UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
GASCO ENERGY, INC.
-------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
GASCO ENERGY, INC.
14 INVERNESS DRIVE E. SUITE H-236
ENGLEWOOD, CO 80112
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 18, 2003
Notice is hereby given that the Annual Meeting of the Stockholders of Gasco
Energy, Inc., a Nevada corporation, will be held on Thursday, September 18, 2003
at 1:30 p.m., Mountain Daylight Time, at the Lone Tree Room, Staybridge Suites,
7820 Park Meadows Drive, Denver-Lone Tree, Colorado. The Annual Meeting will be
held for the following purposes:
1. To elect seven directors to serve until the 2004 Annual Meeting of
Stockholders.
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending December 31, 2003.
3. To approve the Gasco Energy, Inc. 2003 Restricted Stock Plan.
4. To transact such other business as may properly come before such
meeting or any adjournment(s) thereof.
The close of business on August 15, 2003 has been fixed as the record date for
the determination of stockholders entitled to receive notice of and to vote at
the Annual Meeting or any adjournment(s) thereof.
Stockholders are cordially invited to attend the meeting in person. Whether or
not you plan to be present at the meeting, you are requested to sign and return
the enclosed proxy in the enclosed envelope so that your shares may be voted in
accordance with your wishes and in order that the presence of a quorum may be
assured. The giving of such proxy will not affect your right to vote in person,
should you later decide to attend the meeting. Please date and sign the enclosed
proxy and return it promptly in the enclosed envelope. Your vote is important.
By Order of the Board of Directors,
/s/ W. King Grant
--------------------
W. King Grant
Secretary
August 25, 2003
GASCO ENERGY, INC.
14 Inverness Drive East, Suite H-236
Englewood, Colorado 80112
(303) 483-0044
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held September 18, 2003
GENERAL INFORMATION
The enclosed proxy is solicited by and on behalf of the Board of Directors of
Gasco Energy, Inc., a Nevada corporation (the "Company" or "Gasco"), for use at
the 2003 Annual Meeting of Stockholders (the "Annual Meeting") to be held in the
Lone Tree Room, Staybridge Suites, 7820 Park Meadows Drive, Denver-Lone Tree,
Colorado on Thursday, September 18, 2003 at 1:30 p.m., Mountain Daylight Time,
or at any adjournment(s) thereof. This Proxy Statement and the enclosed Proxy
Card were sent to stockholders on or about August 25, 2003.
The enclosed proxy, even though executed and returned, may be revoked at any
time prior to the voting of the proxy (a) by the execution and submission of a
revised proxy, (b) by written notice to the Secretary of the Company or (c) by
voting in person at the Annual Meeting. In the absence of such revocation,
shares represented by the proxies will be voted at the Annual Meeting.
All shares represented by valid proxies will be voted in accordance therewith at
the Annual Meeting. If no direction is made, validly executed and returned
proxies will be voted for the election of the nominees for director named below,
for ratification of the appointment of independent auditors, for the approval of
the Gasco Energy, Inc. 2003 Restricted Stock Plan and in the discretion of the
proxy holders with respect to any other matters properly brought before the
Annual Meeting.
The cost of this solicitation of proxies is being borne by the Company.
Solicitations will be made only by the use of mail, except that, if deemed
desirable, officers and regular employees of the Company may solicit proxies by
telephone, email or facsimile, without being paid additional compensation for
such services. Brokerage houses, custodians, nominees and fiduciaries will be
requested to forward the proxy soliciting material to the beneficial owners of
the Company's Common Stock and Preferred Stock and the Company will reimburse
them for their reasonable expenses incurred in doing so.
The Company's Form 10-K for the year ended December 31, 2002 is being mailed
with this proxy statement to all stockholders entitled to vote at the Annual
Meeting. The Form 10-K does not constitute a part of this proxy soliciting
material.
SHARES OUTSTANDING AND VOTING RIGHTS
At the close of business on August 15, 2003, the record date for the
determination of stockholders entitled to vote at the Annual Meeting, there were
outstanding 40,288,800 shares of Common Stock and 11,339 shares of the Company's
Series B Convertible Preferred Stock ("Preferred Stock"). Each stockholder is
entitled to one vote for each share of Common Stock held and 628.57 votes for
each share of Preferred Stock held. The holders of the Preferred Stock are
entitled to vote as a separate class to elect one director at the Annual
Meeting. For the remaining matters to be voted on at the Annual Meeting, the
1
holders of Common Stock and Preferred Stock will vote together as a single
class.
A quorum of stockholders is necessary for a valid meeting. The required quorum
for the transaction of business at the Annual Meeting is a majority of the total
outstanding shares of Common Stock and Preferred Stock entitled to vote at the
Annual Meeting, either present in person or represented by proxy. Abstentions
and proxies returned by brokerage firms for which no voting instructions have
been received from their principals will be counted for the purpose of
determining the presence of a quorum.
If a quorum is present at the Annual Meeting, the six director nominees who
receive the greatest number of votes cast by shares of Common Stock and
equivalent shares of Preferred Stock present in person or by proxy and entitled
to vote shall be elected as directors. The Preferred Stock director nominee who
receives the greatest number of votes cast by shares of Preferred Stock present
in person or by proxy and entitled to vote shall also be elected as director.
The affirmative vote by the holders of a majority of the shares of Common Stock
and equivalent shares of Preferred Stock present and entitled to vote is
required to ratify the selection of Deloitte & Touche LLP as the Company's
independent auditors for 2003 and to approve the Gasco Energy, Inc. 2003
Restricted Stock Plan.
ELECTION OF DIRECTORS
(Items A 1. & 2. on Proxy Card)
Seven directors are to be elected at the Annual Meeting. If elected, each
director will serve until the Company's 2004 Annual Meeting or until his
successor has been elected and qualified. Each of the nominees serves as a
director of the Company and all of the directors are required to stand for
election at the Annual Meeting because the directors hold annual terms. The
holders of the Company's Preferred Stock, voting as a separate class, are
entitled to elect one director (the "Preferred Stock Nominee"). The remaining
directors will be elected by the Common and Preferred Stockholders, voting as a
single class, with each share of Common Stock afforded one vote and each share
of Preferred Stock afforded 628.57 votes (the "Common Stock Nominees").
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the election of the nominees listed below.
Although the Board of Directors does not contemplate that any of the nominees
will be unable to serve, if such a situation arises prior to the Annual Meeting,
the persons named in the enclosed proxy will vote for the election of such other
person(s) as may be nominated by the Board of Directors.
The following table sets forth information regarding the names, ages and
positions with the Company and the length of continuous service as a director of
the Company.
The Board of Directors Recommends Voting "For" the Election of Each of the
Director Nominees
2
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
Age as
of
Name Positions with the Company 8/11/03
Common Stock Nominees
Marc A. Bruner Director of Gasco since 2001; Chairman of the Board of 54
Directors and Strategic Consultant for the Company
Richard J. Burgess Director of Gasco since 2003 72
Charles B. Crowell Director of Gasco since 2002 60
Mark A. Erickson Director of Gasco since 2001; Chief Executive Officer and 43
President
Carmen J. (Tony) Lotito Director of Gasco since 2001 59
Carl Stadelhofer Director of Gasco since 2001 49
Preferred Stock Nominee
Richard S. Langdon Director of Gasco since 2003 53
The following sets forth certain biographical information concerning each of the
Company's directors and executive officers.
At Large Directors
Marc A. Bruner. Mr. Bruner has served as the Chairman of the Board of Directors
of Gasco and as a member of Gasco's Executive Committee since February 2001.
From January 1996 to January 1999, Mr. Bruner was founding Chairman of the Board
of Ultra Petroleum, a Toronto Stock Exchange and American Stock Exchange listed
natural gas company. Ultra's business is focused on tight sand development in
the Green River Basin of Wyoming. In late 1997, Mr. Bruner co-founded Pennaco
Energy, Inc., a coal bed methane company. In 1996, Mr. Bruner co-founded RIS
Resources International, a natural gas company, and served as a Director until
late 1997.
Richard J. Burgess. Mr. Burgess has served as a director and a member of the
compensation committee of the Company since May 2003 and has served as a
director of Miller Exploration since January 1999. Mr. Burgess served as
President and CEO of NOMECO before retiring in 1994. NOMECO later became CMS Oil
and Gas Company, which is a wholly owned subsidiary of CMS Energy Corporation
(NYSE). Mr. Burgess received a B.S. degree (honors) in Geology from the
University of Manitoba and has held various positions in the oil and gas
industry since 1954. Mr. Burgess currently serves on the Board of Directors of
Michigan Oil and Gas Association and ROC Oil Company and is a former director of
Seagull Energy, Command Petroleum and Sydney Oil Company. Mr. Burgess has been
involved, in various capacities, with the American Association of Petroleum
Geologists, Independent Petroleum Association of America, Ontario Petroleum
Institute and Potential Gas Committee.
Charles B. Crowell. Mr. Crowell has served as a director and a member of the
audit, compensation and executive committees of Gasco since July 2002. Since
1993, Mr. Crowell has been a practicing attorney and a consultant to oil and gas
companies, and was a senior member of Crowell & Bishop, PLLC, Attorneys from
November 1995 through June 1998. From September 1996 until June 2000, Mr.
Crowell held the position of Manager at Enigma Engineering Company, LLC. Mr.
