EXHIBIT 2
Execution Copy
EXCHANGE AGREEMENT
This Exchange Agreement (this "Agreement") is entered into as of the 22nd
day of August, 1997 by and among Petroglyph Energy, Inc., a Delaware corporation
("Petroglyph"), Petroglyph Energy, Inc., a Kansas corporation ("PEI"), Robert C.
Murdock, Robert A. Christensen and S. Kennard Smith (the "PEI Stockholders"),
Natural Gas Partners, L.P., Natural Gas Partners II, L.P., Natural Gas Partners
III, L.P., each a Delaware limited partnership (collectively, "NGP"), R. Gamble
Baldwin, Albin Income Trust, John S. Foster, Kenneth A. Hersh and Bruce B.
Selkirk, III (collectively, NGP and such other limited partners are the "Limited
Partners").
R E C I T A L S
- - - - - - - -
WHEREAS, PEI owns a general partnership interest in Petroglyph Gas
Partners, L.P., a Delaware limited partnership (the "Partnership"), in the pre-
Payout and post-Payout distribution percentage set forth on Exhibit A, and each
of the PEI Stockholders own the number of shares of common stock of PEI, par
value $1.00 per share, that correlate to the indirect pre-Payout and post-Payout
percentages in the Partnership as set forth on Exhibit A; and
WHEREAS, the Limited Partners, in the aggregate, own the limited
partnership interests in the Partnership in the respective pre-Payout and post-
Payout distribution percentages set forth on Exhibit A; and
WHEREAS, PEI, the PEI Stockholders and the Limited Partners desire to
consolidate in Petroglyph their direct and indirect interests in the Partnership
by means of the Exchange (as defined herein); and
WHEREAS, the parties hereto intend that Section 351(a) of the Internal
Revenue Code of 1986, as amended, will apply to the Exchange;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreement
and conditions contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used herein, the terms defined above shall have the
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meaning set forth above and the following terms shall have the following
meanings:
"Aggregate Exchange Shares" shall equal 2,833,333, which number constitutes
the number of shares of Petroglyph Common Stock that Petroglyph shall issue in
the Exchange.
"Closing" has the meaning set forth in Section 5.2 hereof.
"Closing Date" means the date on which the Closing occurs.
"Encumbrances" means all security interests, liens, encumbrances, options,
calls, pledges, trusts, voting trusts and other stockholder agreements,
assessments, covenants, restrictions, reservations, commitments, obligations and
other burdens.
"Exchange" means, collectively, the transactions contemplated by Sections
2.1 and 2.2.
"Exchange Ratio" has the meaning set forth in Section 2.3 hereof.
"Partnership Agreement" means the Amended and Restated Limited Partnership
Agreement of the Partnership dated as of September 28, 1995.
"Payout Threshold" shall mean an amount that represents the aggregate
distributions that the Partners would be required to receive from the
Partnership in order to cause the occurrence of Payout on such date. The Payout
Threshold on October 31, 1997 shall mean $23,668,843, and on each day subsequent
to October 31, 1997, shall mean $23,668,843 plus interest on such amount to such
subsequent date calculated at 11% per annum, compounded annually.
"Permitted Encumbrances" means restrictions imposed by applicable federal
and state securities laws, and arising under the Partnership Agreement.
"Petroglyph Common Stock" means the Common Stock, $.01 par value per share,
of Petroglyph.
"Public Offering" has the meaning set forth for such term in Section 3.1.
"Public Offering Equity Value" shall mean the product of (i) the price per
share at which the underwriters shall initially offer Petroglyph Common Stock to
the public in the Public Offering times (ii) the Aggregate Exchange Shares.
"Securities" means the shares of common stock that each PEI Stockholder
owns of PEI and the Partnership interests of the Limited Partners in the
Partnership.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Holders" means collectively, the PEI Stockholders and the Limited
Partners.
"Transfer Letter" means a letter from a Security Holder stating that such
person is transferring Securities to Petroglyph pursuant to this Agreement and
confirming the continuing accuracy of such Security Holder's representations and
warranties set forth herein.
1.2 Additional Definitions. Capitalized terms which are used but not
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defined herein shall have the meanings set forth for such terms in the
Partnership Agreement.
