UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 28, 2008 (July 25, 2008)

GASTAR EXPLORATION LTD.

(Exact Name of Registrant as Specified in Its Charter)

 

ALBERTA, CANADA   001-32714   38-3324634

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

1331 LAMAR STREET, SUITE 1080

HOUSTON, TEXAS 77010

(Address of principal executive offices)

(713) 739-1800

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 


Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On July 25, 2008, Gastar Exploration, Ltd, Gastar Exploration USA, Inc., f/k/a First Sourcenergy Wyoming, Inc. (together, “Gastar”), J. Russell Porter, Gastar’s Chairman and Chief Executive Officer, (“Porter”) entered into a First Amendment to Porter’s Employment Agreement effective March 23, 2005 (the “Porter Amendment”). On the same date, Gastar and Michael A. Gerlich, Gastar’s Chief Financial Officer, (“Gerlich”) entered into a First Amendment to Gerlich’s Employment Agreement effective April 26, 2005 (the “Gerlich Amendment” and together with the Porter Amendment, the “Amendments”). The Amendments bring each Employment Agreement into compliance with the applicable provisions of Section 409A of the Internal Revenue Code of 1986, as amended, and Treasury regulations, thus providing consistency between the amount paid to each of Porter and Gerlich and the tax treatment of severance payments made in the event of (1) termination of either Porter or Gerlich by the Company and (2) termination resulting from change of control. Additionally, the Amendments make certain clarifications to the provisions of Porter’s and Gerlich’s Employment Agreements including:

 

   

Increasing Porter’s severance payment to 4.5 times his annual salary, rather than 3.0 times his annual salary plus bonus (resulting in no change in the total amount that would be paid to Porter);

 

   

Increasing Gerlich’s severance payment to 2.5 times the sum of his annual salary plus a target bonus of 35% of such amount (to provide consistency between the Gerlich Agreement and the provisions of severance resulting from a change of control);

 

   

Removing stock option vesting acceleration should Porter voluntarily terminate his Employment Agreement;

 

   

Specifying the timing of any bonus payable to Porter and Gerlich; and

 

   

Other administration compliance changes.

A copy of each of the Amendments is attached hereto as Exhibit 10.1 and Exhibit 10.2.

 

Item 9.01 Financial Statements and Exhibits.

 

(c) Exhibits

The following is a list of exhibits filed as part of this Form 8-K:

 

Exhibit No.

  

Description of Document

10.1    First Amendment to Employment Agreement entered into by and between Gastar Exploration, Ltd, Gastar Exploration USA, Inc., f/k/a First Sourcenergy Wyoming, Inc., and J. Russell Porter as of July 25, 2008.
10.2    First Amendment to Employment Agreement entered into by and between Gastar Exploration, Ltd, Gastar Exploration USA, Inc., f/k/a First Sourcenergy Wyoming, Inc., and Michael A. Gerlich as of July 25, 2008.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

      GASTAR EXPLORATION LTD.
Date: July 28, 2008     By:   /s/ J. RUSSELL PORTER
      J. Russell Porter
      President and Chief Executive Officer


EXHIBIT INDEX

 

Exhibit No.

  

Description of Document

10.1    First Amendment to Employment Agreement entered into by and between Gastar Exploration, Ltd, Gastar Exploration USA, Inc., f/k/a First Sourcenergy Wyoming, Inc., and J. Russell Porter as of July 25, 2008.
10.2    First Amendment to Employment Agreement entered into by and between Gastar Exploration, Ltd, Gastar Exploration USA, Inc., f/k/a First Sourcenergy Wyoming, Inc., and Michael A. Gerlich as of July 25, 2008.

Exhibit 10.1

FIRST AMENDMENT TO

EMPLOYMENT AGREEMENT

THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT is entered into by and between Gastar Exploration, Ltd., a Canadian corporation, Gastar Exploration USA, Inc., f/k/a First Sourcenergy Wyoming, Inc., a Michigan corporation (together, the “Company”), and J. Russell Porter (“Porter”) as of July 25, 2008.

WHEREAS , the Company and Porter have heretofore entered into that certain Employment Agreement effective as of March 23, 2005 (the “Employment Agreement”); and

WHEREAS , the Company and Porter desire to amend the Employment Agreement to comply with the applicable provisions of section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury regulations issued thereunder;

NOW, THEREFORE , in consideration of the premises set forth above and the mutual agreements set forth herein, the Company and Porter hereby agree, effective as of the date set forth above, the Employment Agreement is hereby amended as provided below:

 

  1. Section 5 is amended by adding thereto the following:

Any bonus payable to Porter for a calendar year shall be paid not later than the 15 th day of the third month following the end of such year.

