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): January 31, 2014 (January 31, 2014)

 

 

GASTAR EXPLORATION INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware   001-35211   38-3531640

(State or other jurisdiction

of incorporation or organization)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

1331 Lamar Street, Suite 650  
Houston, Texas   77010
(Address of principal executive offices)   (ZIP Code)

(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))

 

 

 


SECTION 1 – REGISTRANT’S BUSINESS AND OPERATIONS

 

Item 1.01 Entry into a Material Definitive Agreement.

On January 31, 2014, Gastar Exploration, Inc., a Delaware corporation (“Gastar Parent”), entered into an Agreement and Plan of Merger (the “merger agreement”) pursuant to which Gastar Parent would merge with and into Gastar Exploration USA, Inc., a direct subsidiary of Gastar Parent (“Gastar Survivor”), as part of a reorganization to eliminate Gastar Parent’s holding company corporate structure. Pursuant to the merger agreement, on or after the effective time of the merger, shares of Gastar Parent’s common stock shall be converted into the right to receive an equal number of shares of common stock of Gastar Survivor, which, together with its subsidiaries, will own and continue to conduct our business in substantially the same manner as it was being conducted by Gastar Parent and its subsidiaries immediately prior to the merger.

A copy of the merger agreement is included as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by reference and is hereby filed. The description of the merger agreement in this Current Report on Form 8-K is a summary and is qualified in its entirety by reference to the complete text of such agreement.

SECTION 2 – FINANCIAL INFORMATION

 

Item 2.01 Completion of Acquisition or Disposition of Assets.

The information included under Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference. On January 31, 2014, Gastar Parent and Gastar Survivor consummated the merger pursuant to the terms of the merger agreement.

SECTION 3 – SECURITIES AND TRADING MARKETS

 

Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.

In connection with the completion of the merger, Gastar Parent notified the NYSE MKT LLC that each issued and outstanding share of Gastar Parent common stock will be converted into one share of Gastar Survivor common stock, and Gastar Parent requested that the NYSE MKT LLC suspend trading of Gastar Parent’s common stock, and commence trading of the Gastar Survivor common stock, as of the open of business on Monday, February 3, 2014. On February 3, 2014, shares of Gastar Survivor’s common stock will commence trading on the NYSE MKT LLC under the ticker symbol “GST”, the same symbol that shares of Gastar Parent’s common stock traded under prior to the merger.

Gastar Parent requested that the NYSE MKT LLC file with the SEC a Form 25 (Notification of removal from Listing and/or Registration under 12(b) of the Securities Exchange Act of 1934) to delist Gastar Parent from the NYSE MKT LLC and to terminate the registration of its common stock under the Securities Act of 1934, as amended (the “Exchange Act”).

 

Item 3.03 Material Modification to Rights of Security Holders

The information included under Item 1.01 and Item 5.03 of this Current Report on Form 8-K is incorporated herein by reference.


SECTION 5 – CORPORATE GOVERNANCE AND MANAGEMENT.

 

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

On January 31, 2014, each of the executive officers and directors of Gastar Parent immediately prior to the merger had been appointed to the same position(s) with Gastar Survivor and will hold such positions until their respective successors are duly elected or appointed and qualified. Each director of Gastar Parent was appointed to serve on the same committees of the board as such director had served on for Gastar Parent immediately prior to the merger.

As a result of the merger, the Gastar Exploration Ltd. 2006 Long-Term Incentive Plan maintained by Gastar Parent (the “Predecessor Plan”) was assumed by Gastar Survivor and, effective as of the merger, was amended, restated and renamed the “Gastar Exploration Inc. Long-Term Incentive Plan” (the “LTIP”). The LTIP provides for substantially the same terms as the Predecessor Plan, except the LTIP provides for awards with respect to Gastar Survivor common stock rather than Gastar Parent common stock. All unexercised and unexpired options to purchase Gastar Parent common stock, restricted shares of Gastar Parent and other rights to acquire Gastar Parent common stock under the Predecessor Plan (including performance-based units) became options to purchase, restricted stock or other rights to acquire the same number of shares of Gastar Survivor pursuant to the LTIP, subject to the same terms and conditions, including the per share exercise price (but, in the case of performance awards, performance from and after the effective time of the merger will be determined with respect to the stock price of Gastar Survivor rather than Gastar Parent). In addition, as a result of the merger, Gastar Survivor assumed the obligations of Gastar Parent under the various compensatory arrangements with the named executive officers and other executive officers.

A copy of the LTIP is included as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference and is hereby filed. The description of the LTIP in this Current Report is a summary and is qualified in its entirety by reference to the complete text of the LTIP.

 

Item 5.03 Amendments to Articles or Bylaws; Change in Fiscal Year.

On January 31, 2014, Gastar Survivor filed a Certificate of Merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware, pursuant to which Gastar Parent merger with and into Gastar Survivor on the terms and subject to the conditions set forth in the merger agreement. As set forth in the Certificate of Merger, the Amended and Restated Certificate of Incorporation of Gastar Exploration USA, Inc. (the “Certificate of Incorporation”), as in effect immediately prior to the effective time of the merger, will be the certificate of incorporation of Gastar Survivor, except that the name of the corporation was changed to “Gastar Exploration Inc.” The Second Amended and Restated Bylaws of Gastar Exploration USA, Inc. (the “Bylaws”) will be the bylaws of Gastar Survivor.

A copy of the Certificate of Merger is included as Exhibit 3.1 to this Current Report on Form 8-K and incorporated herein by reference and is hereby filed. The description of the Certificate of Merger in this Current Report is a summary and is qualified in its entirety by reference to the complete text of such certificate. Copies of the Certificate of Incorporation and Bylaws are included as Exhibit 3.2 and Exhibit 3.3 to this Current Report on Form 8-K and incorporated herein by reference and are hereby filed.


SECTION 8 – OTHER EVENTS

 

Item 8.01 Other Events

The Merger

On January 22, 2014, the holders of Gastar Parent’s common stock voted to adopt the merger agreement, providing for the merger of Gastar Parent with and into its subsidiary, Gastar Survivor, as part of a reorganization to eliminate the holding company corporate structure of Gastar Parent. The merger agreement provides that the merger would result in the shares of the Company’s common stock being converted into an equal number of shares of common stock of Gastar Survivor. Gastar Survivor, together with its subsidiaries, will own and continue to conduct our business in substantially the same manner as was being conducted by Gastar Parent and its subsidiaries prior to the merger.

Pursuant to the merger agreement and the Certificate of Merger, the directors and officers of Gastar Survivor will be the same as the directors and officers of Gastar Parent immediately prior to the effective time of the merger. The Certificate of Incorporation, as amended by the Certificate of Merger, and the Bylaws will be the certificate of incorporation and bylaws of Gastar Survivor after the merger. The rights of stockholders under Gastar Survivor’s governing documents will be substantially the same as the rights of stockholders of Gastar Parent prior to the merger. A description of the capital stock of Gastar Survivor is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.

