COMMON SHARE PURCHASE AGREEMENT between GASTAR EXPLORATION LTD. and NAVASOTA RESOURCES, L.P. dated as of May 9, 2007
Exhibit
10.1
between
and
NAVASOTA
RESOURCES, L.P.
dated
as of
May
9, 2007
TABLE
OF CONTENTS
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Page
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1. Purchase
and
Sale.
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4
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1.1 Consideration
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4
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1.2 Authorization
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4
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1.3 Intentionally
Omitted
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4
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1.4 Registration
Rights Agreement
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4
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1.5 Intentionally
Omitted
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4
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2. The
Closing
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4
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2.1 Closing
Date
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4
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2.2 Payment
and Delivery
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5
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3. Representations
and Warranties of the Company
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5
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3.1
Organization and Existence
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5
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3.2
Capitalization: Ownership of Shares: Authorization
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5
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3.3
No
Conflicts
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6
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3.4
Authority; Enforceability
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6
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3.5
Litigation; Contingencies
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6
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3.6
Subsidiaries
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7
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3.7
Title
to Assets
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7
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3.8
Consents
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8
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3.9
Proprietary Rights
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8
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3.10 Reports;
Financial Statements
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8
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3.11 Compliance
with Laws; OSHA
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9
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3.12 Labor
Matters
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9
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3.13 ERISA
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10
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3.14 Environmental
Matters
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10
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3.15 Permits
and
Licenses
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11
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3.16 Insurance
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11
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3.17 Taxes
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11
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3.18 Absence
of
Certain Developments
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12
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3.19 Brokerage
Fees
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12
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3.20 Investment
Company
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12
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3.21 Forward
Looking Statements
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12
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3.22 Disclosure
Controls
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13
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3.23 Affiliate
Transactions
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13
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3.24 Exempt
Offering
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13
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3.25 HSR
Exemption
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13
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3.26 Disclosure
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13
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3.27 Acknowledgement
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13
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3.28
DISCLAIMERS
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14
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4. Representations
and Warranties of the Purchaser
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14
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4.1 No
Conflict
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14
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4.2 Authority;
Enforceability
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14
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4.3 Consents
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14
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4.4 Investment
Representatives
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15
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4.5 Acknowledgments
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15
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5. Nature
and Survival of Representations and Warranties; Indemnity
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16
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5.1 Survival
of
Representations and Warranties
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16
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5.2 Indemnity
by
the Company
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16
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5.3 Indemnity
by
the Purchaser
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16
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5.4 Limitation
of
Liability
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16
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5.5 Exclusive
Remedy
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17
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6. Conditions
Precedent
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17
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6.1 Certain
Actions
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17
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6.2 Representations
and Warranties
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17
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6.3 Related
Agreements
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17
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6.4 Registration
Rights Agreement
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17
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6.5 Material
Adverse Change
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18
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6.6 Company
Requirements
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18
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6.7 Opinions
of
Counsel
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18
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6.8 Delivery
of
Shares
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18
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6.9 Evidence
of
Authority; Good Standing
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18
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7. Miscellaneous
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18
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7.1
Financial Statements and Other Information
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18
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7.2
Expenses
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18
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7.3
Notices
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18
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7.4
Entire
Agreement; Amendments
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19
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7.5
Assignment
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20
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7.6
No
Third Party Rights
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20
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7.7
Counterparts
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20
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7.8
Headings: Interpretation
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20
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7.9
Governing Law
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19
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7.10 Arbitration
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19
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7.11 Attorney
Fees
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21
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7.12 Severability
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21
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7.13 JOINT
ACKNOWLEDGMENT
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21
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SCHEDULES
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Schedule
3.2
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Outstanding
Registration Rights
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Schedule
3.5
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Litigation;
Contingencies
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Schedule
3.6
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Subsidiaries
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Schedule
3.7
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Liens
Against Assets
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Schedule
3.8
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Consents
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Schedule
3.9
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Proprietary
Rights
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Schedule
3.10
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Changes
to Financial Statements
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Schedule
3.11
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Compliance
With Laws
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Schedule
3.13
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ERISA
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Schedule
3.14
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Environmental
Matters and Permits
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Schedule
3.17
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Taxes
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Schedule
3.18
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Absence
of Certain Developments
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Schedule
3.19
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Brokerage
Fees
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Schedule
3.23
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Affiliate
Transactions
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ii
THIS
COMMON SHARE PURCHASE AGREEMENT, dated effective as of May 9, 2007
(“Agreement”), between Navasota Resources, L.P., a [Texas] limited partnerhsip
(the “Purchaser”) and GASTAR EXPLORATION LTD., an Alberta corporation (the
“Company”).
W I T N E S S E T H:
WHEREAS,
subject to the terms and conditions of this Agreement, the Company desires
to
sell certain leasehold interest for consideration consisting of cash and the
sale of common shares, and the Purchaser desires to acquire that certain
leasehold interest;
NOW,
THEREFORE, in consideration of the premises and of the representations,
warranties and covenants herein contained, the parties hereby agree as
follows:
1.
Purchase
and Sale.
1.1 Consideration.
The
Company hereby agrees to issue and sell to the Purchaser ten million
(10,000,000) common shares (the “Shares”), without par value, of the Company
(“Common Shares”), and the Purchaser hereby agrees to purchase the Shares for a
per share purchase price of USD $2.00 per Share (the “Purchase Price”). The
Purchase Price will be payable by wire transfer of immediately available funds
at the closing of the transactions contemplated by this Agreement and the
Related Agreements (as hereinafter defined) by the parties hereto (the
“Closing”). All references in this Agreement to “dollars” or “$” shall mean the
lawful money of the United States of America, unless otherwise specifically
identified as “CDN $” or “Canadian dollars”.
1.2 Authorization.
The
Company agrees that the Shares to be issued and sold to the Purchaser shall
be
duly authorized and issued, and shall be fully paid, nonassessable and shall
not
be subject to any fees, encumbrances, pledges or “adverse claims” (as Section
8.102(a)(1) of the Uniform Commercial Code of the State of Oklahoma defines
that
term), and upon delivery to the Purchaser will vest full, valid and legal title
to the Shares in the Purchaser.
1.3 Intentionally
Omitted.
1.4 Registration
Rights Agreement.
The
Company and the Purchaser will enter into a Registration Rights Agreement which
will include certain demand and piggy-back registration rights.
1.5 Intentionally
Omitted.
2. The
Closing.
2.1 Closing
Date.
The
Closing shall take place as set forth on May 9, 2007 at the office of the
Company at Houston, Texas as set forth in the Company’s letter to Purchaser
dated May 7, 2007 (“Preferential Rights Letter”).
