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.
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(Name of Registrant as Specified In Its Charter)
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GASCO ENERGY, INC.
14 INVERNESS DRIVE E. SUITE H-236
ENGLEWOOD, CO 80112
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 2004
Notice is hereby given that the Annual Meeting of the Stockholders of Gasco
Energy, Inc., a Nevada corporation, will be held on Tuesday, May 18, 2004 at
1:30 p.m., Mountain Daylight Time, at Pikes Peak Room, Courtyard by Marriott,
8320 South Valley Highway Road, Englewood, Colorado. The Annual Meeting will be
held for the following purposes:
1. To elect eight directors to serve until the 2005 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, 2004.
3. To approve the Gasco Energy, Inc. Amended and Restated 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 April 15, 2004 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
April 19, 2004
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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 May 18, 2004
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 2004 Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Pikes Peak Room, Courtyard by Marriott, 8320 South Valley Highway Road,
Englewood, Colorado on Tuesday, May 18, 2004 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 April 19, 2004. 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. Amended and Restated 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 Annual Report on Form 10-K for the year ended December 31, 2003 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 April 15, 2004, the record date for the
determination of stockholders entitled to vote at the Annual Meeting, there were
outstanding 64,082,254 shares of Common Stock and 5,137 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
holders of Common Stock and Preferred Stock will vote together as a single
class.
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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 seven 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 voting is required to
ratify the selection of Deloitte & Touche LLP as the Company's independent
auditors for 2004 and to approve the Gasco Energy, Inc. Amended and Restated
2003 Restricted Stock Plan, provided such shares voting affirmatively also
constitute a majority of the number of shares required for a quorum.
Abstentions and broker non-votes will have no effect on the outcome of the
election of directors, assuming a quorum is present or represented by proxy at
the Annual Meeting. With respect to all other matters, abstentions and broker
non-votes are not considered to be votes cast and therefore will have no effect
on such matters. A broker non-vote occurs if a broker or other nominee of shares
does not have discretionary authority and has not received voting instructions
with respect to a particular matter.
ELECTION OF DIRECTORS
(Items A 1. & 2. on Proxy Card)
Eight directors are to be elected at the Annual Meeting. If elected, each
director will serve until the Company's 2005 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, which include John A. Schmit who has been nominated to the Board of
Directors by the holders of the Company's Convertible Debentures, 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
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NOMINEES FOR ELECTION AT THE ANNUAL MEETING
Age as
of
Name Positions with the Company 3/31/04
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 44
President
Carmen J. (Tony) Lotito Director of Gasco since 2001 59
Carl Stadelhofer Director of Gasco since 2001 50
John A. Schmit Director of Gasco since 2003 36
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.
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, an 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. 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
Miller Exploration, 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
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
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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 twenty 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 September 2001,
Mr. Lotito served 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.
John A. Schmit. Mr. Schmit became a Director of Gasco in October 2003. He has
been Vice President of Investments for RENN Capital Group, Inc., a registered
investment advisor, since May 1997, where he is a portfolio manager of
closed-end funds. From September 1992 to September 1994, he practiced law with
the law firm of Gibson, Ochsner & Adkins, in Amarillo, Texas. He holds a BBA in
Finance from Texas Christian University, a JD from the University of Oklahoma
College of Law and an LLM in International and Comparative Law from The
Georgetown University Law Center. Mr. Schmit is also a Vice President of
Renaissance Capital Growth & Income Fund III, Inc., a publicly traded closed-end
fund, and a director of Obsidian Enterprises, Inc. Mr. Schmit was designated by
the holders of Gasco's outstanding Convertible Debentures as their
representative on the Board of Directors.
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Preferred Stock Director
Richard S. Langdon. Mr. Langdon became a Director of Gasco and a member of the
audit committee in March 2003. Mr. Langdon is currently the President and Chief
Executive Officer of Matris Exploration Company, a privately held exploration
and production company active in California. 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 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.
