Unassociated Document


    Exhibit 10.1


    


    


    


    
 

    


    


    FINAL
SETTLEMENT AGREEMENT

    


    AND

    


    COMPREHENSIVE
GENERAL RELEASE

    


    


    


    


    


    


    


    


    


    


    between
and among

    


    


    


    


    GASTAR
EXPLORATION, LTD.,

    


    GEOSTAR
CORPORATION,

    


    AND
OTHER INDIVIDUALS AND ENTITIES SET FORTH HEREIN

    


    


    


    June
11,2008

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    This Final
Settlement Agreement and Comprehensive General Release ("Settlement Agreement")
is dated as of June 11, 2008 (the "Effective Date"). This is the same date as
the "Closing Date."

    


    ARTICLE
I

    Identification
of Parties and Definitions

    


    Section
1.01. Parties to the Settlement
Agreement. The following are parties to this Settlement
Agreement:

    


    
      	
              (a)

            	
              The
      "GeoStar Parties"
      are:

            


    

     

    
      	
               
      

            	
              (i)

            	
              GeoStar
      Corporation ("GeoStar");

            


    

     

    
      	
               
      

            	
              (ii)

            	
              First
      Source Texas, he.;

            


    

     

    
      	
               
      

            	
              (iii)

            	
              First
      Source Bossier, LLC;

            


    

     

    
      	
               
      

            	
              (iv)

            	
              First
      Texas Gas, LP;

            


    

     

    
      	
               
      

            	
              (v)

            	
              CBM
      Resources Pty. Ltd.;

            


    

     

    
      	
               
      

            	
              (vi)

            	
              Associated
      Geophysical Services, Inc.;

            


    

     

    
      	
               
      

            	
              (vii)

            	
              Conquest
      Group Operating Company;

            


    

     

    
      	
               
      

            	
              (viii)

            	
              West
      Virginia Development, Inc.;

            


    

     

    
      	
               
      

            	
              (ix)

            	
              West
      Virginia Gas Corporation;

            


    

     

    
      	
               
      

            	
              (x)

            	
              Squaw
      Creek Development, Inc.;

            


    

     

    
      	
               
      

            	
              (xi)

            	
              Arkoma
      Basin Development, Inc.;

            


    

     

    
      	
               
      

            	
              (xii)

            	
              Royalty
      Acquisition Company;

            


    

     

    
      	
               
      

            	
              (xiii)

            	
              BNG
      Producing & Drilling;

            


    

     

    
      	
               
      

            	
              (xiv)

            	
              GeoStar
      Financial Corporation; and

            


    

     

    
      	
               
      

            	
              (xv)

            	
              GeoStar
      Financial Services Corporation.

            


    

     

    
      	
              (b)

            	
              The
      "Gastar Parties"
      are:

            


    

     

    
      	
               
      

            	
              (i)

            	
              Gastar
      Exploration Ltd. ("Gastar
      Ltd.");

            


    

     

    
      	
               
      

            	
              (ii)

            	
              Gastar
      Exploration USA, Inc., f/k/a First Sourcenergy Wyoming,
    Inc.;

            


    

     

    
      	
               
      

            	
              (iii)

            	
              Gastar
      Exploration Victoria, Inc., f/k/a First Sourcenergy Victoria,
      Inc.;

            


    

     

    
      	
               
      

            	
              (iv)

            	
              Gastar
      Exploration Texas, Inc., f/k/a First Texas Development,
    Inc.;

            


    

     

    
      	
               
      

            	
              (v)

            	
              Gastar
      Exploration Texas LLC, f/k/a Bossier Basin,
LLC;

            


    

     

    
      	
               
      

            	
              (vi)

            	
              Gastar
      Exploration Texas, LP, f/k/a First Source Gas,
  LP;

            


    

     

    
      	
               
      

            	
              (vii)

            	
              Gastar
      Exploration New South Wales, Inc., f/k/a First Sourcenergy Group, Inc.;
      and

            


    

     

    
      	
               
      

            	
              (viii)

            	
              Gastar
      Exploration Power Pty. Ltd.

            


    

    


    Section 1
..02. Other
Definitions.

    


    (a) "Affiliate" means, with
respect to any person or entity, a person or entity that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with such first person or entity ("control" in such context
meaning (i) to directly or indirectly own more than 50% of the outstanding
equity or beneficial interest of another entity, or (ii) having the authority,
power, or practical ability (through ownership of voting securities, by
contract, or otherwise), to direct or otherwise exercise a controlling influence
over the management or policies of the entity).


    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (b) The
"Closing Date" is June
11, 2008, provided that this Settlement Agreement and all other finalized
Closing Documents have been fully executed by all Parties to each such Closing
Document and the payment called for in Section 9.01 is made on or before June
12, 2008. Provided that these conditions for the Closing Date have occurred,
this is the date on which the Settlement Agreement becomes effective. This is
the same date as the "Effective Date."

    


    (c) The
"Closing Documents"
are:

    


    (i) this
Settlement Agreement;

     

    (ii) the
GeoStar Parties' Texas Assignments Without Warranty for Leon and Robertson
Counties;

     

    (iii) the
Gastar Parties' Texas Quitclaims and Assignments Without Warranty for Leon and
Robertson Counties;

     

    (iv) the
GeoStar Parties' West Virginia/Pennsylvania Assignment Without Warranty; the EL
4968 Transfer Form;

     

    (vi) the
EL 4968 Tenement Sale Agreement;

     

    (vii) The Gastar Warrant.
Notwithstanding anything to the contrary in this Settlement Agreement, the
Parties agree that if the Gastar Warrant is not approved by the Toronto Stock
Exchange by the Closing Date that the Closing Date shall not be delayed by such
lack of approval.

    


    (d) The
"Disputes"
are:

    


    (i) Cause
No. 07-12854; GeoStar Corp.,
et al. v. Gastar
Exploration Ltd., etal.; in the United States District Court for the
Eastern District of Michigan;

     

    (ii) Cause
No. 07-08-17,891-CV; Gastar
Exploration Ltd., et al. v. GeoStar Corporation, et al.; in the 82nd
Judicial District Court of Robertson County, Texas;

     

    (iii)
Cause No. 07-07-17,858-CV; Gastar Exploration, Ltd., et al. v.
GeoStar Corporation, et al.; in the 82nd Judicial District Court of
Robertson County, Texas;

     

    (iv) Cause
No. 50-181-T-00453-06; Gastar
Exploration, Ltd., and its Subsidiaries v. GeoStar Corporation and its
Subsidiaries; before the International Centre for Dispute Resolution;
and

     

    (v) Cause
No. 2007-46327; Gastar
Exploration Ltd., et al. v. GeoStar Corporation; in the 234th Judicial
District Court of Harris County, Texas.

     

    (e) Unless
the context requires otherwise, a "Party" is any of the parties
to this Settlement Agreement listed in Section 1.01, and the "Parties" are all of the
parties to this Settlement Agreement listed in Section 1.01,
collectively.

     

    (f) The
"POA" is that certain
Participation and Operating Agreement between GeoStar Corporation, and any and
all of its subsidiaries, and Gastar Exploration, Ltd., and any and all of its
subsidiaries, dated June 15, 2001.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    (g) The
"PSAs" are:

     

    (i) that
certain Purchase and Sale Agreement and Assignment of Interests—Texas Producing
Properties, executed June 16, 2005, and effective January 1, 2005, between
GeoStar Corporation, First Source Texas, Inc., First Source Bossier, LLC, First
Texas Gas, LP, Gastar Exploration Ltd., First Texas Development, Inc., Bossier
Basin LLC, and First Source Gas, LP; and

     

    (ii) that
certain Purchase and Sale Agreement and Assignment of Interests—Texas Non
Producing Properties, executed June 16, 2005, and effective January 1, 2005,
between GeoStar Corporation, First Source Texas, Inc., First Source Bossier,
LLC, First Texas Gas, LP, Gastar Exploration Ltd., First Texas Development,
Inc., Bossier Basin LLC, and First Source Gas, LP.

