EXHIBIT 10.14
FAR EAST ENERGY CORPORATION
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as
of this 18th day of June, 2004, by and between Far East Energy Corporation, a
Nevada corporation (the "Company"), and Xxxxxxx X. Xxxx ("Optionee").
Background
The Company desires to grant Optionee an option to purchase shares of the
Company's common stock in exchange for Optionee becoming a member of the
Company's Board of Directors.
Agreement
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, and other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, and intending to be legally bound, it
is agreed as follows:
1. Non-Qualified Stock Option to Purchase Shares.
(a) Number of Option Shares and Option Price. The Company hereby
grants to the Optionee a non-qualified stock option (the "Option"), to
purchase the following number of shares of the Company's common stock,
par value $0.001 per share (the "Option Shares"):
(i) 400,000 shares of common stock, with an exercise price of
$2.00 per share ("Option Price").
(b) Exercise Period. The Option shall be exercisable, in whole or in
part, subject to the vesting schedule and other terms set forth in
this Agreement, until June 18, 2009 (the "Exercise Period").
(c) Vesting Schedule. The Option to purchase shares granted hereby
shall vest in four (4) equal allotments as follows:
(i) Twenty-five percent (25%) of the Option Shares shall be
exercisable on June 18, 2004;
(ii) Twenty-five percent (25%) of the Option Shares shall be
exercisable on June 18, 2005;
(iii) Twenty-five percent (25%) of the Option Shares shall be
exercisable on June 18, 2006; and
(iv) Twenty-five percent (25%) of the Option Shares shall be
exercisable on June 18, 2007.
2. Manner of Exercise and Terms of Payment. The Option may be exercised in
whole or in part, subject to the limitations set forth in this Agreement,
upon delivery to the Company of timely written notice of exercise,
accompanied by full payment of the Option Price for the Option Shares with
respect to which the Option is exercised. The Option Price may be paid by
delivering a certified check or wire transfer of immediately available
funds to the order of the Company. The person entitled to the shares so
purchased shall be treated for all purposes as the holder of such shares as
of the close of business on the date of exercise and certificates for the
shares of stock so purchased shall be delivered to the person so entitled
within a reasonable time, not exceeding thirty (30) days, after such
exercise. Unless this Option has expired, a new Option of like tenor and
for such number of shares as the holder of this Option shall direct,
representing in the aggregate the right to purchase a number of shares with
respect to which this Option shall not have been exercised, shall also be
issued to the holder of this Option within such time.
3. Rights as Stockholder. Optionee or a permitted transferee of the Option
shall have no rights as a stockholder of the Company with respect to any
shares of common stock subject to such Option prior to his or her exercise
of the Option.
4. Adjustment of Purchase Price and Number of Shares. The number and kind
of securities purchasable upon the exercise of this Option and the Option
Price shall be subject to adjustment from time to time, as provided in
Schedule A attached hereto.
5. Investment Representation.
(a) Optionee represents and warrants to the Company that Optionee is
acquiring this Option and the Option Shares for Optionee's own account
for the purpose of investment and not with a view toward resale or
other distribution thereof in violation of the Securities Act of 1933,
as amended ("1933 Act"). Optionee acknowledges that the effect of the
representations and warranties is that the economic risk of any
investment in the Option and Option Shares must be borne by the
Optionee for an indefinite period of time. This representation and
warranty shall be deemed to be a continuing representation and
warranty and shall be in full force and effect upon such exercise of
the Option granted hereby.
(b) Optionee understands that, as this Option has not been registered
under the 1933 Act, the Company has affixed a restrictive legend
stating that the Option is not registered under the 1933 Act and state
securities laws and setting forth or referring to the restriction on
transferability and sale thereof imposed by the 1933 Act or any
applicable state securities law, and that the holder thereof agrees to
be bound by such restrictive legend.
(c) Optionee understands that, prior to such time as the Option Shares
have been registered under the1933 Act, the Company shall place a
legend on each certificate for the Option Shares issued pursuant
hereto, or any certificate issued in exchange therefore, stating that
such securities are not registered under the 1933 Act and state
securities laws and setting forth or referring to the restriction on
transferability and sale thereof imposed by the 1933 Act or any
applicable state securities law, and that the holder thereof agrees to
be bound by such restrictive legend.