Crowell also worked at Triton Energy Corporation where he held the positions of
3
Executive Vice President, Administration from November 1991 to May 1993, Senior
Vice President and General Counsel from August 1989 to October 1991 and Vice
President and General Counsel from November 1981 to July 1989. From June 1999 to
February 2001, Mr. Crowell served as a director of Comanche Energy, Inc. He has
also held public directorships at Arakis Energy Corporation from June 1997 to
October 1998, at Aero Services International, Inc. from December 1989 to May
1993 (where he was Chairman of the Board from August 1990 to December 1992) and
at Triton Europe, plc. from October 1989 to May 1993. Mr. Crowell holds a BA
degree from John Hopkins and a JD from University of Arkansas. He was admitted
to the practice of law in Texas in 1974.
Mark A. Erickson. Mr. Erickson has served as a Director, Chief Executive Officer
and President of Gasco since February 2001. Mr. Erickson served as President of
Pannonian Energy Inc. from mid-1999 until the Company's merger with Pannonian
Energy in February 2001. In late 1997, Mr. Erickson co-founded Pennaco Energy,
Inc., an AMEX listed oil and gas company with properties in the Powder River
basin of Wyoming. He served as an officer and Director of Pennaco from its
inception until mid-1999. Mr. Erickson served as President of RIS Resources
(USA), a natural gas company from late 1997 to the end of 1998. Mr. Erickson is
a Registered Petroleum Engineer with 18 years of experience in business
development, finance, strategic planning, marketing, project management and
petroleum engineering. He holds a MS in Mineral Economics from the Colorado
School of Mines.
Carmen J. (Tony) Lotito. Mr. Lotito became the Chief Financial Officer,
Treasurer and a director of Galaxy Investments, Inc., a publicly traded gas and
coalbed methane exploration and development company upon its acquisition of
Dolphin Energy Corporation in November 2002. Mr. Lotito has served as the Chief
Financial Officer, Treasurer and a Director of Dolphin Energy Corporation since
September 2002. Mr. Lotito has served as a Director of Gasco and as the Chairman
of Gasco's Audit and Compensation Committee since April 2001. Mr. Lotito has
served as Vice President, Chief Financial Officer and a Director of Coriko
Corporation, a private business development company from November 2000 to May
2002. Mr. Lotito has been a member of Equistar Capital LLC, an investment
banking firm since December 1999. From March 2000 to the present, Mr. Lotito
serves as a Director for Impact Web Development. Prior to joining Coriko from
Utah Clay Technology, Inc., Mr. Lotito was self-employed as a financial
consultant. In 1988, Mr. Lotito joined ConAgra, Inc., in San Antonio, Texas as a
brand manager. In 1966, Mr. Lotito joined the firm of Pannell, Kerr Forester &
Co. as a senior accountant in management and audit services for the company's
Los Angeles and San Diego, California offices. Mr. Lotito holds a BS degree in
Accounting from the University of Southern California.
Carl Stadelhofer. Mr. Stadelhofer has served as a Director since February 2001
and a member of the Audit Committee and the Compensation Committee of Gasco
since April 2001. Mr. Stadelhofer is a partner with the law firm of Rinderknecht
Klein & Stadelhofer in Zurich, Switzerland, where he has practiced law for over
twenty years. He was admitted to the practice of law in Switzerland in 1982. He
took his law degree in 1979 in Switzerland and studied law in the United States
at Harvard Law School and at Georgetown University Law School. His practice
specializes in banking and financing, mergers and acquisitions, investment funds
and international securities transactions.
Preferred Stock Director
Richard S. Langdon. Mr. Langdon became a Director of Gasco and a member of the
audit committee in March 2003. From 1997 until December 2002, Mr. Langdon served
as Executive Vice President and Chief Financial Officer of EEX Corporation, a
NYSE-listed exploration and production company that was acquired by Newfield
4
Exploration in late 2002. Before joining EEX Corporation, Mr. Langdon was an oil
and gas consultant from August 1996 to March 1997. Prior to that, he held
various positions with the Pennzoil Companies since 1991, including Executive
Vice President--International Marketing--Pennzoil Products Company, from June
1996 to August 1996; Senior Vice President--Business Development & Shared
Services--Pennzoil Company from January 1996 to June 1996; and Senior Vice
President--Commercial & Control--Pennzoil Exploration & Production Company from
December 1991 to December 1995. Mr. Langdon holds a B.S. in Mechanical
Engineering and a Masters of Business Administration, both from the University
of Texas at Austin.
Additional Executive Officers
Michael K. Decker. Mr. Decker has served as Director, Executive Vice President
and Chief Operating Officer of Gasco since July 2001. From August 1999 until
July 2001, Mr. Decker founded and served as the President of Black Diamond
Energy, LLC. From 1990 to August 1999 Mr. Decker served as the Vice President of
Exploitation of Prima Energy Corporation, a Nasdaq traded oil and gas company.
Prima was recognized by the Denver Business Journal as the "top performing
Colorado based company of the 1990's," with a market return of 1857%. From 1988
to 1990, Mr. Decker was employed by Bonneville Fuels Corporation as a Senior
Geologist. From 1977 to 1988, Mr. Decker was employed by Tenneco Exploration and
Production Company as a Senior Project Geological Engineer. Mr. Decker has
twenty-six years of oil and gas prospecting, development, operations and mergers
and acquisitions experience. He holds a BS degree in Geological Engineering from
the Colorado School of Mines and is the Chairman of the Board of the Potential
Gas Committee, an independent natural gas resource assessment organization.
W. King Grant. Mr. Grant has served as Chief Financial Officer of Gasco since
July 2001 and as Director from July 2001 until March 2003. From November 1999 to
May 2001, Mr. Grant served as Executive Vice President and Chief Financial
Officer for KEH.com, a catalog/internet retailer of new and used camera
equipment. From February 1997 to March 1999, Mr. Grant was a Senior Vice
President in the Natural Resources Group of ING Baring, LLC where he was
responsible for providing financing and advisory services to mid-cap and smaller
energy companies. For the previous eleven years, Mr. Grant held several
positions at Chase Manhattan Bank and its affiliates, most recently as a Vice
President in the Oil & Gas group. Mr. Grant holds a BSE in Chemical Engineering
from Princeton University and an MBA from the Wharton School at the University
of Pennsylvania.
5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows information with respect to the beneficial ownership
of the Company's common stock as of August 11, 2003 by: any individual,
partnership or corporation that is known to the Company, solely by reason of its
examination of Schedule 13D and 13G filings made with the SEC, to be the
beneficial owner of more than 5% of each class of shares issued and outstanding
and each executive officer, director and all executives, officers and directors
as a group. As of August 11, 2003, the Company had 40,288,800 shares of common
stock issued and outstanding and 11,339 shares of Preferred stock issued and
outstanding. If a person or entity listed in the following table is the
beneficial owner of less than one percent of the Company's common stock
outstanding, this fact is indicated by an asterisk in the table. Unless
otherwise noted, each person listed has sole voting and dispositive power over
the shares indicated, and the address of each stockholder is the same as the
Company's address. The number of shares beneficially owned by a person includes
the common shares that are issuable upon conversion of the Preferred Stock.
These shares are deemed outstanding for the purpose of computing their
percentage ownership but are not outstanding for the purposes of computing the
percentage ownership of any other person. The number of shares beneficially
owned by a person also includes shares that are subject to stock options or
warrants that are exercisable within 60 days of August 11, 2003. These shares
are also deemed outstanding for the purpose of computing their percentage
ownership. These shares are not outstanding for the purpose of computing the
percentage ownership of any other person.
Number of Shares
Name Beneficially Owned Percent of Class
5% or Greater Holders
Shama Zoe Limited Partnership Common 8,100,000 20.1%
7128 South Poplar Lane
Englewood, Colorado 80112
Richard C. McKenzie, Jr. (5) Common 8,283,043 18.5%
114 John Street Preferred 6,998 61.7%
Greenwich, Connecticut 06831
Wellington Management Company, LLP (1) Common 3,000,000 7.5%
75 State Street
Boston, Massachusetts 02109
Directors and Executive Officers
Marc Bruner (2) (3) Common 4,072,834 9.9%
Mark A. Erickson (2) (4) (5) Common 3,430,965 8.3%
Preferred 205 1.8%
Michael K. Decker (2) (5) Common 631,804 1.6%
Preferred 100 *
W. King Grant (2) (5) Common 704,900 1.6%
Preferred 100 *
Carmen J. (Tony) Lotito (2) Common 297,170 1.0%
Carl Stadelhofer (2) Common 83,340 *
6
Number of Shares
Name Beneficially Owned Percent of Class
Charles B. Crowell (2)(5) Common 128,857 *
Preferred 205 1.8%
Richard S. Langdon (5) Common 64,114 *
Preferred 100 *
Richard J. Burgess (6) Common 50,000 *
All Directors and Executive Officers as a Group (9 Common 9,589,591 21.8%
persons) (2) (3) (4) (5)(6) Preferred 715 6.3%
- ---------------
(1) Wellington Management Company, LLP acts as advisor to and has the
power to vote shares owned by J. Caird Partners, L.P., which owns
1,800,000 shares of the Company's common stock, and J. Caird Investors
(Bermuda) L.P., which owns 1,200,000 shares of the Company's common
stock. Wellington Management is considered a beneficial owner of the
shares set forth in the table solely by reason of its voting power.