2
ARTICLE II
THE EXCHANGE
2.1 Exchange of Limited Partnership Interests. At the Closing, each of
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the Limited Partners shall transfer to Petroglyph all of the limited partnership
interests held by such Limited Partner. Such transfer shall be effected by
delivery to Petroglyph of a duly executed Transfer Letter by each Limited
Partner.
2.2 Exchange of Shares of PEI. At the Closing, each of the PEI
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Stockholders shall transfer to Petroglyph all of their shares of common stock of
PEI. As a consequence of such transfer, Petroglyph shall become the sole
stockholder of PEI. Such transfer shall be effected by delivery to Petroglyph of
a duly executed Transfer Letter by each PEI Stockholder together with the
certificates representing such shares duly endorsed for transfer to Petroglyph.
2.3 Exchange Calculation. In exchange for the respective transfers of the
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Limited Partners and the PEI Stockholders as contemplated in Section 2.1 and
Section 2.2, respectively, Petroglyph shall issue to each such Security Holder
the number of Petroglyph Common Shares equal to such Security Holder's "Exchange
Ratio" (as such term is defined below) times the Aggregate Exchange Shares. As
used in this Section 2.3, the "Exchange Ratio" for each Security Holder shall be
equal to the sum of:
(a) Such Security Holder's pre-Payout percentage multiplied by the ratio
of (i) Payout Threshold divided by (ii) Public Offering Equity Value,
plus
(b) Such Security Holder's post-Payout percentage multiplied by the ratio
of (i) divided by (ii), where (i) is the difference between Public
Offering Equity Value and Payout Threshold and (ii) is Public Offering
Equity Value.
The number of shares of Petroglyph Common Stock issued to each Security Holder
shall be rounded up or down, as applicable, to the nearest whole number, and no
fractional shares shall be issued. In the event that the Public Offering Equity
Value does not exceed the Payout Threshold, the number of shares of Petroglyph
Common Stock that each Security Holder shall receive in the Exchange shall be
calculated only pursuant to subclause (a) above. An illustrative example of the
foregoing calculation is set forth in Exhibit A.
2.4 Issuance of Certificates. Petroglyph shall cause certificates
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representing the shares of Petroglyph Common Stock issued to the Security
Holders pursuant to this Article II to be delivered as promptly as possible
following the Closing.
3
ARTICLE III
CONDITION TO THE EXCHANGE
3.1 Condition to the Exchange. The obligations of the parties hereto to
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consummate the Exchange are subject to the satisfaction on or before the Closing
Date of the consummation by Petroglyph of a firm underwritten public offering of
Petroglyph Common Stock registered pursuant to the filing of a registration
statement on Form S-1 pursuant to the Securities Act on terms satisfactory to
Petroglyph in its sole discretion (the "Public Offering") contemporaneously with
the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Security Holder Representations. Each Security Holder hereby
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represents and warrants to, and covenants and agrees with, Petroglyph as
follows:
(a) Such Security Holder has been afforded access to, and given an
opportunity to review, all information relating to Petroglyph and the Exchange
which such Security Holder deemed necessary in order to make an informed
decision concerning participation in the Exchange.
(b) Such Security Holder acknowledges that (i) the shares of Petroglyph
Common Stock to be issued in the Exchange are being issued under exemptions from
registration provided for in the Securities Act and that further transfers of
such shares will not be permitted except pursuant to an effective registration
under the Securities Act or in a transaction pursuant to which Petroglyph has
received evidence reasonably satisfactory to it of compliance with the
Securities Act and other applicable securities laws, and (ii) a legend
indicating that the shares of Petroglyph Common Stock have not been registered
under applicable federal and state securities laws and referring to the
restrictions on transferability and sale of the shares of Petroglyph Common
Stock may be placed on any certificate(s) for such shares.
(c) Such Security Holder has no present plan or intent to sell, transfer
or otherwise dispose of the shares of Petroglyph Common Stock to be received by
such person in the Exchange.
(d) Such Security Holder has (i) valid title to the Securities to be
transferred by such person in the Exchange, free and clear of all Encumbrances,
except for Permitted Encumbrances, and (ii) full right, power and authority to
assign, transfer and deliver the Securities hereunder. Upon the issuance and
delivery to Petroglyph of the Securities, Petroglyph will acquire valid title to
such Securities, subject to no Encumbrances other than Permitted Encumbrances.
