EXHIBIT 10.23
ENERGY CAPITAL SOLUTIONS
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
August 2, 2002
CONFIDENTIAL
Gasco Energy Inc.
X. Xxxx Xxxxx
Executive Vice President and CFO
00 Xxxxxxxxx Xxxxx, Xxxxx 000 Xxxxxxxx X
Xxxxxxxxx, Xxxxxxxx 00000
Dear Xx. Xxxxx:
The purpose of this letter agreement (the "Agreement") is to set forth the terms
of the engagement by Gasco Energy Inc. ("Gasco" or the "Company") of Energy
Capital Solutions LLC ("ECS"). During the Term (defined below), ECS will act as
financial advisor to the Company and assist the Company with respect to the
proposed private placement (the "Private Placement") of the Company's equity.
1. Engagement. The Company hereby engages ECS exclusively to render
financial advisory services to the Company concerning:
The Private Placement of the Company's equity (the "Securities"). It
is currently contemplated that the Private Placement will be
structured as an offering of approximately $10 million of Gasco equity
(the "Securities"). The final terms of the Private Placement, however,
will be negotiated between the Company and the investors purchasing
the Securities in the Private Placement. ECS intends to use its best
efforts to help the Company complete the Private Placement. This
Agreement shall not give rise to any commitment by ECS to purchase any
of the Securities, and ECS shall have no authority to bind the
Company.
2. Term. The term of this Agreement shall run for six months from the
date of this letter, and may be extended by mutual consent of the
parties, subject to the provisions of Section 7 (the "Term").
3. Services. In undertaking this assignment, ECS agrees to provide the
following services to the Company as a "finder" in accordance with the
guidelines for "finders" established by the no-action letters of the
Securities and Exchange Commission in effect on the date hereof,
subject to the provisions of Sections 4 and 7:
(a) familiarize itself, to the extent it deems feasible and
appropriate, with the historical and projected business and
financial performance of the Company;
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(b) advise on a strategy, including the identification of certain
accredited investors which may have an interest in investing in
the Company (such accredited investors so being referred to as
the "Potential Investors" as identified by ECS in Exhibit I, of
which it is agreed upon that additional investors may be added to
Exhibit I until the termination of this Agreement), and the
development of procedures and timetables for marketing the
Company to the Potential Investors;
(c) assist in the writing of management's confidential private
placement memorandum or executive summary describing the Company;
(d) advise on the creation of a financial projections model showing
potential returns to the Potential Investors;
(e) assist in coordinating due diligence investigations of the
Company by the Potential Investors; provided, however, that ECS
shall make no recommendation to any Potential Investor as to any
investment in any securities of the Company; and
(f) advise the Company on the evaluation of proposals from the
Potential Investors regarding the Private Placement and formulate
negotiation strategies; provided, however, that ECS shall not
engage in any negotiations with any Potential Investor.
4. Certain Agreements of the Company. The Company:
(a) agrees to make available to ECS all information concerning the
business, assets, operations and financial condition of the
Company, which ECS reasonably requests in connection with the
performance of its obligations hereunder. The Company shall make
members of management and other employees available to ECS for
purposes of satisfying ECS due diligence requirements and
consummating the Private Placement, and shall commit such time
and other resources as are necessary or appropriate to secure
reasonable and timely success of the Private Placement. The
Company shall also provide ECS monthly financial updates on the
Company during the Term and shall inform ECS of any material
events or developments concerning prospective material events
that may come to the attention of the Company at any point during
the Term. None of the information provided to ECS shall contain
an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
ECS will be relying, without independent verification, on the
accuracy and completeness of all financial and other information
that is and will be furnished to it by the Company;
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(b) agrees that the offering memorandum, executive summary and all
other information provided to Potential Investors, in the
aggregate, shall not contain an untrue statement of a material
fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
(c) agrees that it shall be responsible to make all necessary
notifications of and filings with all SEC, state securities
regulatory agencies and other regulatory bodies;
(d) agrees and understands that this Agreement and the advising
services set forth in Section 3 above in no way constitute a
guarantee that the Private Placement will be successful. The
Company acknowledges that it is ultimately responsible for all
phases of the Private Placement.
5. Fees. In consideration for the services provided by ECS, the Company
hereby agrees to pay ECS the following:
Retainer. Upon execution of this Agreement, the Company shall pay ECS
a retainer in the amount of twenty-five thousand dollars ($25,000.00)
immediately upon signing this Agreement.
The Private Placement. In connection with the proposed Private
Placement of the Company's equity, the Company hereby agrees to pay
ECS (the "Advisory Fee") the amount of 5.0% of the gross proceeds
raised from the Potential Investors, if either during the Term or
within 12 months following the Term (i) the Private Placement is
consummated, or (ii) a definitive agreement or letter of intent or
other evidence of commitment is entered into which subsequently
results in a private offering of equity securities of the Company
being consummated. The Advisory Fee shall be paid in its entirety to
ECS at the closing of the Private Placement.
6. Expenses. In addition to any fees that may be payable hereunder and
regardless of whether any proposed transaction is consummated, the
Company hereby agrees to reimburse ECS for all reasonable travel,
legal and other out-of-pocket expenses incurred in performing the
services described herein (including reasonable fees and disbursements
of ECS's legal counsel, which shall not exceed $30,000).