Executive Officers
The following sets forth certain biographical information concerning each of the
Company's executive officers, other than executive officers who also serve as
directors:
Age as
of
Name Position with the Company 3/31/04
Michael K. Decker Executive vice president and chief operating officer 49
W. King Grant Executive vice president and chief financial officer 40
Michael K. Decker. Mr. Decker has served as 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. 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 over
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.
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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 March 31, 2004 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 March 31, 2004, the Company had 64,082,254 shares of common
stock issued and outstanding and 5,137 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 March 31, 2004. 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
RENN Capital Group, Inc. (1) Common 8,166,667 11.8%
8080 North Central Expwy., Ste. 210 LB 59
Dallas, TX 75206
Shama Zoe Limited Partnership (2) Common 6,000,000 9.2%
7128 South Poplar Lane
Englewood, Colorado 80112
Wellington Management Company, LLP (3) Common 4,602,000 7.7%
75 State Street
Boston, Massachusetts 02109
BFS US Special Opportunities Trust PLC (1) Common 4,083,332 6.1%
8080 North Central Expwy., Ste. 210 LB 59
Dallas, TX 75206
Richard C. McKenzie, Jr. (4) Common 1,969,582 2.9%
114 John Street Preferred 3,062 59.6%
Greenwich, Connecticut 06831
Gryphon Master Fund L.P. (5) Common 1,491,600 2.3%
500 Crescent Ct. # 270 Preferred 1,207 23.5%
Dallas, TX 75201
Directors and Executive Officers
Marc Bruner (7) (8) Common 4,236,422 6.4%
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Number of Shares
Name Beneficially Owned Percent of Class
Directors and Executive Officers
Mark A. Erickson (6) (7) (9) Common 3,672,703 5.5%
Preferred 212 4.1%
Michael K. Decker (6) (7) Common 735,101 1.1%
Preferred 105 2.0%
W. King Grant (6) (7) Common 925,471 1.4%
Preferred 104 2.0%
Carmen J. (Tony) Lotito (7) Common 313,832 *
Carl Stadelhofer (7) Common 108,335 *
Charles B. Crowell (6)(7) Common 234,696 *
Preferred 212 4.1%
Richard S. Langdon (6)(7) Common 74,333 *
Preferred 105 2.0%
Richard J. Burgess (7)(10) Common 101,333 *
John A. Schmit (7) Common 8,333 *
All Directors and Executive Officers as a Group (10 Common 10,410,561 15.1%
persons) (6) (7) (8)(9)(10) Preferred 738 14.4%
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(1) RENN Capital Group, Inc. acts as advisor and has the power to vote the
shares of common stock owned by and the shares of common stock issuable
upon the conversion of the 8% Convertible Debentures owned by Renaissance
U.S. Growth Investment Trust, PLC, which owns 1,000,000 shares of common
stock and $625,000 of Convertible Debentures that are convertible into
1,041,667 common shares; BFS US Special Opportunities Trust PLC, which owns
1,999,999 common shares and $1,250,000 of Convertible Debentures that are
convertible into 2,083,333 common shares; and Renaissance Capital Growth
and Income Fund III, Inc., which owns 1,000,001 common shares and $625,000
of Convertible Debentures that are convertible into 1,041,667 common
shares. RENN Capital Group is considered a beneficial owner of the shares
set forth in the table solely by reason of its voting power. No single
individual has voting or investment power over the securities for any of
these entities.
(2) Gilman A. Hill, as general partner, has voting and investment power with
respect to the securities held by Shama Zoe Partnership.
(3) Wellington Management Company, LLP acts as investment advisor to and
therefore has investment discretion of the shares held of record by its
clients who include J. Caird Partners, L.P., which owns 2,961,200 shares of
our common stock, and J. Caird Investors (Bermuda) L.P., which owns
1,640,800 shares of our common stock. Wellington Management is considered a
beneficial owner of the shares set forth in the table by reason of its
investment discretion and voting power. No single individual has voting or
investment power over the securities for any of these entities.