4
(e) This Agreement has been duly executed and delivered by such Security
Holder and constitutes a valid and legally binding obligation of such Security
Holder enforceable against such Security Holder in accordance with its terms,
except to the extent enforcement may be limited by (i) applicable bankruptcy,
insolvency, moratorium, reorganization, fraudulent conveyance or similar laws
from time to time in effect which affect creditors' rights generally, and (ii)
legal and equitable limitations on the availability of equitable remedies.
4.2 Petroglyph Representations. Petroglyph represents and warrants to,
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and covenants and agrees with, each Security Holder as follows:
(a) The shares of Petroglyph Common Stock have been duly authorized for
issuance pursuant to this Agreement and, when issued and delivered to the
Security Holders in exchange for the Securities transferred pursuant hereto,
will be validly issued, fully paid and nonassessable. The issuance of Petroglyph
Common Stock under this Agreement is not subject to any preemptive rights.
(b) Petroglyph is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware. Petroglyph has the
corporate power to enter into and be bound by the terms and conditions of this
Agreement, and to carry out its obligations hereunder, and the execution and
delivery by Petroglyph of this Agreement and the performance by Petroglyph of
its obligations hereunder have been duly authorized by all necessary corporate
action. This Agreement has been duly executed and delivered by Petroglyph and
constitutes a valid and legally binding obligation of Petroglyph enforceable
against it in accordance with its terms, except to the extent enforcement may be
limited (i) by applicable bankruptcy, insolvency, moratorium, reorganization,
fraudulent conveyance or similar laws from time to time in effect which affect
creditors' rights generally and (ii) by legal and equitable limitations on the
availability of equitable remedies.
(c) The execution, delivery and performance of this Agreement by
Petroglyph will not (i) conflict with or result in a violation of any provision
of Petroglyph's charter or bylaws, (ii) conflict with or result in a violation
of any provision of, or constitute (with or without the giving of notice or the
passage of time or both) a default under, or give rise (with or without the
giving of notice or the passage of time or both) to any right of termination,
cancellation, or acceleration under, any bond, debenture, note, mortgage,
indenture, lease, agreement or other instrument or obligation to which
Petroglyph is a party or by which it or any of its properties or assets may be
bound, or (iii) result in a violation by Petroglyph of any statute or law or any
judgment, order, decree, rule or regulation of any court or governmental entity
to which Petroglyph is subject.
4.3 PEI Representations. PEI hereby represents and warrants to, and
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covenants and agrees with, Petroglyph as follows:
(a) PEI has valid title to its general partnership interest in the
Partnership, free and clear of all Encumbrances, except for Permitted
Encumbrances.
5
(b) This Agreement has been duly executed and delivered by PEI and
constitutes a valid and legally binding obligation of PEI enforceable against
PEI in accordance with its terms, except to the extent enforcement may be
limited by (i) applicable bankruptcy, insolvency, moratorium, reorganization,
fraudulent conveyance or similar laws from time to time in effect which affect
creditors' rights generally, and (ii) legal and equitable limitations on the
availability of equitable remedies.
4.4 Survival of Representations and Warranties. The representations,
------------------------------------------
warranties and covenants of the parties hereto shall not survive the Closing.
ARTICLE V
MISCELLANEOUS
5.1 Consent of the Partners. By their execution of this Agreement, each
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of PEI and the Limited Partners hereby consent to the transactions contemplated
hereby pursuant to which the Partners are effecting the Exchange in accordance
with the Partnership Agreement in accordance with Article 9 of the Partnership
Agreement. Without limitation of the foregoing, the parties consent to the
substitution of Petroglyph as a Limited Partner pursuant to Section 9.1 of the
Partnership Agreement and the transfer of the shares of PEI by the PEI
Stockholders pursuant to Section 9.3 of the Partnership Agreement.
5.2 Closing. The closing of the Exchange (the "Closing") shall occur on
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the date and at the time and place as the closing of the Public Offering occurs.