     

    (h) The
"Texas JOAs"
are:

     

    (i) that
certain Operating Agreement dated July 7, 2000 between First Source Texas, Inc.
as Operator and Navasota Resources, Inc., as Non-operator, as
amended.

     

    (ii) that
certain Operating Agreement dated November 4, 2005 between First Source Gas, LP
as Operator, and Chesapeake Exploration Limited Partnership, as Non-operator, as
amended.

     

    (iii) that certain Operating
Agreement dated April 1, 2008, between Gastar Exploration Texas, LP, as Operator
and En Cana Oil & Gas (USA) Inc., as Non-operator.

    


    ARTICLE
II

    Recitals

    


    WHEREAS,
certain of the Parties have asserted claims and/or counterclaims in the
Disputes, each alleging legal and/or equitable causes of action, and/or seeking
declaratory relief, equitable relief, and/or damages; and,

    


    WHEREAS,
the GeoStar Parties and the Gastar Parties dispute the claims and/or
counterclaims made against them in the Disputes; and,

    


    WHEREAS,
the Parties, without admitting any liability and without conceding the validity
of any of the positions or arguments advanced by any other Party, desire to
completely and finally settle the Disputes as well as all claims brought or that
could have been brought therein as of the Effective Date of this Settlement
Agreement among the Parties; and,

    


    WHEREAS,
the Parties desire to compromise any and all other claims, demands, actions and
causes of action of any nature whatsoever that they have had in the past or
presently have as of the Effective Date of this Settlement Agreement against one
another, whether or not asserted, known or unknown, by the Parties;
and,

    


    WHEREAS,
the Parties desire to fully and completely resolve all outstanding disagreements
and settle all outstanding accounts relating in any fashion to the affiliation
between the GeoStar Parties and the Gastar Parties, and the business formerly
carried on between them as of the Effective Date; and,

    


    WHEREAS,
the GeoStar Parties desire to fully convey all their remaining oil, gas, and
hydrocarbon interests in West Virginia, legal or equitable, to the Gastar
Parties; and

    


    WHEREAS,
the Gastar Parties desire to fully convey all their right, title and interests
in Victoria, Australia, specifically including without limitation, the Gastar
Parties' remaining oil, gas, mineral, brown coal, coal mine methane, coal bed
methane and hydrocarbon right, title, license, and/or interests in Victoria,
Australia, legal or equitable, to the GeoStar Parties, but acknowledging that
the Gastar Parties' interests in Australia outside the province of Victoria
(including without limitation PEL 238, PEL 433, and PEL 434) are not conveyed or
affected by this Settlement Agreement; and

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    
WHEREAS,
the GeoStar Parties and Gastar Parties desire to fully separate all their
remaining oil, gas, and hydrocarbon interests in Texas, legal or equitable, save
and except for the Belin Trust Farm-Out Agreement described herein;
and

    


    WHEREAS,
the Parties acknowledge that full, valid, and binding consideration exists for
the execution of this Settlement Agreement and that such consideration includes
the mutual promises contained herein;

    


    NOW,
THEREFORE, in consideration of the mutual terms, conditions, releases,
warranties, covenants and agreements contained herein, the Parties enter into
this Settlement Agreement
and agree as follows.

    


    ARTICLE
III

    Closing

    


    Section
3.01. Obligation to close.
The Parties will use their best efforts to close this Settlement
Agreement (i.e., to
complete the execution of the finalized Closing Documents and to make the cash
payment set forth in Section 9.01 such that the Closing Date has occurred) on or
before June 12, 2008.

    


    Section
3.02. Termination for failure
to close. If the Closing Date has not occurred by June 12, 2008, this
Settlement Agreement, each of the Closing Documents, and all rights and
obligations under any of them, shall terminate.

    


    ARTICLE
IV

    Releases

    


    Section
4.01. Releases by the GeoStar
Parties. The GeoStar Parties, on behalf of themselves, their Affiliates,
their predecessors, successors, principals, and in their capacities as such,
their officers, directors, agents (including, without limitation, attorneys,
advisors, and other professionals), employees, and assigns, do hereby release
and forever discharge the Gastar Parties, and their Affiliates, predecessors,
successors, officers, directors, agents, employees, and assigns (both past and
present, and in all capacities, including, without limitation, their capacities
as officers, directors, shareholders, or agents of the GeoStar Parties, and in
their individual capacities), from any claim, demand, suit, arbitration,
obligation, liability, or cause of action of any character, whether known or
unknown, fixed or contingent, asserted or unasserted, actual or potential, and
whether arising at common law, equity, or pursuant to any statute, rule or
regulation (including U.S., Australian, or Canadian federal, state, or
provincial statutes, rules and regulations), that the GeoStar Parties, or any of
them, (i) have or have had as of the Effective Date, or (ii) in the future may
have relating to any events that occurred prior to the Effective Date. Further,
the GeoStar Parties release any and all claims or potential claims against any
person or party who served in a dual capacity for both a GeoStar Party and a
Gastar Party. The GeoStar Parties hereby covenant not to sue the released
entities and individuals, or any of them, on the basis of any claim released
herein. Notwithstanding anything to the contrary herein, the GeoStar Parties
agree that this is a general release and is to be interpreted liberally to
effectuate the maximum protection for the released entities and individuals
against the assertion or prosecution of claims by or through the GeoStar
Parties.


    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    Section
4.02. Releases by the Gastar
Parties. The Gastar Parties, on behalf of themselves, their Affiliates,
their predecessors, successors, principals, and in their capacities as such,
their officers, directors, agents (including, without limitation, attorneys,
advisors, and other professionals), employees, and assigns, do hereby release
and forever discharge the GeoStar Parties, and their Affiliates, predecessors,
successors, officers, directors, agents, employees, and assigns (both past and
present, and in all capacities, including, without limitation, their capacities
as officers, directors, shareholders, or agents of the Gastar Parties, and in
their individual capacities), from any claim, demand, suit, arbitration,
obligation, liability, or cause of action of any character, whether known or
unknown, fixed or contingent, asserted or unasserted, actual or potential, and
whether arising at common law, equity, or pursuant to any statute, rule or
regulation (including, without limitation, U.S., Australian, or Canadian
federal, state, or provincial statutes, rules and regulations), that the Gastar
Parties, or any of them, (i) have or have had as of
the Effective Date, or (ii) in the future may have relating to any events that
occurred prior to the Effective Date. Further, the Gastar Parties release any
and all claims or potential claims against any person or party who served in a
dual capacity for both a GeoStar Party and a Gastar Party. The Gastar Parties
hereby covenant not to sue the released entities and individuals, or any of
them, on the basis of any claim released herein. Notwithstanding anything to the
contrary herein, the Gastar Parties agree that this is a general release and is
to be interpreted liberally to effectuate the maximum protection for the
released entities and individuals against the assertion or prosecution of claims
by or through the Gastar Parties. Without limitation of this section or the
previous section, it is expressly agreed that Thomas E. Robinson, Frederick J.
Lambert, Jennifer Moeller, David Decker, Milton Evans, Alvin Hosking, Tony P.
Ferguson, and Dean Bohjanen, individually, are included within the scope of the
release described herein.