7. Termination. This Agreement may be terminated on either the Company's
or ECS written request with 30 days notice, provided that such
termination shall not affect the exculpation, indemnification and
contribution obligations of the Company or the right of ECS to receive
any fees payable hereunder, any fees which have accrued prior to such
termination, or the right of ECS to receive reimbursement for its
out-of-pocket expenses described above. t is expressly understood that
neither ECS nor the Company shall have any continuing obligation or
liability to one another under this Agreement upon termination hereof,
except in respect of the matters specifically referenced in this
Section 7.
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8. Disclosure. The Company agrees that, except as required by applicable
law, any advice to be provided by ECS under this Agreement shall not
be disclosed publicly or made available to third parties without the
prior approval of ECS, which approval shall not be unreasonably
withheld.
9. Complete Agreement. This Agreement incorporates the entire agreement
of the parties with respect to the subject matter of this Agreement,
and may not be amended or modified except in writing. The Company
acknowledges and understands that this Agreement shall be binding upon
any successors or assigns of the Company.
10. Miscellaneous, Amendments. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement which shall
remain in full force and effect. The Company is a sophisticated
business enterprise that has retained ECS for the limited purpose set
forth in this Agreement, and the parties acknowledge and agree that
their respective rights and obligations are contractual in nature.
Each party disclaims an intention to impose fiduciary or other
non-contractual obligations on the other by virtue of the engagement
contemplated by this Agreement. This Agreement may not be amended or
modified except in writing and shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to the
conflicts of laws provisions thereof.
11. Indemnification. Recognizing that transactions of the type
contemplated in this Agreement sometimes result in litigation and that
ECS role is advisory, the Company agrees to indemnify and hold
harmless ECS, its partners, employees, directors, officers,
consultants, agents, affiliates and persons deemed to be in control of
ECS within the meaning of either Section 15 of the Securities Act of
1933, as amended, or Section 20 of the Securities Exchange Act of
1934, as amended (collectively, the "Indemnified Parties" and
individually an "Indemnified Party"), from and against any claims,
losses, expenses, damages and liabilities, joint or several, as they
may be incurred, related to or arising in any manner out of any
transaction, proposal or any other matter contemplated by the
engagement of ECS under this Agreement (the "Matters"). The Company
also agrees that neither ECS nor any other Indemnified Party shall
have any liability to the Company or its affiliates, partners,
directors, officers, consultants, agents, employees, controlling
persons, creditors or securityholders for any losses, claims, damages,
liabilities or expenses related to or arising out of any Matters,
except for any such liability for losses, claims, damages, liabilities
or expenses incurred by the Company that are finally judicially
determined to have resulted primarily from the gross negligence or
willful misconduct of such Indemnified Party. The Company will
promptly reimburse any Indemnified Party for all expenses as
reasonably incurred in connection with the investigation of,
preparation for or defense of any pending or threatened claim related
to or arising in any manner out of any Matter, or any action or
proceeding arising therefrom.
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The Company may assume the defense of any litigation or proceeding in
respect of which indemnity may be sought hereunder, including the
employment of counsel and experts reasonably satisfactory to ECS and
the payment of the fees and expenses of such counsel and experts, in
which event, except as provided below, the Company shall not be liable
for the fees and expenses of any other counsel or expert retained by
any Indemnified Party in connection with such litigation or
proceeding. In any such litigation or proceeding the defense of which
the Company shall have so assumed, any Indemnified Party shall have
the right to participate in such litigation or proceeding and to
retain its own counsel and experts, but the fees and expenses of such
counsel and experts shall be at the expense of such Indemnified Party
unless (i) the Company and such Indemnified Party shall have mutually
agreed in writing to the retention of such counsel or experts, (ii)
the Company shall have failed in a timely manner to assume the defense
and employ counsel or experts reasonably satisfactory to ECS in such
litigation or proceeding, or (iii) the named parties to any such
litigation or proceeding (including any impleaded parties) include the
Company and such Indemnified Party and representation of the Company
and any Indemnified Party by the same counsel or experts would, in the
reasonable opinion of ECS, be inappropriate due to actual or potential
differing interests between the Company and any such Indemnified
Party.
The Company shall not, without the prior written consent of ECS,
settle any litigation relating to this Agreement or any Matter unless
such settlement includes an express, complete and unconditional
release of ECS and its affiliates (and their respective control
persons, partners, directors, officers, employees, consultants and
agents) with respect to all claims asserted against any Indemnified
Party in such litigation such release to be set forth in an instrument
signed by all parties to such settlement.
Notwithstanding any provision herein to the contrary, the Company
shall not be liable hereunder for indemnification to an Indemnified
Party, and the Indemnified Party shall not be exculpated, in respect
of any claims, damages, losses, liabilities or expenses that are
finally judicially determined to have resulted primarily from the
gross negligence or willful misconduct of such Indemnified Party.