(2) The following number of shares of common stock issuable upon the
exercise of options that are exercisable within 60 days of August 11,
2003 are included in the amounts shown: Mr. Bruner, 1,025,000 shares;
Mr. Erickson, 1,025,000 shares; Mr. Decker, 530,690 shares; Mr. Grant,
503,680 shares; Mr. Lotito, 116,670 shares; Mr. Stadelhofer, 83,340
shares; and Mr. Crowell, 33,340 shares.
(3) The common stock held by Mr. Bruner includes 8,707 shares of common
stock that is held by Resource Venture Management, which is a company
owned by Mr. Bruner.
(4) The common stock held by Mr. Erickson includes 56,084 shares of common
stock owned by his wife as custodian for their children.
(5) The following number of shares of common stock issuable upon the
conversion of the Series B Convertible Preferred stock are included in
the amounts shown: Mr. McKenzie, 4,398,743 shares; Mr. Erickson,
128,857 shares; Mr. Decker, 64,114 shares; Mr. Grant, 63,483 shares;
Mr. Crowell, 128,857 shares and Mr. Langdon, 64,114 shares.
(6) Includes 40,000 shares of common stock held in a trust for Mr.
Burgess' wife of which Mr. Burgess is the trustee.
Directors' Meetings and Committees of the Board of Directors
The Board of Directors held five meetings during 2002. During 2002, each of the
directors attended at least 75 percent of the aggregate of (i) the total number
of meetings of the Board of Directors held during the period that such director
served as a director and (ii) the total number of meetings held by each
committee of the Board of Directors on which such director served during the
period that such director so served.
The Board of Directors of Gasco has formed an Audit Committee, a Compensation
Committee and an Executive Committee.
7
The Audit Committee currently consists of Messrs. Lotito, Stadelhofer,
Langdon and Crowell, all of whom are independent under the definition
of independence used in the NASD listing standards. Mr. Lotito serves
as the chairman of the Audit Committee. The Audit Committee met four
times during 2002. The Audit Committee is primarily responsible for:
- selecting the independent auditors for recommendation to the Board;
- selecting the securities legal counsel for recommendation to the
Board;
- reviewing the scope of the proposed audit for the current year
including the audit procedures to be utilized and the conclusions and
comments or recommendations of the independent auditors;
- reviewing the adequacy and effectiveness of the accounting controls of
the corporation;
- reviewing the internal audit function including the independence and
authority of its reporting obligations;
- reviewing the financial statements contained in the annual and
quarterly reports to shareholders;
- reviewing the accounting and financial human resources and succession
planning within the Company, and
- investigating any matter brought to its attention within the scope of
its duties.
The Audit Committee has performed its annual review and assessment of the Audit
Committee Charter, which was adopted in March 2001. A copy of the current Audit
Committee Charter is attached hereto as Appendix A. The report of the Audit
Committee is set forth below.
The Compensation Committee currently consists of Messrs. Lotito, Stadelhofer,
Burgess and Crowell. The Compensation Committee met two times during 2002. Mr.
Lotito serves as chairman of the Compensation Committee. The report of the
Compensation Committee with regard to compensation matters is set forth below.
The Compensation Committee is responsible for:
- administering and granting awards under all equity incentive plans;
- reviewing the compensation of the Company's Chief Executive Officer
and recommendations of the Chief Executive Officer as to appropriate
compensation for the other executive officers and key personnel;
- examining periodically the Company's general compensation structure;
and
- supervising the Company's welfare and pension plans and compensation
plans.
The Executive Committee currently consists of Messrs. Bruner, Erickson and
Crowell. The Executive Committee met six times during 2002. The principal
responsibility of the Executive Committee is to aid and assist the Company's
management in the day-to-day operations of the Company. The purpose of the
Executive Committee in particular, is to act on behalf of the Board of
8
Directors, subject to certain limitations, when it is not feasible to call and
convene a full board meeting.
Report of the Audit Committee
The Audit Committee of the Board of Directors is composed of four non-employee
directors who satisfy the requirements of the Nasdaq listing standards as to
independence. The Audit Committee operates under a written charter, which was
approved by the Board of Directors in April 2001.
The Audit Committee's primary duties and responsibilities are to provide
independent, objective oversight of the Company's accounting functions and
internal controls. The Audit Committee annually reviews and recommends to the
Board the selection of the Company's independent auditors, subject to
shareholder ratification.
Management is responsible for the Company's internal controls and the financial
reporting process. The independent auditors are responsible for performing an
independent audit of the Company's financial statements in accordance with
generally accepted auditing standards and to issue a report thereon. The Audit
Committee's responsibility is to monitor and oversee these processes.
The Audit Committee has reviewed and discussed the audited financial statements
with management and with the independent auditors. The Audit Committee has also
discussed with the independent auditors, the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees), as
currently in effect.
The independent auditors also provided to the Audit Committee the written
disclosures and letter required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Audit Committee has
discussed with the independent auditors their independence with respect to the
Company. The Audit Committee considered the non-audit services provided by the
independent auditors and determined that the services provided are compatible
with maintaining their independence from the Company. The total fees paid to
Deloitte & Touche LLP during 2002 consisted of:
Audit fees $ 58,509
All other fees 105,994
--------
Total $164,453
========
Based on the above discussions and review with management and the independent
auditors, the Audit Committee recommended to the Board that the audited
financial statements be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2002 for filing with the Securities and Exchange
Commission.
Audit Committee:
CHARLES B. CROWELL
RICHARD S. LANGDON
CARMEN J. (TONY) LOTITO
CARL STADELHOFER
9
Compensation of Directors
During 2002, each director of the Company who was not a full-time employee was
paid a monthly director's fee of $2,500. In addition, each director was
reimbursed for reasonable travel expenses incurred in connection with such
director's attendance at Board of Directors and Committee meetings. For 2003,
each director of the Company who is not a full-time employee will receive a
monthly director's fee of $2,500 plus an additional monthly fee of $500 for each
committee on which the director serves.
Certain Transactions
Marc A. Bruner Strategic Consulting Agreement The Company has entered into a
Strategic Consulting Agreement with Mr. Bruner, effective January 2, 2003, that
expires on January 31, 2006. The Consulting Agreement was amended and restated
effective January 2, 2003. The amended and restated agreement entitles Mr.
Bruner to an annual fee of $120,000 and an annual bonus payment equal to 0.875%
of Gasco's cash flow from wells drilled by or on behalf of the Company. The
agreement provides for the award to Mr. Bruner of 187,500 shares of common stock
of the Company from a restricted stock plan in exchange for the surrender by Mr.
Bruner of vested options to purchase 150,000 shares of common stock at $3.15 per
share, 50,000 shares of common stock at $3.00 per share and 925,000 shares of
common stock at $2.00 per share. Mr. Bruner also has the right to receive 25% of
all option grants made by the Company each calendar year during the term of the
agreement. In addition, the employment agreement provides that each year Mr.
Bruner and the Company shall mutually agree on a performance-based bonus plan
for Mr. Bruner. The employment agreement also contains non-compete provisions in
the event of the termination of the agreement.
Mr. Bruner's agreement also provides for certain payments in the event that the
agreement is terminated for any reason other than his voluntary termination,
death, disability or termination for cause. In the event that Mr. Bruner's
agreement is terminated by the Company without cause or due to certain change of
control events, Mr. Bruner is entitled to receive an amount equal to his annual
fee for the remaining term of the agreement plus an additional cash payment of
$500,000. If the termination occurs at anytime when the average closing price
for the Company's common stock for the 30 trading days prior to termination is
equal to between $1.50 per share and $1.99 per share, the additional cash
payment will increase to $1,000,000. This payment will be further increased as
such average closing price increases, up to a maximum of $3,500,000 if such
average closing price is greater than $3.50 per share. If the termination is
because of a change of control of the Company, the additional cash payment will
be based on the consideration per share paid to the Company's shareholders in
connection with the change of control instead of the market price of the
Company's common stock.
Other Transactions
Mr. Lotito earned consulting fees of $16,000, $52,000 and $50,000 from the
Company during the years ended December 31, 2002, 2001 and 2000, respectively.
During both of the years ended December 2002 and 2001, the Company paid $240,000
in consulting fees to a company owned by Mr. Bruner pursuant to the Strategic
Consulting Agreement described above. During January 2003, the future annual
fees that will be paid to Mr. Bruner's company were reduced to $120,000 per year
and are committed through January 31, 2006.
10
Mr. Decker earned a $28,000 fee and 12,500 shares of Gasco's common stock for
consulting services provided in connection with a property acquisition in 2001.
Mr. Decker was also paid $22,879 in other consulting fees prior to his
appointment as an officer of the Company.
The Company's management believes that the above transactions and services were
provided in the normal course of business with terms that could be obtained from
non-related sources.
During the year ended December 31, 2002, the Company paid $110,266 in consulting
fees to an unrelated third party. The obligation to pay these fees was a joint
and several liability of Gasco and a Company of which Mr. Lotito and Mr. Bruner
have a combined 66.67% ownership.
Section 16 (a) Beneficial Ownership Reporting Requirements
Section 16 (a) of the Securities Exchange Act of 1934 requires the officers,
directors and persons who own more than ten percent of the Company's stock, to
file reports of ownership and changes in ownership with the Securities Exchange
Commission ("SEC"). Officers, directors and greater than ten percent owners are
required by SEC regulations to furnish the Company with copies of all Section 16
(a) forms they file.