-4-
2.2 Payment
and Delivery.
At the
Closing, the Purchaser shall pay the Purchase Price by transferring immediately
available funds by wire transfer to the Company. At the Closing, the Company
will deliver to the Purchaser certificates representing the Shares. The
certificates for Shares shall be subject to a legend restricting transfer under
the Securities Act, and referring to restrictions on transfer therein, such
legend to be substantially as follows:
THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AS TO THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT
ANY
PROSPECTUS DELIVERY REQUIREMENTS ARE NOT APPLICABLE.
The
Shares may also include any legend required under the laws of any state,
province or other jurisdiction and will include a legend required under the
Canadian Securities Laws, substantially as follows:
UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT
TRADE THE SECURITY BEFORE [insert
the date that is 4 months and a day after the distribution
date].
THE
SECURITIES HEREIN ARE SUBJECT TO THE RESALE RESTRICTIONS SET OUT IN SECTION
3.2
OF ALBERTA SECURITIES COMMISSION RULE 72-501.
The
foregoing legends will be removed and the Company will issue replacement
certificates without such legends upon registration of the Shares and in
accordance with applicable law including the Canadian Securities
Laws.
3. Representations
and Warranties of the Company.
The
Company represents and warrants to the Purchaser that, as of the date of this
Agreement:
3.1 Organization
and Existence.
The
Company is a corporation duly continued and validly existing and in good
standing under the laws of Alberta, Canada and has all requisite corporate
power
to carry on its business as now conducted and is qualified to do business in
those jurisdictions where its ownership, lease or use of property or the conduct
of its business requires such qualification. The Company has delivered to the
Purchaser complete and correct copies of the Articles of Incorporation and
Bylaws of the Company as in effect on the date hereof.
3.2 Capitalization:
Ownership of Shares: Authorization.
The
Company has an unlimited number of authorized Common Shares and no authorized
or
issued shares of preferred shares. As of the date of this Agreement, the Company
had (a) 195,341,375 issued and outstanding Common Shares; (b) no treasury
shares; and (c) $30,000,000 of 9.75% convertible senior unsecured debentures
outstanding that may be converted into 6,849,315 underlying Common Shares.
In
addition as of March 31, 2007, the Company had (i) outstanding warrants to
purchase up to 2,732,521 Common Shares, and (ii) authority to grant up to
30,000,000 options exercisable for Common Shares pursuant to stock option plans
which have been approved by the Company's shareholders, of which 10,699,750
share options were outstanding. Other than the registration rights granted
to
the Purchaser in accordance with the transactions contemplated hereby, the
Company has granted only the registration rights more particularly described
in
Schedule
3.2
that are
currently in effect, including demand or piggy-back registration rights. Except
as set forth in Schedule
3.2,
there
are no options, warrants, rights, conversion rights, phantom rights, preemptive
rights or any other rights of any party to receive equity of the Company. Upon
issuance of the Shares to the Purchaser, the Purchaser will be the record and
beneficial owner of the Shares and the Shares will be duly authorized, validly
issued and outstanding, fully paid and nonassessable. Except as set forth in
Schedule 3.2, as a result of the issuance of the Shares, the Company is not,
nor
will it become, obligated to issue any additional shares of capital stock
(preferred or common) to any officer, director, shareholder or other
party.
-5-
3.3 No
Conflicts.
The
execution and delivery of this Agreement and the Registration Rights Agreement
by the Company and the execution and delivery of the Related Agreements by
the
Company and certain of its subsidiaries, and performance by the Company and
its
subsidiaries hereunder and thereunder, will not result in a violation or breach
of any term or provision of or constitute a default or accelerate the
performance required under (i) the Articles of Incorporation, Bylaws or other
governance documents of the Company or any of its subsidiaries or (ii) any
material indenture, mortgage, deed of trust or other contract or agreement
to
which the Company or any of its subsidiaries is a party or by which their
respective assets are bound, or violate any statute, rule, regulation, order,
writ, injunction or decree of any court, administrative agency or governmental
body, except for any violation, breach or default that would not have a Material
Adverse Effect.
3.4 Authority;
Enforceability.
The
Company has full right, power and authority to execute and deliver this
Agreement, the Registration Rights Agreement and the Related Agreements and
to
consummate the transactions contemplated hereby and thereby. The execution
and
delivery of this Agreement, the Registration Rights Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby to
be
performed by the Company have been duly and validly authorized by all necessary
corporate action on the part of the Company, and no other corporate proceedings
are necessary to authorize the execution and delivery of this Agreement, the
Registration Rights Agreement and the Related Agreements by the Company or
to
consummate the transactions contemplated hereby to be performed by the Company.
This Agreement, the Registration Rights Agreement and the Related Agreements
constitute valid and legally binding obligations of the Company, enforceable
in
accordance with their respective terms, except as that enforcement may be
limited by bankruptcy, insolvency, moratorium or similar laws affecting the
enforcement of creditors’ rights, by the availability of injunctive relief or
specific performance and by general principles of equity and, in the case of
the
Registration Rights Agreement, any rights to indemnity or contribution
thereunder may be limited by federal and state securities laws and public policy
considerations.
3.5 Litigation;
Contingencies.
Except
as described in Schedule
3.5,
there
is no action, suit or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries before any court,
agency or arbitrator that would result in any Material Adverse Effect or that
questions the validity of any action taken or to be taken pursuant to or in
connection with this Agreement, the Registration Rights Agreement or the Related
Agreements. As used in this Agreement, the term “Material Adverse Effect” shall
mean an event, circumstance, loss, development or effect that would result
in a
material adverse effect on the business, operations, assets, financial condition
or results of operations of the Company and its subsidiaries.
-6-
3.6 Subsidiaries.
Except
for the subsidiaries listed in Schedule
3.6
attached
hereto, the Company has no subsidiaries or any material equity interests in
any
other corporation, partnership, limited liability company, joint venture or
other entity (excluding joint ventures, joint operating or ownership
arrangements and tax partnerships entered into in the ordinary course of
business). The Company owns one hundred percent (100%) of all of the issued
and
outstanding equity capital of each of the subsidiaries listed Schedule
3.6.
Each
subsidiary of the Company has been duly organized and is in good standing under
the laws of the jurisdiction of its organization, with the corporate power
and
authority to own its properties and conduct its business; and each subsidiary
of
the Company is duly qualified to do business and is in good standing in all
other jurisdictions in which its ownership or lease of property or the conduct
of its business requires such qualification, except where the failure to be
so
qualified or in good standing would not reasonably be expected to individually
or in the aggregate have a Material Adverse Effect. All of the issued and
outstanding capital stock or similar equity interests of each subsidiary of
the
Company has been duly authorized and validly issued and is fully paid and
nonassessable; and the capital stock or similar equity interests of each
subsidiary owned by the Company, directly or through subsidiaries, are owned
free from liens, encumbrances and defects, except as provided in Schedule
3.7
3.7 Title
to Assets.
