EXHIBIT 10.3
FINANCIAL ADVISORY SERVICES AGREEMENT
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This Financial Advisory Services Agreement (this "Agreement"), dated as of
August 22, 1997, is between Petroglyph Energy, Inc., a Delaware corporation
(the "Company"), and Natural Gas Partners, L.P., a Delaware limited partnership
("NGP I"), Natural Gas Partners II, L.P., a Delaware limited partnership ("NGP
II"), and Natural Gas Partners III, L.P., a Delaware limited partnership ("NGP
III") (NGP I, NGP II and NGP III are collectively, "NGP"), and sets forth the
terms and conditions pursuant to which the Company will retain NGP to act as its
financial advisor.
The Company and NGP agree as follows:
1. Retention of Financial Advisor; Scope of Services.
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(a) Subject to the terms and conditions set forth herein, the Company
hereby retains NGP to act as a financial advisor to the Company during the
Contract Period (as defined in paragraph 2 below).
(b) As financial advisor to the Company, NGP will, from time to time, as
requested by the Company, provide consultation, assistance and advice to the
Company with respect to the Company's financial operations, including without
limitation the following:
(i) assistance in the public equity or debt offering process,
including drafting of documents, road show planning and participation and
general oversight of legal accounting and underwriting issues;
(ii) assistance in bank loan and credit agreement negotiation,
documentation and compliance;
(iii) assistance in upgrading and implementing a long-term budgeting
and planning process;
(iv) assistance in all public reporting and disclosure issues;
(v) assistance in developing and maintaining an investor relations
program, which will include preparation of presentations, planning meetings
and attending meetings with analysts; and
(vi) ongoing advice on business acquisitions, including negotiation
strategies and financing alternatives.
(c) The parties hereto acknowledge that (i) NGP is not regularly engaged
in the business of providing financial advisory services and that the services
to be performed by NGP hereunder are provided as an incident to NGP's activities
as an owner of a significant portion of the stock of the Company, (ii) the fees
to be paid to NGP hereunder were established at an amount which is believed to
be approximately equal to the amount of indirect costs and expenses NGP will
incur in providing such services, (iii) NGP is not an "investment advisor",
within the meaning of the Investment Advisors Act of 1940, as amended, or
applicable state laws, or a "broker" or "dealer" under the Securities Exchange
Act of 1934, as amended, or applicable state laws, (iv) the nature of the
services to be provided by NGP under this Agreement do not include those of an
"investment advisor" (i.e. providing advice as to the value of securities or the
advisability of investing in, purchasing or selling securities), or those of a
"broker" or "dealer" (i.e. effecting transaction in securities for the account
of the Company or others), and (v) it is specifically intended by the parties
hereto that NGP's activities hereunder not subject NGP to any regulation or
registration under federal or state laws.
(d) The parties hereto acknowledge and agree that NGP will make available
any and all of its employees, agents and other resources, which NGP, it its sole
discretion, determines is necessary for it to perform its services hereunder.
The parties further acknowledge that unless and until NGP provides notice to the
contrary, all decisions with respect to staffing, scheduling and allocating
NGP's resources for purposes of this Agreement will be coordinated on behalf of
NGP by its employees Kenneth A. Hersh or David R. Albin, and any request by the
Company for the performance of services hereunder shall be directed to Kenneth
A. Hersh or David R. Albin.
2. Contract Period and Termination. NGP shall act as the Company's
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financial advisor under this Agreement, effective as of the date of the
consummation of the Company's first issuance of securities pursuant to a public
offering (the "Effective Date") and continuing (unless otherwise extended by the
mutual agreement of the parties) until the first anniversary of the Effective
Date (the period from the Effective Date of this Agreement until the date of its
termination is referred to herein as the "Contract Period"). Notwithstanding the
immediately preceding sentence, this Agreement may be terminated effective as of
the end of any fiscal quarter of the Company at any time in the sole discretion
of NGP, if NGP provides written notice of its election to terminate this
Agreement to the Company not less than 30 days before the date on which
termination is to be effective. Upon termination, neither party will have any
further obligation under this Agreement, except for (i) the Company's obligation
to pay to NGP the fees and reimbursements then due pursuant to Paragraph 3,
which shall continue after such termination until such amounts are paid in full,
and (ii) the Company's obligation to provide the indemnification contained in
Paragraph 5, which shall continue in effect for a period of three years after
such termination.