5.3. Limited Power of Attorney. Each of the Limited Partners, by execution
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of this Agreement, constitutes and appoints Kenneth A. Hersh, with full power of
substitution, its agent and attorney-in-fact in its name, place and stead to
make, execute, swear to, verify, acknowledge, amend, file, record, deliver and
publish (a) any amendment of the Partnership Agreement, (b) any waiver or
consent required pursuant to the Partnership Agreement, (c) any agreement,
instrument or document necessary to effectuate the Exchange pursuant to this
Agreement, (d) any agreement, instrument or document which is now or which may
hereafter be required by law to be filed on behalf of such Limited Partner with
respect to the Petroglyph Common Stock acquired pursuant to this Agreement, and
(e) any other certificates or instruments necessary, advisable or appropriate in
connection with the foregoing and which do not increase the obligations of any
such Limited Partner. The existence of such power of attorney will not preclude
execution of any such instrument by any such Limited Partner individually with
respect to any such matter. The limited power of attorney granted by each
Limited Partner in this Section 5.3 may be revoked by any such Limited Partner
at any time upon thirty (30) days notice to Petroglyph, provided that any such
revocation will not affect actions taken pursuant to this power of attorney
pursuant prior to such time.
6
5.4 Termination. This Agreement may be terminated at any time by the
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mutual consent in writing of all of the parties hereto or by any such party if
the Exchange shall not have been consummated by December 31, 1997.
5.5 Modification or Amendment. Subject to applicable law, at any time
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prior to the Closing, this Agreement may be modified or amended by the mutual
consent in writing of all of the parties hereto.
5.6 Waiver of Conditions. The conditions to the parties' obligations to
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consummate the Exchange may be waived in whole or in part, to the extent
permitted by applicable law, by the mutual consent in writing of all of the
parties hereto.
5.7 Additional Agreements. Each of the parties hereto shall have entered
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into a Registration Rights Agreement and a Stockholders Agreement with
Petroglyph, in substantially the forms set forth in Exhibit B and Exhibit C
hereto, and NGP shall have entered into the Financial Advisory Services
Agreement in substantially the form set forth in Exhibit D hereto.
5.8 Indebtedness of PEI. The Partnership loaned to PEI on February 25,
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1994 the original principal amount of $234,210.53, and as of August 25, 1997,
the outstanding balance of the indebtedness under such loan will be $346,745.63.
At the Closing, the parties shall take the following concurrent actions with
respect to the outstanding indebtedness of PEI to the Partnership pursuant to
such loan on and as of the Closing Date (the "Closing Indebtedness"):
(a) Each PEI Stockholder shall borrow from the Partnership, and the
Partnership shall loan to each such PEI Stockholder, an amount that in the
aggregate shall equal the Closing Indebtedness.
(b) Each of Robert C. Murdock and Robert A. Christensen shall execute a
promissory note in favor of the Partnership, the principal of which shall equal
42.5% of the Closing Indebtedness, and Sidney Kennard Smith shall execute a
promissory note in favor of the Partnership, the principal of which shall equal
15.0% of the Closing Indebtedness. Each such promissory note shall be in
substantially the form set forth in Exhibit E hereto.
(c) Each PEI Stockholder shall severally, and not jointly, make a
contribution in cash to the capital of PEI of an amount that in the aggregate
shall equal the Closing Indebtedness.
(d) Concurrently with the making of the capital contributions described in
Section 5.8(c) above, the PEI Stockholders shall be released and forever
discharged from their respective guarantees of the Closing Indebtedness.
5.9 Other Actions. The parties hereto shall take such other actions as
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shall be necessary to effect the Exchange and to satisfy the condition set forth
in Article III of this Agreement.
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5.10 Expenses. Whether or not the Exchange contemplated by this Agreement
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shall be consummated, any fees and expenses incurred by a Security Holder in
connection with this Agreement shall be borne by the Partnership.
5.11 Entire Agreement. This Agreement and the agreements referred to in
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Section 5.7 and Section 5.8 hereof constitute the entire agreement between the
parties with respect to the transactions contemplated hereby and shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. This Agreement and the agreements referred to in Section
5.7 and Section 5.8 hereof supersede all prior agreements, arrangements and
understandings related to the subject matter hereof.
