AGREEMENT
EXHIBIT
10.1
AGREEMENT
THIS AGREEMENT is dated as of
January 12, 2010 (this “Agreement”),
AMONG:
PALO ALTO INVESTORS, LLC, a
limited liability company organized under the laws of the State of California,
and certain of its affiliates listed on the signature pages hereto
(collectively, “Palo
Alto”),
AND:
GASTAR EXPLORATION LTD., a
corporation amalgamated under the laws of Alberta, Canada (the “Company”).
RECITALS
WHEREAS:
A. The
Company is an oil and gas exploration and production company, the common shares
of which are traded on the NYSE Amex;
B. Palo
Alto is an investment advisory firm based in Palo Alto, California which owns or
exercises control or direction over 4,674,744 common shares of the Company,
representing approximately 9.3% of the Company’s outstanding
shares;
C. The
Company and Palo Alto have discussed potential additions to the Board of
Directors and other corporate governance issues, including the separation of the
Chairman of the Board of Directors position from the Chief Executive Officer
position; and
D. The
Company and Palo Alto have determined that it is in their respective best
interests to enter into this Agreement.
NOW THEREFORE, in
consideration of the mutual covenants and agreements contained herein, the
parties hereto agree as follows:
1. Definitions.
Capitalized
terms shall have the following meanings for purposes of this Agreement (and
shall apply equally to both the singular as well as the plural
forms):
“2010 Annual Meeting” means the
annual general meeting of the Company’s shareholders to be held in 2010, or any
adjournment thereof;
“Affiliate” of any specified
Person means any other Person which, directly or indirectly, is in control of,
is controlled by, or is under common control with, such specified
Person. For purposes of this definition, control of a Person means
the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise; and the
terms “controlling” and “controlled” have meanings correlative to the
foregoing;
“Board of Directors” means the
board of directors of the Company;
“Business Day” means any day
other than a Saturday, a Sunday or a day on which commercial banks in New York,
New York or Houston, Texas are required or authorized to be closed;
“Fall-Away Date” shall mean the
earlier to occur of: (i) December 31, 2010; (ii) the date 90 days
following the date on which Palo Alto and its Affiliates own Voting Securities
that represent, in the aggregate, 5% or less of the Company’s then-outstanding
common stock, provided that such ownership has remained at or below 5% for the
entire 90-day period; (iii) such
date as the Board of Directors publicly announces its intention to solicit a
Sale Proposal, or publicly approves or recommends to the Company's stockholders
their approval of, or their conveyance of any Voting Securities pursuant to, any
Sale Proposal; (iv) such date that the Company has entered into a letter of
intent, agreement in principle, definitive agreement, or any similar agreement
with any party (other than a customary confidentiality agreement), with respect
to a Sale Proposal; or (v) such date that any Person or group shall have
acquired or announced its intention to acquire, including by commencement of a
tender offer or exchange offer, beneficial ownership of more than 50% of the
Voting Securities;
“New Director” means Xxxxx
Xxxxx;
“Person” shall mean any
individual, partnership (limited or general), joint venture, limited liability
company, corporation, association, business entity, trust, business trust,
unincorporated organization, government or department or agency of a
government;
“Sale Proposal” means (i) any
merger, consolidation, amalgamation, arrangement, share exchange, business
combination, liquidation, dissolution, recapitalization, reorganization or other
similar transaction involving the Company, other than any such transaction where
the Company is the surviving Person or immediately after such transaction the
former shareholders of the Company own a majority of the equity interest of the
surviving Person, (ii) the sale or issuance of more than 50% of the capital
stock of the Company or its subsidiaries or (iii) the sale of more than 50% of
the assets or businesses of the Company and its subsidiaries; and
“Voting Securities” shall mean
at any time shares of any class of capital stock of the Company that are then
entitled to vote generally in the election of directors.
2. Representations
and Warranties.
(a) Palo
Alto represents and warrants to the Company that (a) Palo Alto is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of California and has the power and authority to enter
into this Agreement and to carry out its obligations hereunder, (b) the
execution and delivery of this Agreement by Palo Alto and the consummation
thereby of the transactions contemplated hereby have been duly authorized by all
necessary action on its part and no other proceedings on its part are necessary
to authorize this Agreement or any of the transactions contemplated hereby and
(c) this Agreement has been duly executed and delivered by Palo Alto and
constitutes a valid and binding obligation of it, and is enforceable against it
in accordance with its terms.