3. Fees and Expenses. NGP shall be entitled to the following fees for
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its services provided during the Contract Period:
(a) An annual fee of $55,000 per year (pro-rated for any portion of a
year), which amount shall be payable quarterly in arrears on the last day
of each fiscal quarter of the Company.
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(b) In addition to the fees described above in Paragraph 3(a), the
Company shall promptly reimburse NGP for all reasonable out-of-pocket
expenses incurred by NGP and its partners, employees and agents (including
any legal fees incurred by NGP, whether from in-house or outside counsel)
in connection with NGP's activities pursuant to this Agreement during the
Contract Period.
All fees and expenses payable to NGP shall be allocated pro rata among NGP I,
NGP II and NGP III based on their relative ownership of common stock of the
Company, provided that in the discretion of the Company, the Company may make
one payment of the fees and expenses then owing to NGP, and NGP shall have the
responsibility to allocate such payment accordingly. In addition to the fees
described above in this Paragraph 3, each representative of NGP that serves on
the Board of Directors of the Company (of which there are currently two NGP
representatives on the Board of Directors) shall be entitled to receive the
compensation to which outside directors are entitled pursuant to the bylaws of
the Company.
4. Furnishing of Company Information; Confidentiality.
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(a) In connection with NGP's activities hereunder on the Company's behalf,
the Company shall furnish NGP with all information concerning the Company and
its operations that NGP deems appropriate or necessary (the "Company
Information") and will provide NGP with access to the Company's books and
records, and the Company's officers, directors, employees, accountants and
counsel. The Company represents and warrants that all Company Information
(including, without limitation, the Company's financial statements) will, to the
best of its knowledge, be complete and correct in all material respects and will
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading in the
light of the circumstances under which such statements are or will be made. The
Company acknowledges and agrees that in rendering its services hereunder, NGP
will be using and relying on the Company information without independent
verification thereof or independent appraisal of any of the Company's assets and
may, in its sole discretion, use additional information contained in public
reports or other information furnished by the Company or third parties. The
Company further acknowledges and agrees that it has sole responsibility for the
accuracy and completeness of the Company Information, any additional information
supplied by the Company to NGP or to any other party contacted by NGP on behalf
of the Company, and that NGP does not assume any such responsibility.
(b) NGP agrees that the Company Information will be used solely for the
purpose of performing its services hereunder. Subject to the limitations set
forth in subparagraph 4(c) below, NGP will keep the Company Information provided
to its hereunder confidential and will not disclose such Company Information or
any portion thereof except (i) to a third party contacted by NGP on behalf of
the Company pursuant hereto who has agreed to be bound by a confidentiality
agreement satisfactory in form and substance to the Company, or (ii) to any
other person for which the Company's consent to disclose such Company
Information has been obtained.
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(c) NGP's confidentiality obligations under this Agreement shall not apply
to any portion of the Company's Information which (i) at the time of disclosure
or thereafter is generally available to and known by the public (other than as a
result of a disclosure directly or indirectly by NGP), (ii) was available to NGP
on a nonconfidential basis from a source other than the Company, provided that
such source is not and was not bound by a confidentiality agreement with the
Company, (iii) has been independently acquired or developed by NGP without
violating any of its obligations under this Agreement, or (iv) the disclosure of
which is legally compelled (whether by deposition, interrogatory, request for
documents, subpoena, civil or administrative investigative demand or other
similar process). In the event that NGP becomes legally compelled to disclose
any of the Company Information, NGP shall provide the Company with prompt prior
written notice of such requirement so that the Company may seek a protective
order or other appropriate remedy and/or waive compliance with the terms of this
Agreement.
5. Indemnification. In consideration of the services performed and to be
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performed by NGP for the Company, and for other good and valuable consideration,
the Company and NGP hereby agree as follows:
(a) The Company shall indemnify and hold harmless NGP its affiliates and
affiliated entities, each of its partners, officers, employees, agents and each
person, if any, who "controls" NGP (within the meaning of the federal securities
laws) (collectively the "Indemnified Parties" and individually, an "Indemnified
Party") from and against any and all actions or claims and any and all losses,
claims, damages, liabilities, costs or expenses (including, without limitation,
reasonable attorneys' fees and any legal or other expenses in giving testimony
or furnishing documents in response to a subpoena or otherwise or the costs of
investigating, preparing or defending any action or claim, whether or not in
connection with any action or litigation in which any Indemnified Party is a
party), joint or several, to which any Indemnified Party may become subject
under the Securities Act of 1933 or any other federal or state securities law or
otherwise as and when incurred, directly or indirectly, caused by, relating to,
based upon or arising out of any matter related to this Agreement, including,
without limitation, any act or omission by NGP in connection with its role as
financial advisor and its acceptance of or the performance or non-performance of
its obligations under this Agreement, except insofar as such losses, claims,
damages, liabilities, costs or expenses arise out of or are based upon any
untrue statement or alleged untrue statement of material fact contained in any
registration statement, preliminary prospectus, final prospectus, placement
memorandum, or in any amendment or supplement thereto, or upon the omission or
alleged omission therefrom of any such statement which has been made therein or
omitted therefrom in reliance upon and in conformity with information furnished
in writing to the Company by or on behalf of NGP expressly for use therein.