 

  2. Section 6(b) is amended to read as follows:

The Company shall pay or reimburse Porter each calendar year up to $25,000 for his membership dues incurred in such clubs and/or organizations that year as are reasonable and customary for the President and CEO.

 

  3. Section 6(c) is amended to read as follows:

The Company shall reimburse Porter for all necessary and reasonable business expenses incurred by him in accordance with the Company’s written policy applicable to executives with respect to such expenses.

 

  4. Section 8(b) is amended to read as follows:

Amount of Severance Payment . Porter shall receive a lump sum severance payment equal to the product of (i) 4.5 and (ii) his highest rate of annual base salary in effect at any time during the one year period preceding Porter’s termination of employment, and if Porter timely elects COBRA health plan continuation coverage under the Company’s group health plan, the Company shall pay Porter, on the first of each month during his COBRA continuation period, an amount equal to his required COBRA premium. If Porter dies during the COBRA continuation period, this health plan continuation coverage and the Company’s monthly payment of the COBRA premium amount will continue for the benefit of Porter’s eligible beneficiary(ies) for the remainder of the COBRA continuation period applicable to them.

 

  5. The following new Section 8(c) is added:

§409A Delay in Payments . Notwithstanding anything in this Agreement to the contrary, if on the date of his separation from service Porter is a “specified employee,” as defined in IRC Section 409A and the Treasury regulations thereunder, then all or the portion of any severance payments, benefits, or reimbursements under this Agreement that would be subject to the additional tax provided by IRC Section 409A(a)(1)(B) if not delayed as required by IRC Section 409A(a)(2)(B)(i) shall be delayed until the first day of the seventh month following his separation from service date (or, if earlier, Porter’s date of death) and shall be paid as a lump sum (without interest) on such date. A termination of Porter’s employment for


purposes of this Agreement means a “separation from service” for purposes of IRC Section 409A and the Treasury regulations thereunder.

 

  6. Section 9 is amended to read as follows:

Effective on the date of Porter’s termination of employment pursuant to Paragraph 4 above, excluding 4(c), the unvested portion of any and all stock options held by Porter on such date shall immediately become fully vested. All other terms of any such stock options shall remain unchanged.

 

  7. Section 15 is amended by adding thereto a new paragraph (m) to read as follows:

Any reimbursement of expenses provided to Porter by this Agreement, whether pursuant to Section 6(b), Section 11 or otherwise, shall be made by the Company upon or as soon as practicable following the receipt of supporting documentation reasonably satisfactory to the Company, but in no event later than the close of Porter’s taxable year following the taxable year in which the expense is incurred by Porter. The amount of expenses eligible for reimbursement with respect to any taxable year of Porter shall not affect the expenses eligible for reimbursement in any other taxable year of Porter and Porter’s right to reimbursement is not subject to liquidation or exchange for another benefit.

Except as expressly modified by this First Amendment, the terms of the Employment Agreement shall remain in full force and effect and are hereby confirmed and ratified. The Gastar Exploration, Ltd. Employee Change of Control Severance Plan (“Severance Plan”) provides severance benefits thereunder are to be offset by the severance benefits provided under this Employment Agreement to avoid any duplication of benefits. Nothing in the Severance Plan shall be construed or operate to eliminate the COBRA continuation coverage and Company monthly COBRA premium payments provided to surviving beneficiaries of Porter under this Employment Agreement.

IN WITNESS WHEREOF , the parties hereto have executed this First Amendment as of the date first set forth above.

 

GASTAR EXPLORATION USA, INC., f/k/a

FIRST SOURCENERGY WYOMING, INC.

    GASTAR EXPLORATION, LTD.
By:   /s/ MICHAEL A. GERLICH     By:   /s/ MICHAEL A. GERLICH
Name:   Michael A. Gerlich     Name:   Michael A. Gerlich
Title:   CFO and Vice-President     Title:   CFO and Vice-President
        PORTER
        /s/ J. RUSSELL PORTER
        J. Russell Porter

 

 

 

Exhibit 10.2

FIRST AMENDMENT TO

EMPLOYMENT AGREEMENT

THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT is entered into by and between Gastar Exploration, Ltd., a Canadian corporation, Gastar Exploration USA, Inc. (f/k/a First Sourcenergy Wyoming, Inc.), a Michigan corporation (together, the “Company”), and Michael A. Gerlich (“Gerlich”) as of July 25, 2008.

