FAR EAST ENERGY
CORPORATION
2005 STOCK INCENTIVE
PLAN
The purpose of the Plan is to (i) aid the
Company and its Subsidiaries and Affiliates in attracting, securing
and retaining employees of outstanding ability, (ii) attract
members to the Board, (iii) attract consultants to provide services
to the Company and its Subsidiaries and Affiliates, as needed, and
(iv) motivate such persons to exert their best efforts on behalf of
the Company and its Affiliates by providing incentives through the
granting of Awards. The Company expects that it will
benefit from the added interest, which such persons will have in
the welfare of the Company as a result of their proprietary
interest in the Company's success.
The following capitalized terms used in the Plan
have the respective meanings set forth in this Section:
(a) Act
: The Securities Exchange Act of 1934, as amended, or
any successor thereto.
(b) Affiliate
: Any entity (i) 20% or more of the voting equity of
which is owned or controlled directly or indirectly by the Company,
or (ii) that had been a business, division or subsidiary of the
Company, the equity of which has been distributed to the Company's
stockholders, even if the Company thereafter owns less than 20% of
the voting equity.
(c) Award
: An Option, Stock Appreciation Right or Other
Stock-Based Award granted pursuant to the Plan.
(d) Award
Agreement : Any written agreement, contract, or
other instrument or document evidencing an Award.
(e) Beneficial
Owner or Beneficially Owned : As such term is
defined in Rule 13d-3 under the Act (or any successor rule
thereto).
(f) Board
: The Board of Directors of the Company.
(g) Change of
Control : The occurrence of any of the following
events:
(i) any
Person becomes the Beneficial Owner, directly or indirectly, of
more than forty percent (40%) of the combined voting power of the
then-outstanding voting securities of the Company entitled to vote
generally in the election of directors (the " Outstanding
Company Voting Securities "); provided , however
, that the following acquisitions shall not constitute a Change of
Control: (A) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company, or (B) any acquisition
by an entity pursuant to a reorganization, merger or consolidation,
unless such reorganization, merger or consolidation constitutes a
Change of Control under clause (ii) of this Section
2(g);
(ii) the
consummation of a reorganization, merger or consolidation, unless
following such reorganization, merger or consolidation sixty
percent (60%) or more of the combined voting power of the
then-outstanding voting securities of the entity resulting from
such reorganization, merger or consolidation entitled to vote
generally in the election of directors is then Beneficially Owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the Beneficial Owners,
respectively, of the Outstanding Company Voting Securities
immediately prior to such reorganization, merger or
consolidation;
(iii) the
(i) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company or (ii) sale or other
disposition (in one transaction or a series of related
transactions) of all or substantially all of the assets of the
Company and its Subsidiaries, unless the successor entity existing
immediately after such sale or disposition is then Beneficially
Owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the Beneficial Owners,
respectively, of the Outstanding Company Voting Securities
immediately prior to such sale or disposition;
(iv) during
any period of twenty-four months (not including any period prior to
the Effective Date), individuals who at the beginning of such
period constitute the Board, and any new director (other than (A) a
director nominated by a Person who has entered into an agreement
with the Company to effect a transaction described in Sections
2(g)(i), (ii) or (iii) of the Plan, (B) a director whose initial
assumption of office occurs as a result of either an actual or
threatened election contest subject to Rule 14a-11 of Regulation
14A promulgated under the Act or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board or (C) a director designated by any Person who
is the Beneficial Owner, directly or indirectly, of securities of
the Company representing 10% or more of the Outstanding Company
Voting Securities) whose election by the Board or nomination for
election by the Company's stockholders was approved in advance by a
vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority
thereof; or
(v) the
Board adopts a resolution to the effect that, for purposes hereof,
a Change of Control has occurred.
Notwithstanding
the foregoing, the definition of Change of Control for any Award
under the Plan that consists of deferred compensation subject to
Section 409A of the Code shall be deemed modified to the extent
necessary to comply with Section 409A of the Code.
(h) Code
: The Internal Revenue Code of 1986, as amended, or any
successor thereto.
(i) Committee
: The Compensation Committee of the Board, or any
successor thereto or other committee designated by the Board to
assume the obligations of the Committee hereunder, or if no such
committee shall be designated or in office, the Board.
(j) Company :
Far East Energy Corporation, a Nevada corporation.
(k) Covered
Employee : An employee of the Company or its
Subsidiaries who may be deemed to be a covered employee within the
meaning of Section 162(m) of the Code.