Except
as otherwise set forth in Schedule
3.7,
the
Company and its subsidiaries have: (i) defensible title to its oil and gas
properties, title investigation having been carried out by the Company in
accordance with the practice in the oil and gas industry in the areas in which
the Company operates and (ii) good and defensible title to all other material
real properties and all other material properties and assets owned by them,
in
each case, except for Permitted Encumbrances, free from liens, encumbrances
and
defects that would materially affect the value thereof taken as a whole or
materially interfere with the use made or to be made thereof by them as a
whole.
The
Company and its subsidiaries have maintained all their tangible personal
properties material to the business of the Company and its subsidiaries, taken
as a whole, in good repair, working order and operating condition, subject
to
ordinary wear and tear, and all such assets are suitable for the purposes for
which they are presently being used, except where the failure to have such
would
not be reasonably expected to have a Material Adverse Effect. The
Company and its subsidiaries have all easements, rights-of-way and similar
authorizations required for the use of the real properties and all other
properties and assets owned by them and used in the conduct of the business
as
heretofore conducted
except
where the failure to have such would not be reasonably expected to have a
Material Adverse Effect. No material properties or assets of the Company and
its
subsidiaries, or any portion thereof, has been condemned or otherwise taken
by
any public authority, and neither the Company nor any of its subsidiaries has
received written notice that any such condemnation or taking is threatened
or
contemplated.“Permitted
Encumbrances” as used herein shall mean any or all of the following: (a)
encumbrances that arise under operating agreements to secure payment of amounts
not yet delinquent and are of a type and nature customary in the oil and gas
industry; (b) encumbrances that arise as a result of pooling and unitization
agreements, declarations, orders, or laws to secure payment of amounts not
yet
delinquent; (c) encumbrances securing payments to mechanics and materialmen
or
securing payment of taxes or assessments that are, in either case, not yet
delinquent; (d) lessor’s royalties, overriding royalties, division orders,
reversionary interests and other similar burdens that do not operate to
materially reduce the value of the property affected; (e) easements,
rights-of-way, servitudes, permits, surface leases, surface use restrictions
and
other surface uses and impediments on, over or in respect of any of the assets,
provided that they do not interfere materially with the ownership, operation,
value, or use of the property affected; (f) rights reserved to or vested in
any
governmental entity, to control or regulate any of the assets in any manner,
and
all applicable laws, of any governmental entity; (g) production sales contracts;
contracts for sale, purchase, exchange, refining or processing of hydrocarbons;
farm-out or farm-in agreements; participation agreements; unitization and
pooling designations, declarations, orders and agreements; agreements of
development; area of mutual interest agreements; gas balancing and deferred
production agreements; plant agreements; production handling agreements;
processing agreements; pipeline, gathering and transportation agreements;
injection, repressuring and recycling agreements; carbon dioxide purchase or
sale agreements; and salt water or other disposal agreements, (in each case)
to
the extent the same are ordinary and customary to the oil, gas and other mineral
exploration, development, processing or extraction business.
-7-
3.8 Consents.
Except
as otherwise set forth in Schedule
3.8,
the
Company is not required to obtain any consent from or approval of any court,
governmental entity or any other person in connection with the execution,
delivery or performance by it of this Agreement, the Registration Rights
Agreement or the Related Agreements and the transactions contemplated hereby
and
thereby, except such filings as may be required to be made with the Securities
and Exchange Commission ("SEC"), pursuant to US Securities Laws, the Canadian
Securities Laws and/or the American Stock Exchange and/or Toronto Stock Exchange
and with any state or foreign “blue sky” or securities regulatory authority.
Except as otherwise set forth in Schedule
3.8,
the
consummation of the transactions contemplated by this Agreement will not require
the approval of any entity or person in order to prevent the termination of
any
material right, privilege, license or agreement of the Company.
3.9 Proprietary
Rights.
Except
as set forth on Schedule
3.9,
the
Company and its subsidiaries own or possess adequate licenses or other valid
rights to use all patents, patent rights, trademarks, trademark rights and
proprietary information used or held for use in connection with their respective
businesses as currently being conducted, except where the failure to own or
possess such licenses and other rights would not have a Material Adverse Effect,
and there are no assertions or claims challenging the validity of any of the
foregoing that would have a Material Adverse Effect. The conduct of the
Company’s and its subsidiaries’ respective businesses as currently conducted
does not conflict with any patents, patent rights, licenses, trademarks,
trademark rights, trade names, trade name rights or copyrights of others in
any
way that would have a Material Adverse Effect. There is no infringement of
any
proprietary right owned by or licensed by or to the Company or any of its
subsidiaries that would have a Material Adverse Effect.
3.10 Reports;
Financial Statements.
The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to any applicable reporting
requirements of the 1934 Act, if any, or to be filed by it under the Canadian
Securities Laws (all of the foregoing filed after November 4, 2005 and prior
to
the date this representation is made (including all exhibits included therein
and financial statements and schedules thereto and documents incorporated by
reference therein) being herein referred to as the "Reports"). The Company
has
made available to the Purchaser true and complete copies of all Reports. As
of
their respective dates, the Reports complied in all material respects with
the
requirements of the laws, rules and regulations applicable to thereto. None
of
the Reports, at the time they were filed with the SEC or under Canadian
Securities Laws, as applicable, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. As of their respective dates, the
consolidated financial statements of the Company and its subsidiaries included
in the Reports and in the Company's registration statement on Form S-3 and
any
amendment thereto filed with the SEC under the Securities Act (the "Form S-3")
complied as to form in all material respects with applicable accounting
requirements and the published securities laws, rules and regulations applicable
thereto. Such consolidated financial statements have been prepared in accordance
with U.S. or Canadian generally accepted accounting principles (as applicable),
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in
all
material respects the financial position of the Company and its subsidiaries
as
of the dates thereof and the results of their operations and cash flows for
the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except as set forth on Schedule
3.10,
all of
the financial statements present fairly in all material respects the financial
position and the results of operations of the Company and its subsidiaries
as of
the dates and for the periods shown therein, and to the knowledge of the
Company, there has been no Material Adverse Effect on the financial condition
of
the Company since December 31, 2006. Except as set forth on Schedule
3.10,
neither
the Company nor any of its subsidiaries has any debt, liability or obligation,
contingent or otherwise, that would have a Material Adverse Effect. The
accounting firm that has expressed its opinion with respect to the consolidated
financial statements included in the Company’s most recently filed annual Report
and the Form S-3 is independent of the Company as required under the Canadian
Securities Laws or pursuant to the standards promulgated by the SEC in Rule
2-01
of Regulation S-X, as applicable, and such firm was otherwise qualified to
render the audit opinion under applicable laws. There is no transaction,
arrangement or other relationship between the Company and an unconsolidated
or
other off-balance-sheet entity that is required to be disclosed by the Company
in the Reports or the Form S-3 that has not been so disclosed.