(b) The
Company represents and warrants to Palo Alto that (a) the Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Alberta, Canada, and has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder, (b) the execution and
delivery of this Agreement by the Company has been duly authorized by all
necessary corporate action on the part of the Company (including approval by its
Board of Directors) and (c) this Agreement has been duly executed and delivered
by the Company and constitutes a valid and binding obligation of the Company,
and is enforceable against the Company in accordance with its
terms.
3. Company
Actions.
(a) Election of New
Director. The Company agrees that the Board of Directors will
as soon as reasonably practicable, and in no event later than January 15, 2010,
take all actions necessary to appoint the New Director to: (i) the Board of
Directors and (ii) the Nominating Committee of the Board of
Directors.
(b) Election of Additional New
Director. The Company agrees that the Board of Directors will
(i) authorize an increase in the size of the Board of Directors to six directors
for election at the 2010 Annual Meeting and (ii) take all actions necessary to
cause one new independent director (who shall be selected and nominated by the
Nominating Committee of the Board of Directors) to be recommended to the
shareholders of the Company for election to the Board of Directors at the 2010
Annual Meeting.
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(c) Separation of the Chairman
and CEO Positions. The Company agrees that the Board of Directors and
management will as soon as reasonably practicable, and in no event later than
January 15, 2010, cause the positions of the Chief Executive Officer and
Chairman of the Board of Directors to be held by different individuals and will
amend the Company’s by-laws to prohibit any one Person from holding both
positions concurrently.
(d) 2010 Annual
Meeting. The Company shall hold the 2010 Annual Meeting no
later than June 15, 2010.
4. Standstill.
Until the
Fall-Away Date:
(a) neither
Palo Alto nor any of its Affiliates shall initiate or propose any stockholder
proposal or action or make any “solicitation” of “proxies” (as such terms are
defined in Regulation 14A under the Exchange Act, as in effect on the date
hereof) with respect to the voting of or consenting with respect to, any Voting
Securities, or become a “participant” in a “solicitation” (as such terms are
defined in Regulation 14A under the Exchange Act, as in effect on the date
hereof) in any election contest with respect to the election or removal of any
director of the Company or in opposition to the publicly disclosed
recommendation of the majority of the directors of the Company with respect to
the election of directors of the Company or make any public statement (or take
any action which would reasonably be expected to require or result in disclosure
publicly of their position) regarding any of the foregoing;
(b) neither
Palo Alto nor any of its Affiliates shall initiate (solicit or knowingly
encourage other Persons to initiate), any tender offer or exchange offer for
Voting Securities, or any merger, consolidation, amalgamation, arrangement, sale
of substantially all the assets or recapitalization, restructuring, liquidation
or dissolution involving the Company or any of its subsidiaries;
(c) neither
Palo Alto nor any of its Affiliates shall publicly disclose any intention, plan
or arrangement inconsistent with any of the foregoing; or
(d) neither
Palo Alto nor any of its Affiliates shall request the Company (or any of its
directors or executive officers), directly or indirectly, to amend or waive any
of the provisions of this Agreement (except in a manner that does not require or
result in disclosure publicly or to third parties).
5. Enforcement. The
parties acknowledge and agree that irreparable harm would result if any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, the parties will be
entitled to seek an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically its provisions in any court having
jurisdiction, this being in addition to any other remedy to which they may be
entitled at law or in equity.
6. Entire Agreement;
Waivers. This Agreement constitutes the entire agreement among
the parties hereto pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the parties with respect to such
subject matter. The parties expressly disclaim reliance on any information,
statements, representations, or warranties regarding the subject matter of this
Agreement other than the terms of this Agreement. No waiver of any provision of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), shall constitute a continuing waiver
unless otherwise expressly provided, or shall be effective unless in writing and
executed by the party against which enforcement of such waiver is
sought.
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7. Amendment or Modification;
Severability. The parties hereto may not amend or modify this
Agreement without the written consent of the other party. If any provision of
this Agreement is held by a court of competent jurisdiction to be unenforceable,
the remaining provisions shall remain in full force and effect. It is declared
to be the intention of the parties that they would have executed the remaining
provisions without including any that may be declared
unenforceable.
8. Successors and
Assigns. All the terms and provisions of this Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors, and each successor shall be deemed to be a party hereto
for all purposes hereof.