Based solely on its review of the copies of such forms received by it, the
Company believes that each of its officers, directors and greater than ten
percent owners complied with all Section 16 (a) filing requirements applicable
to them during the year ended December 31, 2002, except for the following late
filings:
Carmen (Tony) Lotito Form 4, dated 9/9/02 filed late
Marc Bruner Form 4, dated 12/2001 filed late
Mark Erickson Form 4, dated 2/2002 filed late
Charles Crowell Form 4, dated 7/16/02 filed late
11
Executive Compensation
The following table sets forth the compensation paid to our President and Chief
Executive Officer and each of our next highly compensated executive officers and
other officer for services rendered during the years ended December 31, 2002,
2001 and 2000.
Long Term
Annual Compensation Compensation
Securities
Underlying
Options/ All Other
Name & Principal Position Year Salary Bonus SARs (#) Compensation (1)
- ------------------------- ---- ------ ----- --------- ------------
Mark A. Erickson (2) 2002 $ 240,000 $ 7,335
President 2001 220,000 2,160,000 1,080
Chief Executive Officer 2000 $125,000 (2)
W. King Grant 2002 $ 262,002 $ 7,011
Executive Vice President 155,780 437,000 2,220
2001
Chief Financial Officer
Michael K. Decker 2002 $ 200,000 $ 6,135
Executive Vice President 2001 72,000 414,000 1,080
Chief Operations Officer
Howard O. Sharpe 2002 $ 116,178 $ 150,000 250,000 $ 3,437
Vice President (3) 2001 96,000 750,000 720
2000 100,000
- ----------------------
(1) Amount represents the employer contribution to the 401(k) plan of the
individual.
(2) Includes amounts paid to the individual by Pannonian Energy
Corporation prior to the merger of Pannonian into a subsidiary of
Gasco.
(3) Mr. Sharpe, who is not an executive officer, retired from the Company
effective December 31, 2002, at which time; all of his outstanding
options were cancelled.
12
The following table sets forth information with respect to all stock options
granted during the year ended December 31, 2002 to the named Executive Officers
and other officer.
Option/SAR Grants in Last Fiscal Year
Potential Realized
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term (1)
----------------- ------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration 5% 10%
Name Granted Fiscal Year ($/Share) Date (2) Share Price Share Price
---- -------- ----------- --------- ---- ----------- -----------
Howard O. Sharpe 250,000 50 1.95 12/31/02 $20,000 $40,000
(1) Securities and Exchange Commission Rules require calculation of
potential realizable value assuming that the market price of the
Common Stock appreciates in value at 5% and 10% annualized rates from
the date of grant to the expiration date of the option. No gain to an
executive officer is possible without an appreciation in Common Stock
value, which will benefit all holders of Common Stock. The actual
value an executive officer may receive depends on market prices for
the Common Stock, and there can be no assurance that the amounts
reflected will actually be realized.
(2) The options granted to Mr. Sharpe during 2002 were cancelled effective
December 31, 2002, in connection with his retirement.
No options were exercised by executive officers or other officer during either
of the years ended December 31, 2002 or 2001. The following table sets forth the
value of options held by the executive officers at December 31, 2002. All of the
options granted to Mr. Sharpe during the years ended December 31, 2002 and 2001
were cancelled effective December 31, 2002.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of Securities Underlying Value of Unexercised
Unexercised Options/SARs at In-the-Money Options/SARs at
FY-End (#) FY-End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable (1)
- ---- -------------------------- ----------------------------
Mark A. Erickson 2,097,500/62,500 0/0
W. King Grant 387,000/50,000 0/0
Michael K. Decker 339,000/75,000 0/0
(1) The value of in-the-money options is equal to the fair market value of
a share of Common Stock on December 31, 2002 of $0.69, less the
exercise price.
13
Employment Agreements
Michael K. Decker Employment Agreement. Mr. Decker's 2002 and 2001
compensation was determined under the terms of an employment agreement,
effective July 1, 2001, between Gasco and Mr. Decker that expired on June 30,
2004. Mr. Decker's employment agreement was amended and restated effective
January 2, 2003 and is effective until January 31, 2006. Mr. Decker serves as
Chief Operating Officer and Executive Vice President of Gasco. Mr. Decker's
previous employment agreement entitled him to an annual salary of $200,000,
subject to increase at the discretion of the Board of Directors, and an annual
bonus equal to 0.75% of Gasco's cash flow from wells drilled by or on behalf of
the Company. The original employment agreement provided for the award to Mr.
Decker of options to purchase 300,000 shares of common stock of the Company
pursuant to the terms of the Company's Stock and Option and Incentive Award Plan
at an exercise price of $3.15 per share. Options to purchase 100,000 shares
vested upon the execution of the agreement and the remaining options vest in
equal amounts over the following eight fiscal quarters. Mr. Decker's amended and
restated employment agreement reduced his annual salary to $175,000 and provided
for the award of options to purchase 350,000 shares of common stock at $1.00 per
share. The options vest 16 2/3% at the end of each four month period after the
issuance date, February 14, 2003, until they are fully vested on February 14,
2005. Mr. Decker is also entitled to receive 10% of all option grants made by
the Company each calendar year during the term of the agreement. In addition,
the employment agreement provides that each year Mr. Decker and the Company
shall mutually agree on a performance-based bonus plan for Mr. Decker. The
employment agreement also contains non-compete provisions in the event of Mr.
Decker's termination of employment.
Mr. Decker's employment agreement also includes provisions governing the payment
of severance benefits if his employment is terminated for any other reason other
than his voluntary resignation, death, disability or discharge for cause. In the
event that Mr. Decker's employment is terminated by the Company without cause or
due to certain change of control events, Mr. Decker is entitled to receive an
amount equal to his salary for the remaining term of the agreement plus an
additional cash payment of $250,000. If the termination occurs at anytime when
the average closing price for the Company's common stock for the 30 trading days
prior to termination is equal to between $1.50 per share and $1.99 per share,
the additional cash payment will increase to $500,000. This payment will be
further increased as such average closing price increases, up to a maximum of
$1,750,000 if such average closing price is greater than $3.50 per share. If the
termination is because of a change of control of the Company, the additional
cash payment will be based on the consideration per share paid to the Company's
shareholders in connection with the change of control instead of the market
price of the Company's common stock.
Mark A. Erickson Employment Agreement. Mr. Erickson's 2002 and 2001
compensation was determined under the terms of an employment agreement,
effective February 1, 2001, between Gasco and Mr. Erickson that expired on
January 31, 2006. Mr. Erickson's employment agreement was amended and restated
effective January 2, 2003 and is effective until January 31, 2006. Mr. Erickson
serves as Chief Executive Officer and President of Gasco. Mr. Erickson's
employment agreement entitled him to an annual salary of $240,000, subject to
increase at the discretion of the Board of Directors, and an annual bonus equal
to 0.875% of Gasco's cash flow from wells drilled by or on behalf of the
Company. The original employment agreement provided for the award to Mr.
Erickson of options to purchase 1,000,000 shares of common stock of the Company
pursuant to the terms of the Company's Stock and Option and Incentive Award Plan
at an exercise price of $1.00 per share and options to purchase 250,000 shares
of common stock of the Company pursuant to such plan at an exercise price of
$2.50 per share. Options to purchase 1,000,000 shares have vested and the
remaining options vest in equal amounts over the eight fiscal quarters following
14
the effective date of the agreement. Mr. Erickson's amended and restated
employment agreement reduced his annual salary to $120,000 and provides for the
issuance of 187,500 shares of common stock from a restricted stock plan in
exchange for the surrender by Mr. Erickson of vested options to purchase 250,000
shares of common stock at $3.00 per share and 875,000 shares of common stock at
$2.00 per share. Mr. Erickson also has the right to receive 25% of all option
grants made by the Company each calendar year during the term of the agreement.
In addition, the employment agreement provides that each year Mr. Erickson and
the Company shall mutually agree on a performance-based bonus plan for Mr.
Erickson. The employment agreement also contains non-compete provisions in the
event of Mr. Erickson's termination of employment.
Mr. Erickson's employment agreement also includes provisions governing the
payment of severance benefits if his employment is terminated for any other
reason other than his voluntary resignation, death, disability or discharge for
cause. In the event that Mr. Erickson's employment is terminated by the Company
without cause or due to certain change of control events, Mr. Erickson is
entitled to receive an amount equal to his salary for the remaining term of the
agreement plus an additional cash payment of $500,000. If the termination occurs
at anytime when the average closing price for the Company's common stock for the
30 trading days prior to termination is equal to between $1.50 per share and
$1.99 per share, the additional cash payment will increase to $1,000,000. This
payment will be further increased as such average closing price increases, up to
a maximum of $3,500,000 if such average closing price is greater than $3.50 per
share. If the termination is because of a change of control of the Company, the
additional cash payment will be based on the consideration per share paid to the
Company's shareholders in connection with the change of control instead of the
market price of the Company's common stock.
W. King Grant III Employment Agreement. Mr. Grant's 2002 and 2001
compensation was determined under the terms of an employment agreement,
effective June 1, 2001, between Gasco and Mr. Grant that expired on May 31,
2004. Mr. Grant's employment agreement was amended and restated effective
January 2, 2003 and is effective until January 31, 2006. Mr. Grant serves as
Chief Financial Officer and Executive Vice President of Gasco. Mr. Grant's
employment agreement entitled him to an annual salary of $120,000, subject to
increase at the discretion of the Board of Directors, and an annual bonus equal
to 0.5% of Gasco's cash flow from wells drilled by or on behalf of the Company.