-8-
3.11 Compliance
with Laws; OSHA.
The
Company and its subsidiaries are in compliance with all applicable laws,
ordinances, statutes, rules, regulations and orders promulgated by any court
or
federal, state or local governmental body or agency relating to its assets
and
business, except for such violations or failures to comply that would not result
in a Material Adverse Effect. Except as set forth on Schedule
3.11,
since
January 1, 2007, neither the Company nor any of its subsidiaries has received
any notice, citation, claim, assessment or proposed assessment alleging any
violation of any federal, state or local safety and health laws, except for
any
such violations as would not result in a Material Adverse Effect.
3.12 Labor
Matters.
There
is no labor strike or labor disturbance pending or, to the knowledge of the
Company, threatened against the Company or any of its subsidiaries. Neither
the
Company nor any of its subsidiaries has experienced any work stoppage or other
material labor disturbance within the past three years. Neither the Company
nor
any of its subsidiaries is a party to any collective bargaining agreement with
respect to its employees and, to the knowledge of the Company, there are no
current attempts to organize its employees.
-9-
3.13 ERISA.
Except
as set forth on Schedule
3.13
or in
reports, schedules, forms, statements or other documents filed by the Company
with the SEC or pursuant to Canadian Securities Laws, neither the Company nor
any of its subsidiaries maintains or sponsors: (i) any pension, retirement,
savings, deferred compensation or profit-sharing plan; (ii) any stock option,
stock appreciation, stock purchase, performance share, bonus or other incentive
plan; (iii) severance plan, health, group insurance or other welfare plan;
or
(iv) any other similar plan or any “employee benefit plan” within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”) (the term “plan” shall include any contract, agreement or policy, each
such plan being hereinafter referred to individually as a “Plan”). Each Plan
intended to be qualified under Section 401 (a) of the Internal Revenue Code
of
1986, as amended (the “Code”), has received or timely applied for a favorable
determination letter from the Internal Revenue Service regarding such qualified
status (or is covered by a favorable opinion letter issued by the Internal
Revenue Service) and since such determination (or opinion letter), no amendments
to or failure to amend any such Plan or any other circumstances adversely
affects its tax qualified status. Except for any matter that would not have
a
Material Adverse Effect, there has been no prohibited transaction within the
meaning of Section 4975 of the Code and Section 406 of Title I of ERISA with
respect to any Plan that is subject to the prohibited transaction requirements
of the Code or ERISA. Except as set forth on Schedule
3.13,
neither
the Company nor any of its subsidiaries has any liability for any prohibited
transaction or accumulated funding deficiency (within the meaning of Section
412
of the Code) or any complete or partial withdrawal liability (within the meaning
of Sections 4203 and 4205 of the ERISA, respectively), with respect to any
pension, profit sharing or other plan which is subject to ERISA, to which the
Company or any of its subsidiaries makes or ever has made a contribution and
in
which any employee of the Company or any subsidiary is or has ever been a
participant.
3.14 Environmental
Matters.
Except
as would not have a Material Adverse Effect or as set forth on Schedule
3.14
(a) the
Company and each of its subsidiaries have obtained all Environmental Permits
(as
defined below) that are required with respect to their respective businesses,
operations and properties, either owned or leased, and (b) the Company, each
of
it subsidiaries, and their respective properties are in compliance with all
terms and conditions of all applicable Requirements of Environmental Law and
Environmental Permits. Except as would not have a Material Adverse Effect or
as
set forth on Schedule
3.14,
there
are no Environmental Claims pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries. Neither the Company
nor any of its subsidiaries has received any notice from any governmental
authority of any unresolved violation or liability arising under any
Requirements of Environmental Law or Environmental Permit in connection with
its
assets, businesses or operations, except for any such violation or liability
as
would not have a Material Adverse Effect.
“Environmental
Claim” means any third party (including governmental agencies and employees)
action, lawsuit, claim or proceeding (including claims or proceedings under
the
Occupational Safety and Health Act or similar laws relating to safety of
employees) that seeks to impose liability for (a) pollution or contamination
of
the ambient air, surface water, ground water or land; (b) solid, gaseous or
liquid waste generation, handling, treatment, storage, disposal or
transportation; (c) exposure to hazardous or toxic substances; (d) the safety
or
health of employees; or (e) the transportation, processing, distribution in
commerce, use or storage of hydrocarbons. An Environmental Claim includes,
but
is not limited to, a common law action, as well as a proceeding initiated by
a
third party to revoke, modify or terminate an Environmental Permit.
-10-
“Environmental
Permit” means any permit, license, approval or other authorization under any
applicable law, regulation and other requirement of the United States or any
foreign country or of any state, municipality or other political subdivision
thereof relating to pollution or protection of health or the environment,
including laws, regulations or other requirements relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants or
hazardous substances or toxic materials or wastes into ambient air, surface
water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transportation
or
handling of hydrocarbons or chemical substances, pollutants, contaminants or
hazardous or toxic materials or wastes.
“Requirements
of Environmental Law” means all requirements in effect on the Closing Date
imposed by any applicable law, rule, regulation or order of any federal,
foreign, state or local executive, legislative, judicial, regulatory or
administrative agency, board or authority with jurisdiction over the Company
or
any of its subsidiaries or any of their respective properties or assets that
relate to (a) pollution or protection of the ambient air, surface water, ground
water or land; (b) solid, gaseous or liquid waste generation, treatment,
storage, disposal or transportation; (c) exposure to hazardous or toxic
substances; (d) the safety or health of employees; or (e) regulation of the
processing, distribution in commerce, use or storage of
hydrocarbons.
3.15 Permits
and Licenses.
The
Company and its subsidiaries have all licenses, permits and other authorizations
necessary for the conduct of their respective businesses as they are currently
being conducted, except where the failure to hold any such licenses, permits
or
authorizations would not have a Material Adverse Effect.
3.16 Insurance.
The
Company and its subsidiaries maintain insurance policies (together with all
riders and amendments) relating to the assets or the businesses of the Company
and its subsidiaries with coverage limits in amounts that the Company believes
are sufficient to protect against any material claim for casualty or property
damage. Such insurance policies are in full force and effect and all premiums
due thereon have been paid or accrued on the books of the Company.