7
(4) The common shares owned by Mr. McKenzie are per the Schedule 13D/A filed
with the SEC on February 18, 2004.
(5) E.B. Lyon IV has voting and investment power with respect to the securities
held by Gryphon Master Fund, LP.
(6) 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. Erickson, 133,257 shares; Mr. Decker, 66,000 shares; Mr. Grant,
65,370 shares; Mr. Crowell, 133,257 shares and Mr. Langdon, 66,000 shares.
(7) The following number of shares of common stock issuable upon the exercise
of options that are exercisable within 60 days of March 31, 2004 are
included in the amounts shown: Mr. Bruner, 1,025,000 shares; Mr. Erickson,
1,025,000 shares; Mr. Decker, 589,001 shares; Mr. Grant, 537,001 shares;
Mr. Lotito, 133,332 shares; Mr. Stadelhofer, 108,335 shares; Mr. Crowell,
58,335 shares; Mr. Langdon, 8,333 shares; Mr. Burgess, 8,333 shares; Mr.
Schmit, 8,333 shares.
(8) 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.
(9) The common stock held by Mr. Erickson includes 116,690 shares of common
stock owned by his wife as custodian for their children.
(10) The common stock held by Mr. Burgess includes 40,000 shares of common stock
held in a trust for Mr. Burgess' wife of which he is the trustee.
Directors' Meetings and Committees of the Board of Directors
The Board of Directors held six meetings during 2003. During 2003, 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.
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 Board of Directors has determined that Mr. Lotito is an
audit committee financial expert with the meaning proscribed by the rules and
regulations under the Securities and Exchanger Act of 1934. The Audit Committee
met four times during 2003. The Audit Committee is primarily responsible for:
o selecting the independent auditors for recommendation to the Board;
o selecting the securities legal counsel for recommendation to the
Board;
o 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;
8
o reviewing the adequacy and effectiveness of the accounting controls of
the corporation;
o reviewing the internal audit function including the independence and
authority of its reporting obligations;
o reviewing the financial statements contained in the annual and
quarterly reports to shareholders;
o reviewing the accounting and financial human resources and succession
planning within the Company, and
o 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. 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 2003. 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: o administering and granting
awards under all equity incentive plans;
o 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;
o examining periodically the Company's general compensation structure;
and
o 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 2003. 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
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
9
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.
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, 2003 for filing with the Securities and Exchange
Commission.
Audit Committee:
CHARLES B. CROWELL
RICHARD S. LANGDON
CARMEN J. (TONY) LOTITO
CARL STADELHOFER
Audit Fees Summary
During the years ended December 31, 2003 and 2002 the Company retained Deloitte
& Touche LLP as its principal auditors to provide services in the following
categories.
Audit fees relate to the quarterly reviews and the audit for the years ended
December 31, 2003 and 2002 and all other services provided in connection the
statutory and regulatory filings during these fiscal years.
Tax fees during the years ended December 31, 2003 and 2002 relate to the
preparation of the federal and state tax returns as well as the services
rendered for tax advice and planning.
The following table summarizes the fees paid to Deloitte & Touche LLP during the
periods presented.
For the Year Ended December 31,
--------------------------------------
2003 2002
---- ----
Audit Fees $ 81,602 $74,894
Tax Fees 45,356 89,559
-------- ---------
Total $ 126,958 $ 164,453
========= =========
The Audit Committee pre-approves the fees associated with the Company's audit
and tax engagements. During the course of the year, if additional non-audit
services are identified, these services are presented to the Audit Committee for
pre-approval. All fees incurred during 2003 and 2002 were approved by the full
Audit Committee. The Audit Committee of the Board of Directors considered the
services listed above to be compatible with maintaining Deloitte & Touche LLP 's
independence.