WHEREAS , the Company and Gerlich have heretofore entered into that certain Employment Agreement effective as of April 26, 2005 (the “Employment Agreement”); and

WHEREAS , the Company and Gerlich desire to amend the Employment Agreement to comply with the applicable provisions of section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury regulations issued thereunder;

NOW, THEREFORE , in consideration of the premises set forth above and the mutual agreements set forth herein, the Company and Gerlich hereby agree, effective as of the date set forth above, that the Employment Agreement shall be amended as hereafter provided:

 

  1. Section 5 is amended by adding thereto the following:

Any bonus payable to Gerlich for a calendar year shall be paid not later than the 15 th day of the third month following the end of such year.

 

  2. Section 6(b) is amended to read as follows:

The Company shall reimburse Gerlich for all necessary and reasonable business expenses incurred by him in accordance with the Company’s written policy applicable to executives with respect to such expenses.

 

  3. Section 8(b) is amended to read as follows:

Amount of Severance Payment . Gerlich shall receive a lump sum severance payment equal to the product of (i) 2.5 and (ii) the sum of (A) his highest rate of annual base salary in effect at any time during the one year period preceding Gerlich’s termination of employment and (B) a target bonus amount equal to 35% of such highest rate of annual base salary, and if Gerlich timely elects COBRA health plan continuation coverage under the Company’s group health plan, the Company shall pay Gerlich, on the first of each month during his COBRA continuation period, an amount equal to his required COBRA premium. If Gerlich dies during the COBRA continuation period, this health plan continuation coverage and the Company’s monthly payment of the COBRA premium amount will continue for the benefit of Gerlich’s eligible beneficiary(ies) for the remainder of the COBRA continuation period applicable to them.

 

  4. The following new Section 8(c) is added:

§409A Delay in Payments . Notwithstanding anything in this Agreement to the contrary, if on the date of his separation from service Gerlich is a “specified employee,” as defined in IRC Section 409A and the Treasury regulations thereunder, then all or the portion of any severance payments, benefits, or reimbursements under this Agreement that would be subject to the additional tax provided by IRC Section 409A(a)(1)(B) if not delayed as required by IRC Section 409A(a)(2)(B)(i) shall be delayed until the first day of the seventh month following his separation from service date (or, if earlier, Gerlich’s date of death) and shall be paid as a lump sum (without interest) on such date. A termination of Gerlich’s employment for purposes of this Agreement means a “separation from service” for purposes of IRC Section 409A and the Treasury regulations thereunder.

 

  5. Section 14 is amended by adding thereto a new paragraph (n) to read as follows:


Any reimbursement of expenses provided to Gerlich by this Agreement, whether pursuant to Section 6(b), Section 10 or otherwise, shall be made by the Company upon or as soon as practicable following the receipt of supporting documentation reasonably satisfactory to the Company, but in no event later than the close of Gerlich’s taxable year following the taxable year in which the expense is incurred by Gerlich. The amount of expenses eligible for reimbursement with respect to any taxable year of Gerlich shall not affect the expenses eligible for reimbursement in any other taxable year of Gerlich and Gerlich’s right to reimbursement is not subject to liquidation or exchange for another benefit.

Except as expressly modified by this First Amendment, the terms of the Employment Agreement shall remain in full force and effect and are hereby confirmed and ratified. The Gastar Exploration, Ltd. Employee Change of Control Severance Plan (“Severance Plan”) provides severance benefits thereunder that are offset by the severance benefits provided under this Employment Agreement. Nothing in the Severance Plan shall be construed or operate to eliminate the COBRA continuation coverage and Company monthly COBRA premium payments provided to surviving beneficiaries of Gerlich under this Employment Agreement.

IN WITNESS WHEREOF , the parties hereto have executed this First Amendment as of the date first set forth above.

 

GASTAR EXPLORATION USA, INC.     GASTAR EXPLORATION, LTD.
By:   /s/ J. RUSSELL PORTER     By:   /s/ J. RUSSELL PORTER
Name:   J. Russell Porter     Name:   J. Russell Porter
Title:   CEO and President     Title:   CEO and President
        GERLICH
        /s/ MICHAEL A. GERLICH
        Michael A. Gerlich