6. Exercisability. The Option shall be exercisable only by Optionee,
subject to the terms herein, during his lifetime or by his assigns, heirs,
executors or administrators, as the case may be. The Option granted
hereunder and the Option Shares underlying the Option may only be assigned
in compliance with Section 7 herein and applicable securities laws. In the
event Optionee leaves the employment of the Company, all unvested Options
shall expire within thirty (30) days following such termination of
employment.
7. Non-Transferability.
(a) Optionee shall not sell, transfer, assign, pledge for a loan,
margin, hypothecate or exchange the Option or the Option Shares,
except pursuant to the laws of descent, for a period of two (2) years
from the date of grant.
(b) Optionee recognizes that the Option Shares received pursuant to
this Agreement will be subject to various restrictions on sale and/or
transfer, including but not limited to, the restrictions imposed by
Rule 144 under the 1933 Act. Notwithstanding any rights that Optionee
may possess under the 1933 Act and any applicable state securities
laws, Optionee hereby agrees that he or she shall not be entitled, and
the Company shall be under no obligation, to remove the resale
restriction from this Option. Optionee additionally agrees that the
Company is under no obligation to remove the resale restriction from
any number of Option Shares exceeding ten percent (10%) of the average
weekly trading volume in the Company's securities during the ninety
(90) days preceding the intended sale.
8. Miscellaneous.
(a) Termination of Other Agreements. This Agreement sets forth the
entire understanding of the parties hereto with respect to the Option
and Option Shares, and supercedes all prior arrangements or
understandings among the parties regarding such matters.
(b) Notices. Any notices required hereunder shall be deemed to be
given upon the earlier of the date when received at, or (i) the third
business day after the date when sent by certified or registered mail,
(ii) the next business day after the date sent by guaranteed overnight
courier, or (iii) the date sent by telecopier or delivered by hand, in
each case, to the addresses set forth below:
If to the Company: Far East Energy Corporation
000 X. Xxx Xxxxxxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. XxXxxxxxx
With copies to: Xxxxxxx Law Firm
0000 X. Xxxxxxx Xxxxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxxxx
If to the Optionee: Xxxxxxx X. Xxxx
0000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
or to such other addresses as the parties may specify in writing.
(c) Amendments and Waivers. The provisions of this Agreement may be
amended or terminated unless in a writing signed by the Optionee and
the Company.
(d) Binding Effect. This Agreement will bind and inure to the benefit
of the respective successors (including any successor resulting from a
merger or similar reorganization), assigns, heirs, and personal
representatives of the parties hereto.
(e) Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Texas. Venue
shall lie only in the State and Federal Courts in and for the County
of Xxxxxx, Texas as to all disputes arising under this Agreement, and
such venue is hereby consented to by the parties hereto.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered to be an original
instrument and to be effective as of the date first written above.
Each such copy shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for
more than one such counterpart.
(g) Interpretation. Unless the context of this Agreement clearly
requires otherwise, (a) references to the plural include the singular,
the singular the plural, the part the whole, (b) references to one
gender include all genders, (c) "or" has the inclusive meaning
frequently identified with the phrase "and/or" and (d) "including" has
the inclusive meaning frequently identified with the phrase "but not
limited to." The section and other headings contained in this
Agreement are for reference purposes only and shall not control or
affect the construction of the Agreement or the interpretation thereof
in any respect.
IN WITNESS WHEREOF, the undersigned have executed, or have caused this
Agreement to be executed, as of the day and year first above written.
FAR EAST ENERGY CORPORATION OPTIONEE
/s/ Xxxxxxx X. XxXxxxxxx /s/ Xxxxxxx X. Xxxx
------------------------------------- ----------------------------------------
Xxxxxxx X. XxXxxxxxx Xxxxxxx X. Xxxx
Chief Executive Officer
SCHEDULE A
Adjustment of Purchase Price and Number of Shares
1. Adjustment. The number and kind of securities purchasable upon the
exercise of this Option and the Option Price shall be subject to adjustment from
time to time upon the happening of certain events as follows:
(a) Reclassification, Consolidation or Merger. At any time while this
Option remains outstanding and unexpired, in case of (i) any
reclassification or change of outstanding securities issuable upon exercise
of this Option (other than a change in par value, or from par value to no
par value per share, or from no par value per share to par value or as a
result of a subdivision or combination of outstanding securities issuable
upon the exercise of this Option), (ii) any consolidation or merger of the
Company with or into another corporation (other than a merger with another
corporation in which the Company is a continuing corporation and which does
not result in any reclassification or change, other than a change in par
value, or from par value to no par value per share, or from no par value
per share to par value, or as a result of a subdivision or combination of
outstanding securities issuable upon the exercise of this Option), or (iii)
any sale or transfer to another corporation of the property of the Company
as an entirety or substantially as an entirety, the Company, or such
successor or purchasing corporation, as the case may be, shall without
payment of any additional consideration therefor, execute a new Option
providing that the holder of this Option shall have the right to exercise
such new Option (upon terms not less favorable to the holder than those
then applicable to this Option) and to receive upon such exercise, in lieu
of each share of Common Stock theretofore issuable upon exercise of this
Option, the kind and amount of shares of stock, other securities, money or
property receivable upon such reclassification, change, consolidation,
merger, sale or transfer. Such new Option shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 1 of Schedule A. The provisions of
this subsection 1(a) shall similarly apply to successive reclassifications,
changes, consolidations, mergers, sales and transfers.