As a result of the merger, Gastar Survivor will be the successor issuer to Gastar Parent pursuant to Rule 12(g)(3) under the Exchange Act. In accordance with Rule 12(g)(3) under the Exchange Act, the common stock of Gastar Survivor, as the successor issuer to Gastar Parent, is deemed to be registered under Section 12(b) of the Exchange Act.

SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

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

 

Exhibit No.

  

Description of Document

  2.1    Agreement and Plan of Merger, dated January 31, 2014.
  3.1    Certificate of Merger.
  3.2    Amended and Restated Certificate of Incorporation of Gastar Exploration USA, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report filed October 28, 2013).
  3.3    Second Amended and Restated Bylaws of Gastar Exploration USA, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report filed October 28, 2013).
10.1    Gastar Exploration Inc. Long-Term Incentive Plan
99.1    Description of Share Capital.


SIGNATURES

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

 

Date: January 31, 2014     GASTAR EXPLORATION, INC.
    By:  

/s/ J. Russell Porter

      J. Russell Porter
      President and Chief Executive Officer


EXHIBIT INDEX

 

Exhibit No.

  

Description of Document

  2.1    Agreement and Plan of Merger, dated January 31, 2014.
  3.1    Certificate of Merger.
  3.2    Amended and Restated Certificate of Incorporation of Gastar Exploration USA, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report filed October 28, 2013).
  3.3    Second Amended and Restated Bylaws of Gastar Exploration USA, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report filed October 28, 2013).
10.1    Gastar Exploration Inc. Long-Term Incentive Plan
99.1    Description of Share Capital.

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of January 31, 2014, is among Gastar Exploration, Inc., a Delaware corporation (“ Gastar Delaware ”) and Gastar Exploration USA, Inc., a Delaware corporation and a direct subsidiary whose common stock is wholly owned by Gastar Delaware (“ Gastar USA ”).

RECITALS

WHEREAS, prior to the date hereof, Gastar Exploration Ltd., an Alberta, Canada corporation and the predecessor of Gastar Delaware (the “ Predecessor ”), adopted a special resolution of stockholders approving a plan of arrangement under Section 193 of the Business Corporations Act (Alberta) pursuant to which, among other things, the Predecessor was continued as if it had been incorporated under the laws of the State of Delaware;

WHEREAS, as of the date hereof, the authorized capital stock of Gastar Delaware consists of (i) 275,000,000 shares of common stock, par value $0.001 per share (“ Gastar Delaware Common Stock ”), of which approximately 61,891,767 shares are issued and outstanding, approximately 1,295,051 shares are reserved for issuance under the Plan (as defined below) and upon exercise of outstanding Gastar Delaware Equity Awards (as defined below), and no shares are held in treasury, and (ii) 40,000,000 shares of preferred stock, par value $0.01 per share (“ Gastar Delaware Preferred Stock ”), of which none is outstanding;

WHEREAS, as of the date hereof, the authorized capital stock of Gastar USA consists of (i) 275,000,000 shares of common stock, par value $0.001 per share (“ Gastar USA Common Stock ”), of which 750 shares are issued and outstanding and no shares are held in treasury, and (ii) 40,000,000 shares of preferred stock, par value $0.01 per share (“ Gastar USA Preferred Stock ”), of which 3,958,160 shares of 8.675% Series A Cumulative Preferred Stock and 2,140,000 preferred shares of 10.75% Series B Cumulative Preferred Stock are issued and outstanding;

WHEREAS, the Board of Directors of Gastar Delaware and the sole director of Gastar USA have each unanimously determined that it is advisable and in the best interests of their respective stockholders that Gastar Delaware merge with and into Gastar USA, with Gastar USA surviving the merger (sometimes hereinafter referred to as the “ Surviving Company ”), and converting each outstanding share of Gastar Delaware Common Stock into one share of Gastar USA Common Stock, all in accordance with the terms of this Agreement;

WHEREAS, the Board of Directors of Gastar Delaware has unanimously determined that it is advisable and in the best interests of its stockholders to reorganize Gastar Delaware’s operations, such that the public company owned by its stockholders is Gastar USA;

WHEREAS, the Board of Directors of Gastar Delaware and the sole director of Gastar USA have each approved this Agreement and the merger of Gastar Delaware with and into Gastar USA upon the terms and subject to the conditions set forth in this Agreement (the “ Merger ”);


WHEREAS, the Board of Directors of Gastar Delaware and the sole director of Gastar USA have each declared advisable this Agreement and the Merger upon the terms and subject to the conditions set forth in this Agreement, and the Board of Directors of Gastar Delaware and the sole director of Gastar USA have each unanimously determined to recommend to their respective stockholders the adoption of this Agreement and the approval of the Merger, subject to the terms and conditions hereof and in accordance with the provisions of the General Corporation Law of the State of Delaware (the “ DGCL ”); and

WHEREAS, the parties intend, by executing this Agreement, to adopt a plan of reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the “ Code ”), and to cause the Merger to qualify as a reorganization under the provisions of Section 368(a) of the Code.

NOW, THEREFORE, in consideration of the premises and the covenants and agreements contained in this Agreement, and intending to be legally bound hereby, Gastar Delaware and Gastar USA hereby agree as follows:

ARTICLE 1

THE MERGER

1.1 The Merger . In accordance with Section 251 of the DGCL, and subject to and upon the terms and conditions of this Agreement, Gastar Delaware shall, at the Effective Time (as defined below), be merged with and into Gastar USA, the separate corporate existence of Gastar Delaware shall cease and Gastar USA shall continue as the Surviving Company. At the Effective Time, the effect of the Merger shall be as provided in the DGCL.

1.2 Effective Time . The Merger shall become effective as soon as practicable following satisfaction or waiver of all conditions precedent to the Merger upon the filing of a Certificate of Merger with the Secretary of the State of the State of Delaware or a later date specified therein (the “ Effective Time ”).

1.3 Organizational Documents of the Surviving Company .

1.3.1 From and after the Effective Time, the Amended and Restated Certificate of Incorporation of Gastar USA, in the form currently in effect, shall be the Certificate of Incorporation of the Surviving Company until thereafter amended as provided therein or by applicable law, except that Article 1 of the Amended and Restated Certificate of Incorporation of Gastar USA shall be amended to read in its entirety as follows:

“The name of the corporation shall be Gastar Exploration Inc.”.

1.3.2 From and after the Effective Time, the Second Amended and Restated Bylaws of Gastar USA, in the form currently in effect, shall continue to be the bylaws of the Surviving Company (the “ Surviving Company Bylaws ”) until thereafter amended as provided therein or by applicable law.

1.4 Directors . The directors of Gastar Delaware immediately prior to the Effective Time shall be the directors of the Surviving Company and shall hold office from the Effective Time until their successors are duly elected or appointed and qualified in the manner provided in the Surviving Company Bylaws or as otherwise provided by law.

