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Exhibit 10.1
FINAL SETTLEMENT AGREEMENT
AND
COMPREHENSIVE GENERAL RELEASE
between and among
GASTAR EXPLORATION, LTD.,
GEOSTAR CORPORATION,
AND OTHER INDIVIDUALS AND ENTITIES SET FORTH HEREIN
June
11,2008
This
Final Settlement Agreement and Comprehensive General Release
("Settlement Agreement") is dated as of June 11, 2008 (the
"Effective Date"). This is the same date as the "Closing
Date."
ARTICLE I
Identification of Parties and Definitions
Section
1.01. Parties
to the Settlement Agreement. The following are parties
to this Settlement
Agreement:
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(a)
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The
"GeoStar Parties"
are:
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(i)
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GeoStar
Corporation ("GeoStar");
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(ii)
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First
Source Texas, he.;
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(iii)
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First
Source Bossier, LLC;
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(iv)
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First
Texas Gas, LP;
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(v)
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CBM
Resources Pty. Ltd.;
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(vi)
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Associated
Geophysical Services, Inc.;
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(vii)
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Conquest
Group Operating Company;
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(viii)
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West
Virginia Development, Inc.;
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(ix)
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West
Virginia Gas Corporation;
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(x)
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Squaw
Creek Development, Inc.;
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(xi)
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Arkoma
Basin Development, Inc.;
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(xii)
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Royalty
Acquisition Company;
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(xiii)
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BNG
Producing & Drilling;
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(xiv)
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GeoStar
Financial Corporation; and
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(xv)
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GeoStar
Financial Services Corporation.
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(b)
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The
"Gastar Parties"
are:
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(i)
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Gastar
Exploration Ltd. ("Gastar
Ltd.");
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(ii)
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Gastar
Exploration USA, Inc., f/k/a First Sourcenergy Wyoming,
Inc.;
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(iii)
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Gastar
Exploration Victoria, Inc., f/k/a First Sourcenergy Victoria,
Inc.;
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(iv)
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Gastar
Exploration Texas, Inc., f/k/a First Texas Development,
Inc.;
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(v)
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Gastar
Exploration Texas LLC, f/k/a Bossier Basin, LLC;
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(vi)
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Gastar
Exploration Texas, LP, f/k/a First Source Gas, LP;
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(vii)
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Gastar
Exploration New South Wales, Inc., f/k/a First Sourcenergy Group,
Inc.; and
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(viii)
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Gastar
Exploration Power Pty. Ltd.
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Section
1 .02. Other
Definitions.
(a) "Affiliate" means, with respect to any person or entity,
a person or entity that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common
control with such first person or entity ("control" in such context
meaning (i) to directly or indirectly own more than 50% of the
outstanding equity or beneficial interest of another entity, or
(ii) having the authority, power, or practical ability (through
ownership of voting securities, by contract, or otherwise), to
direct or otherwise exercise a controlling influence over the
management or policies of the entity).
(b)
The "Closing
Date" is June 11, 2008, provided that this Settlement
Agreement and all other finalized Closing Documents have been
fully executed by all Parties to each such Closing Document
and the payment called for in Section 9.01 is made on or
before June 12, 2008. Provided that these conditions for the
Closing Date have occurred, this is the date on which the
Settlement Agreement becomes effective. This is the same date
as the "Effective Date."
(c)
The "Closing
Documents" are:
(i)
this Settlement Agreement;
(ii)
the GeoStar Parties' Texas Assignments Without Warranty for
Leon and Robertson Counties;
(iii)
the Gastar Parties' Texas Quitclaims and Assignments Without
Warranty for Leon and Robertson Counties;
(iv)
the GeoStar Parties' West Virginia/Pennsylvania Assignment
Without Warranty; the EL 4968 Transfer Form;
(vi)
the EL 4968 Tenement Sale Agreement;
(vii)
The Gastar Warrant. Notwithstanding anything to the contrary
in this Settlement Agreement, the Parties agree that if the
Gastar Warrant is not approved by the Toronto Stock Exchange
by the Closing Date that the Closing Date shall not be delayed
by such lack of approval.