3.17 Taxes.
Each of
the Company and its subsidiaries (i) has made or filed all foreign, U.S. and
Canadian federal, state, provincial and territorial income and all other tax
returns, reports and declarations required by any jurisdiction to which it
is
subject (unless and only to the extent that the Company and each of its
subsidiaries has set aside on its books provisions reasonably adequate for
the
payment of all unpaid and unreported taxes), (ii) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
items set forth on Schedule
3.17
being
contested in good faith and for which the Company has made appropriate reserves
on its books, and (iii) has set aside on its books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the periods
to
which such returns, reports or declarations (referred to in clause (i) above)
apply. The charges, accruals and reserves on the books of the Company in respect
of taxes for all prior fiscal periods are considered adequate by the Company,
the Company knows of no assessment for additional taxes for any of such fiscal
years or any basis therefore and there are no unpaid taxes in any material
amount claimed in writing to be due by the taxing authority of any jurisdiction,
and to the Company’s knowledge, there is no basis for any such claim. All tax
returns and reports that have been filed by the Company and its subsidiaries
are
complete in all material respects. To the knowledge of the Company, no claim
has
been made that the Company or any of its subsidiaries is subject to a tax in
any
jurisdiction in which the Company or any of its subsidiaries has not filed
a
return and that remains unpaid as of the date hereof. The Company and its
subsidiaries have withheld and paid all material amounts of taxes required
to
have been withheld and paid in connection with amounts previously paid to any
employee, independent contractor, creditor, stockholder or other third party.
Neither the Company nor any of its subsidiaries has been the subject of an
audit
and neither the Company not any of its subsidiaries has waived any statute
of
limitations or agreed to an extension of time with respect to a tax assessment
or deficiency.
-11-
3.18 Absence
of Certain Developments.
Since
December 31, 2006, there has been no change in the business or operations of
the
Company or any of its subsidiaries that would have a Material Adverse Effect,
except changes in the ordinary course of business. Except as set forth on
Schedule
3.18,
the
Company has not, since the date of the most recent consolidated financial
statements included in the Form S-3, directly or indirectly, declared or paid
any dividend or ordered or made any other distribution on account of any shares
of any class of the capital stock of the Company. The Company has not, since
such date, directly or indirectly redeemed, purchased or otherwise acquired
any
such shares or agreed to do so or set aside any sum or property for any such
purpose.
3.19 Brokerage
Fees.
Except
as set forth in Schedule 3.19, there are no contracts, agreements or
understandings between the Company and any person that would give rise to a
valid claim against the Company or Purchaser for a brokerage commission,
finder’s fee or other like payment in connection with the transactions
contemplated by this Agreement and the Related Agreements.
3.20 Investment
Company.
The
Company is not, and after giving effect to the offering and sale of the Shares
and the application of proceeds thereof, will not be an "investment company"
as
defined in the Investment Company Act of 1940.
3.21 Forward
Looking Statements.
The
statistical and market related data and forward looking statements included
in
the Reports and the Form S-3 are based on or derived from sources the Company
believes to be reliable and accurate in all material respects and represents
the
Company's good faith estimates that are made on the basis of data derived from
such sources.
-12-
3.22 Disclosure
Controls.
The
Company has established and maintains disclosure controls and procedures (as
such term is defined in Rule 13a-15 under the Exchange Act); such disclosure
controls and procedures are designed to ensure that material information
relating to the Company and its subsidiaries is made known to the chief
executive officer and chief financial officer of the Company by others within
the Company or any subsidiary, and such disclosure controls and procedures
are
reasonably effective to perform the functions for which they were established
subject to the limitations of any such control system. The Company's auditors
and the audit committee of the board of directors of the Company have been
advised of: (A) any significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's ability to record,
process, summarize and report financial data; and (B) any fraud, whether or
not
material, that involves management or other employees who have a role in the
Company's internal controls. Any material weaknesses in internal controls have
been identified for the Company's auditors; and since the date of the most
recent evaluation of such disclosure controls and procedures, there have been
no
significant changes in internal controls or in other factors that could
significantly affect internal controls, including any corrective actions with
regard to significant deficiencies and material weaknesses. The Company and
its
subsidiaries are in material compliance with any provisions of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended, and the rules and regulations thereunder
to the extent applicable to the Company or any of its subsidiaries.
3.23 Affiliate
Transactions.
There
are no transactions affecting the business of the Company or any of the
Company's subsidiaries or their respective assets between the Company or any
subsidiary of the Company and any affiliates of the Company, any subsidiary
of
the Company or any officer or director of the Company, except as set forth
in
Schedule 3.23.
3.24 Exempt
Offering.
Subject
to the accuracy of the representations and warranties of the Purchaser set
forth
in Section 4, the offer, sale and issuance of the Shares pursuant to this
Agreement are exempt from the registration and prospectus delivery requirements
of the Securities Act by virtue of Regulation D thereunder and from the
registration, prospectus delivery or qualification requirements of the Canadian
Securities Laws and any applicable state securities laws.
3.25 HSR
Exemption.
As of
the date hereof and as of the Closing Date, the Company, considered together
with all entities it controls, does not hold assets with an aggregate fair
market value of greater than Fifty Million Dollars ($50,000,000.00) which would
be considered to be non-exempt assets under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder, including, without limitation, Section 802.4 of Title 16 of the
Code
of Federal Regulations.
3.26 Disclosure.
No
representation or warranty of the Company set forth in this Agreement contains,
or will contain as of the Closing Date, any untrue statement of a material
fact
or, to the knowledge of the Company, omits to state a material fact necessary
in
order to make the statements contained herein not misleading
3.27 Acknowledgement.
The
Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of an arm’s length purchaser with respect to the Company in connection
with this Agreement, the Registration Rights Agreement and the Related
Agreements and the transactions contemplated hereby and thereby. The Company
further represents to the Purchaser that the Company’s decision to enter into
this Agreement, the Registration Rights Agreement and the Related Agreements
has
been based solely on the independent evaluation by the Company and its
representatives of all of the terms and conditions of the transactions
contemplated thereby. The Company does not believe, and has no reasonable
grounds to believe, that the Purchaser is a resident of Alberta.