The employment agreement provides for the award to Mr. Grant of options to
purchase 200,000 shares of common stock of the Company pursuant to the terms of
the Company's Stock and Option and Incentive Award Plan at an exercise price of
$3.00 per share and options to purchase 100,000 shares of common stock of the
Company pursuant to such plan at an exercise price of $3.15. Options to purchase
100,000 shares at an exercise price of $3.00 per share vested upon the execution
of the agreement and the remaining options vest in equal amounts over the
following eight fiscal quarters. Mr. Grant's amended and restated employment
agreement reduced his annual salary to $175,000 and provided for the award of
options to purchase 200,000 shares of common stock at $1.00 per share. The
options vest 16 2/3% at the end of each four month period after the issuance
date, February 14, 2003, until they are fully vested on February 14, 2005. Mr.
Grant is also entitled to receive 10% of all option grants made by the Company
each calendar year during the term of the agreement. In addition, the employment
agreement provides that each year Mr. Grant and the Company shall mutually agree
on a performance-based bonus plan for Mr. Grant. The employment agreement also
contains non-compete provisions in the event of Mr. Grant's termination of
employment.
Mr. Grant's employment agreement also includes provisions governing the payment
of severance benefits if his employment is terminated for any other reason other
than his voluntary resignation, death, disability or discharge for cause. In the
event that Mr. Grant's employment is terminated by the Company without cause or
due to certain change of control events, Mr. Grant is entitled to receive an
15
amount equal to his salary for the remaining term of the agreement plus an
additional cash payment of $250,000. If the termination occurs at anytime when
the average closing price for the Company's common stock for the 30 trading days
prior to termination is equal to between $1.50 per share and $1.99 per share,
the additional cash payment will increase to $500,000. This payment will be
further increased as such average closing price increases, up to a maximum of
$1,750,000 if such average closing price is greater than $3.50 per share. If the
termination is because of a change of control of the Company, the additional
cash payment will be based on the consideration per share paid to the Company's
shareholders in connection with the change of control instead of the market
price of the Company's common stock.
Anti-Dilution Provisions of Employment Agreements and Consulting Agreement
Each of the above original Employment Agreements for Messrs. Decker, Erickson
and Grant and the Strategic Consulting Agreement for Mr. Bruner described under
"Certain Transactions" above, contained the following described anti-dilution
provision during the year 2002. Upon the completion of any subsequent
transaction involving the issuance of common stock of the Company, or the
issuance of any security which is convertible, by its terms into common stock of
the Company (a "Financing"), the Company shall grant the person additional
options to purchase shares of the Company's common stock at the same per share
price as that involved in the Financing. The number of options granted to the
person shall be sufficient to maintain his ownership interest in the Company
(the ratio of (a) the sum of the number of his unexercised options (both vested
and unvested) plus the number of shares owned by him as result of exercising
options to (b) the total number of outstanding shares of the Company's common
stock plus the number of shares represented by all unexercised options) at the
level that existed immediately prior to such Financing. Messrs. Decker,
Erickson, Grant and Bruner waived their rights under this anti-dilution
provision with respect to (1) the issuance by the Company of 9,500,000 shares of
common stock to Shama Zoe on May 1, 2002, and (2) the issuance by the Company of
6,500,000 shares of common stock for cash in a private placement on August 14,
2002. The amended and restated employment agreements that became effective
January 2, 2003 as described above, do not contain any anti-dilution provisions.
Compensation Committee Interlocks and Insider Participation
During 2002, the Compensation Committee of the Board was comprised of three
directors, Mr. Lotito, Mr. Crowell and Mr. Stadelhofer. None of these directors
is or was an officer of the Company or any of its subsidiaries at any time now
or in the past.
Report of the Compensation Committee of the Company
The Compensation Committee of the Board of Directors is responsible for setting
and administering the policies that govern the annual compensation and the
long-term compensation for the Company's executive officers. The Compensation
Committee for the year ended December 31, 2002 was composed of Mr. Lotito, Mr.
Crowell, and Mr. Stadelhofer, neither of whom is employed by the Company or any
of its subsidiaries. Mr. Burgess was added to the Compensation Committee during
May 2003 and he is not employed by the Company or any of its subsidiaries. The
Compensation Committee makes all decisions concerning the compensation of
executive officers who receive annual compensation in excess of $100,000,
determines the total amount of bonuses, if any, to be paid and grants all awards
of stock options. The Compensation Committee's compensation practices are
designed to attract, motivate and retain key personnel by recognizing individual
contributions, as well as the overall performance of the Company.
16
The current executive compensation consists of base salary, potential cash bonus
awards and long-term incentive opportunities in the form of stock options.
Although the Compensation Committee has not adopted a formal compensation plan,
executive compensation is reviewed by the Compensation Committee and is set for
individual executive officers based on subjective evaluations of each
individual's performance, the Company's performance, and a comparison to salary
ranges for similar positions in other companies within the oil and gas industry.
The goal of the Compensation Committee is to ensure that the Company retains
qualified executives and whose financial interests are aligned with those of the
shareholders.
Base Salaries: The base salary for each executive officer is determined based on
the individual's performance, industry experience and the compensation levels of
industry competitors. The Compensation Committee reviews various surveys and
publicly filed documents to determine comparable salary levels within the
industry.
Potential Cash Bonus Awards: The Compensation Committee does not currently have
a formal cash bonus plan. Cash bonuses may be awarded from time to time for
exceptional effort and performance. The Compensation Committee considers the
achievements of the Company to determine the level of the cash bonus, if any, to
be awarded. The Compensation Committee focuses the earnings of the Company, the
return on stockholders' equity, the growth in proved oil and gas reserves and
the successful completion of specific projects of the Company to determine the
level of bonus awards, if any.
Stock Options: The Compensation Committee utilizes stock option awards as a
method of aligning the executives' interests with those of the stockholders by
giving the key employees a direct stake in the performance of the Company. The
Compensation Committee uses the same criteria described above to determine the
level of stock option awards. During 2001, 3,011,000 common stock options were
granted to the Company's executive officers. There were no common stock options
granted to the executive officers during the year ended December 31, 2002.
Compensation of the Chief Executive Officer: During the year ended December 31,
2002, Mark Erickson, President and Chief Executive Officer received total
compensation of $247,335 which is comprised of an annual salary of $240,000,
which Mr. Erickson is entitled to under his employment agreement, and deferred
compensation pursuant to the Company's 401(k) plan of $7,335. The Compensation
Committee considered the factors described above to determine that the
compensation paid to Mr. Erickson during 2002 was appropriate.
The foregoing report is made by the Compensation Committee of the Company's
Board of Directors. The members of the Committee during 2002 were Mr. Lotito,
Mr. Crowell and Mr. Stadelhofer.
CARMEN LOTITO
CHARLES B. CROWELL
CARL STADELHOFER
17
Performance Chart
The following chart shows the changes in the value of $100, over the period of
January, 2001, when the Company began trading, until December 31, 2002, invested
in: (1) Gasco Energy, Inc.; (2) the NASDAQ Market Index; and (3) a peer group
consisting of all the publicly-held companies within SIC code 1311, Crude
Petroleum and Natural Gas, consisting of approximately 190 companies. The
year-end value of each investment is based on share price appreciation and
assumes that $100 was invested on January 1, 2000 and that all dividends were
reinvested. Calculations exclude trading commissions and taxes. The comparison
of past performance in the graph is required by the SEC and is not intended to
forecast or be indicative of possible future performance of the Company's Common
Stock.
January 1, December 31, December 31,
2001 2001 2002
---- ---- ----
Gasco Energy, Inc. $100.00 $46.30 $ 18.25
Peer Group Index 100.00 91.75 104.72
NASDAQ Market Index 100.00 80.00 73.86
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(Item B 3. on Proxy Card)
The Board of Directors has appointed the firm of Deloitte & Touche LLP as the
independent auditors of the Company for the fiscal year ending December 31,
2003, and recommends ratification by the stockholders of such appointment.
Representatives of Deloitte & Touche LLP are expected to be present at the
annual meeting, have an opportunity to make statements regarding the Company and
to be available to respond to appropriate questions.
18
Audit Fees. The aggregate fees for the audit of the Company's 2002
consolidated financial statements and review of its quarterly financial
information were $58,509.
Financial Information Systems Design and Implementation Fees. No financial
information systems design and implementation services were rendered to the
Company by Deloitte & Touche LLP in fiscal year 2002.
All Other Fees. The Company paid an aggregate of $105,944 to Deloitte &
Touche LLP for other professional services rendered in fiscal year 2002. These
services rendered by Deloitte & Touche LLP consisted of $89,559 related to tax
planning and compliance services and $16,385 related to security offerings and
related registration statements.
The Audit Committee of the Board of Directors considered the services listed
above to be compatible with maintaining Deloitte & Touche LLP 's independence.
The Board of Directors recommends a vote "For" approval of the proposal to
ratify the appointment of Deloitte & Touche LLP as the Company's independent
auditors for 2003.
APPROVAL OF THE GASCO ENERGY, INC., 2003 RESTRICTED STOCK PLAN
(Item B 4. on Proxy Card)
General. At the Annual Meeting, the stockholders will be asked to approve the
adoption of the Gasco Energy, Inc. 2003 Restricted Stock Plan (the "Stock
Plan"). A copy of the Stock Plan is attached hereto as Appendix B. The Stock
Plan authorizes the granting of restricted stock to employees, directors or
consultants of the Company. The Plan will provide the Company with the ability
to give employees, directors and consultants the opportunity to invest in and
hold the common stock of the Company. The Board continues to believe that
employee ownership in the Company best aligns the employees' interests with its
shareholders.