(d)
The "Disputes"
are:
(i)
Cause No. 07-12854; GeoStar Corp., et
al. v. Gastar Exploration Ltd.,
etal.; in the United States District Court for the
Eastern District of Michigan;
(ii)
Cause No. 07-08-17,891-CV; Gastar Exploration Ltd.,
et al. v. GeoStar Corporation, et al.; in the 82nd
Judicial District Court of Robertson County,
Texas;
(iii)
Cause No. 07-07-17,858-CV; Gastar Exploration,
Ltd., et al. v. GeoStar Corporation, et al. ; in the
82nd Judicial District Court of Robertson County,
Texas;
(iv)
Cause No. 50-181-T-00453-06; Gastar Exploration,
Ltd., and its Subsidiaries v. GeoStar Corporation and its
Subsidiaries; before the International Centre for
Dispute Resolution; and
(v)
Cause No. 2007-46327; Gastar Exploration Ltd.,
et al. v. GeoStar Corporation; in the 234th Judicial
District Court of Harris County, Texas.
(e)
Unless the context requires otherwise, a "Party" is any of
the parties to this Settlement Agreement listed in Section
1.01, and the "Parties" are all
of the parties to this Settlement Agreement listed in Section
1.01, collectively.
(f)
The "POA" is that
certain Participation and Operating Agreement between GeoStar
Corporation, and any and all of its subsidiaries, and Gastar
Exploration, Ltd., and any and all of its subsidiaries, dated
June 15, 2001.
(g)
The "PSAs"
are:
(i)
that certain Purchase and Sale Agreement and Assignment of
Interests—Texas Producing Properties, executed June 16,
2005, and effective January 1, 2005, between GeoStar
Corporation, First Source Texas, Inc., First Source Bossier,
LLC, First Texas Gas, LP, Gastar Exploration Ltd., First Texas
Development, Inc., Bossier Basin LLC, and First Source Gas,
LP; and
(ii)
that certain Purchase and Sale Agreement and Assignment of
Interests—Texas Non Producing Properties, executed June
16, 2005, and effective January 1, 2005, between GeoStar
Corporation, First Source Texas, Inc., First Source Bossier,
LLC, First Texas Gas, LP, Gastar Exploration Ltd., First Texas
Development, Inc., Bossier Basin LLC, and First Source Gas,
LP.
(h)
The "Texas
JOAs" are:
(i)
that certain Operating Agreement dated July 7, 2000 between
First Source Texas, Inc. as Operator and Navasota Resources,
Inc., as Non-operator, as amended.
(ii)
that certain Operating Agreement dated November 4, 2005
between First Source Gas, LP as Operator, and Chesapeake
Exploration Limited Partnership, as Non-operator, as
amended.
(iii)
that certain Operating Agreement dated April 1, 2008, between
Gastar Exploration Texas, LP, as Operator and En Cana Oil
& Gas (USA) Inc., as Non-operator.