(b) Subdivision or Combination of Shares. If the Company at any time while
this Option remains outstanding and unexpired, shall subdivide or combine
its Capital Stock, the Option Price shall be proportionately reduced, in
case of subdivision of such shares, as of the effective date of such
subdivision, or, if the Company shall take a record of holders of its
Capital Stock for the purpose of so subdividing, as of such record date,
whichever is earlier, or shall be proportionately increased, in the case of
combination of such shares, as of the effective date of such combination,
or, if the Company shall take a record of holders of its Capital Stock for
the purpose of so combining, as of such record date, whichever is earlier.
(c) Stock Dividends. If the Company at any time while this Option is
outstanding and unexpired shall pay a dividend in shares of, or make other
distribution of shares of, its Capital Stock, then the Option Price shall
be adjusted, as of the date the Company shall take a record of the holders
of its Capital Stock for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as at the date of such payment
or other distribution), to that price determined by multiplying the Option
Price in effect immediately prior to such payment or other distribution by
a fraction (a) the numerator of which shall be the total number of shares
of Capital Stock outstanding immediately prior to such dividend or
distribution, and (b) the denominator of which shall be the total number of
shares of Capital Stock outstanding immediately after such dividend or
distribution. The provisions of this subsection 1(c) shall not apply under
any of the circumstances for which an adjustment is provided in subsection
1(a) or 1(b).
(d) Liquidating Dividends, Etc. If the Company at any time while this
Option is outstanding and unexpired makes a distribution of its assets to
the holders of its Capital Stock as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings or
surplus legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of all or
substantially all of the Company's assets (other than under the
circumstances provided for in the foregoing subsections (a) through (c)),
the holder of this Option shall be entitled to receive upon the exercise
hereof, in addition to the shares of Common Stock receivable upon such
exercise, and without payment of any consideration other than the Option
Price, an amount in cash equal to the value of such distribution per share
of Common Stock multiplied by the number of shares of Common Stock which,
on the record date
for such distribution, are issuable upon exercise of this Option (with no
further adjustment being made following any event which causes a subsequent
adjustment in the number of shares of Common Stock issuable upon the
exercise hereof), and an appropriate provision therefor should be made a
part of any such distribution. The value of a distribution which is paid in
other than cash shall be determined in good faith by the Board of
Directors.
2. Notice of Adjustments. Whenever any of the Option Price or the number
of shares of Common Stock purchasable under the terms of this Option at that
Option Price shall be adjusted pursuant to Section 1 hereof, the Company shall
promptly make a certificate signed by its President or a Vice President and by
its Treasurer or Assistant Treasurer or its Secretary or Assistant Secretary,
setting forth in reasonable detail the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description of the basis on which the Company's Board of Directors
made any determination hereunder), and the Option Price and number of shares of
Common Stock purchasable at that Option Price after giving effect to such
adjustment, and shall promptly cause copies of such certificate to be mailed (by
first class and postage prepaid ) to the registered holder of this Option.
NOTICE OF EXERCISE
(To be signed only upon exercise of Option)
TO: Far East Energy Corporation
The undersigned, the owner of Option to purchase ___________ shares of Common
Stock of Far East Energy Corporation, a Nevada corporation ("Far East"), hereby
irrevocably elects to exercise such Option and herewith pays for the shares by
giving Far East a personal check or wire transfer in the amount of the Option
Price as specified in the Option. The undersigned requests that the certificates
for such shares be delivered to them according to instructions indicated below.
DATED this ___ day of _____________ 200__.
By:
____________________________________
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Instructions for delivery:
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