-13-
3.28 DISCLAIMERS. EXCEPT
AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, THE REGISTRATION RIGHTS
AGREEMENT AND THE RELATED AGREEMENTS, THE COMPANY (i) MAKES NO REPRESENTATION
OR
WARRANTY, EXPRESS, STATUTORY, IMPLIED OR OTHERWISE WITH RESPECT TO THE SHARES,
THE COMPANY OR ANY OF ITS SUBSIDIARIES OR THEIR RESPECTIVE ASSETS AND (ii)
DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES ASSOCIATED WITH THE SHARES
THE COMPANY OR ANY OF ITS SUBSIDIARIES OR THEIR RESPECTIVE ASSETS, EXPRESS,
STATUTORY, IMPLIED OR OTHERWISE.
4. Representations
and Warranties of the Purchaser.
The
Purchaser represents and warrants to the Company that, as of the date of this
Agreement:
4.1 No
Conflict.
The
execution and delivery of this Agreement and the Registration Rights Agreement
by the Purchaser, and performance by the Purchaser hereunder and thereunder
will
not result in a violation or breach of any term or provision of or constitute
a
default or accelerate the performance required under the Certificate of
Incorporation or Bylaws of the Purchaser or any material indenture, mortgage,
deed of trust or other contract or agreement to which the Purchaser is a party
or by which its assets are bound, or violate any order, writ, injunction or
decree of any court, administrative agency or governmental body.
4.2 Authority;
Enforceability.
The
Purchaser has full right, power and authority to execute and deliver this
Agreement and the Registration Rights Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this
Agreement and the Registration Rights Agreement and the consummation of the
transactions contemplated hereby and thereby to be performed by the Purchaser
have been duly and validly authorized by all necessary corporate action on
the
part of the Purchaser, and no other corporate proceedings are necessary to
authorize the execution and delivery of this Agreement and the Registration
Rights Agreement by the Purchaser or to consummate the transactions contemplated
hereby to be performed by the Purchaser. This Agreement and the Registration
Rights Agreement will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their respective terms, except as
that
enforcement may be limited by bankruptcy, insolvency, moratorium or similar
laws
affecting the enforcement of creditors’ rights, by the availability of
injunctive relief or specific performance and by general principles of
equity.
4.3 Consents.
The
Purchaser is not required to obtain any consent from or approval of any court,
governmental entity or any other person in connection with the execution,
delivery or performance by it of this Agreement or the Registration Rights
Agreement and the transactions contemplated hereby. The consummation of the
transactions contemplated by this Agreement will not require the approval of
any
entity or person in order to prevent the termination of any material right,
privilege, license or agreement of the Purchaser.
-14-
4.4 Investment
Representatives.
The
Purchaser is an “accredited investor” within the meaning of Regulation D
promulgated by the SEC under the Securities Act, and (by virtue of its
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company) is capable of evaluating the
merits and risks of its investment in the Company. The Purchaser acknowledges
that it has had, or will have prior to Closing, the opportunity to ask questions
of the officers of the Company. The Purchaser is an informed and sophisticated
purchaser, experienced in the evaluation and purchase of interests in companies
such as the Company as contemplated hereunder. The Purchaser has or will have
undertaken such investigation and legal and financial due diligence and has
or
will have evaluated such documents and information as it has deemed necessary
to
enable it to make an informed and intelligent decision with respect to the
execution, delivery and performance of this Agreement. In reaching the
conclusion that it desires to acquire the Shares, the Purchaser has evaluated
its financial resources and investment position and the risks associated with
this investment and acknowledges that it is able to bear the economic risks
of
this investment. As of the date hereof, the Purchaser represents, warrants
and
agrees that it is acquiring the Shares as principal solely for its own account,
for investment, and not with a view to the distribution or resale thereof.
The
Purchaser further represents that its present financial condition is such that
it is not under any present necessity or constraint to dispose of such Shares
to
satisfy any existing or contemplated debt or undertaking and that the investment
is suitable for the Purchaser upon the basis of the Purchaser’s other security
holdings, financial situation and needs. The Purchaser acknowledges and
understands that it must bear the economic risk of this investment for an
indefinite period of time because the offering of the Shares has not been
registered under the Securities Act and, accordingly, the Shares must be held
indefinitely unless subsequently registered under the Securities Act and/or
the
Canadian Securities Laws and applicable state and other securities laws or
unless an exemption from such registration is available. The Purchaser agrees
that any certificates evidencing the Shares must bear a legend restricting
the
transfer thereof as set forth in Section 2.2 and that a notice may be made
in the records of the Company or to its transfer agent restricting the transfer
of the Shares in a manner consistent with the foregoing.
4.5 Acknowledgments.
The
Purchaser certifies that it is not a resident of Alberta and acknowledges that:
(a) no securities commission or similar regulatory authority has reviewed or
passed on the merits of the Shares; (b) there is no government or other
insurance covering the Shares; (c) there are risks associated with the purchase
of the Shares and in owning the Shares; (d) there are restrictions on the
Purchaser's ability to resell the Shares and it is the responsibility of the
Purchaser to find out what those restrictions are and to comply with them before
selling the Shares; and (e) the Company has advised the Purchaser that the
Company is relying upon an exemption from the requirements to provide the
Purchaser with a prospectus and to sell securities through a person or company
registered to sell securities under applicable securities legislation and,
as a
consequence of acquiring the securities pursuant to this exemption, certain
protections, rights and remedies provided by applicable securities legislation,
including statutory rights of rescission or damages, will not be available
to
the Purchaser.
-15-
5.
Nature
and Survival of Representations and Warranties;
Indemnity
5.1 Survival
of Representations and Warranties.
All
covenants, agreements, representations and warranties made hereunder or pursuant
hereto or in connection with the transactions contemplated hereby shall survive
the Closing for a period of eighteen (18) months.
5.2 Indemnity
by the Company.
The
Company shall indemnify and hold harmless the Purchaser and the officers,
directors, managers, agents, affiliates and representatives of the Purchaser
(the “Purchaser Indemnitees”) from and against, and shall reimburse the
Purchaser Indemnitees for, any loss, liability, damage or expense, including
reasonable attorneys’ fees and costs of investigation incurred as a result
thereof, that the Purchaser shall incur or suffer (collectively, the “Purchaser
Recoverable Losses”), arising out of or resulting from (a) any misrepresentation
or breach of any representation or warranty contained in Article 3 hereof on
the
part of the Company, or (b) any nonfulfillment or breach of any agreement or
covenant under or pursuant to this Agreement or the Registration Rights
Agreement on the part of the Company.
5.3 Indemnity
by the Purchaser.
The
Purchaser shall indemnify and hold harmless the Company and the officers,
directors, managers, agents, affiliates and representatives of the Company
(the
“Company Indemnitees”) from and against, and shall reimburse the Company
Indemnitees for, any loss, liability, damage or expense, including reasonable
attorneys’ fees and cost of investigation incurred as a result thereof, that the
Company shall incur or suffer (collectively, the “Company Recoverable Losses”)
arising out of or resulting from (a) any misrepresentation or breach of any
representation or warranty contained in Article 4 hereof on the part of the
Purchaser, or (b) any nonfulfillment or breach of any agreement or covenant
under or pursuant to this Agreement or the Registration Rights Agreement on
the
part of the Purchaser.