ARTICLE II
Recitals
WHEREAS,
certain of the Parties have asserted claims and/or
counterclaims in the Disputes, each alleging legal and/or
equitable causes of action, and/or seeking declaratory relief,
equitable relief, and/or damages; and,
WHEREAS,
the GeoStar Parties and the Gastar Parties dispute the claims
and/or counterclaims made against them in the Disputes;
and,
WHEREAS,
the Parties, without admitting any liability and without
conceding the validity of any of the positions or arguments
advanced by any other Party, desire to completely and finally
settle the Disputes as well as all claims brought or that
could have been brought therein as of the Effective Date of
this Settlement Agreement among the Parties; and,
WHEREAS,
the Parties desire to compromise any and all other claims,
demands, actions and causes of action of any nature whatsoever
that they have had in the past or presently have as of the
Effective Date of this Settlement Agreement against one
another, whether or not asserted, known or unknown, by the
Parties; and,
WHEREAS,
the Parties desire to fully and completely resolve all
outstanding disagreements and settle all outstanding accounts
relating in any fashion to the affiliation between the GeoStar
Parties and the Gastar Parties, and the business formerly
carried on between them as of the Effective Date;
and,
WHEREAS,
the GeoStar Parties desire to fully convey all their remaining
oil, gas, and hydrocarbon interests in West Virginia, legal or
equitable, to the Gastar Parties; and
WHEREAS,
the Gastar Parties desire to fully convey all their right,
title and interests in Victoria, Australia, specifically
including without limitation, the Gastar Parties' remaining
oil, gas, mineral, brown coal, coal mine methane, coal bed
methane and hydrocarbon right, title, license, and/or
interests in Victoria, Australia, legal or equitable, to the
GeoStar Parties, but acknowledging that the Gastar Parties'
interests in Australia outside the province of Victoria
(including without limitation PEL 238, PEL 433, and PEL 434)
are not conveyed or affected by this Settlement Agreement;
and
WHEREAS,
the GeoStar Parties and Gastar Parties desire to fully separate all
their remaining oil, gas, and hydrocarbon interests in Texas, legal
or equitable, save and except for the Belin Trust Farm-Out
Agreement described herein; and
WHEREAS,
the Parties acknowledge that full, valid, and binding
consideration exists for the execution of this Settlement
Agreement and that such consideration includes the mutual
promises contained herein;
NOW,
THEREFORE, in consideration of the mutual terms, conditions,
releases, warranties, covenants and agreements contained
herein, the Parties enter into this Settlement
Agreement
and agree as follows.
ARTICLE III
Closing
Section
3.01. Obligation to
close. The Parties will use their best efforts to close
this Settlement Agreement (i.e., to
complete the execution of the finalized Closing Documents and
to make the cash payment set forth in Section 9.01 such that
the Closing Date has occurred) on or before June 12,
2008.
Section
3.02. Termination for failure
to close. If the Closing Date has not occurred by June
12, 2008, this Settlement Agreement, each of the Closing
Documents, and all rights and obligations under any of them,
shall terminate.
ARTICLE IV
Releases
Section
4.01. Releases by the GeoStar
Parties. The GeoStar Parties, on behalf of themselves,
their Affiliates, their predecessors, successors, principals,
and in their capacities as such, their officers, directors,
agents (including, without limitation, attorneys, advisors,
and other professionals), employees, and assigns, do hereby
release and forever discharge the Gastar Parties, and their
Affiliates, predecessors, successors, officers, directors,
agents, employees, and assigns (both past and present, and in
all capacities, including, without limitation, their
capacities as officers, directors, shareholders, or agents of
the GeoStar Parties, and in their individual capacities), from
any claim, demand, suit, arbitration, obligation, liability,
or cause of action of any character, whether known or unknown,
fixed or contingent, asserted or unasserted, actual or
potential, and whether arising at common law, equity, or
pursuant to any statute, rule or regulation (including U.S.,
Australian, or Canadian federal, state, or provincial
statutes, rules and regulations), that the GeoStar Parties, or
any of them, (i) have or have had as of the Effective Date, or
(ii) in the future may have relating to any events that
occurred prior to the Effective Date. Further, the GeoStar
Parties release any and all claims or potential claims against
any person or party who served in a dual capacity for both a
GeoStar Party and a Gastar Party. The GeoStar Parties hereby
covenant not to sue the released entities and individuals, or
any of them, on the basis of any claim released herein.
Notwithstanding anything to the contrary herein, the GeoStar
Parties agree that this is a general release and is to be
interpreted liberally to effectuate the maximum protection for
the released entities and individuals against the assertion or
prosecution of claims by or through the GeoStar
Parties.