10
Compensation of Directors
During 2003, each director of the Company who was not a full-time employee or
consultant was paid a monthly director's fee of $2,500 plus an additional
monthly fee of $500 for each committee on which the director serves. Directors
are also entitled to receive additional compensation of $500 per half day for
each half day spent on Gasco business in excess of five whole days in a single
month. 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.
During December 2003, the non-employee directors were granted options to
purchase an aggregate 300,000 shares of the Company's common stock at an
exercise price of $1.00 per common share. The options vest 16 2/3% at the end of
each four-month period after the issuance date.
Director Nominations Process
The Board of Directors does not have a nominations committee; however,
given the fact that a majority of the Board of Directors is comprised of
independent directors, the Board of Directors believes the functions of a
nominations committee are adequately addressed by the following process for the
nomination of director candidates. Stockholders seeking to recommend director
candidates for consideration may do so by writing the Secretary of the Company,
giving the recommended candidates' name, biographical data and qualifications;
provided that such recommendations are submitted by shareholders within the time
period set forth below under "Stockholder Proposals and Nominations."
The full Board of Directors, including directors that are not
independent, participates in the nomination process and the selection of
director nominees. When identifying director nominees, the Board of Directors
considers, among other factors, the candidate's reputation, integrity,
independence from the Company, skills and business, government or other
professional acumen, bearing in mind the composition of the Board of Directors
and the current state of the Company and the industry generally; the number of
other public companies for which the candidate serves as director; the
availability of the candidate's time and commitment to the Company and the
candidate's specific experience in the oil and gas business. In the case of
current directors being considered for re-nomination, the Board of Directors
also takes into account the director's tenure as a member of the Board of
Directors, the director's history of attendance at meetings of the Board of
Directors and committees thereof; and the director's preparation for and
participation in such meetings. The same criteria will be evaluated with respect
to candidates recommended by stockholders. In addition, the Board of Directors
takes into account whether a candidate has been designated by one or more groups
of holders of the Company's equity securities pursuant to the terms of such
security. The holders of the Company's Convertible Debentures and the holders of
the Company's Preferred Stock each have the right to designate a candidate for
nomination by the Board of Directors.
Stockholders Communications
Stockholders can contact any director or committee of the Board of Directors by
writing them c/o Secretary, Gasco Energy, Inc., 14 Inverness Drive E., Suite
H-236, Englewood, Colorado 80112.
11
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 provided 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
During the year ended December 31, 2003 a clerical error was made in the payroll
process, which caused the president and chief executive officer of the Company,
Mark Erickson, to be overpaid by $55,000 during 2003, and $9,196 during the
first quarter of 2004. The error was discovered during February 2004, and Mr.
Erickson made restitution as soon as possible thereafter. Since the repayment
was made as soon as possible, no interest was charged and Mr. Erickson owes no
further amounts to the Company.
Mr. Lotito earned consulting fees of $16,000 and $52,000 from the Company during
the years ended December 31, 2002 and 2001, respectively. During the year ended
December 31, 2003 and during both of the years ended December 2002 and 2001, the
Company paid $120,000 and $240,000, respectively in consulting fees to a company
owned by Mr. Bruner pursuant to the Strategic Consulting Agreement described
above. The Company is committed to pay consulting fees of $120,000 per year to
Mr. Bruner's company through January 31, 2006.
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.
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.
12
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, 2003, except for the following late
filings:
Carmen (Tony) Lotito Form 4, dated 2/10/03
Marc Bruner Form 4, dated 8/12/03
Mark Erickson Form 4, dated 8/12/03
Form 4, dated 10/23/03
Carl Stadelhofer Form 4, dated 2/10/03
Form 4, dated 2/16/03
W. King Grant Form 4, dated 8/12/03
Form 4, dated 10/23/03
Michael Decker Form 4, dated 6/30/03
Form 4, dated 10/23/03
Charles Crowell Form 4, dated 2/7/03
Form 4, dated 2/10/03
Form 4, dated 6/30/03
Form 4, dated 10/23/03
Form 4, dated 12/31/03
Richard Langdon Form 4, dated 3/3/03
Form 4, dated 6/30/03
Form 4, dated 12/16/03
Richard Burgess Form 4, dated 10/23/03
13
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, 2003,
2002 and 2001.