 

2


1.5 Officers . The officers of Gastar Delaware immediately prior to the Effective Time shall be the officers of the Surviving Company and shall hold office from the Effective Time until their successors are duly elected or appointed and qualified in the manner provided in the Surviving Company Bylaws or as otherwise provided by law.

1.6 Additional Actions . Subject to the terms of this Agreement, the parties hereto shall take all such reasonable and lawful action as may be necessary or appropriate in order to effectuate the Merger and to comply with the requirements of the DGCL. If, at any time after the Effective Time, the Surviving Company shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm, of record or otherwise, in the Surviving Company its right, title or interest in, to or under any of the rights, properties or assets of either of Gastar Delaware acquired or to be acquired by the Surviving Company as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, the officers of the Surviving Company shall be authorized to execute and deliver, in the name and on behalf of Gastar Delaware, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of Gastar Delaware or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Company or otherwise to carry out this Agreement.

1.7 Conversion and Cancellation of Securities . At the Effective Time, by virtue of the Merger and without any action on the part of Gastar Delaware, Gastar USA or the holder of any of the following securities:

1.7.1 Each share of Gastar Delaware Common Stock issued and outstanding immediately prior to the Effective Time (other than any shares held in treasury, if any, which shall be automatically cancelled and retired without the payment of any consideration therefor) shall be converted into one duly issued, fully paid and nonassessable share of Gastar USA Common Stock (the “ Merger Consideration ”).

1.7.2 Each issued and outstanding share of Gastar USA Common Stock owned by Gastar Delaware immediately prior to the Merger shall automatically be cancelled and retired and shall cease to exist.

1.7.3 From and after the Effective Time, holders of certificates formerly evidencing Gastar Delaware Common Stock shall cease to have any rights as stockholders of Gastar Delaware, except as provided by law; provided , however , that such holders shall have the rights set forth in Section 1.8 herein.

1.7.4 In accordance with Section 262 of the DGCL, no appraisal rights shall be available to holders Gastar Delaware Common Stock in connection with the Merger.

1.7.5 Each share of Gastar USA Preferred Stock issued and outstanding immediately prior to the Effective Time shall remain outstanding after the Effective Time and shall have the same rights and privileges associated with the Gastar USA Preferred Stock prior to the Merger. Any and all obligations of Gastar USA with respect to the Gastar USA Preferred Stock prior to the Merger shall, after the Effective Time, be obligations of the Surviving Company.

 

3


1.8 No Surrender of Certificates; Direct Registration of Gastar USA Common Stock . At the Effective Time, each outstanding share of Gastar Delaware Common Stock (other than any shares of Gastar Delaware Common Stock to be cancelled in accordance with Section 1.7.1) shall automatically represent the same number of shares of Gastar USA Common Stock without any further act or deed by the stockholders of Gastar Delaware and record of such ownership shall be kept in uncertificated, book entry form in records maintained by the Surviving Company or its designated stock transfer agent. Until thereafter surrendered for transfer or exchange in the ordinary course, each outstanding stock certificate that, immediately prior to the Effective Time, evidenced Gastar Delaware Common Stock (or the common shares of its Predecessor) shall, from and after the Effective Time, be deemed and treated for all corporate purposes to evidence the ownership of the same number of shares of Gastar USA Common Stock.

1.9 Stock Transfer Books . At the Effective Time, the stock transfer books of Gastar Delaware shall be closed and thereafter shall be no further registration of transfers of shares of Gastar Delaware Common Stock theretofore outstanding on the records of Gastar Delaware. From and after the Effective Time, the holders of certificates representing shares of Gastar Delaware Common Stock (or the common shares of its Predecessor) outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares of Gastar Delaware Common Stock except as otherwise provided in this Agreement or by law. On or after the Effective Time, any stock certificates presented to an exchange agent appointed by Gastar USA or the Surviving Company for any reason shall solely represent the right to receive the Merger Consideration issuable in respect of the shares of Gastar Delaware Common Stock formerly represented by such certificates without any interest thereon.

1.10 Plan of Reorganization . This Agreement is intended to constitute a “plan of reorganization” within the meaning of Treasury Regulations Section 1.368-2(g). Each party hereto shall use its commercially reasonable efforts to cause the Merger to qualify, and will not knowingly take any actions or cause any actions to be taken which could reasonably be expected to prevent the Merger from qualifying, as a reorganization within the meaning of Section 368(a) of the Code.

1.11 Successor Issuer . It is the intent of the parties hereto that Gastar USA be deemed a “successor issuer” of Gastar Delaware in accordance with Rule 12g-3 under the Securities Exchange Act of 1934, as amended, and Rule 414 under the Securities Act of 1933, as amended. At or after the Effective Time, Gastar USA shall file (i) an appropriate Current Report on Form 8-K describing the Merger and (ii) appropriate pre-effective and/or post-effective amendments, as applicable, to any Registration Statements of Gastar Delaware (or its Predecessor) on Form S-8.

 

4


ARTICLE 2

ACTIONS TO BE TAKEN IN CONNECTION WITH THE MERGER

2.1 Conversion of Gastar Delaware Awards . At the Effective Time, (a) Gastar USA will assume sponsorship of the Gastar Exploration Ltd. 2006 Long-Term Stock Incentive Plan, as amended (the “ Plan ”), including all shares available for issuance thererunder and (b) all outstanding restricted shares of Gastar Delaware Common Stock (“ Gastar Delaware Restricted Shares ”), options to purchase Gastar Delaware Common Stock (“ Gastar Delaware Options ”) and performance-based units with respect to Gastar Delaware Common Stock (“ Gastar Delaware PBUs ”) (collectively with Gastar Delaware Restricted Shares and Gastar Delaware Options, “ Gastar Delaware Equity Awards ”), whether granted pursuant to the Plan or otherwise and whether or not then vested or exercisable, will be converted into an award with respect to the same number of shares of Gastar USA Common Stock. Each Gastar Delaware Equity Award so converted pursuant to this Agreement will continue to have, and be subject to, the same terms and conditions as set forth in the Plan and any agreements thereunder immediately prior to the Effective Time (including, without limitation, the vesting schedule (without acceleration thereof by virtue of the Merger and the transactions contemplated hereby) and per share exercise price), except that (i) each Gastar Delaware Equity Award will be exercisable (or will become exercisable in accordance with its terms) for, or shall be denominated with reference to, that number of shares of Gastar USA Common Stock equal to the number of shares of Gastar Delaware Common Stock that were subject to such Gastar Delaware Equity Award immediately prior to the Effective Time and (ii) the performance metrics pursuant to all Gastar Delaware PBUs will be determined with respect to the stock price of Gastar USA rather than Gastar Delaware. The conversion of any Gastar Delaware Options into options to purchase Gastar USA Common Stock shall be conducted in a manner that complies with the requirements of Section 409A of the Code and, with respect to any such Gastar Delaware Options that are “incentive stock options” within the meaning of Section 422 of the Code, shall be made in a manner consistent with Section 424(a) of the Code so as not to constitute a “modification” of such Company Options within the meaning of Section 424 of the Code. From and after the Effective Time, no options or other equity-based awards with respect to Gastar Delaware Common Stock shall remain outstanding.