    


    Section
4.03. Dismissal of Disputes.
Within five (5) business days after the Effective Date, the Parties will
file agreed motions to dismiss with prejudice all claims and counterclaims made
by each Party in each of the Disputes in the form agreed upon by the Parties'
litigation counsel. Each of the Parties covenants, warrants, and represents that
it has not filed or otherwise initiated any lawsuit, complaint, charge, or other
proceeding against the other in any local, state, or federal court, arbitration,
or agency based upon events occurring prior to the Effective Date, other than
the Disputes.

    


    Section
4.04. Costs. Each Party
shall bear its own attorneys' fees and all costs incurred in connection with,
relating to, or arising out of the Disputes or the Settlement Agreement,
including, but not limited to, its attorneys' fees, court costs, and arbitration
fees.

    


    Section
4.05. Ownership of Claims.
Each Party represents and warrants that it presently owns, free and clear
of any and all liens, encumbrances, rights of control, pledges, or other
burdens, one-hundred percent (100%) of the alleged damages and claims it
releases by this Settlement Agreement, other than interests held by its
attorneys, on whose behalf each such Party represents and warrants that it is
fully authorized to enter into this Settlement Agreement and release all such
damages and claims. Each Party further represents and warrants that, other than
such attorneys, no other person or entity owns any interest in the alleged
damages and claims released, whether by assignment, subrogation, constructive
trust, or otherwise.

     

    
      
         

      

      
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    ARTICLE
V

    Texas
Properties

    


    Section
5.01. Assignments Without
Warranty by GeoStar Parties. Contemporaneously with the execution of this
Settlement Agreement, certain of the GeoStar Parties will execute the assignment
and quitclaim attached hereto as Exhibit A (the "GeoStar Parties' Texas
Assignment"), the purpose of which is to add to that certain Exhibit A to the
Assignment of Oil and Gas Leases and Other Agreements (itself an exhibit to the
Assignment and Bill of Sale attached to each of the PSAs as Exhibit 2) in order
to complete the conveyance of oil, gas, and hydrocarbon properties that were
intended to be conveyed under the PSAs save and except for the
properties addressed in Section 5.02, and subject to the agreement
described in Section 5.03. This assignment and quitclaim includes, without
limitation, any ownership of, claim (whether legal, equitable, or otherwise) to,
or assertion of, any past or present, known or unknown, existing or inchoate,
right, title, and/or interest. From and after the Closing Date, at the request
of the Gastar Parties but without further consideration, the GeoStar Parties
will execute and deliver or use reasonable efforts to cause to be executed and
delivered, such other instruments and take such other actions as the Gastar
Parties reasonably may request related to such interests in Leon and Robertson
Counties to effectuate and perform this assignment and

    quitclaim.

    


    Section
5.02. Releases and Assignments
by Gastar Parties.

    


    (a)
Contemporaneously with the execution of this Settlement Agreement, the Gastar
Parties will execute the quitclaim and/or release attached hereto as Exhibit B-l
(the "Gastar Parties' Texas Release") and the assignment attached hereto as
Exhibit B-2 (the "Gastar Parties' Texas Assignment Without Warranty") the
purpose of which is to quitclaim or release and/or assign to the applicable
GeoStar Parties at least 343.9522 net acres of leasehold interests in Leon and
Robertson Counties identified therein which are more fully described in the
lease schedules attached to Exhibit B-l and B-2. The Gastar Parties hereby
irrevocably and unconditionally assign these acres to the GeoStar Parties and in
so doing, relinquish, release, and quitclaim any right, title and/or interest in
the at least 343.9522 net acres of leasehold interests in Leon and Robertson
Counties which the Gastar Parties have or which could be asserted on their
behalf. This assignment and release includes, without limitation, any ownership
of claims (whether legal, equitable, or otherwise) to, or assertion of, any past
or present, known or unknown, existing or inchoate, right, title, and/or
interest. From and after the Closing Date, at the request of the GeoStar Parties
but without further consideration, the Gastar Parties will execute and deliver
or use reasonable efforts to cause to be executed and delivered, such other
instruments and take such other actions as the GeoStar Parties reasonably may
request related to the at least 343.9522 net acres of leasehold interests in
Leon and Robertson Counties-to effectuate and perform this assignment,
relinquishment, release, and quitclaim. The Gastar Parties shall covenant,
warrant, and represent that all costs associated with the at least 343.9522 net
acres of leasehold interests in Leon and Robertson Counties are paid in full as
of the Closing Date and that none of the leases have expired as of the Closing
Date. At or before closing, or as otherwise agreed between the Parties, the
Gastar Parties will turn over the complete lease files in the Gastar Parties'
possession associated with the at least 343.9522 net acres of leasehold
interests in Leon and Robertson Counties.

    


    (b) Within
five days after the Closing Date, the Gastar Parties shall give notice to the
successor of Navasota Resources, LP (the "Navasota Successor"), in accordance
with that certain Ratification and Assumption executed May 9, 2007 between
Gastar Ltd., Gastar Exploration Texas LP, and Navasota Resources, LP (as
amended), of cures to title as to 162.8061 net acres of leasehold interests in
Leon and Robertson Counties (the "Cured Acreage"), and permit the Navasota
Successor to exercise its rights to acquire the Cured Acreage.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    


    (i) If the Navasota
Successor timely closes its acquisition of the Cured Acreage, in whole or in
part, at their election, the GeoStar Parties may elect that (a) the Gastar
Parties shall deliver to the GeoStar Parties $20,000 per net acre for all net
acres sold to the Navasota Successor no later than forty-eight hours after the
election by the GeoStar Parties or (b) the Gastar Parties shall deliver to the
GeoStar Parties $10,000 per net acre for all net acres sold to the Navasota
Successor no later than forty-eight hours after the election by the GeoStar
Parties. Under this option (b), the Parties shall, as soon thereafter as is
practicable, amend the farm-out agreement referred to in Section 5.03 to include
a third and fourth 160-acre PUD location known as the "Belin Trust A-l W Offset"
and the "Belin Trust A-l N Offset," being locations to the immediate west and
north of the location of the "Belin Trust A-l." The GeoStar Parties shall have
commercially reasonable access (consistent with Gastar's seismic license) with
which to review the Gastar Parties' 3D seismic and decide which option to
exercise.

     

    (ii) If
the Navasota Successor elects not to acquire the Cured Acreage, or any portion
thereof, or does not timely close the acquisition of the Cured Acreage, or any
portion thereof, the Gastar Parties will promptly execute an assignment to the
GeoStar Parties of that portion of the Cured Acreage not acquired by the
Navasota Successor. To the extent that the Cured Acreage is assigned to the
GeoStar Parties, the Gastar Parties shall:

    


    (A)
irrevocably and unconditionally assign the Cured Acreage to the GeoStar Parties,
and in so doing, relinquish, release, and quitclaim any right, title and/or
interest in the Cured Acreage which the Gastar Parties have or which could be
asserted on their behalf;

     

    (B) the
assignment shall include, without limitation, any ownership of claims (whether
legal, equitable, or otherwise) to, or assertion of, any past or present, known
or unknown, existing or inchoate, right, title, and/or interest;

     

    (C) agree
that from and after the Closing Date, at the request of the GeoStar Parties but
without further consideration, the Gastar Parties will execute and deliver or
use reasonable efforts to cause to be executed and delivered, such other
instruments and take such other actions as the GeoStar Parties reasonably may
request related to the Cured Acreage to effectuate and perform this assignment,
relinquishment, release, and quitclaim;

     

    (D)
covenant, warrant and represent that all costs and liabilities associated with
the same are paid in full as of the Closing Date and that none of the leases
have expired as of the Closing Date; and

     

    (E) turn
over the complete lease files associated with the Cured Acreage.