The Company agrees that the exculpation, indemnification and
reimbursement commitments set forth herein shall apply whether or not
such Indemnified Party is a formal party to any such claim, action or
proceeding. The Company agrees that if any exculpation,
indemnification or reimbursement sought pursuant to this letter were
for any reason not to be available to any Indemnified Party or
insufficient to hold any Indemnified Party harmless as and to the
extent contemplated hereby, then the Company shall contribute to the
amount paid or payable by the Indemnified Party as a result of the
claims, damages, losses, expenses and liabilities in such proportion
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as is appropriate (i) to reflect the relative benefits to the Company
and its securityholders on the one hand, and ECS on the other hand, in
connection with the transaction to which such exculpation,
indemnification or reimbursement relates or (ii) if the allocation on
that basis is not permitted by applicable law, to reflect not only the
relative benefits referred to in clause (i) above but also the
relative fault of each such Indemnified Party, respectively, and the
Company as well as any other relevant equitable considerations. The
Company and ECS agree that it would not be just and equitable if the
contribution provided for herein were determined by pro rata
allocation or any other method which does not take into account the
equitable considerations referred to above. It is hereby agreed that
the relative benefits to the Company, on the one hand, and ECS, on the
other hand, with respect to this engagement shall be deemed to be in
the same proportion as the fee paid to ECS in connection with such
engagement. In no event shall ECS contribute in excess of the fees
actually received by ECS pursuant to the terms of this Agreement.
The exculpation, indemnity, reimbursement and contribution obligations
of the Company shall survive the termination of this Agreement, shall
be in addition to any liability which the Company may otherwise have
and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company or an
Indemnified Party.
The exculpation, indemnity, reimbursement and contribution provided
herein shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto or any
person controlling (within the meaning of Section 15 of the Securities
Act of 1933, as amended, or Section 20 of the Securities Exchange Act
or 1934, as amended) any party hereto.
12. Confidentiality. All of the information to be revealed by the Company
to ECS or its directors, officers, employees, affiliates,
representatives (including, without limitation, advisors, attorneys
and accountants) or agents (collectively, "Representatives") about the
Company's interests, prospects, business plan, assets, liabilities and
financing sources, are deemed to be confidential and proprietary,
including without limitation, all analyses, compilations, forecasts,
studies or other documents prepared by ECS or its Representatives in
connection with the Private Placement which contain or reflect such
information. Such confidential information shall also consist of
profit or loss forecasts and interim financial information not yet
available to the public.
It is agreed that for purposes of this agreement "confidential
information" does not include any material that the Company authorizes
to be used in the Private Placement such as a Private Placement
Memorandum, Information Memorandum and other supporting documents for
the financing, as well as, information of which ECS or its
Representatives can demonstrate knowledge prior to the date of this
Agreement that was not furnished by the Company to ECS or its
Representatives on a confidential basis, information which is publicly
available prior to this Agreement, and/or information which through no
action of ECS or its Representatives became public after the execution
of this Agreement, provided that such source is not bound by a
confidentiality agreement with the Company.
ECS agrees that (i) any confidential information provided by the
Company to ECS or its Representatives will be held strictly
confidential, provided that it may be disclosed to anyone with a need
to know who has signed a confidentiality agreement in the form hereof
with the Company; and (ii) no purchase or sale of the securities of
the Company will be made or encouraged by ECS or its Representatives
during the time ECS possesses material confidential information prior
to its disclosure to the public by means of press release or
otherwise.
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Upon the request of the Company, ECS and its Representatives will
promptly deliver to the Company any copies of confidential
information, including any notes and extracts thereof and ECS shall
certify to the Company in writing the destruction of all analyses,
projection, and other work product derived from or relating to the
confidential information given to ECS and its Representatives.
ECS will direct its Representatives to observe the terms of this
Agreement, and will be responsible for any breach of this Agreement by
any of its Representatives. It is understood and agreed that money
damages would not be sufficient remedy for any breach of this
Agreement by ECS or its Representative and that the Company shall be
entitled to specific performance as a remedy for any such breach. Such
remedy shall not be deemed to be the exclusive remedy for ECS or any
of its Representatives' breach of this Agreement but shall be in
addition to all other remedies available at law or equity to the
Company.
In the event that ECS or any of its Representatives are requested
pursuant to, or required by, applicable law, regulation or legal
process to disclose any of the confidential information, ECS will
notify the Company promptly so that the Company may seek a protective
order or other appropriate remedy (including procuring the
confidential treatment of the information in the hands of the person
receiving the information) or, in the Company's sole discretion, waive
compliance with the terms of this Agreement. In the event that no such
protective order or other remedy is obtained, or that the Company
waives compliance with the terms of this Agreement, ECS will furnish
only that portion of the confidential information which it is advised
by counsel is legally required.
Please confirm that the foregoing is in accordance with our understandings and
agreements by signing and returning to ECS the duplicate of this letter enclosed
herewith.
Very truly yours,
ENERGY CAPITAL SOLUTIONS, LLC
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------
Xxxxx X. Xxxxxxx
Managing Director
Accepted and Agreed to:
GASCO ENERGY INC.
By: /s/ X. Xxxx Xxxxx
----------------------------------------
X. Xxxx Grant
Executive Vice President and CFO
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