2.2 Assignment and Assumption of Agreements . Effective as of the Effective Time, Gastar Delaware hereby assigns to Gastar USA, and Gastar USA hereby assumes and agrees to perform, all obligations of Gastar Delaware pursuant to the Plan, each stock option agreement and restricted stock agreement entered into pursuant to the Plan, and each outstanding Gastar Delaware Equity Award granted thereunder.

2.3 Reservation of Shares . On or prior to the Effective Time, Gastar USA will reserve sufficient shares of authorized but unissued Gastar USA Common Stock to provide for the issuance of Gastar USA Common Stock upon exercise of the Gastar Delaware Equity Awards outstanding under the Plan.

2.4 Proxy Statement .

 

5


2.4.1 Prior to the Effective Time, Gastar Delaware shall have prepared and filed with the Securities and Exchange Commission (the “ SEC ”) a proxy statement in a form relating to the Stockholders’ Meeting (as defined below) (together with a form of proxy and any amendments thereof or supplements thereto, the “ Proxy Statement ”). Each of Gastar USA and Gastar Delaware shall use its reasonable best efforts to cause a preliminary form of Proxy Statement to be filed with the SEC as soon as practicable and to be cleared by the SEC as promptly as practicable, and Gastar USA shall take all actions reasonably required under any applicable federal securities laws or state blue sky laws in connection with the issuance of shares of Gastar USA Common Stock pursuant to the Merger, including the obtaining of any “no-action” advice from the staff of the SEC, including advice supporting the conclusion that the issuance of Gastar USA Common Stock pursuant to the Merger will not require registration under the Securities Act of 1933, as amended (the “ Securities Act ”). As promptly as reasonably practicable after the Proxy Statement shall have been cleared by the SEC, Gastar Delaware shall mail or caused to be mailed or otherwise made available in accordance with the Securities Act and the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), the Proxy Statement to its stockholders; provided , however , that the parties shall consult and cooperate with each other in determining the appropriate time for mailing or otherwise making available to Gastar Delaware’s stockholders the Proxy Statements in light of the date set for the Stockholders’ Meeting.

2.5 Meeting of Gastar Delaware Stockholders .

2.5.1 Meeting of Gastar Delaware Stockholders . Gastar Delaware shall take all action necessary in accordance with the DGCL and its Certificate of Incorporation and Bylaws to call, hold and convene a meeting of its stockholders to consider the adoption of this Agreement (the “ Stockholders’ Meeting ”) to be held no less than 10 nor more than 60 days following the distribution of the definitive Proxy Statement to its stockholders, to the extent required by the DGCL. Gastar Delaware will use its reasonable best efforts to solicit from its stockholders proxies in favor of the adoption of this Agreement and approval of the Merger. Gastar Delaware may adjourn or postpone the Stockholders’ Meeting to the extent necessary to ensure that any necessary supplement or amendment to the Proxy Statement is provided to its stockholders in advance of any vote on this Agreement and the Merger or, if as of the time for which the Stockholders’ Meeting is originally scheduled (as set forth in the Proxy) there are insufficient shares of Gastar Delaware Common Stock voting in favor of the adoption of this Agreement and approval of the Merger or represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of such Stockholders’ Meeting. Notwithstanding the foregoing, pursuant to the applicable sections of Gastar Delaware’s Certificate of Incorporation and Bylaws and the DGCL, the stockholders of Gastar Delaware may approve this Agreement and/or the Merger by written consent in lieu of a meeting of the stockholders.

2.6 Section 16 Matters . Prior to the Effective Time, the Board of Directors of Gastar Delaware or an appropriate committee of non-employee directors thereof (as such term is defined for purposes of Rule 16b-3 promulgated under the Exchange Act) shall adopt a resolution consistent with the interpretive guidance of the SEC so that the receipt by any officer or director of Gastar Delaware who is a covered person for purposes of Section 16(a) of the Exchange Act of shares of Gastar USA Common Stock in exchange for shares of Gastar

 

6


Delaware Common Stock or Gastar Delaware Options pursuant to this Agreement and the Merger is intended to be an exempt transaction pursuant to Section 16b-3 of the Exchange Act. Prior to the Effective Time, the sole director of Gastar USA or an appropriate committee of non-employee directors (as such term is defined for purposes of Rule 16b-3 promulgated under the Exchange Act) shall adopt a resolution consistent with the interpretive guidance of the SEC so that the receipt by any officer or director of the Gastar Delaware or Gastar USA who is a covered person for purposes of Section 16(a) of the Exchange Act of shares of Gastar USA Common Stock or options in exchange for shares of Gastar Delaware Common Stock or Gastar Delaware Options pursuant to this Agreement and the Merger is intended to be an exempt transaction for purposes of Section 16b-3 of the Exchange Act.

ARTICLE 3

CONDITIONS OF MERGER

3.1 Conditions Precedent . The obligations of the parties to this Agreement to consummate the Merger and the transactions contemplated by this Agreement shall be subject to fulfillment or waiver by the parties hereto at or prior to the Effective Time of each of the following conditions:

3.1.1 This Agreement and the Merger shall have been approved and adopted by the requisite vote of stockholders of Gastar Delaware at a meeting of the stockholders of Gastar Delaware or by written consent in lieu thereof.

3.1.2 No order, statute, rule, regulation, executive order, injunction, stay, decree, judgment or restraining order that is in effect shall have been enacted, entered, promulgated or enforced by any court or governmental or regulatory authority or instrumentality that prohibits or makes illegal the consummation of the Merger or the transactions contemplated hereby.

3.1.3 The Proxy Statement shall have been cleared for mailing by the SEC under the Exchange Act and no proceeding for the purpose of stopping the solicitation of proxies from holders of Gastar Delaware Common Stock by Gastar Delaware shall have been initiated or, to the knowledge of Gastar USA or Gastar Delaware, threatened by the SEC and not concluded or withdrawn. Gastar Delaware and Gastar USA shall have obtained legal advice or “no-action” advice from the staff of the SEC, or both, in support of the conclusion that neither the solicitation of proxies pursuant to the Proxy Statement in favor of the Merger nor the issuance of Gastar USA Common Stock pursuant to the Merger will require registration under the Securities Act, in each case mutually satisfactory to Gastar Delaware and Gastar USA.

3.1.4 The Gastar USA Common Stock to be issued pursuant to the Merger shall have been approved for listing on the NYSE MKT LLC, subject to official notice of issuance and satisfaction of other standard conditions.