Long Term
Annual Compensation Compensation Securities
Restricted Underlying
Stock Options All Other
Name & Principal Position Year Salary Bonus Awards (#) Compensation
- ------------------------- ---- ------ ----- ------ ---- ------------
(1) (2)
Mark A. Erickson (2) 2003 $ 120,000 $ 5,000 $ 131,250 $ 5,400
President 2002 240,000 7,335
Chief Executive Officer 2001 220,000 2,160,000 1,080
W. King Grant 2003 $ 175,000 $ 5,000 $ 35,000 200,000 $ 5,400
Executive Vice President 2002 262,002 7,011
Chief Financial Officer 2001 155,780 437,000 2,220
Michael K. Decker 2003 $ 175,000 $ 5,000 350,000 $ 5,400
Executive Vice President 2002 200,000 6,135
Chief Operations Officer 2001 72,000 414,000 88,834 (3)
Howard O. Sharpe 2002 $ 116,178 $ 150,000 250,000 $ 3,437
Vice President (4) 2001 96,000 750,000 720
- ----------------------
(1) Amount represents the value of the shares of restricted shares calculated
using the trading price of the Company's common stock on the date of grant.
As of December 31, 2003, Mr. Erickson held 187,500 shares of restricted
stock valued at $240,000 as of such date and Mr. Grant held 50,000 shares
of restricted stock valued at $64,000 at such date. All of these restricted
shares were issued on August 12, 2003 and vest 20% on the first
anniversary, 20% on the second anniversary and 60% on the third anniversary
of the awards.
(2) Amount represents the employer contribution to the 401(k) plan of the
individual, unless otherwise noted.
(3) Amount includes (a) consulting fees of $50,879 and 12,500 shares of Company
common stock (having a market value of $36,875 on the date of payment) paid
to Mr. Decker before he became an employee of the Company on June 29, 2001,
and (b) the Company's 401(k) plan contribution of $1,080.
(4) Mr. Sharpe, who is not an executive officer, retired from the Company
effective December 31, 2002, at which time; all of his outstanding options
were cancelled.
14
The following table sets forth information with respect to all stock options
granted during the year ended December 31, 2003 to the named Executive Officers
and other officer.
Potential Realized
Value at Assumed
Individual Grants Annual Rates of Stock
----------------- Price Appreciation
Number of % of Total Exercise for Option Term (1)
Securities Options Granted to or Base ------------
Underlying Employees in Price Expiration 5% 10%
Name Options Granted Fiscal Year ($/Share) Date Share Price Share Price
---- -------------- ----------- --------- ---- ----------- -----------
W. King Grant 200,000 12% $ 1.00 2/14/10 $ 0 $41,641
Michael K. Decker 350,000 22% $ 1.00 2/14/10 $ 0 $72,872
(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. The market
price of the Company's common stock on the date of grant was $0.62 per
share and an increase of 5% would be below the exercise price of the
options resulting in a potential realized value of zero. No gain to an
executive officer is possible without an appreciation in Common Stock
value, which will benefit all holders of Common Stock. The actual
value an executive officer may receive depends on market prices for
the Common Stock, and there can be no assurance that the amounts
reflected will actually be realized.
No options were exercised by executive officers or other officer during either
of the years ended December 31, 2003, 2002 or 2001. The following table sets
forth the value of options held by the executive officers at December 31, 2003.
All of the options granted to Mr. Sharpe during the years ended December 31,
2002 and 2001 were cancelled effective December 31, 2002.