Section
4.02. Releases by the Gastar
Parties. The Gastar Parties, on behalf of themselves,
their Affiliates, their predecessors, successors, principals,
and in their capacities as such, their officers, directors,
agents (including, without limitation, attorneys, advisors,
and other professionals), employees, and assigns, do hereby
release and forever discharge the GeoStar Parties, and their
Affiliates, predecessors, successors, officers, directors,
agents, employees, and assigns (both past and present, and in
all capacities, including, without limitation, their
capacities as officers, directors, shareholders, or agents of
the Gastar Parties, and in their individual capacities), from
any claim, demand, suit, arbitration, obligation, liability,
or cause of action of any character, whether known or unknown,
fixed or contingent, asserted or unasserted, actual or
potential, and whether arising at common law, equity, or
pursuant to any statute, rule or regulation (including,
without limitation, U.S., Australian, or Canadian federal,
state, or provincial statutes, rules and regulations), that
the Gastar Parties, or any of them, (i) have or have
had
as of the Effective Date, or (ii) in the future may have
relating to any events that occurred prior to the Effective
Date. Further, the Gastar Parties release any and all claims
or potential claims against any person or party who served in
a dual capacity for both a GeoStar Party and a Gastar Party.
The Gastar Parties hereby covenant not to sue the released
entities and individuals, or any of them, on the basis of any
claim released herein. Notwithstanding anything to the
contrary herein, the Gastar Parties agree that this is a
general release and is to be interpreted liberally to
effectuate the maximum protection for the released entities
and individuals against the assertion or prosecution of claims
by or through the Gastar Parties. Without limitation of this
section or the previous section, it is expressly agreed that
Thomas E. Robinson, Frederick J. Lambert, Jennifer Moeller,
David Decker, Milton Evans, Alvin Hosking, Tony P. Ferguson,
and Dean Bohjanen, individually, are included within the scope
of the release described herein.
Section
4.03. Dismissal of
Disputes. Within five (5) business days after the
Effective Date, the Parties will file agreed motions to
dismiss with prejudice all claims and counterclaims made by
each Party in each of the Disputes in the form agreed upon by
the Parties' litigation counsel. Each of the Parties
covenants, warrants, and represents that it has not filed or
otherwise initiated any lawsuit, complaint, charge, or other
proceeding against the other in any local, state, or federal
court, arbitration, or agency based upon events occurring
prior to the Effective Date, other than the
Disputes.
Section
4.04. Costs. Each Party
shall bear its own attorneys' fees and all costs incurred in
connection with, relating to, or arising out of the Disputes
or the Settlement Agreement, including, but not limited to,
its attorneys' fees, court costs, and arbitration
fees.
Section
4.05. Ownership of
Claims. Each Party represents and warrants that it
presently owns, free and clear of any and all liens,
encumbrances, rights of control, pledges, or other burdens,
one-hundred percent (100%) of the alleged damages and claims
it releases by this Settlement Agreement, other than interests
held by its attorneys, on whose behalf each such Party
represents and warrants that it is fully authorized to enter
into this Settlement Agreement and release all such damages
and claims. Each Party further represents and warrants that,
other than such attorneys, no other person or entity owns any
interest in the alleged damages and claims released, whether
by assignment, subrogation, constructive trust, or
otherwise.
ARTICLE V
Texas Properties
Section
5.01. Assignments Without
Warranty by GeoStar Parties. Contemporaneously with the
execution of this Settlement Agreement, certain of the GeoStar
Parties will execute the assignment and quitclaim attached
hereto as Exhibit A (the "GeoStar Parties' Texas Assignment"),
the purpose of which is to add to that certain Exhibit A to
the Assignment of Oil and Gas Leases and Other Agreements
(itself an exhibit to the Assignment and Bill of Sale attached
to each of the PSAs as Exhibit 2) in order to complete the
conveyance of oil, gas, and hydrocarbon properties that were
intended to be conveyed under the PSAs save and except
for the properties addressed in Section 5.02, and
subject
to the agreement described in Section 5.03. This
assignment and quitclaim includes, without limitation, any
ownership of, claim (whether legal, equitable, or otherwise)
to, or assertion of, any past or present, known or unknown,
existing or inchoate, right, title, and/or interest. From and
after the Closing Date, at the request of the Gastar Parties
but without further consideration, the GeoStar Parties will
execute and deliver or use reasonable efforts to cause to be
executed and delivered, such other instruments and take such
other actions as the Gastar Parties reasonably may request
related to such interests in Leon and Robertson Counties to
effectuate and perform this assignment and
quitclaim.