3.1.5 All material consents and authorizations of, filings or registrations with, and notices to, any governmental or regulatory authority required of Gastar Delaware or Gastar USA or their subsidiaries to consummate the Merger shall have been obtained or made.

 

7


3.1.6 All consents required under instruments evidencing material amounts of indebtedness and all material consents required under other material contracts with Gastar Delaware or Gastar USA or their subsidiaries shall have been obtained.

3.1.7 Any and all opinions, rulings, confirmation or other guidance with respect to tax matters associated with the reorganization from applicable governmental bodies and the external advisors of Gastar Delaware and Gastar USA mutually determined to be necessary and advisable shall have been obtained.

ARTICLE 4

COVENANTS

4.1 Listing of Gastar USA Common Stock . Gastar USA will use its best efforts to obtain, at or before the Effective Time, confirmation of listing on the NYSE MKT LLC of the Gastar USA Common Stock issuable pursuant to the Merger.

4.2 The Plan . Gastar Delaware and Gastar USA will take or cause to be taken all actions necessary or desirable in order to implement the assumption by Gastar USA pursuant to Section 2.1 of this Agreement of the Plan, each stock option agreement or restricted stock agreement entered into pursuant thereto, and each Gastar Delaware Equity Award granted thereunder, all to the extent deemed appropriate by Gastar Delaware and Gastar USA and permitted under applicable law.

4.3 Insurance . Gastar USA shall procure insurance or cause the execution of the insurance policies of Gastar Delaware such that, upon consummation of the Merger, Gastar USA shall have insurance coverage that is substantially identical to the insurance coverage held by Gastar Delaware immediately prior to the Merger.

4.4 Efforts to Consummate . Subject to the terms and conditions of this Agreement, each party to this Agreement will act in good faith and use commercially reasonable efforts to take or cause to be taken all actions, and do or cause to be done all things, required, proper or advisable to satisfy the conditions precedent to set forth in Article 3 of this Agreement and to consummate the transactions contemplated hereby as expeditiously as reasonably practicable. Each party hereto will refrain from taking any action to frustrate, hinder or delay the satisfaction of any condition precedent to the Merger and the transactions contemplated hereby.

ARTICLE 5

TERMINATION AND AMENDMENT

5.1 Termination . This Agreement may be terminated and the Merger contemplated hereby may be abandoned at any time prior to the Effective Time by action of the Board of Directors of Gastar Delaware if such Board of Directors should determine that for any reason the completion of the transactions provided for herein would be inadvisable or not in the best interests of Gastar Delaware or its stockholders. In the event of such termination and abandonment, this Agreement shall become void and neither Gastar Delaware, Gastar USA nor their respective stockholders, directors or officers shall have any liability with respect to such termination and abandonment.

 

8


5.2 Amendment . At any time prior to the Effective Time, this Agreement may, to the extent permitted by the DGCL, be supplemented, amended or modified by the mutual consent of the parties to this Agreement.

ARTICLE 6

MISCELLANEOUS PROVISIONS

6.1 Governing Law . This Agreement shall be governed by and construed and enforced under the laws of the State of Delaware.

6.2 Counterparts . This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which shall constitute one and the same agreement.

6.3 Entire Agreement . This Agreement constitutes the entire agreement and supersedes all other agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof.

6.4 Severability . The provisions of this Agreement are severable, and in the event any provision hereof is determined to be invalid or unenforceable, such invalidity or unenforceability shall not in any way affect the validity or enforceability of the remaining provisions hereof.

6.5 No Third-Party Beneficiaries . Nothing contained in this Agreement is intended by the parties hereto to expand the rights and remedies of any person or entity not party hereto against any party hereto as compared to the rights and remedies which such person or entity would have had against any party hereto had the parties hereto not consummated the transactions contemplated hereby.

6.6 Tax Matters . Each of Gastar Delaware and Gastar USA will comply with the recordkeeping and information reporting requirements of the Code that are imposed as a result of the transactions contemplated hereby, and will provide information reporting statements to holders of Gastar Delaware Common Stock at the time and in the manner prescribed by the Code and applicable Treasury Regulations.

[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]

 

9


IN WITNESS WHEREOF, Gastar Delaware and Gastar USA have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

GASTAR EXPLORATION, INC.
By:  

/s/ J. Russell Porter

Name:   J. Russell Porter
Title:   President and Chief Executive Officer
GASTAR EXPLORATION USA, INC.
By:  

/s/ J. Russell Porter

Name:   J. Russell Porter
Title:   President

S IGNATURE P AGE TO A GREEMENT AND P LAN OF M ERGER

Exhibit 3.1

CERTIFICATE OF MERGER

OF

GASTAR EXPLORATION, INC.

INTO

GASTAR EXPLORATION USA, INC.

Dated: January 31, 2014

Pursuant to Title 8, Section 251 of the Delaware General Corporation Law (the “ DGCL ”), the undersigned corporation executed the following Certificate of Merger:

FIRST: The name, jurisdiction of incorporation and type of entity of each of the constituent corporations which is to merge are as follows:

 

Name

  

Jurisdiction of Incorporation and Type

Gastar Exploration, Inc.    Delaware Corporation
Gastar Exploration USA, Inc.    Delaware Corporation

SECOND: An Agreement and Plan of Merger (the “ Merger Agreement ”) has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with Section 251 of the DGCL.

THIRD: The name of the surviving Delaware corporation is Gastar Exploration USA, Inc. (the “ Surviving Corporation ”).

FOURTH: The Amended and Restated Certificate of Incorporation of Gastar Exploration USA, Inc., as in effect immediately prior to the effective time of the merger, shall be the Certificate of Incorporation of the Surviving Corporation, except that Article 1 of the Amended and Restated Certificate of Incorporation of Gastar Exploration USA, Inc. shall be amended and restated in its entirety to read as follows:

“The name of the corporation shall be Gastar Exploration Inc.”

FIFTH: This Certificate of Merger, and the merger referenced herein, shall become effective upon the filing of this Certificate of Merger in the office of the Secretary of State of the State of Delaware.

SIXTH: The executed Merger Agreement is on file at the principal place of business of the Surviving Corporation. The address of the principal office of the Surviving Corporation is 1331 Lamar Street, Suite 650, Houston, TX 77010.

SEVENTH: A copy of the Merger Agreement will be furnished by the Surviving Corporation, on request and without cost, to any stockholder of any constituent corporations.

[Signature page follows.]


IN WITNESS WHEREOF , the undersigned has caused this Certificate of Merger to be signed by its duly authorized officer as of the date first written above.

 

GASTAR EXPLORATION USA, INC.
By:  

/s/ J. Russell Porter

Name:   J. Russell Porter
Title:   President

S IGNATURE P AGE TO C ERTIFICATE OF M ERGER

Exhibit 10.1

GASTAR EXPLORATION INC.