5.12 Counterparts. For the convenience of the parties hereto, this
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Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
5.13 Governing Law. This Agreement shall be governed by and construed in
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accordance with the laws of the State of Delaware without giving effect to the
principles of conflict of laws thereof.
8
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
written above.
PETROGLYPH:
PETROGLYPH ENERGY, INC., a
Delaware corporation
By: /s/ Robert C. Murdock
-----------------------------------------
Robert C. Murdock, President
PEI:
PETROGLYPH ENERGY, INC., a Kansas
corporation
By: /s/ Robert C. Murdock
-----------------------------------------
Robert C. Murdock, President
PEI STOCKHOLDERS:
/s/ Robert C. Murdock
--------------------------------------------
Robert C. Murdock
/s/ Robert A. Christensen
--------------------------------------------
Robert A. Christensen
/s/ S. Kennard Smith
--------------------------------------------
S. Kennard Smith
9
THE LIMITED PARTNERS:
NATURAL GAS PARTNERS, L.P.
By: G.F.W. Energy, L.P.,
its general partner
By: /s/ R. Gamble Baldwin
-------------------------------------
Name:
Title: General Partner
NATURAL GAS PARTNERS II, L.P.
By: GFW II, L.L.C.,
its general partner
By: /s/ Kenneth A. Hersh
-------------------------------------
Name: Kenneth A. Hersh
Title: Authorized Member
NATURAL GAS PARTNERS III, L.P
By: Rainwater Energy Investors, L.P.,
its general partner
By: GFW III, L.L.C.,
its general partner
By: /s/ Kenneth A. Hersh
-------------------------------------
Name: Kenneth A. Hersh
Title: Authorized Member
/s/ R. Gamble Baldwin
----------------------------------------
R. Gamble Baldwin
10
ALBIN INCOME TRUST
By: /s/ Donald Shore
-------------------------------------
Donald Shore, Trustee
/s/ John S. Foster
----------------------------------------
John S. Foster
/s/ Kenneth A. Hersh
----------------------------------------
Kenneth A. Hersh
/s/ Bruce B. Selkirk, III
----------------------------------------
Bruce B. Selkirk, III
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Exhibit A
Distribution Percentages of the Partners and PEI Stockholders
Petroglyph Energy, Inc.
----------------------------
Reorganization Ownership Calculation - Partnership Distribution
===============================================================
- ----------------------------------------------------------------------------------------
OFFERING ASSUMPTIONS
- ----------------------------------------------------------------------------------------
Low Middle High
--- ------ ----
Fully-Distributed Equity Value Range $72,300,000 $77,500,000 $82,700,000
Offering Size $35,000,000 $35,000,000 $35,000,000
----------- ----------- -----------
Pre Money Equity Value $37,300,000 $42,500,000 $47,700,000
----------- ----------- -----------
- ----------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------
IPO ASSUMPTIONS
- ---------------------------------------------------------------------------
Pre-Offering Shares 2,833,333
Gross Proceeds from IPO $35,000,000
Pre-Money Valuation/Pre-Offering Shares $15.000
Shares to Be Sold 2,333,333
Total Post Offering Shares 5,166,666
% of Company Sold to Public 45.16129%
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- ------------------------------------------------------------------------------------------------------------------
TOTAL PROFIT CALCULATION
- ------------------------------------------------------------------------------------------------------------------
Valuation Applied Middle
Market Equity Value (Pre-Money) $42,500,000
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LP Payout Threshold $22,569,299 (Note: Threshold as of: October 31, 1997
LP Payout Threshold / Distribution % Until Payout $23,668,843 ("Grossed Up" Payout #)
Market Equity Value less Grossed Up Payout # $18,831,157 ("Profit")
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VALUATION CHECK
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Mgmt & NGP Post Deal Ownership 54.839%
