Re: Appointment of William E. Vastardis as Chief Financial Officer of Prospect Energy Corporation

 

                                                                    EXHIBIT 10.1

 

 

 

                                                              May 1, 2005

 

 

Mr. John F. Barry III

Prospect Energy Corporation

10 East 40th Street

44th Floor

New York, New York 10016

 

 

 

Re:      Appointment of William E. Vastardis as Chief Financial Officer of

         Prospect Energy Corporation

 

Dear John:

 

EOS Fund Services LLC ("EOS") is pleased to offer to the board of directors (the

"board") of Prospect Energy Corporation ("PEC") this proposal to provide the

services described herein in connection with the appointment of William E.

Vastardis as the Chief Financial Officer of PEC (the "CFO"). EOS's obligations

to PEC are exclusively those set forth in this engagement letter (also referred

to as the "Agreement"). Schedule A sets forth the limitations of EOS's liability

and other terms and conditions, which allow EOS to permit Mr. Vastardis to serve

as PEC's CFO.

 

     1. Engagement of William E. Vastardis. Subject to the specific approval of

at least a majority of the directors of PEC who are not "interested persons"

within the meaning of the Investment Company Act of 1940 (the "1940 Act") (the

"independent directors"), EOS hereby designates William E. Vastardis to serve in

the capacity of the CFO of PEC, an investment company that has elected to be a

business development company pursuant to the 1940 Act. The PEC board and

specifically the independent directors thereof shall receive such information

about the qualifications of and have such access in person or otherwise to Mr.

Vastardis so that the board of directors may decide upon his continued

appointment as the CFO with the benefit of all necessary and requested

information. By signature hereto of an authorized person, PEC shall evidence the

approval by the PEC board, including the independent directors, of the

designation of William E. Vastardis as the CFO of PEC as well as his

compensation as set forth in this engagement letter. The PEC board hereby

acknowledges that William E. Vastardis is the Chief Executive Officer of EOS and

that, at his sole discretion, certain employees of EOS shall assist him from

time to time as necessary in accomplishing the functions of the

 

 

 

                                                                        JFB ____

                                                                        WEV ____

 

<PAGE>

 

Prospect Energy Corporation

Chief Financial Officer Appointment

Page 2 of 10

 

office of the CFO provided that such employees shall be supervised by Mr.

Vastardis and EOS, and Mr. Vastardis will be responsible for any actions taken

by such employees on behalf of the Corporation as if such actions had been taken

by Mr. Vastardis. Nothing in this Agreement shall be construed to permit or

appoint any other individual or employee of EOS except William E. Vastardis to

serve as the PEC CFO.

 

     2. Services to be Provided. The CFO shall, among other things, provide the

financial services and monitoring listed in Exhibit I to this Agreement. In

general, CFO will provide services and assistance to enable PEC to comply with

its reporting obligations under the Securities Exchange Act of 1934 (the "1934

Act"). Such assistance will include preparation of Forms 10-K, 10-Q and 8-K

under the 1934 Act. Accounting and financial reporting policies and procedures

may also be established or modified by the CFO. All public releases of financial

information will be authorized in advance by the CEO of PEC as well as the CFO.

The CFO will administer a program to promote compliance by the officers and

directors of PEC with their reporting requirements under Section 13 and 16 of

the 1934 Act. The CFO shall prepare with the assistance of counsel as needed,

documents necessary for officer and director compliance under Section 16 of the

1934 Act, including Forms 3, 4, 5, 13G and 13D. The CFO shall cause to be

maintained detailed records and SEC receipts of all filings.

 

     3. Cooperation. In furtherance of this engagement and its intended results,

the CFO will be relying upon the meaningful and timely cooperation of management

and certain selected personnel of PEC's investment adviser, Prospect Capital

Management, LLC ("PCM"), and its fund administrator, Prospect Administration,

LLC ("PA"). In order for the CFO, or EOS acting at his direction, to conduct

proper and effective on-going monitoring of the PEC financial operations and

accounting functions, PEC acknowledges that the CFO, or EOS acting at the CFO's

sole direction, will require complete and unfettered access to (i) PEC's books

and records, (ii) PCM's officers and employees, (iii) all officers and employees

of PEC's portfolio companies, (iv) all books and records of PEC's portfolio

companies, and (v) a number of third parties (including, without limitation,

service providers) with whom PEC has dealings or agreements.