(l) Disability
: Inability to engage in any substantial gainful
activity by reason of a medically determinable physical or mental
impairment which can be expected to result in death, or can be
expected to last for a continuous period of not less than
12 months. The determination whether a Participant
has suffered a Disability shall be made by the Committee based upon
such evidence as it deems necessary and appropriate. A
Participant shall not be considered disabled unless he or she
furnishes such medical or other evidence of the existence of the
Disability as the Committee, in its sole discretion, may
require.
(m) Effective
Date : The date on which the Plan takes effect, as
defined pursuant to Section 27 of the Plan.
(n) Fair Market
Value : On a given date, the arithmetic mean of the
high and low prices of the Shares as reported on such date on the
Composite Tape of the principal national securities exchange on
which such Shares are listed or admitted to trading, or, if no
Composite Tape exists for such national securities exchange on such
date, then on the principal national securities exchange on which
such Shares are listed or admitted to trading, or, if the Shares
are not listed or admitted on a national securities exchange, the
arithmetic mean of the per Share closing bid price and per Share
closing asked price on such date as quoted on the National
Association of Securities Dealers Automated Quotation System (or
such market in which such prices are regularly quoted), or, if
there is no market on which the Shares are regularly quoted, the
Fair Market Value shall be the value established by the Committee
in good faith. If no sale of Shares shall have been
reported on such Composite Tape or such national securities
exchange on such date or quoted on the National Association of
Securities Dealers Automated Quotation System on such date, then
the immediately preceding date on which sales of the Shares have
been so reported or quoted shall be used.
(o) ISO
: An Option that is also an incentive stock option
granted pursuant to Section 7(d) of the Plan.
(p) LSAR
: A limited stock appreciation right granted pursuant to
Section 8(d) of the Plan.
(q) Other
Stock-Based Awards : Awards granted pursuant to
Section 9 of the Plan.
(r) Option
: A stock option granted pursuant to Section 7 of the
Plan.
(s) Option
Price : The purchase price per Share of an Option,
as determined pursuant to Section 7(a) of the Plan.
(t) Participant
: An individual who is selected by the Committee to
participate in the Plan pursuant to Section 5 of the
Plan.
(u)
Performance-Based Awards : Other Stock-Based
Awards granted pursuant to Section 9(b) of the Plan.
(v) Person
: As such term is used for purposes of Section 13(d)(3)
or 14(d)(2) of the Act (or any successor section
thereto).
(w) Plan
: The Far East Energy Corporation 2005 Stock Incentive
Plan.
(x) Restricted
Stock : Restricted stock granted pursuant to Section
9 of the Plan.
(y) Restricted
Stock Unit : A restricted stock unit representing a
right to acquire a fixed number of Shares at a future date, granted
pursuant to Section 9 of the Plan.
(z) Securities
Act : The Securities Act of 1933, as amended,
or any successor thereto.
(aa) Shares
: Shares of common stock, par value $0.001 per Share, of
the Company, as adjusted pursuant to Section 10 of the
Plan.
(bb) Stock
Appreciation Right : A stock appreciation right
granted pursuant to Section 8 of the Plan.
(cc) Subsidiary
: A subsidiary corporation, as defined in Section 424(f)
of the Code (or any successor section thereto).
(dd) Termination of
Service : A Participant's termination of service with the
Company, its Subsidiaries and Affiliates. A Termination
of Service of an employee of the Company or any Subsidiary shall
not be deemed to have occurred in the case of sick leave, military
leave or any other leave of absence, in each case approved by the
Committee or in the case of transfers between locations of the
Company or its Subsidiaries. In the case of "specified
employees" (as described in Section 409A of the Code),
distributions may not be made before the date which is six months
after the date of termination of service (or, if earlier, the date
of death of the participant). A specified employee is a
"key employee" as defined in Section 416(i) of the Code without
regard to Paragraph (5), but only if the Company has any stock
which is publicly traded on an established securities market or
otherwise.