5.4 Limitation
of Liability.
(a) Notwithstanding
any liability that the Company or the Purchaser may incur in Sections 5.2 and
5.3, respectively, above, the Company shall not be obligated for a Purchaser
Recoverable Loss, and the Purchaser shall not be obligated for a Company
Recoverable Loss, unless and until such loss, individually, or in the aggregate,
shall exceed $250,000, in which case the Company or the Purchaser, as the case
may be, shall be obligated for all amounts in excess thereof. In no event will
the liability of the Company under this Article 5 with respect to Purchaser
Recoverable Losses or the Purchaser under this Article 5 with respect to Company
Recoverable Losses exceed an amount equal to twenty five percent (25%) of the
Purchase Price.
(b) Notwithstanding
any provision in any other Section of this Agreement to the contrary, no
Purchaser Recoverable Loss or Company Recoverable Loss will include any
indirect, consequential, exemplary, punitive or treble damage (collectively,
the
“Excluded Damages”) suffered by the Purchaser Indemnitees or the Company
Indemnitees. The Purchaser hereby releases the Company, to the fullest extent
applicable law permits, from liability for all Excluded Damages, and the Company
hereby releases the Purchaser, to the fullest extent applicable law permits,
from liability for all Excluded Damages.
-16-
5.5 Exclusive
Remedy.
The
rights to indemnification set forth in this Article 5 shall be the sole and
exclusive remedy of the Purchaser Indemnitees against the Company and the
Company Indemnitees against the Purchaser, respectively, in connection with
the
surviving representations and warranties (except to the extent that the
Purchaser Indemnitees or the Company Indemnitees may have any claim against
the
other party arising out of or based on fraud).
6. Conditions
Precedent.
The
obligation of the Purchaser hereunder to purchase the Shares from the Company
is
subject to the satisfaction or waiver of each of the following
conditions:
6.1 Certain
Actions.
No
preliminary or permanent injunction or other order will have been issued by
any
court of competent jurisdiction or any regulatory body preventing consummation
of the transactions contemplated by this Agreement and no action will have
been
commenced or threatened against the Company or the Purchaser or any of their
respective affiliates, associates, officers or directors seeking to prevent
or
challenge the transactions contemplated by this Agreement or seeking damages
arising from the transactions contemplated by this Agreement.
6.2 Representations
and Warranties.
All
representations and warranties of the Company contained herein will be true
and
correct in all material respects on and as of the Closing Date as if made on
and
as of the Closing Date (except
to the extent that a representation specifically speaks to an earlier date,
in
which case such representation shall continue to remain true and correct as
of
the Closing Date with respect to such earlier date), and the Purchaser will
have
received a certificate signed by a responsible officer of the Company to such
effect.
6.3 Related
Agreements.
The
transactions contemplated by this Agreement, the Registration Rights Agreement,
and related conveyances, documents and agreements contemplated thereby
(collectively, the “Related Agreements”) among Gastar Exploration Ltd. and
Purchaser and one or more of their respective subsidiaries are being consummated
pursuant to the Preferential Rights Letter and that certain Letter of Intent
dated April 27, 2007 executed between Chesapeake Energy Corporation and the
Company. The Letter of Intent and the Preferential Rights Letter reflect
interdependent provisions reflecting the agreement of the parties to the
purchase of shares and to purchase certain leasehold interests. Consummation
of
the entirety of the transactions is a condition precedent under all of the
Related Agreements. While
certain values for accounting purposes may be placed on the various components
of the transaction, the parties acknowledge and agree that the consideration
attributable to the matters covered in the Related Agreements were not derived
separately but were negotiated as a whole and that the transactions would not
be
consummated without each of the matters covered by the Related Agreements being
completed.
6.4 Registration
Rights Agreement.
The
Company shall have executed and delivered to the Purchaser the Registration
Rights Agreement.
-17-
6.5 Material
Adverse Change.
There
shall not have occurred since the date hereof any material adverse change in
the
financial condition, results of operations or business of the Company excluding
any change or effect resulting from general economic conditions, any occurrence
or condition affecting the oil and gas industry generally or any occurrence
or
condition arising out of the transactions contemplated by this Agreement or
the
public announcement thereof.
6.6 Company
Requirements.
All
statutory, regulatory, listing agency and other requirements for the valid
consummation by the Company of the transactions contemplated by this Agreement
shall have been fulfilled and all authorizations, consents and approvals of
all
governmental or other authorities required to be obtained in order to permit
consummation by the Company of the transactions contemplated by this Agreement
shall have been obtained. The Company shall have made all filings under all
applicable U.S. and Canadian federal, state, provincial, territorial and foreign
securities laws necessary to consummate the issuance of the Shares pursuant
to
this Agreement in compliance with such laws.
6.7 Opinions
of Counsel.
If
requested by the Purchaser, the Purchaser shall have received an opinion of
Canadian counsel for the Company in form, scope and substance reasonably
satisfactory to the Purchaser.
6.8 Delivery
of Shares.
The
Company shall have issued and delivered the Shares as directed in writing by
the
Purchaser.
6.9 Evidence
of Authority; Good Standing.
The
Company shall have delivered to the Purchaser a secretary’s certificate, dated
as of the Closing Date attaching certificates of good standing for the Company
and each of its subsidiaries as of a recent date and certifying the resolutions
of the board of directors of authorizing the Company to execute deliver and
perform the transactions contemplated by this Agreement, the Registration Rights
Agreement and the Related Agreements.
7. Miscellaneous.
7.1 Financial
Statements and Other Information.
So long
as the Purchaser owns at least five percent (5%) of the outstanding capital
stock of the Company at any time upon the written request of the Purchaser,
the
Company will provide to the Purchaser copies of all financial statements and
other information provided to any governmental authority, lender, investor,
partner, or shareholder.
7.2 Expenses.
Each of
the parties will pay their respective costs and expenses (including legal fees)
in connection with this Agreement as a result of the transactions contemplated
hereby.