LONG-TERM INCENTIVE PLAN

Section 1. Background . On January 31, 2014, Gastar Exploration, Inc., a Delaware corporation that was formerly an Alberta corporation known as Gastar Exploration Ltd. (“ Gastar Delaware ”) completed the closing of a reorganization pursuant to which Gastar Delaware was merged with and into Gastar Exploration USA, Inc., a Delaware corporation and a direct subsidiary of Gastar Delaware (“ Gastar ”) , with Gastar continuing as the surviving entity (the “ Merger ”), pursuant to an Agreement and Plan of Merger (the “ Merger Agreement ”) dated as of January 31, 2014 by and between Gastar Delaware and Gastar. Upon completion of the Merger, Gastar changed its name to “Gastar Exploration Inc.” As of immediately prior to the effective time of the Merger (the “ Effective Time ”), Gastar and its sole voting stockholder assumed, adopted and approved the Gastar Exploration Ltd. 2006 Long-Term Incentive Plan, as amended (the “ LTIP ”), and approved the Gastar Exploration Inc. Long-Term Incentive Plan (the “ Successor Plan ”) as an amendment and restatement of the LTIP. Capitalized terms used but not defined herein are defined in the LTIP.

Section 2. Name of Plan . The LTIP shall hereinafter be referred to as the “Gastar Exploration Inc. Long-Term Incentive Plan”.

Section 3. Certain References . All references in the LTIP to the “Company”, including for purposes of determining which “Employees”, “Officers” and “Directors” are eligible for awards under the LTIP shall from and after the Effective Time be references to Gastar.

Section 4. Shares Subject to Plan . The number of shares of the common stock of Gastar, par value $.001 (“ Gastar Shares ”) that may be delivered pursuant to the Successor Plan shall be equal to the number of shares of the common stock of Gastar Delaware which remained available for issuance under the LTIP as of the Effective Time, plus any Gastar Shares which again become available for issuance pursuant to Section 4 of the LTIP and subject to any adjustment mad pursuant to Section 11(a) of the LTIP. All references to “Shares” in the LTIP shall from and after the Effective Time be references to Gastar Shares. The individual award limitations set forth in the LTIP shall continue to apply, without modification, to awards granted pursuant to the Successor Plan except that such limitations shall be in respect of with respect to Gastar Shares.

Section 4. Awards . The types and terms of Awards which may be granted pursuant to the Successor Plan shall be the same as those available for grant pursuant to the LTIP except that such Awards shall be in respect of Gastar Shares rather than shares of Gastar Delaware.

Section 5. LTIP Governs . Except as set forth herein, Awards granted pursuant to the LTIP or the Successor Plan shall be governed by (or remain governed by) and subject to all terms and conditions of the LTIP.

Exhibit 99.1

DESCRIPTION OF SHARE CAPITAL

The following description of the share capital of Gastar Exploration Inc. (the “ Company ”) is a summary. This summary does not purport to be complete and is qualified in its entirety by reference to (i) the Delaware General Corporation Law (the “ DGCL ”), (ii) the complete text of the Company’s certificate of incorporation (the “ certificate of incorporation ”), which is filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “ SEC ”) on October 28, 2013 and (iii) the complete text of the Company’s bylaws (the “ bylaws ”), which are filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on October 28, 2013. You should read the DGCL, the certificate of incorporation and the bylaws carefully and in their entirety. As used herein, references to “Gastar,” “we,” “us” or “our” refer to the Company.

Common Shares

We are authorized to issue up to an aggregate of 275 million shares of common stock, par value $0.001 per share (the “ common shares ”). In the event of dissolution or winding-up, the holders of our common shares are entitled to share equally in our assets, if any remain after the payment of all our debts and liabilities and the liquidation preference of any outstanding preferred shares. Holders of our common shares are entitled to receive dividends as may be lawfully declared from time to time by our board of directors. The rights, preferences and privileges of holders of our common shares are subject to the terms of any series of preferred shares which we may issue in the future.

Preferred Shares

Pursuant to our certificate of incorporation, we are authorized to issue up to an aggregate of 40 million shares of preferred stock, par value $0.01 per share (the “ preferred shares ”), from which our board of directors by resolution may establish from time to time one or more series of preferred shares and may fix the powers, preferences and rights, and the qualifications, limitations or restrictions in respect of any series established.

Issuance of Shares

In accordance with our certificate of incorporation, our board of directors will have the power to issue any of our unissued shares.

Dividends

Delaware law permits a corporation, unless otherwise restricted by its certificate of incorporation, to declare and pay dividends out of surplus or, if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and/or for the preceding fiscal year as long as the amount of capital of the corporation is not less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having preference upon the distribution of assets. The ability of a Delaware corporation to pay dividends on its shares is dependent on the financial status of the corporation standing alone and not on a consolidated basis. In determining the amount of surplus of a Delaware corporation, the assets of the corporation, including stock of subsidiaries owned by the corporation, must be valued at their fair market value as determined by the board of directors, regardless of their historical book value.

Right to Call Special Meeting

Delaware law provides that a special meeting of the shareholders may be called by the board of directors or by any person or persons as may be authorized by the certificate of incorporation or bylaws. Our bylaws provide that a special meeting of stockholders may be called by our board of directors (or the chairman in the absence of a designation by the board of directors) or our chief executive officer.


Shareholder Action by Written Consent

Under Delaware law, unless otherwise limited by the certificate of incorporation, stockholders may act by written consent without a meeting if holders of outstanding capital stock entitled to vote thereon representing not less than the minimum number of votes that would be necessary to take the action at an annual or special meeting execute a written consent providing for the action. Our certificate of incorporation permits stockholders to act by written consent without a meeting only if all shareholders entitled to vote on that resolution sign the written resolution.

Notice of Shareholder Proposals and Nomination of Director Candidates by Shareholders

Delaware law does not provide procedures for stockholders to nominate individuals to serve on the board of directors or to present other proposals at meetings of stockholders. Our bylaws contain procedures governing stockholder nominations and stockholder proposals. For purposes of the 2014 annual meeting, the first anniversary of the preceding year’s annual meeting shall be deemed to be June 6, 2014. To nominate an individual to our board of directors or to present other proposals at an annual meeting of the stockholders, a stockholder must provide advance notice to us not later than the 90th day nor earlier than the 120th day prior to the anniversary of the preceding year’s annual meeting, unless the date of the annual meeting is more than 30 days prior to or after the anniversary of the preceding year’s annual meeting, in which case the stockholder must provide advance notice to us not earlier than the 120th day prior to such annual meeting and not later than the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. To nominate an individual to our board of directors or to present other proposals at a special meeting of the stockholders, a stockholder must provide advance notice to us, not earlier than the 120th day prior to such special meeting and not later than the later of the 90th day prior to such meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the board of directors to be elected at such meeting.