    


    Section
5.03. Farm-Out
Agreement.

    


    (a) The
Gastar Parties agree to provide a farm-out to a designated GeoStar Party of all
of the Gastar Parties' existing interests in two 160-acre PUD locations
identified in the T.J. Smith reports as the "Belin Trust A-l R" and the "Belin
Trust A-l S Offset" (the "Belin Trust Farm-Out Agreement"). Within no more than
thirty days after the Effective Date for this Settlement Agreement, the Gastar
Parties will provide the initial draft and work together with the GeoStar
Parties to finalize the language of the separate document with all of the terms
of the Belin Trust Farm-Out Agreement, which will incorporate and merge the
terms set forth in this Section 5.03.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    (b) The
Belin Trust Farm-Out Agreement will identify the relevant locations to be
farmed-out, which will be a replacement site for the location of the "Belin
Trust A-l" well and the adjacent 160-acre location to its immediate
south.

     

    (c) The
interests to be earned by the GeoStar Parties for both of the two 160-acre
farm-out locations must be earned by drilling one test well; to wit, a single
well on either 160 acre farm out location shall be sufficient to earn in the
GeoStar Parties1' interests on both 160-acre farm out locations. The designated
GeoStar Party will, prior to the second anniversary of the Belin Trust Farm-Out
Agreement (i) commence a test well on one of the 160-acre farmout locations,
(ii) use commercially reasonable efforts to prosecute drilling operations after
commencement for the test well or substitute test well to a depth sufficient to
test either the Travis Peak formation or the Upper or Lower Bossier formation as
shown on the log for the Anadarko Belin Trust "A" well located on the Jose Maria
Viesca Survey, A-30, Robertson County, Texas (the "Objective Formation"), (iii)
complete the test well or substitute test well capable of producing oil, gas or
related hydrocarbons in commercial quantities, (iv) the test well or substitute
test well must be producing hydrocarbons in accordance with the terms of the
Belin Trust Farm-Out Agreement and (v) the designated GeoStar Party must submit
to the applicable Gastar Party a written request for an assignment of the
interest earned. The Belin Trust Farm- Out Agreement will reserve unto the
applicable Gastar Parties all oil and gas rights in each applicable 160 acre
farm-out location conveyed, except those rights that may be earned by the
GeoStar Parties thereunder. If the GeoStar Party timely completes a producing
test well or substitute well in accordance with the terms outlined in (i)
through (v) above and otherwise complies with the terms of the Belin Trust
Farm-Out Agreement then the applicable Gastar Parties shall assign their entire
interest in the two 160-acre tracts at all depths, down to the Smackover
formation, plus 100 feet, reserving an overriding royalty interest of 1% of the
eighteighth's (1% of 8/8ths) with respect to the Gastar Parties' interest, with
the option to convert such overriding royalty interest to a 12.5% working
interest after payout of (x) 200% of all drilling and completion costs of such
test well and (y) 100% of all operating and other costs. The GeoStar Parties
shall pay or cause to be paid all of the costs of drilling, testing, completing
and equipping (or plugging and abandoning) of the test well. In addition, the
GeoStar Parties shall provide the Gastar Parties with access to all geological
information and other data related to any well from surface to total depth
including a complete suite of logs, core analyses, dipmeter, directional
surveys, velocity surveys, check shot corrected sonic, oil, gas, water analyses,
bottom hole pressure surveys and other information including daily production
information to be set forth in the Belin Trust Farm-Out Agreement.

    


    (d) The
Geostar Parties acknowledge that on or after execution of the Belin Trust
Farm-Out Agreement they may be subject to the following agreements:

    


    (i) that
certain Stipulation of Interests, Cross-Assignment of Oil, Gas and Mineral
Leases and Agreement between First Source Texas, Inc., as Operator and First
Texas Development, Inc., et al., dated September 9, 2003;

     

    (ii) that
certain Agreement among Navasota Resources, Inc., Michael E. Ellis, Alta Mesa
Resources, Inc., Galveston Bay Resources, Inc., Buckeye Production Company,
Inc., Nueces Resources, Inc., Texas Energy Acquisitions, Inc., Aransas
Resources, Inc., Oklahoma Energy Acquisitions, Inc., Kentucky Energy
Acquisitions, Inc., Louisiana Exploration & Acquisitions, Inc., Petro
Acquisitions, Inc., Petro Operating Company, Inc., First Source Texas, Inc., and
First Texas Development, Inc., dated August 27, 2003;

     

    (iii) that certain Agreement
among Navasota Resources, Inc., Michael E. Ellis, Alta Mesa Resources, Inc.,
Galveston Bay Resources, Inc., Buckeye Production Company, Inc., Nueces
Resources, Inc., Texas Energy Acquisitions, Inc., Aransas Resources, Inc.,
Oklahoma Energy Acquisitions, Inc., Kentucky Energy Acquisitions, Inc.,
Louisiana Exploration & Acquisitions, Inc., Petro Acquisitions, Inc., Petro
Operating Company, Inc., First Source Texas, Inc., and First Texas Development,
Inc., dated June 30, 2004; (iv) that certain Operating Agreement between First
Source Texas, Inc., Operator, and Navasota Resources, Inc., and Kentex Energy,
L.L.C. as Non-Operators, dated July 7, 2000;

     

    
      
         

      

      
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    (v) those
certain ETC Gas Marketing Agreements among Gastar Exploration Texas, L.P., and
ETC Texas Pipeline, Ltd., et al, dated September 1, 2007;

     

    (vi) that
certain Purchase and Sale and Exploration and Development Agreement and
Operating Agreement between Gastar Exploration Ltd., First Source Gas L.P., and
Chesapeake Exploration L.P., dated November 4, 2005; and

     

    (vii) that
certain Operating Agreement between Gastar Exploration Texas, LP, Operator, and
EnCana Oil & Gas (USA) Inc., Non-Operator, dated April 1, 2008.
Notwithstanding the above, the Gastar Parties will be responsible for any
liabilities related to the properties covered by the Belin Trust Farm-Out
Agreement incurred before the effective date of the Belin Trust Farm-Out
Agreement.

    


    (e) The
Belin Trust Farm-Out Agreement will be subject to any required approvals by
participants in the Texas JO As and any necessary waivers of applicable
preferential rights. The Gastar Parties represent that they have obtained a
verbal agreement of waiver of preferential rights from Navasota Resources, LP,
or its Affiliate. The Gastar Parties represent that they will use commercially
reasonable efforts to obtain that waiver and all other necessary waivers of
applicable preferential rights in writing.

    


    (f) The
Gastar Parties will covenant, warrant, and represent to the GeoStar Parties that
the applicable Gastar Parties' interests have not expired and that to the extent
that the interest those parties will transfer under the Belin Trust Farm-Out
Agreement is insufficient to confer full operatorship status upon the designated
GeoStar Party, the Gastar Parties will use their commercially reasonable efforts
to obtain such a designation from the participants in the Texas JO
As.