3. Shares
Subject to the Plan
The maximum
number of Shares with respect to which Awards may be granted under
the Plan shall be 12,500,000 (subject to adjustment in accordance
with the provisions of Section 10 hereof), whether pursuant to
ISOs or otherwise. Of that number, not more than 2,600,000 Shares
(subject to adjustment in accordance with the provisions of
Section 10 hereof) will be available for grants under the Plan
of ISOs pursuant to Section 7(d) hereof, and not more than
3,900,000 Shares (subject to adjustment in accordance with the
provisions of Section 10 hereof) will be available for grants
under the Plan of unrestricted Shares, Restricted Stock, Restricted
Stock Units or any Other Stock-Based Awards pursuant to
Section 9 hereof. The maximum number of Shares with respect to
which Awards of any and all types may be granted during a calendar
year to any Participant shall be limited, in the aggregate, to
1,500,000 (subject to adjustment in accordance with the provisions
of Section 10 hereof). The Shares may consist, in whole or in
part, of authorized and unissued Shares or treasury Shares,
including Shares acquired by purchase in the open market or in
private transactions. If any Awards are forfeited, cancelled,
terminated, exchanged or surrendered or such Award is settled in
cash or otherwise terminates without a distribution of Shares to
the Participant, any Shares counted against the number of Shares
reserved and available under the Plan with respect to such Award
shall, to the extent of any such forfeiture, settlement,
termination, cancellation, exchange or surrender, again be
available for Awards under the Plan.
(a) The
Plan shall be administered by the Committee, which may delegate its
duties and powers in whole or in part to any subcommittee
thereof. If necessary to satisfy the requirements of
Section 162(m) of the Code and/or Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, the Committee shall
consist solely of at least two individuals who are each
"non-employee directors" within the meaning of Rule 16b-3 under the
Act (or any successor rule thereto), "outside directors" within the
meaning of Section 162(m) of the Code (or any successor section
thereto) and satisfy all applicable independence requirements set
forth in any applicable stock exchange or market or quotation
system in which the Shares are then traded, listed or quoted. Any
action permitted to be taken by the Committee may be taken by the
Board, in its discretion; provided however that, to
the extent required by any stock exchange or market or quotation
system on which the Shares are traded, listed or quoted, any Award
approved by the Board shall also have been approved by a majority
of the Company's independent directors (within the meaning of such
exchange or market or quotation system). The Committee
may also delegate to a committee consisting of employees of the
Company the authority to authorize transfers, establish terms and
conditions upon which transfers may be made and establish classes
of options eligible to transfer options, as well as to make other
determinations with respect to option transfers.
(b) The
Committee is authorized to interpret the Plan, to establish, amend
and rescind any rules and regulations relating to the Plan, to make
any other determinations that it deems necessary or desirable for
the administration of the Plan, and to take the following actions,
in each case subject to and consistent with the provisions of the
Plan:
(i) to
select Participants to whom Awards may be granted;
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to determine
the type or types of Awards to be granted to each
Participant;
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(iii) to
determine the type and number of Awards to be granted, the number
of Shares to which an Award may relate, the terms and conditions of
any Award granted under the Plan (including, but not limited to,
any exercise price, grant price, or purchase price, and any bases
for adjusting such exercise, grant or purchase price, any
restriction or condition, any schedule for lapse of restrictions or
conditions relating to transferability or forfeiture,
exercisability, or settlement of an Award, and waiver or
accelerations thereof, and waivers of performance conditions
relating to an Award, based in each case on such considerations as
the Committee shall determine), and all other matters to be
determined in connection with an Award;
(iv) to
determine whether, to what extent, and under what circumstances an
Award may be settled, or the exercise price of an Award may be
paid, in cash, Shares, other Awards, or other property, or an Award
may be cancelled, forfeited, exchanged, or surrendered;
(v) to
prescribe the form of each Award Agreement, which need not be
identical for each Participant;
(vi) to
correct any defect or supply any omission or reconcile any
inconsistency in the Plan and to construe and interpret the Plan
and any Award, rules and regulations, Award Agreement, or other
instrument hereunder, in each case, in the manner and to the extent
the Committee deems necessary or desirable; and
(vii) to
make all other decisions and determinations as may be required
under the terms of the Plan or as the Committee may deem necessary
or advisable for the administration of the Plan.
(c) Any
decision of the Committee in the interpretation and administration
of the Plan, as described herein, shall lie within its sole and
absolute discretion and shall be final, conclusive and binding on
all parties concerned (including, but not limited to, Participants
and their beneficiaries or successors). Determinations
made by the Committee under the Plan need not be uniform and may be
made selectively among Participants, whether or not such
Participants are similarly situated.
