Exhibit 4.2
THIS WARRANT AND THE SECURITIES
ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY
STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, HYPOTHECATED,
PLEDGED OR OTHERWISE TRANSFERRED OR DISPOSED OF WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO AND QUALIFIED BY
APPLICABLE STATE AUTHORITIES, OR AN OPINION OF LEGAL COUNSEL IS
DELIVERED TO THE ISSUER STATING THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
WARRANT
FOR VALUE RECEIVED
, Arrow Energy International Pte
Ltd, a company organized under the laws of the Republic of
Singapore (“ Holder ”), is entitled at any time
during the Exercise Period (as such term and other capitalized
terms are defined in Section 1), subject to the terms and
conditions set forth herein, to purchase from Far East Energy
Corporation, a Nevada corporation (the “ Company
”), 7,420,000 shares of the Company’s common stock, par
value $0.001 per share (“ Common Stock ”),
subject to adjustment as provided herein, at the Aggregate Purchase
Price, all on the terms and conditions and pursuant to the
provisions hereinafter set forth and in the Securities Purchase
Agreement dated March 13, 2009 among the Company, Far East
Energy (Bermuda), Ltd. and Holder (the “ Agreement
”).
1. Definitions.
As used in this Warrant, the
following terms have the respective meanings set forth
below:
“ Affiliate ”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 144 of the Securities Act.
“ Aggregate Purchase
Price ” means an amount equal to (a) the number of
shares of Common Stock being purchased upon exercise of this
Warrant pursuant to Section 2.2, multiplied by (b) the
Exercise Price as of the date of such exercise.
“ Applicable Law
” means all laws, rules and regulations applicable to the
Person, conduct, action or covenant in question, including, but not
limited to, all applicable common law and equitable principles, all
provisions of all applicable state and federal constitutions,
statutes, rules, regulations and orders of governmental bodies, and
all orders, judgments and decrees of all courts and
arbitrators.
“ Board of Directors
” means the board of directors elected or appointed by the
shareholders of the Company to manage the business of the Company
or any committee of such board duly authorized to take the action
purported to be taken by such committee.
“ Business Day ”
means any day except Saturday, Sunday and any day which shall be a
federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other
governmental action to close.
“ Constituent Person
” has the meaning set forth in Section 3.4.
“ Exercise Period
” means the period commencing on the earlier of (i) the
Approval Date (as defined in the Farmout Agreement) and
(ii) the satisfaction or waiver of the Farm-In Conditions on
or prior to the Farm-In Deadline and ending at 5:00 p.m., Central
Time, on the date that is eighteen months after the date
hereof.
“ Exercise Price
” means US$1.00, subject to adjustment as provided in
Section 3.
“ Farm-In Conditions
” has the meaning set forth in the Farmout
Agreement.
“ Farm-In Deadline
” has the meaning set forth in the Farmout
Agreement.
“ Farmout Agreement
” means the Farmout Agreement dated the date hereof between
Far East Energy (Bermuda), Ltd. and Holder.
“ Fundamental Change
” has the meaning set forth in Section 3.4.
“ Non-Electing Shares
” has the meaning set forth in Section 3.4.
“ Notice of Exercise
” means the form of Notice of Exercise attached hereto as
Exhibit A .
“ Person ” means
an individual or corporation, partnership, company, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“ Trading Day ”
means each Monday, Tuesday, Wednesday, Thursday and Friday, other
than any day on which the principal exchange or market in which the
Common Stock is traded is required or authorized by law to be
closed and, if no such exchange or market exists, any day on which
banks in New York, New York are not required or authorized by law
to be closed.
“ Trading Price ”
means (a) if the Common Stock is actively traded on any
national securities exchange, then the highest price at which sales
of a share of Common Stock shall have been sold during such Trading
Day and (b) if the shares of Common Stock are not actively
traded or quoted on any such exchange, then the highest sale price
of a share of Common Stock during such Trading Day.
“ Trigger Price ”
has the meaning set forth in Section 4.
“ Warrant ” means
this Warrant and all warrants issued upon division or combination
of, or in substitution for, this Warrant.
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“ Warrant Stock ”
means the shares of Common Stock issued, issuable or both (as the
context may require) to Holder upon the exercise
thereof.
2. Exercise of
Warrant.
2.1. Right of Exercise .
Subject to Section 10.1, Holder is entitled to exercise this
Warrant at any time and from time to time during the Exercise
Period.
2.2. Manner of Exercise .
Subject to the terms and conditions of this Warrant, Holder has the
right to exercise this Warrant during the Exercise Period, in whole
or in part, by delivering to the Company in accordance with
Section 10.2 (a) a Notice of Exercise, duly executed by
Holder, specifying the number of shares of Common Stock to be
purchased, (b) payment of the Aggregate Purchase Price by
cash, certified or official bank check and (c) this Warrant.