    


    (g)
Subject to the reversionary interests retained by the Gastar Parties, the Gastar
Parties will transfer to the applicable GeoStar Party, to the extent allowable
under the Texas JOAs, that portion of the Gastar Parties' rights under the Texas
JOAs related to the property subject to the Belin Trust Farm-Out Agreement. At
the election of the applicable GeoStar Party, the Gastar Parties will also
assign to the applicable GeoStar Party, to the extent assignable and to the
extent not actually in use by Gastar Parties for their operations, the Gastar
Parties' rights to use, at the expense of the GeoStar Party, processing,
gathering, and transportation pipelines related to the property subject to the
Belin Trust Farm-Out Agreement. To the extent that the Gastar Parties' rights to
such processing, gathering, or transportation pipelines are fully utilized by
the Gastar Parties, the Gastar Parties will use commercially reasonable efforts
to facilitate obtaining additional processing, gathering, transportation
pipeline capacity for use by and at the expense of the GeoStar Party. In
addition, in the event that the Gastar Parties have available capacity with
respect to processing, gathering, or transportation pipelines owned by the
Gastar Parties related to the property subject to the Belin Trust Farm-Out
Agreement and not otherwise in use for their operations, the Gastar Parties
shall make such capacity available to the applicable GeoStar Party for use at a
market-based fee. The GeoStar Parties shall have the right, but not the
obligation, to use the capacity referred to in this paragraph, provided that notwithstanding
anything in this paragraph, the GeoStar Parties are obligated to comply with
those contracts, agreements, and dedications to which they are subject under
Section 5.03(d).

     

    
      
         

      

      
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    (h) In the
event that a third and fourth farm-out location are to be added to the Belin
Trust Farm-Out Agreement under Section 5.02(b), all terms of this Section 5.03
shall apply, mutatis mutandis,
to the third and fourth locations. For the avoidance of doubt, the
Parties agree that the test well satisfying the conditions in Section 5.03(c)
will earn the GeoStar Parties' interests in all four farm-out locations in the
manner described therein.

    


    (i) At or
before execution of the Belin Trust Farm-Out Agreement, or as otherwise agreed
between the Parties, the Gastar Parties will turn over copies of lease files
associated with the property subject to the Belin Trust Farm-Out
Agreement.

    


    ARTICLE
VI

    West
Virginia and Pennsylvania Properties

    


    Section
6.01. Assignments by GeoStar
Parties Without Warranty. Contemporaneously with the execution of this
Settlement Agreement, certain of the GeoStar Parties will execute the assignment
and quitclaim attached hereto as Exhibit C (the "GeoStar Parties' West
Virginia/Pennsylvania Assignment"), the purpose of which is to convey all of
GeoStar's oil, gas, and hydrocarbon properties held by GeoStar in West Virginia
and Pennsylvania, and to convey legal title to all oil, gas, and hydrocarbon
properties. This assignment and quitclaim includes, without limitation, any
ownership of, claim (whether legal, equitable, or otherwise) to, or assertion
of, any past or present, known or unknown, existing or inchoate, right, title,
and/or interest. The GeoStar Parties represent to the Gastar Parties that none
of the leasehold interests subject to the special warranty of title set forth in
the GeoStar Parties' West Virginia/Pennsylvania Assignment have expired. From
and after the Closing Date, at the request of the Gastar Parties but without
further consideration, the GeoStar Parties will execute and deliver or use
reasonable efforts to cause to be executed and delivered, such other instruments
and take such other actions as the Gastar Parties reasonably may request related
to such interests in West Virginia and Pennsylvania to effectuate and perform
this assignment and quitclaim. Within thirty days after the Closing Date, the
GeoStar Parties shall deliver to the assignee Gastar Parties original leases,
lease purchase reports, complete title reports, and plats in the GeoStar
Parties' possession for the properties assigned pursuant to

    Exhibit
C.

    


    Section
6.02. Pending West
Virginia/Pennsylvania assignments. The Parties acknowledge that at this
time the GeoStar Parties have pursued and are pursuing assignments of additional
interests in West Virginia and Pennsylvania to which the GeoStar Parties are
presently entitled. The GeoStar Parties agree to use commercially reasonable
efforts to continue doing so for a period of ninety (90) days after the Closing
Date, and that to the extent they, or any GeoStar Party Affiliate, obtain
assignment of any such oil, gas, or hydrocarbon interest in West Virginia or
Pennsylvania within those ninety (90) days after the Closing Date, the GeoStar
Parties covenant, warrant, and represent that they or their Affiliates will
assign that interest to the Gastar Parties within a reasonable time thereafter,
not to exceed thirty days. The GeoStar Parties further agree that from and after
the Closing Date, and continuing beyond the ninety-day period described in this
Section, at the request of the Gastar Parties but without further consideration,
the GeoStar Parties will execute and deliver or use reasonable efforts to cause
to be executed and delivered, such other instruments and take such other actions
as the Gastar Parties reasonably may request to convey any additional interests
in West Virginia and Pennsylvania that the Gastar Parties determine ought to
have been assigned to GeoStar Parties prior to the Closing Date but were not
otherwise conveyed to the Gastar Parties pursuant to this Settlement Agreement.
Gastar acknowledges that GeoStar makes no warranty (and expressly disclaims any
warranty) as to any right, title or interest obtained under Section
6.02.


    
      
         

      

      
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    Section
6.03. Release of claims related
to Gastar leasing activity in West Virginia and Pennsylvania. Without
limitation to the scope of the mutual releases set forth in Article 4, the
GeoStar Parties relinquish and release any claims to any rights or properties
held by or being sought by the Gastar Parties in West Virginia and
Pennsylvania.

    


    Section
6.04. Transition of
operatorship.


     

    (a) The
GeoStar Parties represent and warrant that all costs and liabilities associated
with the interests assigned and quitclaimed in Exhibit A of the GeoStar Parties'
West Virginia/Pennsylvania Assignment, including without limitation all
royalties on the interests, are paid in full, or are in process of being paid
and will be paid in full, through April 30, 2008.

     

    (b)
Notwithstanding anything to the contrary in this Settlement Agreement or the
Closing Documents, the GeoStar Parties remain liable for any costs or
liabilities associated with the interests assigned and quitclaimed in the
GeoStar Parties' West Virginia/Pennsylvania Assignment that were paid or are
owed to the GeoStar Parties, their Affiliates, or any of them.

     

    (c) At or
prior to the Closing Date, or as soon thereafter as can be accomplished through
the exercise of their best efforts, the GeoStar Parties shall turn over copies
of the following documents with respect to the interests assigned and
quitclaimed in the GeoStar Parties' West Virginia/Pennsylvania
Assignment:

    


    (i)
Current division orders and revenue decks;

     

    (ii)
Current billing decks;

     

    (iii) Name
and address information for all division orders and billing owners;

     

    (iv) List
of all vendors being utilized as to the interests, including the addresses
and tax identification numbers of those vendors;

     

    (v) The
most recent filings of each report filed with applicable state authorities,
including without limitation severance tax, production, state royalties, and any
other annual, quarterly, or monthly required filings regarding operation and
reporting of properties or interests assigned;

     

    (vi) The
detailed revenue suspense report, by owner and well, sometimes referred to as
OGSYS Report 440 (or its equivalent);

     

    (vii)
Gross revenue report for 2007 to the present, by property;

     

    (viii)
Lease operating expense report for 2007 to the present, by property and general
ledger account;

     

    (ix)
Royalty payment report for 2007 to the present;

     

    (x) All
contracts in force with respect to the interests;

     

    (xi)
Summary of utility services in use, including addresses and meter
numbers;

     

    (xii) List
of all purchasers or payors of revenue with addresses by property;

     

    (xiii)
List of all contract pumpers, with monthly rates and contact information for
each;

     

    (xiv) All
original well files, logs, seismic, and maps;

     

    (xv)
Report of revenues and expenses after April 1, 2008; and

     

    (xvi)
delay rental payment checks and receipts for same.