The Board of Directors recommends a vote "For" approval of the proposal to
approve the Gasco Energy, Inc. 2003 Restricted Stock Plan.
Purpose of the Stock Plan. The purpose of the Stock Plan is to enable the
Company to attract able persons to serve as directors, consultants or employees
of the Company and to provide a means whereby those individuals upon whom the
responsibilities of the successful administration and management of the Company
rest, and whose present and potential contributions to the Company are of
importance, can acquire and maintain stock ownership, thereby strengthening
their concern for the welfare of the Company. A further purpose of the Stock
Plan is to provide such individuals with additional incentive and reward
opportunities designed to enhance the profitable growth of the Company.
Plan Administration. The Compensation Committee will administer the Stock Plan.
The Committee will have to the authority to determine which employees,
consultants or directors shall receive stock awards under the Stock Plan. In
making such determinations, the Committee shall take into account the nature of
the services rendered by the respective employees, consultants or directors,
their present and potential contribution to the Company's success and such other
factors as the Committee, in its discretion, deem relevant. Subject to the
express provisions of the Stock Plan, the Committee shall have authority, in its
sole and absolute discretion, to make such determinations, perform such acts and
exercise such power and authority necessary or advisable to administer the Stock
Plan.
19
Shares Subject to the Stock Plan and Award Limits. Subject to adjustment in the
event of the recapitalization or reorganization or other change in the Company's
capital structure, the aggregate number of shares of Common Stock that may be
issued under the Stock Plan shall not exceed 425,000 shares. To the extent that
an award under the Stock Plan lapses or the rights of its holder terminate, any
shares of Common Stock subject to such award shall again be available for the
grant of an award under the Stock Plan.
Grant of Awards. The Committee may from time to time grant awards under the
Stock Plan to one or more employees, consultants or directors determined to be
eligible for participation in the Stock Plan in accordance with the terms
thereof.
Stock Offered. The stock to be offered under the Stock Plan may be authorized
but unissued Common Stock or Common Stock previously issued and outstanding and
reacquired by the Company. Any of such shares which remain unissued and which
are not subject to outstanding awards at the termination of the Stock Plan shall
cease to be subject to the Stock Plan but, until termination of the Stock Plan,
the Company shall at all times make available a sufficient number of shares to
meet the requirements of the Stock Plan.
Eligibility. Awards of stock under the Stock Plan may be granted only to persons
who, at the time of grant, are employees, consultants or directors. An award may
be granted on more than one occasion to the same person.
Recapitalization or Reorganization. The existence of the Stock Plan and the
common stock granted hereunder shall not affect in any way the right or power of
the Board or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other changed in the Company's
capital structure or its business, any merger or consolidation of the Company,
any issue of debt or equity securities ahead of or affecting Common Stock or the
rights thereof, the dissolution or liquidation of the Company or any sale, lease
exchange or other disposition of all or any part of its assets or business or
any other corporate act or proceeding.
In the event of changes in the outstanding Common Stock by reason of
recapitalizations, reorganizations, mergers, consolidations, combinations,
split-ups, spin-offs, exchanges or other relevant changes in capitalization or
distributions to the holders of Common Stock, the aggregate number of shares
available for awards under the Stock Plan shall be appropriately adjusted to the
extent, if any, determined by the Committee, whose determination shall be
conclusive.
Amendment and Termination of the Stock Plan. The Board in its discretion may
terminate the Stock Plan at any time with respect to any shares of Common Stock
for which awards have not theretofore been granted. The Board shall have the
right to alter or amend the Stock Plan or any part thereof from time to time;
provided that no change in the Stock Plan may be made that would impair the
rights of an individual with respect to an award theretofore granted without the
consent of the individual, and provided, further, that the Board may not,
without approval of the stockholders of the Company, amend the Plan to increase
the maximum aggregate number of shares that may be issued under the Stock Plan
or change the class of individuals eligible to receive awards under the Stock
Plan.
Miscellaneous. Neither the adoption of the Stock Plan nor any action of the
Board or of the Committee shall be deemed to give an employee, consultant, or
director any right to a restricted stock award, or any other rights hereunder
except as may be evidenced by a restricted stock agreement duly executed on
behalf of the Company, and then only to the extent and on the terms and
conditions expressly set forth therein. The Stock Plan shall be unfunded. The
Company shall not be required to establish any special or separate fund or to
20
make any other segregation of funds or assets to assure the performance of its
obligations under any award.
Existing Grants
On August 12, 2003, the Committee granted a total of 425,000 shares of
restricted stock under the Stock Plan to the following individuals, subject to
stockholder approval of the Stock Plan:
Name and Position Number of Shares
Mark Erickson 187,500
Marc Bruner 187,500
King Grant 50,000
The terms of the restricted stock provide for forfeiture of such shares in the
event the executive's employment with the Company is terminated for any reason
other than a termination by the Company without cause. The forfeiture
restrictions lapse with respect to 20% of the shares on the first anniversary of
the grant, with respect to 20% of the shares on the second anniversary of the
grant and with respect to the remaining 60% of the shares on the third
anniversary of the grant. In addition, the forfeiture restrictions lapse on
certain change of control events, termination of employment without cause or the
expiration of the executive's employment agreement.
Equity Compensation Plans
The table below provides information relating to the Company's equity
compensation plans as of December 31, 2002:
Number of securities
remaining available
Number of securities Weighted-average for future issuance
to be issued exercise price of under compensation
upon exercise of outsanding plans (excluding
outstanding options, options, securities reflected
Plan Category warrants and rights warrants and rights in first column)
- ------------- ------------------- ------------------- ----------------
Equity compensation plans
approved by security holders 258,000 $ 1.66 918,900
Equity compensation plans
not approved by security holders 6,097,250 2.19 (a)
--------- --------- --------
Total 6,355,250 $ 2.17 918,900
========= ==== =======
21
(a) The equity compensation plan not approved by shareholders is comprised
of individual common stock option agreements issued to directors,
consultants and employees of the Company, as summarized below. The
common stock options vest between zero and two years of the date of
issue and expire within ten years of the vesting date. The exercise
prices of these options range from $1.00 per share to $3.70 per share.
Since these options are issued in individual compensation
arrangements, there are no options available under any plan for future
issuance. The material terms of these options are as follows:
Options Issued to: Number of Exercise Price Vesting Dates Expiration Dates
Options
Employees 5,674,750 $1.00 - $3.15 2001 - 2003 2006 - 2008
Consultants 272,500 $3.00 - $3.70 2001 - 2003 2006 - 2008
Directors 150,000 $3.00 - $3.15 2001 - 2003 2006 - 2008
-------
Total Issued 6,097 250
=========
OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting or any adjournment(s) thereof, it is
intended that the enclosed proxy will be voted in accordance with the judgment
of the persons named in the proxy.
STOCKHOLDER PROPOSALS AND NOMINATIONS
Any stockholder who wishes to submit a proposal for inclusion in the proxy
material for the Company's 2004 Annual Meeting of Stockholders must forward such
proposal to the Secretary of the Company at the address indicated on the cover
page of this proxy statement, so that the Secretary receives it no later than
May 21, 2004.
In addition, the Company's Bylaws provide that only such business as is properly
brought before the Annual Meeting will be conducted. For business to be properly
brought before the meeting or for nominations of persons for election to the
Board of Directors to be properly made at the Annual Meeting by a stockholder
and not included in the Company's proxy statement for such meeting, notice must
be received by the Secretary of the Company at the address indicated on the
cover page not earlier than May 21, 2004 and not later than June 21, 2004;
provided that in the event that the date of the 2004 annual meeting is more than
thirty days before or more than seventy days after September 18, 2004, such
notice must be so delivered not earlier than the close of business on the 120th
day prior to such annual meeting and not later than the close of business on the
later of the 90th day prior to such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is first made by
the Company. On request, the Secretary of the Company will provide detailed
instructions for submitting proposals or nominations. A copy of the Bylaws may
also be obtained upon request from the Secretary of the Company.
By Order of the Board of Directors,
/s/ W. King Grant
------------------
W. King Grant
Secretary
August 25, 2003
22
Appendix A
Audit Committee Charter
Organization
There shall be a committee of the board of directors to be known as the audit
committee. The audit committee shall be composed of at least three directors who
are independent of the management of the corporation and are free of any
relationship that, in the opinion of the board of directors, would interfere
with their exercise of independent judgment as a committee member.
Statement of Policy
The audit committee shall provide assistance to the board of directors in
fulfilling their responsibility to the shareholders, potential shareholders, and
investment community relating to corporate accounting, reporting practices of
the corporation, and the quality and integrity of the financial reports of the
corporation. In so doing, it is the responsibility of the audit committee to
maintain free and open means of communication between the directors, the
independent auditors, the internal auditors, and the financial management of the
corporation.
Responsibilities
In carrying out its responsibilities, the audit committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the directors and shareholders that the corporate
accounting and reporting practices of the corporation are in accordance with all
requirements and are of the highest quality.