7.3 Notices.
All
notices and other communications provided for or permitted hereunder must be
in
writing and will be deemed delivered and received (i) if personally
delivered or if delivered by facsimile or courier service, when actually
received by the party to whom the notice or communication is sent, or
(ii) if deposited with the United States postal service (whether actually
received or not), at the close of business on the third business day next
following the day when placed in the mail, postage prepaid, certified or
registered with return receipt requested, addressed to the appropriate party or
parties at the address of that party set forth or referred to below (or at
such
other address as that party may designate by written notice to each other party
in accordance herewith):
-18-
(a) if
to the
Company, to:
▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention:
Mr. J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax
No.:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy (which will not constitute notice for purposes of this Agreement)
to:
▇▇▇▇▇▇
& ▇▇▇▇▇▇
2300
First City Tower
▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention:
Mr. T. ▇▇▇▇ ▇▇▇▇▇
Fax
No.:
(▇▇▇) ▇▇▇-▇▇▇▇
(b) if
to the
Purchaser, to:
Navasota
Resources, L.P.
▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Fax
No.:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy (which will not constitute notice for purposes of this Agreement)
to:
____________________
____________________
____________________
____________________
Attention:
___________
Fax
No.:
_____________
7.4 Entire
Agreement;
Amendments.
This
Agreement, the Registration Rights Agreement, the Related Agreements, the
schedules hereto and thereto and the documents specifically referred to herein
and therein or executed contemporaneously therewith constitute the entire
agreement, understanding, representations and warranties of the parties hereto
related to the subject matter hereof and supersede all prior agreements of
the
parties related to the subject matter hereof. This Agreement may be amended
only
by an instrument in writing executed by both of the parties hereto.
-19-
7.5 Assignment.
This
Agreement may be assigned at any time by the Purchaser to a wholly owned
subsidiary of the Purchaser without the prior consent of the Company so long
as
the party to whom this Agreement is assigned agrees in writing to be bound
by
all terms and conditions contained herein. No other assignment may be made
by
the Purchaser without the Company’s prior written consent. Subject to the
provisions of this Section 7.5, this Agreement will inure to the benefit of
and be binding on the successors and assigns of each of the parties
hereto.
7.6 No
Third Party Rights.
Nothing
in this Agree-ment, express or implied, is intended to confer upon any person,
other than the parties hereto and their respective successors and assigns,
any
rights or remedies under or by reason of this Agreement or to constitute such
person a third party beneficiary of this Agreement.
7.7 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original instrument, but all of which taken together shall
constitute one and the same agreement.
7.8 Headings:
Interpretation.
The
headings of the various sections of this Agreement have been inserted for
convenience of reference only and shall not limit or affect the meaning or
interpretation of this Agreement. Whenever the context requires, references
in
this Agreement to the singular number shall include the plural and vice versa,
and words denoting gender shall include the masculine, feminine and neuter.
This
Agreement uses the words “herein,” “hereof,” “hereto” and “hereunder” and words
of similar import to refer to this Agreement as a whole and not to any
particular provision of this Agreement. As used in this Agreement, the word
“including” (and, with correlative meaning, the word “include”) means including
without limiting the generality of any description preceding that word, and
the
verbs “shall” and “will” are used interchangeably and have the same
meaning.
7.9 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Texas, without regard to any principles of conflicts of law thereof
that would result in the application of the laws of any other
jurisdiction.
7.10 Arbitration.
(a) The
parties shall attempt in good faith to resolve any dispute arising out of or
relating to this Agreement promptly by negotiation between executives who have
authority to settle the controversy and who are at a higher level of management
than the persons with direct responsibility for administration of this
Agreement. Any party may give the other party written notice of any dispute
not
resolved in the normal course of business. Within 15 days after delivery of
the
notice, the receiving party shall submit to the other party a written response.
The notice and response shall include (a) a statement of that party’s position
and a summary of arguments supporting that position, and (b) the name and title
of the executive who will represent that party and of any other person who
will
accompany the executive. Within 30 days after delivery of the initial notice,
the executives of both parties shall meet at a mutually acceptable time and
place, and thereafter as often as they reasonably deem necessary, to attempt
to
resolve the dispute. All reasonable requests for information made by one party
to the other will be honored.
All
negotiations pursuant to this clause are confidential and shall be treated
as
compromise and settlement negotiations for purposes of applicable rules of
evidence.
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(b) If
the
dispute has not been resolved by negotiation as provided herein within 45 days
after delivery of the initial notice of negotiation, the parties shall endeavor
to settle the dispute by mediation under the CPR Mediation Procedure in effect
on the date of this Agreement, provided, however, that if one party fails to
participate in the negotiation as provided herein, the other party can initiate
mediation prior to the expiration of the 45 days. Unless otherwise agreed,
the
parties will select a mediator from the CPR Panels of Distinguished
Neutrals.
(c) Any
dispute arising out of or relating to this Agreement, including the breach,
termination or validity thereof, that has not been resolved by mediation as
provided herein within 45 days after initiation of the mediation procedure,
shall be finally resolved by arbitration in accordance with the CPR Rules for
Non-Administered Arbitration in effect on the date of this Agreement, by three
independent and impartial arbitrators, of whom each party shall designate
one and the two arbitrators shall appoint the third; provided, however, that
if
one party fails to participate in either the negotiation or mediation as agreed
herein, the other party can commence arbitration prior to the expiration of
the
time periods set forth above. The arbitration shall be governed by the Federal
Arbitration Act, 9 U.S.C. §§ 1-16, and judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction thereof. The place
of arbitration shall be Houston, Texas.
The
arbitrators are not empowered to award damages in excess of compensatory damages
and each party expressly waives and foregoes any right to punitive, exemplary
or
similar damages unless a statute requires that compensatory damages be increased
in a specified manner.
(d) Each
party is required to continue to perform its obligations under this Agreement
pending final resolution of any dispute arising out of or relating to this
Agreement, unless to do so would be impossible or impractical.
7.11 Attorney
Fees.
Without
limiting the arbitrators’ right to award costs and/or attorneys’ fees pursuant
to Section 7.10 hereof, if any action at law or in equity is brought to secure
injunctive relief, enforce an arbitration award or, subject to Section 7.10
hereof, enforce or interpret the terms of this Agreement, the prevailing party
shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which it may be
entitled.
7.12 Severability.
In case
any one or more of the provisions contained in this Agreement or any application
thereof shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and
other applications thereof shall not in any way be affected or impaired
thereby.
7.13 JOINT
ACKNOWLEDGMENT.
THIS
WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
[SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF, this Agreement has been duly executed by the Company and by
the
Purchaser by their respective officers duly authorized effective as of the
date
first above written.
|
THE
COMPANY:
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GASTAR
EXPLORATION LTD., an Alberta corporation
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||
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By:
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/s/
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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|
|
J.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President and CEO
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THE
PURCHASER:
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NAVASOTA
RESOURCES, L.P., a Texas limited partnership
|
||
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By:
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/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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|
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
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||
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President
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||
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