(b) The indemnity provided for in subparagraph (a) above shall cover any
loss, claim, damage, liability, cost or expense incurred by an Indemnified Party
REGARDLESS OF THE ORDINARY NEGLIGENCE OF SUCH INDEMNIFIED PARTY, but shall not
cover any loss, claim, damage, liability, cost or expense to the extent it is
found in a final judgment by a court of
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competent jurisdiction (not subject to further appeal) to have resulted from an
Indemnified Party's gross negligence or willful misconduct.
(c) The indemnity provided for in subparagraph (a) shall be in addition to
any liability that the Company may otherwise have to the Indemnified Parties and
shall be subject to the following:
(i) Promptly after receipt by an Indemnified Party under subparagraph
(a) above of notice of the commencement of any action, proceeding,
investigation or other event with respect to which any Indemnified Party
demands indemnification hereunder, such Indemnified Party shall, if a claim
in respect thereof is to be made against the Company, notify the Company in
writing of the commencement thereof, provided that the failure to so notify
the Company shall not relieve it from any liability that it may have to any
Indemnified Party, except to the extent the Company is prejudiced by such
failure.
(ii) Notwithstanding anything expressed or implied herein to the
contrary, the indemnity provided for herein shall cover the amount of any
settlements entered into in connection with any claim for which an
Indemnified Party may be indemnified hereunder, if and only if such
settlement is consented to by the Company.
(iii) No settlement binding on an Indemnified Party may be made
without the consent of such Indemnified Party (which consent shall not be
unreasonably withheld).
(iv) If the claim for indemnification arises out of a claim for
damages by a person other than an Indemnified Party, the Company, after
giving notice to the Indemnified Party, may undertake to defend or settle
such claim for damages and may employ counsel for such purpose. The
Indemnified Party, at its own expense, shall have the right to employ
separate counsel with respect to such claim and to participate in, but not
control, such settlement or defense; provided that, if the Company is also
a defendant in respect of any such claim and a potential conflict exists
between the interests of the Company and those of an Indemnified Party or
if the Company does not elect to undertake the settlement or defense of
such claim, the Indemnified Parties shall, at the expense of the Company,
have the right to employ not more than one counsel to represent the
Indemnified Parties with respect to such claim and the Indemnified Parties
may control any settlement or defense applicable to the claims brought
against such Indemnified Parties.
(v) Expenses and other costs incurred by an Indemnified Party in
connection with any suit, action or other proceeding relating to this
Agreement shall be advanced by the Company to such Indemnified Party prior
to any final determination of whether an Indemnified Party is entitled to
be indemnified for such costs and expenses hereunder, if the Indemnified
Party provides to the Company an undertaking to return any amounts so
received to the extent that it is ultimately determined that he was not
entitled to be indemnified for such costs and expenses hereunder.
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(vi) In order to provide for just and equitable contribution, if a
claim for indemnification is made hereunder but a court of competent
jurisdiction finds in a final judgment (not subject to appeal) that such
indemnification may not be enforced in such case, even though the express
provisions hereof provide for indemnification, then in such case, the
Company on the one hand, and the Indemnified Parties on the other hand,
shall contribute to the losses, claims, damages, liabilities or costs so
that the Indemnified Parties are responsible in the aggregate for a
percentage of the losses, claims, damages, liabilities or costs equal to a
fraction, the numerator of which is the fees (but not expenses) previously
received by NGP pursuant to Paragraph 3 of this Agreement, and the
denominator of which is the sum of total aggregate amount of all
consideration received by the Company in respect of transactions giving
rise to such claim for indemnification, or, if no such transaction exists
or has not been completed, the fair market value of the outstanding units
of the Company's partnership interests on the date hereof, and the Company
shall be responsible for the remainder of such losses, claims, damages,
liabilities or costs; provided, however, that if such allocation is not
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permitted by applicable law then the relative fault of the Company, on the
one hand, and the Indemnified Parties, on the other hand, in connection
with the statements, acts or omissions that resulted in such losses,
claims, damages, liabilities or costs and relevant equitable considerations
shall also be considered. No person found liable for a fraudulent
misrepresentation shall be entitled to contribution from any person who is
not also found liable for such fraudulent misrepresentation.