In carrying out these responsibilities, the audit committee will:
o Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the corporation and its
divisions and subsidiaries.
o Review and recommend to the directors the securities legal counsel for
the corporation.
o Meet with the independent auditors and financial management of the
corporation to review the scope of the proposed audit for the current
year and the audit procedures to be utilized, and at the conclusion
thereof review such audit, including any comments or recommendations
of the independent auditors.
o Review with the independent auditors, the company's internal auditor,
and financial and accounting personnel, the adequacy and effectiveness
of the accounting and financial controls of the corporation, and
elicit any recommendations for the improvement of such internal
control procedures or particular areas where new or more detailed
controls or procedures are desirable. Particular emphasis should be
given to the adequacy of such internal controls to expose any
payments, transactions, or procedures that might be deemed illegal or
otherwise improper. Further, the committee periodically should review
company policy statements to determine their adherence to the code of
conduct.
A-1
o Review the internal audit function of the corporation including the
independence and authority of its reporting obligations; the proposed
audit plans for the coming year, and the coordination of such plans
with the independent auditors.
o Receive prior to each meeting of the committee, a summary of findings
from completed internal auditors and a progress report on the proposed
internal audit plan, with explanations for any deviations from the
original plan.
o Review the financial statements contained in the annual and quarterly
reports to shareholders with management and the independent auditors
to determine that the independent auditors are satisfied with the
disclosure and content of the financial statements to be presented to
the shareholders. Any changes in accounting principles should be
reviewed.
o Provide sufficient opportunity for the internal and independent
auditors to meet with the members of the audit committee without
members of management present. Among the items to be discussed in
these meetings are the independent auditors' evaluation of the
corporation's financial, accounting, and auditing personnel, and the
cooperation that the independent auditors received during the course
of the audit.
o Review accounting and financial human resources and succession
planning within the company.
o Submit the minutes of all meetings of the audit committee to, or
discuss the matters discussed at each committee meeting with, the
board of directors.
o Investigate any matter brought to its attention within the scope of
its duties, with the power to retain outside counsel for this purpose
if, in its judgment, that is appropriate.
The members of the audit committee shall be compensated for their service on the
committee in accordance with the compensation policy of the Board of Directors
for service of directors over and above the level of service expected from a
director. Specifically, each director shall be paid a monthly fee of $2500
payable in arrears. It is expected that for this fee a director will devote such
service as is required to function as an educated director, up to 25% of the
director's time during any month (based on 4 weeks per month). For time spent by
a director providing services to the Company, in excess of 25% per month, that
director shall be compensated prorata on 1/2 day increments including but not
limited to service on the Audit Committee. Director compensation will be a
maximum of $10,000 per month. In addition to any fees received, a director shall
be reimbursed for any and all expenses incurred in connection with the business
of the committee, provided such expenses are approved in advance, in writing.
The board of directors may approve additional or greater compensation in its
discretion.
A-2
Appendix B
GASCO ENERGY, INC.
2003 RESTRICTED STOCK PLAN
I. PURPOSE
The purpose of the GASCO ENERGY, INC. 2003 RESTRICTED STOCK PLAN (the
"Plan") is to provide a means through which GASCO ENERGY, INC., a Nevada
corporation (the "Company"), and its Affiliates may attract able persons to
serve as Directors or Consultants or to enter the employ of the Company and its
Affiliates and to provide a means whereby those individuals upon whom the
responsibilities of the successful administration and management of the Company
and its Affiliates rest, and whose present and potential contributions to the
Company and its Affiliates are of importance, can acquire and maintain stock
ownership, thereby strengthening their concern for the welfare of the Company
and its Affiliates. A further purpose of the Plan is to provide such individuals
with additional incentive and reward opportunities designed to enhance the
profitable growth of the Company and its Affiliates. Accordingly, the Plan
provides for granting Restricted Stock Awards as provided herein.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan unless
specifically modified by any paragraph:
(a) "Affiliate" means any corporation, partnership, limited liability
company or partnership, association, trust or other organization which,
directly or indirectly, controls, is controlled by, or is under common
control with, the Company. For purposes of the preceding sentence,
"control" (including, with correlative meanings, the terms "controlled by"
and "under common control with"), as used with respect to any entity or
organization, shall mean the possession, directly or indirectly, of the
power (i) to vote more than 50% of the securities having ordinary voting
power for the election of directors of the controlled entity or
organization, or (ii) to direct or cause the direction of the management
and policies of the controlled entity or organization, whether through the
ownership of voting securities or by contract or otherwise.
(b) "Award" means, individually or collectively, any Restricted Stock
Award.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended. Reference
in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations
under such section.
(e) "Committee" means a committee of the Board that is selected by the
Board as provided in Paragraph IV(a).
(f) "Common Stock" means the common stock, par value $.001 per share, of
the Company.
(g) "Company" means Gasco Energy, Inc., a Nevada corporation.
B-1
(h) "Consultant" means any person who is not an Employee or a Director and
who is providing advisory or consulting services to the Company or any
Affiliate.
(i) "Director" means an individual elected to the Board by the stockholders
of the Company or by the Board under applicable corporate law who is
serving on the Board on the date the Plan is adopted by the Board or is
elected to the Board after such date.
(j) "Employee" means any person (including a Director) in an employment
relationship with the Company or any Affiliate.
(k) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(l) "Participant" means an Employee, Consultant, or Director who has been
granted an Award.
(m) "Plan" means the Gasco Energy, Inc. 2003 Restricted Stock Plan, as
amended from time to time.
(n) "Restricted Stock Agreement" means a written agreement between the
Company and a Participant with respect to a Restricted Stock Award.
(o) "Restricted Stock Award" means an Award granted under the Plan.
(p) "Rule 16b-3" means SEC Rule 16b-3 promulgated under the 1934 Act, as
such may be amended from time to time, and any successor rule, regulation
or statute fulfilling the same or a similar function.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall become effective upon the date of its adoption by the Board,
provided the Plan is approved by the stockholders of the Company within 12
months thereafter. Notwithstanding any provision in the Plan or in any
Restricted Stock Agreement, no Restricted Stock Award shall vest prior to such
stockholder approval. No further Awards may be granted under the Plan after 10
years from the date the Plan is adopted by the Board. The Plan shall remain in
effect until all Restricted Stock Awards granted under the Plan have vested or
been forfeited.
IV. ADMINISTRATION
(a) Composition of Committee. The Plan shall be administered by a committee
of, and appointed by, the Board that shall be comprised solely of two or more
"Non-Employee Directors" as defined in Rule 16b-3.
(b) Powers. Subject to the express provisions of the Plan, the Committee
shall have authority, in its discretion, to determine which Employees,
Consultants, or Directors shall receive an Award, the time or times when such
Award shall be made and the number of shares to be subject to each Restricted
Stock Award. In making such determinations, the Committee shall take into
account the nature of the services rendered by the respective Employees,
Consultants, or Directors, their present and potential contribution to the
Company's success and such other factors as the Committee in its discretion
shall deem relevant.
(c) Additional Powers. The Committee shall have such additional powers as
are delegated to it by the other provisions of the Plan. Subject to the express
B-2
provisions of the Plan, this shall include the power to construe the Plan and
the respective agreements executed hereunder, to prescribe rules and regulations
relating to the Plan, and to determine the terms, restrictions and provisions of
the agreement relating to each Award, and to make all other determinations
necessary or advisable for administering the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any agreement relating to an Award in the manner and to the extent it shall deem
expedient to carry it into effect. The determinations of the Committee on the
matters referred to in this Paragraph IV shall be conclusive.
V. SHARES SUBJECT TO THE PLAN; AWARD LIMITS;
GRANT OF AWARDS
(a) Shares Subject to the Plan and Award Limits. Subject to adjustment as
provided in Paragraph VIII(b), the aggregate number of shares of Common Stock
that may be issued under the Plan shall not exceed 425,000 shares. Shares shall
be deemed to have been issued under the Plan only to the extent actually issued
and delivered pursuant to an Award. To the extent that an Award lapses or the
rights of its holder terminate, any shares of Common Stock subject to such Award
shall again be available for the grant of an Award under the Plan.
(b) Grant of Awards. The Committee may from time to time grant Awards to
one or more Employees, Consultants, or Directors determined by it to be eligible
for participation in the Plan in accordance with the terms of the Plan.
(c) Stock Offered. Subject to the limitations set forth in Paragraph V(a),
the stock to be offered pursuant to the grant of an Award may be authorized but
unissued Common Stock or Common Stock previously issued and outstanding and
reacquired by the Company. Any of such shares which remain unissued and which
are not subject to outstanding Awards at the termination of the Plan shall cease
to be subject to the Plan but, until termination of the Plan, the Company shall
at all times make available a sufficient number of shares to meet the
requirements of the Plan.
VI. ELIGIBILITY
Awards may be granted only to persons who, at the time of grant, are
Employees, Consultants, or Directors. An Award may be granted on more than one
occasion to the same person.
VII. RESTRICTED STOCK AWARDS
(a) Forfeiture Restrictions To Be Established by the Committee. Shares of
Common Stock that are the subject of a Restricted Stock Award shall be subject
to restrictions on disposition by the Participant and an obligation of the
Participant to forfeit and surrender the shares to the Company under certain
circumstances (the "Forfeiture Restrictions"). The Forfeiture Restrictions shall
be determined by the Committee in its sole discretion, and the Committee may
provide that the Forfeiture Restrictions shall lapse upon (i) the attainment of
one or more performance targets established by the Committee, (ii) the
Participant's continued employment with the Company or an Affiliate or continued
service as a Consultant or Director for a specified period of time, (iii) the
occurrence of any event or the satisfaction of any other condition specified by
the Committee in its sole discretion, or (iv) a combination of any of the
foregoing. Each Restricted Stock Award may have different Forfeiture
Restrictions, in the discretion of the Committee.