    
      
         

      

      
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    (d) Prior
to closing, the GeoStar Parties shall execute letters in lieu to all natural gas
and crude oil buyers for the properties to which the GeoStar Parties' West
Virginia/Pennsylvania Assignment in a form acceptable to the Gastar
Parties.

     

    (e) At
closing, the GeoStar Parties shall deliver all legal revenue suspense amounts
(excluding the portion of same allocated to Gastar Parties) for the properties
to which the GeoStar Parties' West Virginia/Pennsylvania Assignment relate in
the amount of $19,966.65. The amount shall be paid by reducing the payment
otherwise due to the GeoStar Parties as further described in Section
9.01.

     

    (f) After
ninety days, the Gastar Parties may, at their option, obtain an assignment from
the GeoStar Parties of the GeoStar Parties' claims in, and assumption of the
GeoStar Parties' obligations in, Case No. 07-6077-CK, West Virginia Gas Corp. v. Spartan
Exploration, Inc., and Milton Otteman, in the Circuit Court for Isabella
County, Michigan.

    


    ARTICLE
VII

    Victoria
Properties

    


    Section
7.01. Assignments by Gastar
Parties. The Gastar Parties desire to fully convey all their right, title
and interests in Victoria, Australia to the GeoStar Parties, specifically
including without limitation, the Gastar Parties' remaining oil, gas, mineral,
brown coal, coal mine methane, coal bed methane and hydrocarbon right, title,
license, and/or interests in Victoria, Australia, legal or equitable, or any
mining license or extensions thereto. Contemporaneously with the execution of
this Settlement Agreement, certain of the Gastar Parties will execute the
Tenement Sales Agreement of EL 4968 attached hereto as Exhibit D-l (the "EL 4968
Tenement Transfer") and the Transfer Form for EL 4968 attached hereto as Exhibit
D-2, the purpose of which is to assign to the GeoStar Parties all of the Gastar
Parties' right, title, and interests in EL 4968, specifically including without
limitation, the Gastar Parties' remaining oil, gas, mineral, brown coal, coal
mine methane, coal bed methane and hydrocarbon right, title, license, and/or
interests in EL 4968, legal or equitable, or any mining license or extensions
thereto. In addition, as part of this Settlement Agreement, the Gastar Parties
also acknowledge that with respect to EL 4416, they have no right, title or
interest in EL 4416, specifically including without limitation, oil, gas,
mineral, brown coal, coal mine methane, coal bed methane and hydrocarbon right,
title, license, and/or interests in EL 4416, legal or equitable, or any mining
license or extensions thereto.

    


    Section
7.02. Release of claims related
to GeoStar holdings in Victoria, Australia. Without limitation to the
scope of the mutual releases set forth in Article 4, the Gastar Parties
relinquish and release any claims to any rights or properties held by or being
sought by the GeoStar Parties in Victoria, Australia, including but not limited
to any rights or properties related to exploration licenses EL 4416 or EL 4968,
and specifically including, without limitation, any claims to any oil, gas,
mineral, brown coal, coal mine methane, coal bed methane and hydrocarbon right,
title, license and/or interests, or any mining license or extensions
thereto.

    


    Section
7.03. Further Assurances.
From and after the Closing Date, at the request of the GeoStar Parties
but without further consideration, the Gastar Parties will execute and deliver
or use reasonable efforts to cause to be executed and delivered such other
documents effecting the Gastar Parties' release and relinquishment related to
the GeoStar Parties' holdings or instruments of conveyance or take such other
actions as the GeoStar Parties reasonably may request to more effectively put
the GeoStar Parties in possession of any property which was intended by the
parties to be conveyed by the Gastar Parties or to cure the title to any such
property.


    
      
         

      

      
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    Section
7.04. Indemnification.
NOTWITHSTANDING THE PROVISIONS OF ARTICLE IV AND SECTION 7.02 OF THIS SETTLEMENT
AGREEMENT AND CLAUSE 5.2 OF THE EL 4968 TENEMENT TRANSFER TO
THE CONTRARY, THE GEOSTAR PARTIES AGREE TO INDEMNIFY AND HOLD HARMLESS THE
GASTAR PARTIES FOR ANY CLAIMS MADE AGAINST THE GASTAR PARTIES ARISING BY THROUGH
OR UNDER THE GEOSTAR PARTIES' EXERCISE OF THE POWER OF ATTORNEY SET FORTH IN THE
PARTIES' TENEMENT SALE AGREEMENT FOR EL 4968.

    


    ARTICLE
VIII

    Termination
of Prior Agreements

    


    Section
8.01. Termination of prior
agreements. Without limitation to the scope of the mutual releases set
forth in Article 4, any remaining obligations under the following agreements are
hereby terminated and merged into this Settlement Agreement except as set forth
in Section 8.02:

    


    (a) the
POA;

     

    (b) the
PSAs; and

     

    (c) that
certain Loan Agreement between Gastar Exploration Ltd. and GeoStar Corporation
dated June 1, 2000, and Amendments to same dated December 1, 2000, and December
31,2002.

    


    Section
8.02. Survival of obligations
under terminated agreements. The agreements and obligations under the
documents identified in Section 8.01 (a) and (b) survive and are enforceable
only to the extent necessary to facilitate performance under this Settlement
Agreement, another Closing Document, or the Belin Trust Farm-Out Agreement. Any
enforcement of such obligations shall be subject to the procedures of Article
10.

    


    ARTICLE
IX

    Other
Consideration

    


    Section
9.01. Cash Payment.
Gastar Ltd. shall make a one-time payment in the amount of TWENTY-FIVE
MILLION, SEVEN-HUNDRED-FORTY THOUSAND AND NO/100THS U.S. DOLLARS
(US$25,741,695.36) to GeoStar, less the legal suspense amount of NINETEEN
THOUSAND, NINE-HUNDRED-SIXTY-SIX AND 65/100 (US$ 19,966.65), for a net payment
of TWENTY-FIVE MILLION, SEVEN-HUNDRED-TWENTY-ONE THOUSAND, SEVENHUNDRED
TWENTY-EIGHT AND 71/100 (US$25,721,728.71) wired as follows:

    


    Encore
Trust Account Number - 050003110

    Encore
Bank Route Number - 113093849

    For the
Account of Fred Hagans, P.C., d/b/a Hagans, Burdine, Montgomery,

    Rustay
& Winchester

    Federal ID
Number 76-0320978

    Encore
Bank - Contact person Vasthi Perez - (713) 658-0808

    


    Such
payment shall be made by initiating the wire payment in immediately available
funds no later than
10 AM June 12, 2008, Central Time.