Notwithstanding the foregoing, the Indemnified Parties, in the aggregate,
shall not be obligated to contribute any amount hereunder that exceeds the
amount of fees (but not expenses) NGP received previously pursuant to this
Agreement.
(vii) The Company agrees that the Indemnified Parties shall not have
any liability (whether direct or indirect, in contract, tort or otherwise)
to the Company for or in connection with any matter related to this
Agreement, except for liabilities or expenses that are found in a final
judgment by a court of competent jurisdiction (not subject to further
appeal) to have resulted primarily and directly from NGP or such other
Indemnified Party's gross negligence or willful misconduct.
6. GOVERNING LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT
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SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS APPLICABLE TO
CONTRACTS MADE AND TO BE FULLY PERFORMED THEREIN.
7. Successors and Assigns. The benefits of this Agreement shall inure to
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the parties hereto, their respective successors and assigns, and to the
indemnified parties hereunder and their successors and representatives, and the
obligations and liabilities assumed in this Agreement by the parties hereto
shall be binding upon their respective successors and assigns. This Agreement
may not be assigned by any party to an unaffiliated party without the express
written consent of the other party hereto.
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8. Notices. All communications under this Agreement shall be in writing
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and shall be delivered personally or sent by personal delivery, expedited
delivery, certified mail, return receipt requested or by telecopy as follows:
If to NGP:
100 N. Guadalupe Street, Suite 205
Santa Fe, New Mexico 87501
Telecopy Number: (505) 983-8120
Attention: David R. Albin
777 Main Street, Suite 2700
Fort Worth, Texas 76102-5304
Telecopy Number: (817) 820-6650
Attention: Kenneth A. Hersh
If to the Company:
6209 North Highway 61
Hutchinson, Kansas 67502
P.O. Box 1839
Hutchinson, Kansas 67504-1839
Telecopy Number: (316) 665-8500
Attention: Robert C. Murdock
Either party may change its address or telecopy number set forth above by
giving the other party notice of such change in accordance with the provisions
of this Paragraph 8. A notice shall be deemed given, if by personal delivery or
expedited delivery service, on the date of such delivery to such address, if by
certified mail, on the date shown on the applicable return receipt, or if by
telecopy, on the date of receipt of the transmission of such notice at such
telecopy number.
9. Nature of Relationship. The parties hereto intend that the services
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provided by NGP to the Company pursuant to this Agreement are being provided as
an independent contractor. Nothing contained in this Agreement shall constitute
or be construed to be or create a general partnership or joint venture between
NGP and the Company or their respective successors or assigns.
10. Captions. The Paragraph titles herein are for reference purposes only
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and do not control or affect the meaning or interpretation of any term or
provision hereof.
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11. Amendments. No alteration, amendment, change or addition hereto shall
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be binding or effective unless the same is set forth in writing signed by a duly
authorized representative of each party.
12. Partial Invalidity. If the final determination of a court of
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competent jurisdiction declares, after the expiration of the time within which
judicial review (if permitted) of such determination may be perfected, that any
term or provision hereof is invalid or unenforceable, (i) the remaining terms
and provisions hereof shall be unimpaired and (ii) the invalid or unenforceable
term or provision shall be replaced by a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision.
13. Survival. All representations, warranties and agreements contained
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herein, or contained in certificates submitted pursuant to this Agreement, shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any party hereto, and shall survive the execution and
delivery hereof.
14. Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be an original, but all of which together
shall be considered one and the same agreement.
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This Agreement is executed as of the date first written above by a duly
authorized representative of each of the Company and NGP.
COMPANY
PETROGLYPH ENERGY, INC.
By: /s/ Robert C. Murdock
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Name: Robert C. Murdock
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Title: President
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NGP
NATURAL GAS PARTNERS, L.P.
By: G.F.W. Energy, L.P., its
general partner
By: /s/ David R. Albin
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Name: David R. Albin
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Title: Authorized Signatory
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NATURAL GAS PARTNERS II, L.P.
By: GFW II, L.L.C.,
its general partner
By: /s/ Kenneth A. Hersh
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Name: Kenneth A. Hersh
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Title: Authorized Signatory
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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
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Name: Kenneth A. Hersh
Title: Authorized Signatory
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