Upon receipt thereof, the Company shall, as promptly as reasonably
practicable, execute (or cause to be executed) and deliver (or
cause to be delivered) to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock
issuable upon such exercise. The certificate or certificates so
delivered shall be, to the extent possible, in such denomination or
denominations as Holder shall request in the Notice of Exercise and
shall be registered in the name of Holder. This Warrant shall be
deemed to have been exercised and such certificate or certificates
shall be deemed to have been issued, and Holder shall be deemed to
have become a holder of record of such shares for all purposes, as
of the date the items specified in clauses (a) through
(c) above are received by the Company. If this Warrant shall
have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates representing the shares
of Common Stock being issued, deliver to Holder a new warrant
evidencing the rights of Holder to purchase the un-purchased shares
of Common Stock called for by this Warrant, which new warrant shall
in all other respects be identical with this Warrant, or, at the
request of Holder, appropriate notation may be made on this Warrant
and the same returned to Holder. Notwithstanding any provision
herein to the contrary, the Company shall not be required to
register shares in the name of any Person who acquires this Warrant
(or part hereof) or any Warrant Stock otherwise than in accordance
with this Warrant.
2.3. Payment of Taxes . The
issuance of a certificate or certificates for shares of Common
Stock upon exercise of this Warrant shall be made without charge
for any stamp or other similar tax in respect of such
issuance.
2.4. Fractional Shares . The
Company shall not be required to issue fractions of shares of
Common Stock upon exercise of this Warrant or to distribute
certificates which evidence fractional shares of Common Stock. If,
upon exercise of this Warrant, Holder is entitled to a fractional
share of Warrant Stock, the number of shares of Warrant Stock to be
issued to Holder will be rounded up to the nearest whole
share.
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3. Adjustment of Exercise Price and Number of
Warrant Shares Issuable.
The Exercise Price and the number of
shares of Warrant Stock issuable upon the exercise of this Warrant
are subject to adjustment from time to time upon the occurrence of
the events enumerated in this Section 3.
In the event that, at any time as a
result of the provisions of this Section 3, Holder shall
become entitled upon subsequent exercise to receive any shares of
capital stock of the Company other than Common Stock, the number of
such other shares so receivable upon exercise of this Warrant shall
thereafter be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions
contained herein.
3.1. Adjustment for Change in
Capital Stock .
If the Company (i) pays a
dividend or makes a distribution on its Common Stock in shares of
its Common Stock, (ii) subdivides its outstanding shares of
Common Stock into a greater number of shares, (iii) combines
its outstanding Common Stock into a smaller number of shares,
(iv) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock or (v) issues by
reclassification of its Common Stock any shares of its capital
stock, then the Exercise Price in effect immediately prior to such
action shall be proportionately adjusted so that Holder shall
receive, if this Warrant is thereafter exercised, the aggregate
number and kind of shares of capital stock of the Company which it
would have owned immediately following such action if such Warrant
had been exercised immediately prior to such action.
The adjustment shall become
effective immediately after the record date in the case of a
dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification. If,
after an adjustment, Holder upon exercise of this Warrant may
receive shares of two or more classes of capital stock of the
Company, the Company shall determine, in good faith, the allocation
of the adjusted Exercise Price between the classes of capital
stock. After such allocation, the exercise privilege and the
Exercise Price of each class of capital stock shall thereafter be
subject to adjustment on terms comparable to those applicable to
Common Stock in this Section 3. Such adjustment shall be made
successively whenever any event listed above shall
occur.
3.2 When De Minimis Adjustment
May Be Deferred .
No adjustment in the Exercise Price
need be made unless the adjustment would require an increase or
decrease of at least 1% in the Exercise Price; provided that
the exercise price is at least equal to the par or nominal value of
the Common Stock. Any adjustments that are not made shall be
carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 3 shall be
made to the nearest cent or to the nearest 1/10,000th of a share,
as the case may be, it being understood that no such rounding shall
be made under Section 3.5 (and, in calculations made pursuant
to such paragraph, the adjusted Exercise Price shall refer to such
adjusted price before rounding).
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3.3 When No Adjustment
Required .
No adjustment need be made for a
transaction referred to in Section 3.1 hereof, if Holder is to
participate (without being required to exercise this Warrant) in
the transaction on a basis and with notice that the Board of
Directors determines to be fair and appropriate in light of the
basis and notice on which holders of Common Stock participate in
the transaction. No adjustment need be made for (i) rights to
purchase Common Stock pursuant to a Company plan for reinvestment
of dividends or interest, or (ii) a change in the par value or
no par value of the Common Stock (save as to Exercise Price). To
the extent this Warrant becomes convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will
not accrue on the cash.
3.4 Reclassification,
Consolidation, Merger, Sale, Transfer or Share Exchange . In
case of any reclassification of the Common Stock, any consolidation
of the Company with, or merger of the Company into, any other
Person, any merger of