    
      
         

      

      
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    Section
9.02. Warrants. Subject
to the approval of the Toronto Stock Exchange and the American Stock Exchange
(to the extent required by the rules and procedures of those exchanges), Gastar
Ltd. shall grant or issue to GeoStar a warrant in the form attached hereto as
Exhibit F (the "Gastar Warrant"), which shall be exercisable only on the terms
and conditions set forth therein. Notwithstanding anything to the contrary
therein or in the Settlement Agreement, the Parties expressly acknowledge and
agree that the Gastar Parties are not obligated, by this Settlement Agreement,
the Gastar Warrant, or otherwise, to pursue or consummate the sale of their oil
and gas interests in Leon and Robertson Counties, Texas, or to cause the
conditions for the exercise of warrants to occur. To the extent the approvals of
the Toronto Stock Exchange and/or the American Stock Exchange are required to
issue the Gastar Warrant, Gastar Ltd. will use its best efforts to obtain those
approvals as soon as possible, but obtaining such approval is not a precondition
to closing. Within ninety (90) days of the Closing Date, Gastar shall also issue
a Registration Rights Agreement for the benefit of the holders of the Gastar
Warrant in substantially the same form as that certain Registration Rights
Agreement issued as Exhibit 6 to the PSAs, provided that the
Registration Rights Agreement issued for the benefit of the holders of the
Gastar Warrant shall not include piggy-back registration rights.

    


    Section
9.03. Navasota litigation.
Gastar Ltd. and GeoStar will agree to cooperate in the use of
commercially reasonable efforts to obtain the voluntary dismissal, with
prejudice, of the GeoStar Parties and their Affiliates from Cause No. 0-05-451;
Navasota Resources, L.P. v.
First Source Texas, Inc., et al.\ in the 12th District Court of Leon
County, Texas, and all appeals related thereto. TO THE EXTENT THAT ANY GEOSTAR
PARTY OR AFFILIATE OF A GEOSTAR PARTY IS NOT DISMISSED FROM SAID LITIGATION WITH
PREJUDICE, GASTAR LTD. WILL FULLY INDEMNIFY SUCH ENTITY WITH RESPECT TO SAID
LITIGATION TO THE FULLEST EXTENT PERMITTED BY TEXAS LAW.

    


    Section
9.04. Representations of
affiliate status. The Gastar Parties and the GeoStar Parties
agree not to intentionally express or imply ownership or control of each other's
subsidiaries
or affiliates. No party shall be entitled to seek or recover punitive damages
for a breach of
this section.

    


    Section
9.05. Nondisparagement.
Each Party agrees that it will not, directly or indirectly, make any
derogatory or disparaging written, oral, or electronic statements about the
other, provided that this obligation does not prohibit truthful statements by
any party that are required or permitted by law or valid legal
process.

    


    Section
9.06. Updated S.E.C.
disclosures. By the fifteenth day after the Closing Date, GeoStar will
update any filings it has made with the United States Securities Exchange
Commission which disclose the number of shares of common stock held by GeoStar,
including without limitation GeoStar's Schedule 13D as filed on July 24,
2006.

    


    Section
9.07. Further Assurances.
In connection with this Settlement Agreement, the Closing Documents, and
the transactions contemplated by them, each Party shall execute and deliver such
additional assignments and other documents, and take such other action, as shall
be reasonably requested by any other Party to effectuate and perform the
provisions of the Settlement Agreement, the Closing Documents, and those
transactions, including any such steps as may be necessary to remove any clouds
on any Party's titter or to more effectively put the receiving party in
possession of any property which was intended to be conveyed by the Settlement
Agreement, the Closing Documents, or the PSAs, including without limitation any
interests in Wyoming or Montana.

     

    
      
         

      

      
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    ARTICLE
X

    Dispute
Resolution

    


    Section
10.01. Initiation of
arbitration. In the event of any controversy or claim, whether based in
contract, tort or otherwise, arising out of or relating to this Settlement
Agreement, the Closing Documents, or the Belin Trust Farm-Out Agreement or the
scope, breach, termination or validity of same (a "Claim"), then either Party
may initiate binding arbitration under the rules of the American Arbitration
Association ("AAA") as follows

    


    (a) The
Party desiring to initiate arbitration in connection with any Claim shall notify
the other Party in writing, demand arbitration, and include a statement of the
matter in controversy. The responding Party shall answer in the manner and in
the time required by the AAA rules.

     

    (b) Unless
otherwise agreed by the parties to the arbitration, the arbitration shall be
before a panel of three arbitrators, each of whom shall have a minimum of five
years' commercial experience in the oil and gas industry or the equivalent of
five years' litigation experience principally in the oil and gas sector. Each
party shall appoint one arbitrator under the AAA rules for direct appointment,
and each arbitrator so appointed shall be neutral and independent as provided in
the AAA rules. The chairperson shall be appointed by the partyappointed
arbitrators or the AAA as set forth in the AAA rules.

    


    Section
10.02. Conduct and result of
arbitration.

    


    (a) The
arbitration shall be conducted in accordance with the procedures and evidentiary
standards in the AAA rules except as set forth herein.

     

    (b) Any
decision by a majority of the arbitration panel may be filed in any court of
competent jurisdiction and may be enforced by any Party as a final judgment in
such court.

    


    ARTICLE
XI

    Additional
Terms and Conditions

    


    Section
11.01. Authority. The
boards of directors of GeoStar and Gastar Ltd., respectively, have approved the
terms of the Settlement Agreement as reflected in the corporate resolutions
attached hereto as Exhibits G and H. The persons executing this Settlement
Agreement have all proper authority to execute it on behalf of the Parties they
represent.

    


    Section
11.02. Adequacy of
Consideration. The Parties acknowledge and agree that full, valid, and
binding consideration exists for the execution of this Settlement Agreement and
that such consideration includes the mutual promises contained
herein.

    


    Section
11.03. No Admission of
Liability. The execution of this Settlement Agreement shall not be
construed as an admission of liability or an admission of the validity of any
claim on the part of any Party hereto in any respect. Each Party expressly
acknowledges that the consideration exchanged herein is exchanged in full accord
and satisfaction of all of claims arising out of the Disputes. Each Party also
expressly acknowledges that each other Party denies any liability for the claims
or counterclaims made in the Disputes, that none of the consideration exchanged
pursuant to this Settlement Agreement is paid to compromise actual or potential
liability in the Disputes, and that each Party is settling this case to avoid
the time and expense necessary to litigate or arbitrate the Disputes and to
advance the final resolution of the commercial relationships between the
Parties.

     

    
      
         

      

      
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    Section
11.04. Settlement Agreement
Inadmissible. This Settlement Agreement shall not be admissible in any
action, suit, or proceeding, whatsoever, as evidence or as an admission of any
claim or liability, provided, however, that any Party hereto may use all or part
of this Settlement Agreement to the extent necessary to enforce any right or
obligation conferred upon such Party by this Settlement Agreement.

    


    Section
11.05. Successors and Assigns.
Except as set out more specifically herein, this Settlement Agreement
shall be binding upon and inure to the benefit of each Party's heirs, devisees,
agents, representatives, successors and assigns, trustees, attorneys, members,
legal representatives, controlled or controlling persons, and/or any
corporation, partnership, or other entity into or with which such Party has
merged, consolidated, or reorganized, or to which it has transferred all or
substantially all of its assets.

    


    Section
11.06. Entire Agreement and
Merger. The Parties agree that this Settlement Agreement and the
documents executed pursuant to it constitute the full, final, and complete
settlement of the Disputes and other matters addressed herein, and supersedes
all other written or oral exchanges, arrangements, or negotiations between them
concerning the subject matter of the Disputes or this Settlement Agreement,
including without limitation that certain Rule 11 Agreement dated June 5, 2008.
The Parties further agree that there are no representations, agreements,
arrangements, or understandings, oral or written, concerning the subject matter
of this Settlement Agreement that are not fully expressed, merged into, and
incorporated herein.