 

     4. In-Person Visits. The CFO shall attend each PEC board meeting. The CFO

shall also meet privately with the independent directors of the board at their

request and no less frequently than quarterly. In addition, the CFO (or his

designee, when appropriate) may visit PCM, PEC's portfolio companies or any of

PEC's third-party service providers in the ordinary course of performing his

duties and as often as is required to discharge the CFO's duties and

responsibilities.

 

     5. Term. The term of the CFO role shall be from month to month, starting as

of the date hereof, and shall be automatically renewed on a monthly basis unless

the PEC board provides reasonable written notice prior to the next renewal date

or the CFO provides sixty (60) days' written notice to the PEC board.

 

 

 

                                                                        JFB ____

                                                                        WEV ____

 

<PAGE>

 

Prospect Energy Corporation

Chief Financial Officer Appointment

Page 3 of 10

 

     6. Fees. PEC will compensate EOS for allowing William E. Vastardis to serve

as the Chief Financial Officer of PEC at the monthly rate of US$ 18,750.00.

 

     In the event EOS is required to commit personnel or other resources in the

performance of its obligations hereunder that are disproportionate to the

projected fees set forth herein, the parties agree to negotiate in good faith in

an effort to adjust the monthly fee or to consider in good faith payment by PEC

to EOS of a supplemental fee in addition to the scheduled monthly fee.

 

     PEC will also reimburse EOS for out-of-pocket costs of the CFO and EOS

(including reasonable travel costs required for the CFO and personnel of EOS

acting at his direction to conduct necessary on-site evaluations, due diligence

inquiries and other on-going compliance monitoring at PEC's offices or elsewhere

on behalf of PEC).

 

     Fees for Mr. Vastardis' Chief Financial Officer services will be invoiced

on a monthly basis, payable in advance upon receipt to EOS, in full by wire

transfer. Expenses will be invoiced on a monthly basis, as incurred at the end

of each month, payable to EOS, in full by wire transfer upon receipt of backup

documentation reasonably acceptable to PEC.

 

     In the event that the CFO is terminated for cause pursuant to Section 7

below, EOS shall promptly rebate any prepaid fees for the month in which the

termination occurs.

 

     7. Termination. The PEC board reserves the right to terminate the

engagement of the CFO at any time by written notice. If the PEC board terminates

the engagement of the CFO without "cause" (as hereinafter defined), then PEC

shall be liable to pay the remaining unpaid fees, if any, which would have

accrued to the CFO under Section 6 hereof for the remainder of the then current

term of this engagement.

 

     Termination for "cause" means that the CFO has materially breached the

terms of this engagement letter, has been convicted of a felony, has willfully

neglected the performance of his duties as set forth herein, or has been

otherwise rendered unable or unqualified to serve as an officer of an investment

company pursuant to the applicable provisions of Section 9 of the 1940 Act. This

Agreement shall terminate automatically if Mr. Vastardis is no longer associated

with EOS.

 

     8. Indemnification. Except to the extent prohibited by any federal or state

laws to the contrary, the CFO and EOS shall not be liable to PEC or any

affiliate thereof for any errors, acts or omissions in the performance of

services hereunder except for losses arising out of the CFO's reckless disregard

of the duties involved in the conduct of the office of the CFO, EOS's reckless

disregard for any of its duties hereunder, or the CFO's or EOS's willful

misconduct, bad faith or gross negligence in the performance of

 

 

 

                                                                        JFB ____

                                                                        WEV ____

 

<PAGE>

 

Prospect Energy Corporation

Chief Financial Officer Appointment

Page 4 of 10

 

their respective duties and obligations hereunder. PEC agrees to, and hereby

does, indemnify the CFO and EOS for any claims, losses, costs, damages or

expenses whatsoever arising from or as a result of the CFO's acts or omissions

or those of EOS in the performance or attempted performance of their respective

duties hereunder, except for those claims, losses, costs, damages and expenses

resulting from the reckless disregard of the duties involved in the conduct of

the CFO's office or the willful misconduct, bad faith or gross negligence of the

CFO or the employees, agents or contractors of EOS acting at the CFO's directio