I think the agent should have said they would do it for a percentage of the net door take. Offering to play for free is self-demeaning.

If the organiser's club does make any money on the gig, then the band gets some. And if not, the band has been warned in advance that they may go home with empty pockets. It's the best alternative (out of a not-very-good choice) that I can see, and at least there's the chance of some earnings, in addition to the exposure & stage experience.