    


    Section
11.07. Reliance. The
Parties acknowledge that they are not relying upon any statement or
representation of any other Party or its agent or representatives, except as
expressly set forth herein, but are instead relying solely on their own judgment
and investigation of the matters at issue. Each Party is represented by legal
counsel who has read and explained the entire contents of this Settlement
Agreement and the documents executed pursuant to it in full, as well the legal
consequences of same.

    


    Section
11.08. Accounting. For
accounting purposes, the Parties acknowledge that the value of the various forms
of compensation received or paid by either Party are deemed to apply to the
resolution of claims related to the look-back provisions of the
PSAs.

    


    Section
11.09. No Advice Regarding Tax
Liability. Each Party understands and agrees that it is solely and
completely responsible for any tax liability the Party may incur resulting from
this Settlement Agreement; that it is not relying on any statements,
representations or admissions on the part of any other Party concerning any tax
consequences or tax issues; and that it is each Party's responsibility to seek
competent tax advice concerning this matter as needed.

    


    Section
11.10. Participation of
Counsel. The Parties acknowledge that they have had an opportunity to
fully develop and discover any and all of their actual and potential claims that
are settled by this Settlement Agreement. The Parties further acknowledge that
they have received advice of counsel in the negotiation, preparation, drafting,
and execution of this Settlement Agreement, which was prepared by the combined
efforts of all Parties pursuant to arms-length negotiations. The rule of
"construction against the drafter" shall not be employed in the interpretation
of this Settlement Agreement.

    


    Section
11.11. Amendments and
Modifications. This Settlement Agreement may not be modified, altered, or
changed except upon express written and signed consent of all Parties in a
document that makes specific reference to this Settlement Agreement. The Parties
further agree that, in any dispute concerning this Settlement Agreement, they
will not assert an amendment or modification except one made in accordance with
this section.

     

    
      
         

      

      
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    Section
11.12. Construction and
Severability. This Settlement Agreement shall be construed, in any case
where doubt may arise, in such a manner as will make it lawful and fully
enforceable. The language of all parts of this Settlement Agreement shall in all
cases be construed as a whole, according to its fair meaning. In the event any
part of this Settlement Agreement is found to be void, voidable, or
unenforceable, then it is the intention of the Parties that such part be severed
and the other provisions shall remain fully valid and enforceable.

    


    Section
11.13. Notices. All
notices or other communications required or permitted to be given under this
Settlement Agreement shall be sufficiently given for all purposes hereunder if
in writing and personally delivered, delivered by recognized courier service
(such as Federal Express) or certified United States mail, return receipt
requested, or sent by facsimile communication to the appropriate address or
number as set forth below. Notices and other communications shall be effective
upon receipt by the person to be notified.

    


    If to any
of the GeoStar Parties:

    


    Thomas E.
Robinson

    2480 West
Campus Drive, Building C

    Mt.
Pleasant, Michigan 48858

    Fax: (989)
773-0006

    


    with a
copy to:

    


    Fred
Hagans

    HAGANS,
BURDINE, MONTGOMERY, RUST AY & WINCHESTER

    3200
Travis, Fourth Floor

    Houston,
Texas 77006

    Fax:(713)547-4950

    


    If to any
of the Gastar Parties:

    


    J. Russell
Porter

    Gastar
Exploration, Ltd.

    1331
Lamar, Suite 1080

    Houston,
Texas 77010

    Fax: (713)
739-0458

    


    with a
copy to:

    


    James D.
Thompson, III

    VINSON
& ELKINS, L.L.P.

    1001
Fannin, Suite 2500

    Houston,
Texas 77002-6760

    Fax:(713)758-2346

    


    Section
11.14. Governing Law.
This Settlement Agreement (and any attachment hereto, unless otherwise
set forth in the attachment) shall be governed by, enforced, and construed in
accordance with Texas law, without regard to the application of Texas' conflict
of laws principles. Subject to and without waiving the dispute resolution
provision contained herein, the Parties consent to personal jurisdiction in the
federal and state courts in Texas for purposes of enforcement of this Settlement
Agreement.


    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    Section
11.15. Confidentiality of this
Settlement Agreement.

    


    (a) This
Settlement Agreement shall be considered confidential information and will be
maintained as confidential by the Parties. No media release or public disclosure
relating to or announcing this Settlement Agreement shall be issued by either
Party unless the wording thereof has been first agreed by the other
Party.

     

    (b)
Notwithstanding the foregoing, any Party to this Settlement Agreement may make
whatever disclosure it, in its sole discretion, considers necessary to comply
with: the Party, or

    


    (i) any
requirement of U.S. or Canadian securities law,

     

    (ii) any
requirement of a regulatory agency having jurisdiction over

     

    (iii) any
requirement of any stock exchange on which securities issued by the Party are
traded, including, without limitation, any disclosures necessary for the purpose
of obtaining approval for the issuance of warrants called for in this Settlement
Agreement.

    


    (c) Any
Party may disclose the terms of the Settlement Agreement to its own counsel,
accountants, and agents, provided that the person to whom that information is
disclosed owes a contractual or fiduciary obligation to the disclosing Party to
maintain the confidentiality of the information disclosed.

    


    Section
11.16. Return or Disposal of
Confidential Information Produced in the Disputes. Upon entry of the
dismissals in each of the Disputes, the Parties will return or dispose of
discovery material in their possession and that was obtained from the other
Parties per the terms of the confidentiality agreement entered into between the
Parties with respect to discovery. The Parties, through their litigation
counsel, may by mutual agreement (i) vary the procedure in said confidentiality
agreement for the return or disposal of discovery materials, or (ii) waive the
return of documents from a Party to the extent the documents relate to interests
retained by that Party as a result of this Settlement Agreement.

    


    Section
11.17. Title and Headings.
Title and headings are inserted for convenience of reference only and are
not intended to be a part of or to affect the meaning or interpretation of the
Settlement Agreement.

    


    Section
11.18. Counterparts.
This Settlement Agreement may be executed in one or more counterparts,
all of which together shall be one instrument, and all of which shall be
considered duplicate originals.

    


    IN WITNESS
WHEREOF, the Parties, through their duly authorized representatives, have signed
and acknowledged this Settlement Agreement as shown below:

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    GEOSTAR
CORPORATION,

    on behalf
of itself and First Source Texas, Inc.; First Source Bossier, LLC; First Texas
Gas, LP; CBM Resources Pty. Ltd.; Associated Geophysical Services, Inc.;
Conquest Group Operating Company; West Virginia Development, Inc.; West Virginia
Gas Corporation; Squaw Creek Development, Inc.; Arkoma Basin Development, Inc.;
Royalty Acquisition Company; BNG Producing & Drilling; GeoStar Financial
Corporation; and GeoStar Financial Services Corporation, and with all due
authority to execute on behalf of each of them,

     

     

    /s/  THOMAS E.
ROBINSON                                                                

    Thomas E.
Robinson

    President

    Date:  06/11/08

    


    


    GASTAR
EXPLORATION, LTD.,

    on behalf
of itself and Gastar Exploration USA, Inc.; Gastar Exploration Victoria, Inc.;
Gastar Exploration Texas, Inc.; Gastar Exploration Texas LLC; Gastar Exploration
Texas, LP; Gastar Exploration New South Wales, Inc.; and Gastar Exploration
Power Pty. Ltd., and with all due authority to execute on behalf of each of
them,

    


    


    /s/  J. RUSSELL
PORTER                                                                

    J. Russell
Porter

    President,
Chief Executive Officer and Chairman

    Date:  06/11/08

    
 

     

     

     

    20