New Shareholders Ownership 45.161%
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Mgmt & NGP shares 2,833,333
Price Per Share $15.000
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Equity Value $42,500,000
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Total Investment % of General Partner % of Limited Partner % of Total Partnership
================= ================== ================== ====================
Robert C. Murdock $ 191,016.48 42.5000% 0.00000% 1.12435%
Robert A. Christensen $ 191,016.48 42.5000% 0.00000% 1.12435%
Sidney Kennard Smith $ 67,417.58 15.0000% 0.00000% 0.39683%
----------------- ----------------- ------------------ --------------------
Subtotal General Partner $ 449,450.53 100.0000% 0.00000% 2.64554%
----------------- ----------------- ------------------ --------------------
NGP $ 7,218,094.32 43.64139% 42.48684%
NGP II $ 4,116,382.62 24.88810% 24.22968%
NGP III $ 4,619,867.38 27.93223% 27.19327%
R. Gamble Baldwin $ 110,418.05 0.66760% 0.64994%
David R. Albin $ 331,254.16 2.00280% 1.94981%
John S. Foster $ 55,209.03 0.33380% 0.32497%
Kenneth A. Hersh $ 82,813.54 0.50070% 0.48745%
Bruce B. Selkirk, III $ 5,520.90 0.03338% 0.03250%
----------------- ----------------- ------------------ --------------------
Subtotal limited Partner $16,539,560.00 100.00000% 100.00000% 97.35446%
----------------- ----------------- ------------------ --------------------
Total $16,989,010.5 100.00000% 100.00000% 100.00000%
----------------- ----------------- ------------------ --------------------
Distribution % Distribution % Distribution $ Distribution $
Until Payout After Payout Until Payout After Payout
================ ================= ================ ================
Robert C. Murdock 1.97435% 6.22435% $467,305.85 $1,172,117.19
Robert A. Christensen 1.97435% 6.22435% $467,305.85 $1,172,117.19
Sidney Kennard Smith 0.69683% 2.19683% $164,931.48 $413,688.42
---------------- ----------------- ---------------- ----------------
Subtotal General Partner 4.64553% 14.64553% $1,099,543.18 $2,757,922.81
---------------- ----------------- ---------------- ----------------
NGP 41.61402% 37.24988% $9,849,556.57 $7,014,583.42
NGP II 23.73192% 21.24311% $5,617,070.33 $4,000,323.08
NGP III 26.63463% 23.84140% $6,304,107.85 $4,489,612.31
R. Gamble Baldwin 0.63659% 0.56983% $150,672.57 $107,304.86
David R. Albin 1.90976% 1.70948% $452,017.73 $321,914.60
John S. Foster 0.31829% 0.28491% $75,336.29 $53,652.44
Kenneth A. Hersh 0.47744% 0.42737% $113,004.43 $80,478.65
Bruce B. Selkirk, III 0.03183% 0.02849% $7,533.63 $5,365.24
---------------- ----------------- ---------------- ----------------
Subtotal limited Partner 95.35447% 85.35447% $22,569,299.40 $16,073,234.61
---------------- ----------------- ---------------- ----------------
Total 100.00000% 100.00000% $23,668,842.59 $18,831,157.41
---------------- ----------------- ---------------- ----------------
Total Total Pre-Offering
Dollars Ownership Shares
================= ============== ================
Robert C. Murdock $1,639,423.05 3.85747% 109,295
Robert A. Christensen $1,639,423.05 3.85747% 109,295
Sidney Kennard Smith $578,619.90 1.36146% 38,575
----------------- -------------- ----------------
Subtotal General Partner $3,857,465.99 9.07639% 257,164
----------------- -------------- -----------------
$16,864,139.99 39.68033% 1,124,276
NGP $9,617,393.41 22.62916% 641,160
NGP II $10,793,720.17 25.39699% 719,581
NGP III $257,977.43 0.60701% 17,198
R. Gamble Baldwin $773,932.33 1.82102% 51,595
David R. Albin $128,988.73 0.30350% 8,599
John S. Foster $193,483.08 0.45525% 12,899
Kenneth A. Hersh $12,898.87 0.03035% 860
Bruce B. Selkirk, III ----------------- -------------- ----------------
$38,642,534.01 90.92361% 2,576,169
Subtotal limited Partner ----------------- -------------- ----------------
$42,500,000.00 100.00000% 2,833,333
Total ----------------- -------------- ----------------
Exhibit B, C and D
Form of Registration Rights Agreement (See Exhibit 10.2)
Form of Stockholders Agreement (See Exhibit 10.1)
Form of Financial Advisory Services Agreement (See Exhibit 10.3)