(b) Other Terms and Conditions. Common Stock awarded pursuant to a
Restricted Stock Award shall be represented by a stock certificate registered in
B-3
the name of the Participant. Unless provided otherwise in a Restricted Stock
Agreement, the Participant shall have the right to receive dividends and other
distributions with respect to Common Stock subject to a Restricted Stock Award,
to vote Common Stock subject thereto and to enjoy all other stockholder rights,
except that (i) the Participant shall not be entitled to delivery of the stock
certificate until the Forfeiture Restrictions have expired, (ii) the Company
shall retain custody of the stock until the Forfeiture Restrictions have
expired, (iii) the Participant may not sell, transfer, pledge, exchange,
hypothecate or otherwise dispose of the stock until the Forfeiture Restrictions
have expired, and (iv) a breach of the terms and conditions established by the
Committee pursuant to the Restricted Stock Agreement shall cause a forfeiture of
the Restricted Stock Award. At the time of such Award, the Committee may, in its
sole discretion, prescribe additional terms, conditions or restrictions relating
to Restricted Stock Awards, including, but not limited to, rules pertaining to
the treatment of distributions or dividends on shares of Restricted Stock and to
the termination of employment or service as a Consultant or Director (by
retirement, disability, death or otherwise) of a Participant prior to expiration
of the Forfeitures Restrictions. Such additional terms, conditions or
restrictions shall be set forth in a Restricted Stock Agreement made in
conjunction with the Award.
(c) Payment for Restricted Stock. The Committee shall determine the amount
and form of any payment for Common Stock received pursuant to a Restricted Stock
Award, provided that in the absence of such a determination, a Participant shall
not be required to make any payment for Common Stock received pursuant to a
Restricted Stock Award, except to the extent otherwise required by law.
(d) Committee's Discretion to Accelerate Vesting of Restricted Stock
Awards. The Committee may, in its discretion and as of a date determined by the
Committee, fully vest any or all Common Stock awarded to a Participant pursuant
to a Restricted Stock Award and, upon such vesting, all restrictions applicable
to such Restricted Stock Award shall terminate as of such date. Any action by
the Committee pursuant to this Subparagraph may vary among individual
Participants and may vary among the Restricted Stock Awards held by any
individual Participant.
(e) Restricted Stock Agreements. At the time any Award is made under this
Paragraph VII, the Company and the Participant shall enter into a Restricted
Stock Agreement setting forth each of the matters contemplated hereby and such
other matters as the Committee may determine to be appropriate. The terms and
provisions of the respective Restricted Stock Agreements need not be identical.
Subject to the consent of the Participant, the Committee may, in its sole
discretion, amend an outstanding Restricted Stock Agreement from time to time in
any manner that is not inconsistent with the provisions of the Plan.
VIII. RECAPITALIZATION OR REORGANIZATION
(a) No Effect on Right or Power. The existence of the Plan and the Awards
granted hereunder shall not affect in any way the right or power of the Board or
the stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's or any
Affiliate's capital structure or its business, any merger or consolidation of
the Company or any Affiliate, any issue of debt or equity securities ahead of or
affecting Common Stock or the rights thereof, the dissolution or liquidation of
the Company or any Affiliate or any sale, lease, exchange or other disposition
of all or any part of its assets or business or any other corporate act or
proceeding.
(b) Changes in the Common Stock. In the event of changes in the outstanding
Common Stock by reason of recapitalizations, reorganizations, mergers,
consolidations, combinations, split-ups, split-offs, spin-offs, exchanges or
B-4
other relevant changes in capitalization or distributions to the holders of
Common Stock, the aggregate number of shares available for Awards under the Plan
shall be appropriately adjusted to the extent, if any, determined by the
Committee, whose determination shall be conclusive.
(c) Stockholder Action. Any adjustment provided for in Subparagraph (b)
above shall be subject to any required stockholder action.
(d) No Adjustments unless Otherwise Provided. Except as hereinbefore
expressly provided, the issuance by the Company of shares of stock of any class
or securities convertible into shares of stock of any class, for cash, property,
labor or services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefore, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, and in any case whether or not
for fair value, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number of shares of Common Stock subject to Awards
theretofore granted.
IX. AMENDMENT AND TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with respect
to any shares of Common Stock for which Awards have not theretofore been
granted. The Board shall have the right to alter or amend the Plan or any part
thereof from time to time; provided that no change in the Plan may be made that
would impair the rights of a Participant with respect to an Award theretofore
granted without the consent of the Participant, and provided, further, that the
Board may not, without approval of the stockholders of the Company, amend the
Plan to increase the maximum aggregate number of shares that may be issued under
the Plan or change the class of individuals eligible to receive Awards under the
Plan.
X. MISCELLANEOUS
(a) No Right To An Award. Neither the adoption of the Plan nor any action
of the Board or of the Committee shall be deemed to give an Employee,
Consultant, or Director any right to a Restricted Stock Award, or any other
rights hereunder except as may be evidenced by a Restricted Stock Agreement duly
executed on behalf of the Company, and then only to the extent and on the terms
and conditions expressly set forth therein. The Plan shall be unfunded. The
Company shall not be required to establish any special or separate fund or to
make any other segregation of funds or assets to assure the performance of its
obligations under any Award.
(b) No Employment/Membership Rights Conferred. Nothing contained in the
Plan shall (i) confer upon any Employee or Consultant any right with respect to
continuation of employment or of a consulting or advisory relationship with the
Company or any Affiliate or (ii) interfere in any way with the right of the
Company or any Affiliate to terminate his or her employment or consulting or
advisory relationship at any time. Nothing contained in the Plan shall confer
upon any Director any right with respect to continuation of membership on the
Board.
(c) Other Laws; Withholding. The Company shall not be obligated to issue
any Common Stock pursuant to any Award granted under the Plan at any time when
the shares covered by such Award have not been registered under the Securities
Act of 1933, as amended, and such other state and federal laws, rules and
regulations as the Company or the Committee deems applicable and, in the opinion
of legal counsel for the Company, there is no exemption from the registration
requirements of such laws, rules and regulations available for the issuance and
sale of such shares. No fractional shares of Common Stock shall be delivered,
nor shall any cash in lieu of fractional shares be paid. The Company shall have
the right to deduct in connection with all Awards any taxes required by law to
B-5
be withheld and to require any payments required to enable it to satisfy its
withholding obligations.
(d) No Restriction on Corporate Action. Nothing contained in the Plan shall
be construed to prevent the Company or any Affiliate from taking any action
which is deemed by the Company or such Affiliate to be appropriate or in its
best interest, whether or not such action would have an adverse effect on the
Plan or any Award made under the Plan. No Participant, beneficiary or other
person shall have any claim against the Company or any Affiliate as a result of
any such action.
(e) Restrictions on Transfer. An Award shall not be transferable otherwise
than (i) by will or the laws of descent and distribution, (ii) pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder, or (iii) with the consent of the Committee.
(f) Governing Law. The Plan shall be governed by, and construed in
accordance with, the laws of the State of Nevada, without regard to conflicts of
law principles thereof.
B-6
FORM OF PROXY
Proxy - Gasco Energy, Inc.
Meeting Details
Proxy Solicited by Board of Directors for Annual Meeting - September 18, 2003
Charles B. Crowell and Richard S. Langdon, or any of them, each with the power
of substitution, are hereby authorized to represent and vote the shares of the
undersigned, with all the powers which the undersigned would possess if
personally present, at the Annual Meeting of Stockholders of Gasco Energy, Inc.
to be held on September 18, 2003, 1:30 p.m., at the Lone Tree Room, Staybridge
Suites, 7820 Park Meadows Drive, Denver-Lone Tree, CO 810124, or at any
postponement thereof.
Shares represented by this proxy will be voted as directed by the stockholder.
If no such directions are indicated, the Proxies will have authority to vote FOR
the nominees listed in Proposals 1 and 2, and FOR proposals 3 and 4.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting.
(Continued and to be voted on reverse side.)
Annual Meeting Proxy Card
A. Election of Directors.
1. The Board of Directors recommends a vote FOR the listed nominees.
For Withhold
01 Marc A. Bruner [ ] [ ]
02 Charles B. Crowell [ ] [ ]
03 Mark A. Erickson [ ] [ ]
04 Richard J. Burgess [ ] [ ]
05 Carmen J. (Tony) Lotito [ ] [ ]
06 Carl Stadelhofer [ ] [ ]
Election of Preferred Stock Director (only holders of Series B Preferred Stock
are entitled to vote)
2. The Board of Directors recommends a vote FOR the listed
nominee.
For Withhold
07 Richard S. Langdon [ ] [ ]
B. Proposals
The Board of Directors recommends a vote FOR the following proposals.
For Withhold
3. Proposal to ratify the appointment of Deloitte &
Touche LLP as independent auditors of Gasco Energy, [ ] [ ]
Inc. for the fiscal year ending December 31, 2003.
For Withhold
4. Proposal to approve the Gasco Energy, Inc. 2003 [ ] [ ]
Restricted Stock Plan.
C. Authorized Signatures - Sign Here - This section must be completed for your
instructions to be executed.
NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on the proxy.
All joint holders must sign. When signing as attorney, trustee, executor,
administrator, guardian or corporate officer, please provide your FULL title.
Signature 1 - Please keep Signature 2 - Please keep Date (mm/dd/yyyy)
signature within the box signature within the box
- ------------------------ ------------------------ --/--/--