9. Headings; Interpretation;
Counterparts. Descriptive headings are for convenience only
and will not control or affect the meaning or construction of any provision of
this Agreement. The words “include,” “includes,” and “including” shall be deemed
to be followed by the phrase “without limitation.” For the
convenience of the parties, any number of counterparts of this Agreement may be
executed by the parties, and each such executed counterpart will be an original
instrument.
10. Notices. Any
notices or other communications required or permitted hereunder shall be
sufficiently given if in writing (including by email), addressed as
follows:
If to the
Company, to: Gastar Exploration Ltd., 0000 Xxxxx Xxxxxx
Xxxxx 0000, Xxxxxxx, Xxxxx 00000, Attention: Chief Executive Officer,
Facsimile No.: (000) 000-0000; with a copy to: Xxxxxx & Xxxxxx
LLP, First City Tower, 0000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx
00000-0000, Attention: T. Xxxx Xxxxx, Facsimile No.: (000) 000-0000
If to
Palo Alto, to: Palo Alto Investors, LLC, 000 Xxxxxxxxxx Xxx., Xxxx
Xxxx, XX 00000, Attention: Xxxxx Xxxxxxxx, Facsimile No.: (000) 000-0000; with a
copy to: Blake, Xxxxxxx & Xxxxxxx LLP, 199 Bay Street, Suite
0000, Xxxxxxxx Xxxxx Xxxx, Xxxxxxx, Xxxxxxx X0X 0X0, Attention: Xxxxx X.
Xxxxxxx, Facsimile No.: (000) 000-0000; and O’Melveny & Xxxxx LLP, Times
Square Tower, 0 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxx
Xxxxxxxx, Facsimile No.: (000) 000-0000
Any
notice or other communication so given shall be deemed to have been given and
received on the day of delivery if delivered, or on the day of faxing or sending
by other means of recorded electronic communication. Any notice or other
communication sent by registered mail shall be deemed to have been given and
received on the fifth business day following the mailing thereof.
11. Governing Law. This
Agreement shall be construed in accordance with the laws of the Province of
Alberta and the federal laws of Canada applicable in the Province of Alberta and
shall be treated in all respects as an Alberta contract. Each of the parties
irrevocably attorns to the jurisdiction of the courts of the Province of
Alberta.
12. Further
Assurances. Each party hereto shall promptly do, execute,
deliver or cause to be done, execute and delivered all further acts, documents
and things in connection with this Agreement necessary or desirable in order to
give full effect to this Agreement and every part hereof. The Company
and Palo Alto shall act in good faith and shall not take any steps or actions
that would seek to frustrate this Agreement or the intent hereof.
13. Disclosure Required by
Law. Nothing in this Agreement shall prohibit Palo Alto or the
Company from making any disclosure required under federal securities laws or
other applicable laws, including the filing of any documents that such party
reasonably determines are required by the Securities and Exchange Commission
(the “SEC”); provided, that the
content of any document so filed does not violate any of the other terms and
conditions of this Agreement unless such content constitutes disclosure required
by any securities laws or rules or regulations promulgated from time to time by
the SEC.
[Signature
pages follow]
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as
of the date first referred to above.
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PALO
ALTO INVESTORS, INC.
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By:
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/s/ XXXX
XXXXXX
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Name:
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Xxxx
Xxxxxx
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Title:
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Chief
Operating Officer
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PALO
ALTO INVESTORS, LLC
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By:
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/s/ XXXX
XXXXXX
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Name:
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Xxxx
Xxxxxx
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Title:
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Chief
Operating Officer
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PALO
ALTO SMALL CAP MASTER FUND, L.P.
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By:
Palo Alto Investors, LLC, its general partner
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By:
Palo Alto Investors, its manager
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By:
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/s/ XXXX
XXXXXX
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Name:
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Xxxx
Xxxxxx
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Title:
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Chief
Operating Officer
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PALO
ALTO SMALL CAP FUND, L.P.
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By:
Palo Alto Investors, LLC, its general partner
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By:
Palo Alto Investors, its manager
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By:
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/s/ XXXX
XXXXXX
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Name:
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Xxxx
Xxxxxx
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Title:
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Chief
Operating Officer
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By:
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/s/ J. XXXXXXX
XXXXXX
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Name:
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J.
Xxxxxxx Xxxxxx
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Title:
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President
& CEO
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