Section
5.02. Releases and Assignments
by Gastar Parties.
(a)
Contemporaneously with the execution of this Settlement
Agreement, the Gastar Parties will execute the quitclaim
and/or release attached hereto as Exhibit B-l (the "Gastar
Parties' Texas Release") and the assignment attached hereto as
Exhibit B-2 (the "Gastar Parties' Texas Assignment Without
Warranty") the purpose of which is to quitclaim or release
and/or assign to the applicable GeoStar Parties at least
343.9522 net acres of leasehold interests in Leon and
Robertson Counties identified therein which are more fully
described in the lease schedules attached to Exhibit B-l and
B-2. The Gastar Parties hereby irrevocably and unconditionally
assign these acres to the GeoStar Parties and in so doing,
relinquish, release, and quitclaim any right, title and/or
interest in the at least 343.9522 net acres of leasehold
interests in Leon and Robertson Counties which the Gastar
Parties have or which could be asserted on their behalf. This
assignment and release includes, without limitation, any
ownership of claims (whether legal, equitable, or otherwise)
to, or assertion of, any past or present, known or unknown,
existing or inchoate, right, title, and/or interest. From and
after the Closing Date, at the request of the GeoStar Parties
but without further consideration, the Gastar Parties will
execute and deliver or use reasonable efforts to cause to be
executed and delivered, such other instruments and take such
other actions as the GeoStar Parties reasonably may request
related to the at least 343.9522 net acres of leasehold
interests in Leon and Robertson Counties-to effectuate and
perform this assignment, relinquishment, release, and
quitclaim. The Gastar Parties shall covenant, warrant, and
represent that all costs associated with the at least 343.9522
net acres of leasehold interests in Leon and Robertson
Counties are paid in full as of the Closing Date and that none
of the leases have expired as of the Closing Date. At or
before closing, or as otherwise agreed between the Parties,
the Gastar Parties will turn over the complete lease files in
the Gastar Parties' possession associated with the at least
343.9522 net acres of leasehold interests in Leon and
Robertson Counties.
(b)
Within five days after the Closing Date, the Gastar Parties
shall give notice to the successor of Navasota Resources, LP
(the "Navasota Successor"), in accordance with that certain
Ratification and Assumption executed May 9, 2007 between
Gastar Ltd., Gastar Exploration Texas LP, and Navasota
Resources, LP (as amended), of cures to title as to 162.8061
net acres of leasehold interests in Leon and Robertson
Counties (the "Cured Acreage"), and permit the Navasota
Successor to exercise its rights to acquire the Cured
Acreage.
(i)
If the
Navasota Successor timely closes its acquisition of the Cured
Acreage, in whole or in part, at their election, the GeoStar
Parties may elect that (a) the Gastar Parties shall deliver to
the GeoStar Parties $20,000 per net acre for all net acres
sold to the Navasota Successor no later than forty-eight hours
after the election by the GeoStar Parties or (b) the Gastar
Parties shall deliver to the GeoStar Parties $10,000 per net
acre for all net acres sold to the Navasota Successor no later
than forty-eight hours after the election by the GeoStar
Parties. Under this option (b), the Parties shall, as soon
thereafter as is practicable, amend the farm-out agreement
referred to in Section 5.03 to include a third and fourth
160-acre PUD location known as the "Belin Trust A-l W Offset"
and the "Belin Trust A-l N Offset," being locations to the
immediate west and north of the location of the "Belin Trust
A-l." The GeoStar Parties shall have commercially reasonable
access (consistent with Gastar's seismic license) with which
to review the Gastar Parties' 3D seismic and decide which
option to exercise.
