Exhibit No. 10.27
August 23, 1996
Xx. Xxx Xxxxxx
President
Crown Energy Corporation
000 Xxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Dear Xxx:
Pursuant to our conversation, this letter agreement (the "Agreement") sets forth
an arrangement regarding the engagement of EnCap Investments L.C. ("EnCap") as
exclusive financial advisor for Crown Energy Corporation ("Crown"or the
"Company") for the purpose of (i) raising $4-6 million of equity capital (the
"Equity Capital"), and (ii) assisting Crown to obtain project debt financing
("Project Financing"). The terms and conditions of the engagement are:
1. The Company hereby engages EnCap as the Company's exclusive
financial advisor for the purpose of providing financial
advisory or investment banking services in connection with
raising the Equity Capital. In this role, EnCap will help set
the strategy for approaching the market, assist in the
preparation of marketing materials, solicit institutional or
otherwise accredited investors and assist in the structuring,
negotiation and closing process.
2. To the extent requested by the Company, EnCap will also assist
Crown to obtain Project Financing to fund the capital costs
associated with the construction and implementation of its
mining and production facility. In this capacity, EnCap will
identify and approach potential lenders and help the Company
negotiate the structure, terms and conditions of such financing.
3. This engagement will be effective upon execution of this
Agreement and will be effective for a 90 day period thereafter.
Either the Company or EnCap may terminate this engagement
hereunder by giving the other party at least 30 days prior
written notice; provided however, the Company shall remain
responsible for the reimbursement of EnCap's expenses as
described under sub-paragraph 4.d. and the obligations of the
Company as described under paragraph 7 shall survive.
4. As compensation for the services rendered hereunder, the Company
agrees to pay EnCap the following fees and expenses:
a. Retainer Fee In lieu of a cash retainer, the Company
------------ shall pay EnCap a one-time Retainer Fee of
50,000 unregistered shares of the Company's
Common Stock, $.02 par value ("Common
Stock") with free piggyback rights. The
Company shall deliver the Common Stock to
EnCap within 30 days of execution of this
Agreement.
b. Equity Fee Upon closing and receipt of funds from
---------- investor(s) identified by EnCap, the Company
shall pay EnCap an Equity Fee equal to 7.0%
of the gross Equity Capital proceeds raised
or committed to the Company payable in cash
immediately upon receipt of funds from
investors. Additionally, the Company shall
also issue five year warrants to purchase
100,000 unregistered shares of Common Stock
to EnCap at closing exercisable at the
lesser of the Company's closing stock price
on the day of closing or $1.00 per share.
EnCap will have the right to demand that the
Company use its best efforts to file a
registration statement on the underlying
Common Stock at EnCap's request anytime
after the initial production facility
becomes commercially viable.
c. Project Upon closing and receipt of funds from
------- lender(s) identified
Financing Fee by EnCap, the Company shall pay EnCap a
------------- Project Financing Fee equal to 1.0% of the
gross proceeds raised or committed to the
Company payable in cash immediately upon
receipt of funds from lenders identified by
EnCap. In the event that either ING Capital
Corporation, Transamerica Business Credit or
Corpfinance Ltd. provides Project Financing,
the Company will not be obligated to pay
EnCap a Project Financing Fee.
d. Expense The Company shall also reimburse EnCap for
------- its reasonable
Reimbursement and itemized out-of-pocket expenses
------------- previously approved by the Company in
performing its services under this
Agreement. Such reimbursement shall be
payable within 30 days of presentation of an
invoice for such expenses. These expense
shall be paid regardless of whether the
transaction is ultimately consummated as a
result of EnCap's efforts.
5. If, during the 12-month period immediately following
termination of the Agreement (the "Protection Period"), an
investor or lender that had been contacted by EnCap provides
Equity Capital or Project Financing to the Company, the Equity
Fee described in sub-paragraph 4.b. or the Project Financing
Fee described in sub-paragraph 4.c. shall be payable by Crown
to EnCap.
6. The initial list of investors and lenders identified by EnCap
and approved by Crown is enclosed in Exhibit A. During the
term of this Agreement, EnCap may periodically submit new
investors or lenders to Exhibit A agreed to by Crown and
EnCap.
7. In connection with this engagement, Crown, for itself and its
successors and affiliates, hereby (i) agrees to use its best
efforts to assure that any information furnished or to be
furnished to EnCap by or on behalf of Crown in connection with
this engagement does not and will not contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not
misleading, and (ii) covenants and agrees to indemnify and
hold harmless EnCap, its subsidiaries and affiliates, and the
respective successors, assigns, heirs, beneficiaries and legal
representatives of each indemnified entity and person from and
against any and all damage, loss, cost, expense, obligation,
claim or liability, including attorney's fees and expenses,
suffered by any indemnified person or entity as a result of
any breach of the letter or as a result of any other matter
related to the services provided (whether or not consummated)
by EnCap hereby; provided that Crown shall have no obligation
to indemnify EnCap with respect to any act or omission of
EnCap or of its officers, directors, employees or agents that
constitutes gross negligence or willful misconduct.
If the foregoing correctly sets forth the understanding and agreement between
EnCap and the Company, please confirm your acceptance and agreement by signing
and returning the enclosed duplicate of this letter, which will thereupon
constitute a binding agreement between us.
Very truly yours,
ENCAP INVESTMENTS L.C.
Xxxx X. Xxxxxxxx
Managing Director
Agreed to and Approved this ____ day of August, 1996.
CROWN ENERGY CORPORATION
Xxx Xxxxxx
President
cc: Xxxxx X. Xxxxxxxxx
Chairman of the Board, Chief Executive Officer