Aggregated Option Exercises in Last Fiscal Year and FY-End Option/ Values
Number of Securities Underlying Value of Unexercised
Unexercised Options at FY-End (#) In-the-Money Options at FY-End ($)
Exercisable/Unexercisable Exercisable/Unexercisable (1)
Name
Mark A. Erickson 1,025,000/0 $280,000/0
W. King Grant 503,668/133,332 $18,667/$37,333
Michael K. Decker 530,667/233,333 $32,667/$65,333
(1) The value of in-the-money options is equal to the fair market value of a
share of Common Stock on December 31, 2003 of $1.28, less the exercise
price.
15
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 vested 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 vested in equal amounts over the eight fiscal quarters
following the effective date of the agreement. Mr. Erickson's amended and
restated employment agreement reduced his annual salary to $120,000 and provided
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
16
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 provided 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
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
17
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 2003, the Compensation Committee of the Board was comprised of four
directors, Mr. Lotito, Mr. Crowell, Mr. Stadelhofer and Mr. Burgess. 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, 2003 was composed of Mr. Lotito, Mr.
Crowell, Mr. Stadelhofer and Mr. Burgess, none of whom is 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.
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.
18
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 2003 1,608,000 common stock options were
granted to the Company's employees and directors. 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,
2003, Mark Erickson, President and Chief Executive Officer received total
compensation of $130,400 which is comprised of an annual salary of $120,000,
which Mr. Erickson is entitled to under his employment agreement, a cash bonus
of $5,000 and deferred compensation pursuant to the Company's 401(k) plan of
$5,400. The Compensation Committee considered the factors described above to
determine that the compensation paid to Mr. Erickson during 2003 was
appropriate.
The foregoing report is made by the Compensation Committee of the Company's
Board of Directors. The members of the Committee during 2003 were Mr. Lotito,
Mr. Crowell, Mr. Stadelhofer and Mr. Burgess.
CARMEN LOTITO
CHARLES B. CROWELL
CARL STADELHOFER
RICHARD J. BURGESS
The Company has adopted a Financial Code of Ethics that applies to the Company's
principal executive officer, principal financial officer, principal accounting
officer and controller and is available on the Company's internet website at
www.gascoenergy.com. In the event that an amendment to, or a waiver from, a
provision of the Company's Financial Code of Ethics is necessary, the Company
intends to post such information on its website.
19
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, 2003, 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, December 31,
2001 2001 2002 2003
---- ---- ---- ----
Gasco Energy, Inc. $100.00 $46.30 $ 18.25 $33.86
Peer Group Index 100.00 91.75 104.72 165.89
NASDAQ Market Index 100.00 80.00 73.86 111.26
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.
20
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. AMENDED AND RESTATED 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. Amended and Restated 2003 Restricted Stock
Plan (the "Stock Plan"). A copy of the Stock Plan is attached hereto as Appendix
A. The stockholders first approved the Gasco Energy, Inc. 2003 Restricted Stock
Plan at the 2003 Annual Meeting. 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.
Changes to the Stock Plan
The Board of Directors desires to amend the Stock Plan to authorize an
additional 1,000,000 shares for granting awards under the Stock Plan, which
requires shareholder approval. The Company issued 425,000 shares of restricted
stock under the Gasco Energy, Inc. 2003 Restricted Stock Plan during 2003. After
the amendment, there will be approximately 1,000,000 shares available for
issuance under the Stock Plan.
The Board of Directors recommends a vote "For" approval of the proposal to
approve the Gasco Energy, Inc. Amended and Restated 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.
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 1,425,000 shares, including the
425,000 shares issued in 2003. 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.
21
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 change 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 change 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
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:
22
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, 2003:
Number of securities
remaining available
Number of securities Weighted-average for future issuance
to be issued exercise price of under compensation
upon exercise of outstanding 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
Stock option plan 1,799,336 $ 1.09 2,229,544
Restricted stock plan 425,000 N/A (a) -
Equity compensation plans
not approved by security holders 3,817,250 2.18 (b)
--------- ----------
Total 6,041,586 $ 1.83 (c) 2,229,544
========= ==== =========
(a) The restricted shares vest 20% on the first anniversary, 20% on the second
anniversary and 60% on the third anniversary of the awards, provided the
holder remains employed by the Company.
