has
exercised its option under the CalEnergy Agreement to drill the second
well and (ii) makes a prepayment of the Note in an amount not less than
$1,000,000.
(c) If the Borrower notifies RRPV that CalEnergy has exercised its
option under the CalEnergy Agreement to acquire 50% of all of the
rights and receivables of FXEP arising out of the Relevant Agreements
as to the entire acreage covered by the Relevant Agreements, RRPV will
cooperate with the Borrower to release RRPV's remaining liens under the
Security Agreements upon payment of the outstanding balance of the
Note.
(d) RRPV will not be responsible for any delays caused by the failure
of the courts in Poland to effect any release of liens.
10. The Borrower will not permit FXEP to agree to any amendment to the
CalEnergy Agreement without RRPV's consent.
11. The Borrower will permit a representative of RRPV to visit any drilling
sites at any time during normal business hours. The Borrower shall
provide monthly progress reports in form and substance reasonably
satisfactory to RRPV. The Borrower will provide RRPV with certified
copies of the minutes of all operational meetings involving FXEP and
POGC and/or CalEnergy.
12. The Borrower shall reimburse RRPV for all out-of-pocket costs incurred
by RRPV in connection with the foregoing, including reasonable legal
fees and all costs incurred in connection with registering and
releasing pledges of collateral.
The terms and conditions set forth above are subject to the negotiation and
execution of a definitive agreement to amend the Note, which the parties
undertake to do in good faith and in timely fashion. Such agreement shall
contain such other provisions as may be necessary to effect the transactions
contemplated above and such other terms and conditions as the parties may
agreement. This letter does not amend or modify the Note and the terms and
conditions of the Note continue in full force and effect.
If the foregoing is acceptable to you, please indicate your agreement to these
terms and conditions by countersigning this letter in the space provided below.
Please return one countersigned copy of this letter to our offices. This offer
will expire on February 7, 2003 unless we received a countersigned copy of this
letter on or before such date.
By and on behalf of
Rolls-Royce Power Ventures Ltd.
/s/ Mark Mencel
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Name: Mark Mencel
Title: Vice President EMEA
Accepted and agreed this
6th day of February 2003.
FX Energy, Inc.
By: /s/ David N. Pierce
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Name: David N. Pierce
Title: President