(d) The
Committee shall require payment of any amount it may determine to
be necessary to withhold for federal, state, local or other taxes
as a result of the grant, vesting or the exercise of an
Award. With the approval of the Committee, the
Participant may elect to pay a portion or all of such withholding
taxes by (i) delivery of Shares or (ii) having Shares withheld by
the Company from any Shares that would have otherwise been received
by the Participant. The number of Shares so delivered or
withheld shall have an aggregate Fair Market Value on the date of
the exercise of an Award sufficient to satisfy the applicable
withholding taxes. In addition, with the approval of the
Committee, a Participant may satisfy any additional tax that the
Participant elects to have the Company withhold by delivering to
the Company or its designated representative Shares already owned
by the Participant or, in the case of Shares acquired through an
employee benefit plan sponsored by the Company or its Subsidiaries,
Shares held by the Participant for more than six months.
(e) If
the chief executive officer of the Company is a member of the
Board, the Board by specific resolution may constitute such chief
executive officer as a committee of one which shall have the
authority to grant Awards of up to an aggregate of 200,000 Shares
(subject to adjustment in accordance with the provisions of Section
10 hereof) in each calendar year to Participants who are not
subject to the rules promulgated under Section 16 of the Act (or
any successor section thereto) or Covered Employees;
provided , however , that such chief executive
officer shall notify the Committee of any such grants made pursuant
to this Section 4.
(f) Notwithstanding
the foregoing, a Repricing (as defined below) is prohibited without
prior stockholder approval. Subject to compliance with the
provisions of the immediately preceding sentence regarding a
Repricing, the Committee may, at any time or from time to
time: (a) authorize the Company, with the consent of the
respective Participants, to issue new Awards in exchange for the
surrender and cancellation of any or all outstanding Awards or
(b) buy from a Participant an Award previously granted with
payment in cash, Shares (including Restricted Stock) or other
consideration, based on such terms and conditions as the Committee
and the Participant may agree. The exercise of the authority
provided in this Section 4(f) is circumscribed to the
extent necessary to avoid the inadvertent application of the
interest and additional tax provisions of Section 409A of the
Code. For purposes of this Plan, “Repricing” means
any of the following or any other action that has the same purpose
and effect: (a) lowering the exercise price of an
outstanding Option granted under this Plan after it is granted or
(b) canceling an outstanding Award granted under this Plan at
a time when its exercise or purchase price exceeds the then Fair
Market Value of the stock underlying such outstanding Award, in
exchange for another Award or a cash payment, unless the
cancellation and exchange occurs in connection with a merger,
consolidation, sale of substantially all the Company’s
assets, acquisition, spin-off or other similar corporate
transaction.
Employees of the Company, its Subsidiaries and
Affiliates and members of the Board, who are from time to time
responsible for, or contributes to, the management, growth and
protection of the business of the Company and its Affiliates, and
consultants to the Company and its Subsidiaries, are eligible to be
granted Awards under the Plan. Participants shall be
selected from time to time by the Committee, in its sole
discretion, from among those eligible, and the Committee shall
determine, in its sole discretion, the number of Shares to be
covered by the Awards granted to each
Participant. Notwithstanding any provisions of the Plan
to the contrary, an Award may be granted to an employee or
consultant, in connection with his or her hiring or retention prior
to the date the employee or consultant first performs services for
the Company or a Subsidiary; provided , however ,
that any such Award shall not become vested prior to
the date the employee or consultant first performs such
services.
No Award may be granted under the Plan after the
tenth anniversary of the Effective Date, but Awards theretofore
granted may extend beyond that date.
7. Terms
and Conditions of Options
Options granted under the Plan shall be, as
determined by the Committee, non-qualified, incentive or other
stock options for federal income tax purposes, as evidenced by the
related Award Agreements, and shall be subject to the foregoing and
the following terms and conditions and to such other terms and
conditions, not inconsistent therewith, as the Committee shall
determine:
(a)
Option Price . The Option Price per Share shall
be determined by the Committee, but shall not be less than 100% of
the Fair Market Value of the Shares on the date an Option is
granted.
(b)
Exercisability . Options granted under the Plan
shall be exercisable at such time and upon such terms and
conditions as may be determined by the Committee, but in no event
shall an Option be exercisable more than ten years after the date
it is granted.
(c)
Exercise of Options . Except as otherwise
provided in the Plan or in an Award Agreement, an Option may be
exercised for all, or from time to time any part, of the Shares for
which it is then exercisable. For purposes of Section 7
of the Plan, the exercise date shall be the date the Company
receives a written notice of exercise in accordance with
th