Number of Directors

Under Delaware law, the number of directors is fixed by, or in the manner provided in, the bylaws of a corporation, unless the certificate of incorporation fixes the number of directors. Our bylaws provide that the number of directors must be set by a resolution adopted by a majority of the total authorized number of directors, but also provide that the board will consist of no fewer than 1 and no greater than 15 directors.

Our board of directors consists of 5 directors.

Removal of Directors

Under Delaware law, any director may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Our certificate of incorporation provides that any director may be removed from office at any time (a) with cause by the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of capital stock of the corporation, entitled to vote generally at an election of directors or (b) without cause by the affirmative vote of the holders of at least 66 2/3% of the voting power of all the then-outstanding shares of the capital stock of the corporation entitled to vote generally at an election of directors.

Vacancies on the Board of Directors

Under Delaware law, vacancies and newly created directorships may be filled by a majority of directors then in office unless the certificate of incorporation or the bylaws otherwise provide. Our certificate of incorporation and bylaws provide that any vacancies or newly created directorships shall be filled by a majority of the directors then in office (although less than a quorum).


Subject to the terms of any series of preferred stock entitled to separately elect directors, whenever the holders of any class of stock or series thereof are entitled to elect one or more directors pursuant to the terms of such class or series, vacancies and newly created directorships of such class or series may be filled by a majority of directors elected by such class or series thereof then in office, or by a sole remaining director so elected. If there is no director in office elected by such class or series, then an election of directors may be held in accordance with the DGCL.

Duties of Directors and Director Liability

Directors of a corporation incorporated or organized under the DGCL have fiduciary obligations to the corporation and its stockholders. Under these fiduciary obligations, the directors must act in accordance with the so-called duty of care. In addition, under Delaware common law, directors have a duty of care and a duty of loyalty. The duty of care requires that the directors act in an informed and deliberative manner and inform themselves, prior to making a business decision, of all material information reasonably available to them. The duty of loyalty is the duty to act in good faith, not out of self-interest, and in a manner which the directors reasonably believe to be in the best interest of the stockholders.

Interested Director Transactions

Under Delaware law, certain contracts or transactions in which one or more of a corporation’s directors has an interest are not void or voidable because of such interest, provided that certain conditions, such as obtaining the required approval and fulfilling the requirements of good faith and full disclosure, are met. Under Delaware law, (a) either the stockholders or the board of directors must approve any such contract or transaction after full disclosure of the material facts, and, in the case of approval by the board of directors, the contract or transaction must also be “fair” to the corporation, or (b) the contract or transaction must have been just and reasonable or fair as to the corporation at the time it was approved. Under Delaware law, if approval by the board of directors is sought, the contract or transaction must be approved by a majority of the disinterested directors (even though less than a majority of a quorum).

Voting Rights and Quorum Requirements

Under Delaware law, the certificate of incorporation or bylaws may specify the required quorum, but a quorum may consist of no less than one-third of the total voting power. Additionally, the NYSE MKT LLC rules require a quorum to be at least 33 1/3% of the shares entitled to vote, in person or by proxy. Our bylaws provide that the holders of one-third (33 1/3%) of the voting power, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders.

Except as otherwise specified in our bylaws or under Delaware law, any action or resolution requiring approval of the shareholders may be passed by a simple majority of votes cast at a meeting at which a quorum is present and entitled to vote generally on the subject matter. Votes may be cast by any stockholder in person, by remote communication or by his proxy.

Indemnification of Officers, Directors and Employees

Delaware law permits indemnification of present or former directors, officers, employees and agents made a party, or threatened to be made a party, to any third party proceeding by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if such person:

 

    Acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation; and

 

    With respect to any criminal action or proceeding, had no reasonable cause to believe that such conduct was unlawful.

In a derivative action, or an action by or in the right of the corporation, the corporation is permitted by Delaware law to indemnify directors, officers, employees and agents against expenses actually and reasonably incurred by them in connection with the defense or settlement of an action or suit if they acted in


good faith and in a manner that they reasonably believed to be in or not opposed to the best interests of the corporation. However, in such a case, no indemnification shall be made if the person is adjudged liable to the corporation, unless and only to the extent that, the court in which the action or suit was brought or the Court of Chancery of the State of Delaware shall determine upon application that such person is fairly and reasonably entitled to indemnity for such expenses despite such adjudication of liability.

Our certificate of incorporation provides for mandatory indemnification of our directors and officers to the extent permitted under applicable law. The DGCL allows a corporation to advance expenses before the resolution of an action, if in the case of current directors and officers, such persons agree to repay any such amount advanced if they are later determined not to be entitled to indemnification. Our certificate of incorporation provides for the mandatory advancement of expenses to directors and officers.

Delaware corporate law, our bylaws and our certificate of incorporation may permit indemnification for liabilities under the Securities Act or the Exchange Act. The board of directors has been advised that, in the opinion of the SEC, indemnification for liabilities arising under the Securities Act and the Exchange Act may be contrary to public policy and, therefore, may be unenforceable, absent a decision to the contrary by a court of appropriate jurisdiction.

Amendment of Certificate of Incorporation

Under Delaware law, an amendment to a corporation’s certificate of incorporation requires the approval by the holders of a majority of the outstanding voting power. Our certificate of incorporation allows for amendments in any manner permitted by Delaware law. The amendment of certain articles in our certificate of incorporation will require the affirmative vote of the holders of at least two-thirds of the outstanding voting power, while the rest will require approval by the holders of a majority of the outstanding voting power.

Under Delaware law, the holders of outstanding shares of a class of stock are entitled to vote as a class on a proposed amendment to increase or decrease the number of authorized shares of such class unless the certificate of incorporation provides that such number of shares may be increased or decreased by the affirmative vote of holders of a majority of the voting power of the outstanding shares entitled to vote. Our certificate of incorporation contains such a provision and requires the vote of the holders of a majority of the voting power of all of our outstanding shares entitled to vote to increase or decrease the aggregate number of authorized shares of preferred stock unless a separate vote is otherwise required. In addition, under Delaware law, if the amendment to the certificate of incorporation would increase or decrease the par value of the shares of a class, or alter or change the powers, preferences or special rights of the shares of such class so as to affect them adversely, that class is entitled to vote separately on the amendment whether or not it is designated as voting stock. Furthermore, under Delaware law if the proposed amendment would alter or change the powers, preferences or special rights of one or more series of any class so as to affect them adversely, but shall not so affect the entire class, then only the shares of the series so affected by the amendment shall be considered a separate class for purposes of the class vote.

Amendment of Bylaws

Delaware law reserves the power to the shareholders to adopt, amend or repeal the bylaws unless the certificate of incorporation confers such power on the board of directors in addition to the shareholders. Our certificate of incorporation provides that a majority of the total number of directors has the power to make, amend, alter, change, add to or repeal our bylaws. In addition, our certificate of incorporation provides that the adoption, amendment or repeal of the bylaws by the shareholders requires the affirmative vote of the holders of at least two thirds of the outstanding voting power.