(ii)
If the Navasota Successor elects not to acquire the Cured
Acreage, or any portion thereof, or does not timely close the
acquisition of the Cured Acreage, or any portion thereof, the
Gastar Parties will promptly execute an assignment to the
GeoStar Parties of that portion of the Cured Acreage not
acquired by the Navasota Successor. To the extent that the
Cured Acreage is assigned to the GeoStar Parties, the Gastar
Parties shall:
(A)
irrevocably and unconditionally assign the Cured Acreage to
the GeoStar Parties, and in so doing, relinquish, release, and
quitclaim any right, title and/or interest in the Cured
Acreage which the Gastar Parties have or which could be
asserted on their behalf;
(B)
the assignment shall include, without limitation, any
ownership of claims (whether legal, equitable, or otherwise)
to, or assertion of, any past or present, known or unknown,
existing or inchoate, right, title, and/or
interest;
(C)
agree that from and after the Closing Date, at the request of
the GeoStar Parties but without further consideration, the
Gastar Parties will execute and deliver or use reasonable
efforts to cause to be executed and delivered, such other
instruments and take such other actions as the GeoStar Parties
reasonably may request related to the Cured Acreage to
effectuate and perform this assignment, relinquishment,
release, and quitclaim;
(D)
covenant, warrant and represent that all costs and liabilities
associated with the same are paid in full as of the Closing
Date and that none of the leases have expired as of the
Closing Date; and
(E)
turn over the complete lease files associated with the Cured
Acreage.
Section
5.03. Farm-Out
Agreement.
(a)
The Gastar Parties agree to provide a farm-out to a designated
GeoStar Party of all of the Gastar Parties' existing interests
in two 160-acre PUD locations identified in the T.J. Smith
reports as the "Belin Trust A-l R" and the "Belin Trust A-l S
Offset" (the "Belin Trust Farm-Out Agreement"). Within no more
than thirty days after the Effective Date for this Settlement
Agreement, the Gastar Parties will provide the initial draft
and work together with the GeoStar Parties to finalize the
language of the separate document with all of the terms of the
Belin Trust Farm-Out Agreement, which will incorporate and
merge the terms set forth in this Section 5.03.
(b)
The Belin Trust Farm-Out Agreement will identify the relevant
locations to be farmed-out, which will be a replacement site
for the location of the "Belin Trust A-l" well and the
adjacent 160-acre location to its immediate
south.
(c)
The interests to be earned by the GeoStar Parties for both of
the two 160-acre farm-out locations must be earned by drilling
one test well; to wit, a single well on either 160 acre farm
out location shall be sufficient to earn in the GeoStar
Parties1' interests on both 160-acre farm out locations. The
designated GeoStar Party will, prior to the second anniversary
of the Belin Trust Farm-Out Agreement (i) commence a test well
on one of the 160-acre farmout locations, (ii) use
commercially reasonable efforts to prosecute drilling
operations after commencement for the test well or substitute
test well to a depth sufficient to test either the Travis Peak
formation or the Upper or Lower Bossier formation as shown on
the log for the Anadarko Belin Trust "A" well located on the
Jose Maria Viesca Survey, A-30, Robertson County, Texas (the
"Objective Formation"), (iii) complete the test well or
substitute test well capable of producing oil, gas or related
hydrocarbons in commercial quantities, (iv) the test well or
substitute test well must be producing hydrocarbons in
accordance with the terms of the Belin Trust Farm-Out
Agreement and (v) the designated GeoStar Party must submit to
the applicable Gastar Party a written request for an
assignment of the interest earned. The Bel
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