(b) 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 Options Exercise Price Vesting Dates Expiration Dates
Employees 3,394,750 $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 3,817,250
=========
(c) Weighted average exercise price of options to purchase a total of 5,616,586
shares of common stock.
23
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 2005 Annual Meeting of Stockholders must comply with
Rule 14a-8 under the Securities Exchange Act of 1934. Under Rule 14a-8, such
proposal must be submitted 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 December 20, 2004. However, if the date of the 2005
Annual Meeting of Stockholders is more than 30 days from May 18, 2005, the
deadline is a reasonable time prior to the Company's printing of the proxy
materials, which deadline will be communicated to the Stockholders in the
Company's public filings.
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 December 20, 2004 and not later than January 19,
2005; 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 May 18, 2005, 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
April 19, 2004
24
Appendix A
GASCO ENERGY, INC.
AMENDED AND RESTATED 2003 RESTRICTED STOCK PLAN
WHEREAS, there is reserved to the Board in Section 9 of the Gasco
Energy, Inc. 2003 Restricted Stock Plan (the "Original Plan") the right to amend
the Original Plan, subject to certain restrictions set forth therein; and
WHEREAS, the Board deems it advisable to amend and restate the Original
Plan in the manner hereafter set forth and for the purpose of increasing the
number of shares of Common Stock issuable under the Original Plan;
NOW, THEREFORE, the Original Plan is hereby amended and restated
effective as of January 29, 2004, subject to subsequent approval of the
stockholders of the Company, to read as follows:
I. PURPOSE
The purpose of the GASCO ENERGY, INC. AMENDED AND RESTATED 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:
"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.
"Award" means, individually or collectively, any Restricted Stock Award.
"Board" means the Board of Directors of the Company.
A-1
"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.
"Committee" means a committee of the Board that is selected by the Board as
provided in Paragraph IV(a).
"Common Stock" means the common stock, par value $.001 per share, of the
Company.
"Company" means Gasco Energy, Inc., a Nevada corporation.
"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.
"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.
"Employee" means any person (including a Director) in an employment relationship
with the Company or any Affiliate.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Participant" means an Employee, Consultant, or Director who has been granted an
Award.
"Plan" means the Gasco Energy, Inc. Amended and Restated 2003 Restricted Stock
Plan, as amended from time to time.
"Restricted Stock Agreement" means a written agreement between the Company and a
Participant with respect to a Restricted Stock Award.
"Restricted Stock Award" means an Award granted under the Plan.
"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
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.
A-2
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.
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
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
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 1,425,000 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.
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.
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
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
A-3
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.
Other Terms and Conditions. Common Stock awarded pursuant to a Restricted Stock
Award shall be represented by a stock certificate registered in 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.
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.
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.
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
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
A-4
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.
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 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.
Stockholder Action. Any adjustment provided for in Subparagraph (b) above shall
be subject to any required stockholder action.
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 therefor, 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
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.
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.
A-5
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 be withheld
and to require any payments required to enable it to satisfy its withholding
obligations.
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.
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.
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.
A-6
FORM OF PROXY
Proxy - Gasco Energy, Inc.
Meeting Details
Proxy Solicited by Board of Directors for Annual Meeting - May 18, 2004
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 May 18, 2004, 1:30 p.m., at Pikes Peak Room, Courtyard by
Marriott, 8320 South Valley Highway Road, Englewood, CO 80112, or at any
postponement or adjournment 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 [ ] [ ]
07 John A. Schmit [ ] [ ]
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
08 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, 2004.
For Withhold
4. Proposal to approve the Gasco Energy, Inc. Amended & [ ] [ ]
Restated 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
- ------------------------- ---------------------- --/--/--