Business Combination

Under Section 203 of DGCL (“ Section 203 ”), certain “business combinations” with “interested stockholders” of Delaware corporations are subject to a three-year moratorium unless specified conditions are met.

Section 203 prohibits a Delaware corporation from engaging in a “business combination” with an “interested stockholder” for three years following the date that such person becomes an interested stockholder. With certain exceptions, an interested stockholder is a person or group who or which owns 15% or more of the corporation’s outstanding voting stock (including any rights to acquire stock pursuant to an option, warrant, agreement, arrangement or understanding, or upon the exercise of conversion or exchange rights, and stock with respect to which the person has voting rights only), or is an affiliate or associate of the corporation and was the owner of 15% or more of such voting stock at any time within the previous three years.

For purposes of Section 203, the term “business combination” is defined broadly to include: (a) mergers with or caused by the interested stockholder; (b) sales or other dispositions to the interested stockholder (except proportionately with the corporation’s other stockholders) of assets of the corporation or a subsidiary equal to ten percent or more of the aggregate market value of the corporation’s consolidated assets or its outstanding stock; (c) the issuance or transfer by the corporation or a subsidiary of stock of the corporation or such subsidiary to the interested stockholder (except for transfers in a conversion or exchange or a pro rata distribution or certain other transactions, none of which increase the interested stockholder’s proportionate ownership of any class or series of the corporation’s or such subsidiary’s stock); or (d) receipt by the interested stockholder (except proportionately as a stockholder), directly or indirectly, of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation or a subsidiary.

The three-year moratorium imposed on business combinations by Section 203 does not apply if: (a) prior to the date on which such stockholder becomes an interested stockholder the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested stockholder; (b) the interested stockholder owns 85% of the corporation’s voting stock upon consummation of the transaction which made him or her a 15% stockholder (excluding from the 85% calculation shares owned by directors who are also officers of the target corporation and shares held by employee stock plans which do not permit employees to decide whether to accept a tender or exchange offer); or (c) on or after the date such person becomes an interested stockholder, the board approves the business combination and it is also approved at a stockholder meeting by 66 2/3% of the voting stock not owned by the interested stockholder.

Section 203 only applies to certain publicly held Delaware corporations which have a class of voting stock that is (a) listed on a national securities exchange or (b) held of record by more than 2,000 stockholders. We meet these conditions as a result of the listing of our common stock on the NYSE MKT LLC. A Delaware corporation to which Section 203 applies may elect not to be governed by Section 203. The application of Section 203 to us will confer upon the board of directors the power to reject a proposed business combination in certain circumstances, even though a potential acquirer may be offering a substantial premium for our shares over the then current market price.

Approval of Certain Transactions

Under Delaware law, a sale, lease or exchange of all or substantially all the property or assets of a Delaware corporation requires the approval of the holders of a majority of the outstanding voting power of the corporation. Mergers or consolidations also generally require the approval of the holders of a majority of the outstanding voting power of the corporation. However, shareholder approval is generally not required by a Delaware corporation if such corporation’s certificate of incorporation is not amended by the merger; each share of stock of such corporation outstanding immediately prior to the merger will be an identical outstanding share of the surviving corporation after the effective date of the merger; and if the number of shares of common stock, including securities convertible into common stock, issued in the merger does not exceed 20% of such corporation’s outstanding common stock immediately prior to the effective date of the merger. In addition, shareholder approval is not required by a Delaware corporation if it is the surviving


corporation in a merger with a subsidiary in which its ownership was 90% or greater. Finally, unless required by its certificate of incorporation, shareholder approval is not required under Delaware law for a corporation to merge with or into a direct or indirect wholly owned subsidiary of a holding company (as defined under Delaware law) in certain circumstances. Our certificate of incorporation does not require such a vote.

Access to Corporate Records

Delaware law allows any stockholder to inspect a corporation’s stock ledger, list of stockholders, and other books and records for a purpose reasonably related to such person’s interest as a stockholder.

Appraisal Rights/Dissenters’ Rights

Under Delaware law, stockholders who have neither voted in favor of nor consented to a merger or consolidation have the right to seek appraisal in connection with certain mergers or consolidations by demanding payment in cash for their shares equal to the fair value of such shares. Fair value is determined by a court in an action timely brought by the dissenters. In determining fair value, the court may consider all relevant factors, including the rate of interest which the resulting or surviving corporation would have had to pay to borrow money during the pendency of the court proceeding.

Delaware law grants appraisal rights only in the case of certain mergers or consolidations and not in the case of other fundamental changes, such as the sale of all or substantially all of the assets of the corporation or amendments to the certificate of incorporation, unless so provided in the corporation’s certificate of incorporation. Further, no appraisal rights are available for shares of any class or series listed on a national securities exchange or held of record by more than 2,000 stockholders. However, appraisal rights are available if the agreement of merger or consolidation does not convert such shares into:

 

    Stock of the surviving corporation

 

    Stock of another corporation which is listed on a national securities exchange or held of record by more than 2,000 shareholders,

 

    Cash in lieu of fractional shares; or

 

    Some combination of the above.

In addition, dissenters’ rights are not available for any shares of the surviving corporation if the merger did not require the vote of the stockholders of the surviving corporation.

Shareholder’s and Derivative Suits

In Delaware, a stockholder may bring a derivative action on behalf of a corporation to enforce a corporate right, including the breach of a director’s duty to the corporation. Delaware law requires that the plaintiff in a derivative suit be a stockholder of the corporation at the time of the wrong complained of and remain so through the duration of the suit; that the plaintiff make a demand on the directors of the corporation to assert the corporate claim unless the demand would be futile; and that the plaintiff be an adequate representative of the other stockholders.

Liquidation, Dissolution or Winding Up

Under Delaware law, unless the board of directors approves the proposal to dissolve, the dissolution must be approved by stockholders holding 100% of the total voting power of the corporation. Only if the dissolution is initially approved by the board of directors may it be approved by a simple majority of the corporation’s stockholders. In the event of such a board-initiated dissolution, Delaware law allows a Delaware corporation to include in its certificate of incorporation a super-majority voting requirement in connection with dissolutions. Our certificate of incorporation contains no such super-majority voting requirement, however, and a majority of shares voting at a meeting at which a quorum is present would be sufficient to approve a dissolution of the Company which had previously been approved by our board of directors.


In the case of our dissolution or winding up, the holders of each class or series of preference shares will be entitled to share equally and ratably in our surplus assets.

No Liability for Further Calls or Assessments

Our common shares are being duly and validly issued and fully-paid.

Stock Exchange Listing

Our common shares are listed on the NYSE MKT LLC under the symbol “GST.”

Transfer Agent and Registrar

The transfer agent and registrar for our common shares is American Stock Transfer & Trust Company LLC. Its address is 6201 15th Avenue, Brooklyn, New York 11219. The transfer agent for any series of preferred shares that we may offer will be named and described in the prospectus or prospectus supplement for that series.