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Exhibit 4.2
WARRANT
AGREEMENT
THIS WARRANT AGREEMENT (this
“ Agreement ”) made as of May 30, 2008 (the
“ Effective Date ”) by and between Far East
Energy Corporation, a Nevada corporation, with offices at 363 North
Sam Houston Parkway East, Suite 380, Houston, Texas 77060 (“
Company ”), and Continental Stock Transfer &
Trust Company, a New York corporation, with offices at 17 Battery
Place, New York, NY 10004 (“ Warrant Agent
”).
WHEREAS, the Company has
engaged in a public offering of shares of common stock, par value
$0.001 per share, of the Company (“ Common Stock
”) and warrants (“ Warrants ”) to certain
investors, each such Warrant evidencing the right of the holder
thereof to purchase one share of Common Stock for $1.00, subject to
adjustment as described herein; and
WHEREAS, the Company has
filed with the Securities and Exchange Commission a Registration
Statement on Form S-3, No. 333-132631 (“ Registration
Statement ”), for the registration, under the Securities
Act of 1933, as amended (“ Securities Act ”) of,
among other securities, the Warrants and the Common Stock issuable
upon exercise of the Warrants (the “ Warrant Stock
”); and
WHEREAS, the Company desires
the Warrant Agent to act on behalf of the Company, and the Warrant
Agent is willing to so act, in connection with the issuance,
registration, transfer, exchange, redemption and exercise of the
Warrants; and
WHEREAS, the Company desires
to provide for the form and provisions of the Warrants, the terms
upon which they shall be issued and exercised, and the respective
rights, limitation of rights, and immunities of the Company, the
Warrant Agent, and the holders of the Warrants; and
WHEREAS, all acts and things
have been done and performed which are necessary to make the
Warrants, when executed on behalf of the Company and countersigned
by or on behalf of the Warrant Agent, as provided herein, the
valid, binding and legal obligations of the Company, and to
authorize the execution and delivery of this Agreement.
NOW, THEREFORE, in
consideration of the mutual agreements herein contained, the
parties hereto agree as follows:
1. Definitions. For the
purposes of this Agreement:
1.1 “ Closing
Price ” shall mean, with respect to each share of Common
Stock for any day, (a) the last reported sale price regular
way or, in case no such sale takes place on such day, the average
of the closing bid and asked prices regular way, in either case as
reported on the principal national securities exchange on which the
Common Stock is listed or admitted for trading or (b) if the
Common Stock is not listed or admitted for trading on any national
securities exchange, the last reported sale price or, in case no
such sale takes place on such day, the average of the highest
reported bid and the lowest reported asked quotation for the Common
Stock, in either case as quoted on the NASDAQ Global Market or the
NASDAQ Capital Market or (c) if the Common Stock is not listed
or admitted for trading on any national securities exchange or
quoted on the NASDAQ Global Market or the NASDAQ Capital Market,
the last reported sale price or, in case no such sale takes place
on such day, the average of the highest reported bid and the lowest
reported asked quotation for the Common Stock, in either case as
reported on NASDAQ or a similar service if NASDAQ is no longer
reporting such information.
1.2 “ Convertible
Securities ” means stock or other securities convertible
into shares of Common Stock.
1.3 “ Current Market
Price Per Share ” means the average of the daily Closing
Prices for the five (5) consecutive Trading Days preceding the
date in question.
1.4 “ Required
Holders ” means the holders of the Warrants representing
at least a majority of shares of Common Stock underlying the
Warrants then outstanding.
1.5 “ Trading
Day ” means, with respect to any security, each Monday,
Tuesday, Wednesday, Thursday and Friday, other than any day on
which the principal exchange or market in which such security is
traded are 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.
2. Appointment of Warrant
Agent . The Company hereby appoints the Warrant Agent to act as
agent for the Company for the Warrants, and the Warrant Agent
hereby accepts such appointment and agrees to perform the same in
accordance with the terms and conditions set forth in this
Agreement.
3. Warrants .
3.1 Form of Warrant .
The Warrants shall (a) be issued in registered form only,
(b) be in the form of Exhibit A hereto (the “
Warrant Certificate ”), the provisions of which are
incorporated herein, (c) be signed by, or bear the facsimile
signature of, the Chairman of the Board or Chief Executive Officer
and Chief Financial Officer, Treasurer, Secretary or Assistant
Secretary of the Company and (d) shall bear a facsimile of the
Company’s seal. In the event the person whose facsimile
signature has been placed upon any Warrant shall have ceased to
serve in the capacity in which such person signed the Warrant
before such Warrant is issued, it may be issued with the same
effect as if he or she had not ceased to be such at the date of
issuance.
3.2 Effect of
Countersignature . Unless and until countersigned by the
Warrant Agent pursuant to this Agreement, a Warrant shall be
invalid and of no effect and may not be exercised by the holder
thereof.
3.3 Registration
.
(a) Warrant Register .
The Warrant Agent shall maintain books (“ Warrant
Register ”) for the registration of original issuance and
the registration of transfer of the Warrants. Upon the initial
issuance of the Warrants, the Warrant Agent shall countersign and
register the Warrants in the names of the holder or holders thereof
in such denominations and otherwise in accordance with instructions
delivered to the Warrant Agent by the Company.
(b) Registered Holder
. Prior to due presentment for registration of transfer of any
Warrant, the Company and the Warrant Agent may deem and treat the
person in whose name such Warrant shall be registered upon the
Warrant Register (“ registered holder ”), as the
absolute owner of such Warrant and of each Warrant represented
thereby (notwithstanding any notation of ownership or other writing
on the Warrant Certificate made by anyone other than the Company or
the Warrant Agent), for the purpose of any exercise thereof, and
for all other purposes, and neither the Company nor the Warrant
Agent shall be affected by any notice to the contrary.
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4. Terms and Exercise of
Warrants .
4.1 Warrant Price .
Each Warrant shall, when countersigned by the Warrant Agent,
entitle the registered holder thereof, subject to the provisions of
such Warrant and of this Agreement, to purchase from the Company
the number of shares of Common Stock stated therein, at the price
of $1.00 per share, subject to the adjustments provided in
Section 5 hereof and the last sentence of this
Section 4.1. The term “ Warrant Price ” as
used in this Agreement refers to the price per share at which
Common Stock may be purchased at the time a Warrant is exercised.
The Company in its sole discretion may lower the Warrant Price at
any time prior to the Expiration Date (as defined in
Section 4.2) for a period of not less than ten
(10) days.
4.2 Duration of
Warrants . The Warrants may be exercised only during the period
(“ Exercise Period ”) commencing on the date of
issuance, and terminating at 5:00 p.m., New York City time on the
earlier to occur of (a) May 30, 2013 or (b) the date
fixed for redemption of the Warrant as provided in Section 7
of this Agreement (“ Expiration Date ”). Except
with respect to the right to receive the Redemption Price (as set
forth in Section 7) in accordance with the terms of
Section 7, each Warrant not exercised on or before the
Expiration Date shall become void, and all rights thereunder and
all rights in respect thereof under this Agreement shall cease at
the close of business on the Expiration Date. The Company in its
sole discretion may extend the duration of the Warrants by delaying
the Expiration Date; provided, however, that the Company will
provide notice to registered holder or holders of the Warrants of
such extension of not less than 10 days.
4.3 Exercise of
Warrants .
(a) Payment. Subject
to the provisions of the Warrant and this Agreement, each Warrant,
when countersigned by the Warrant Agent, may be exercised on any
Trading Day during the Exercise Period by the registered holder
thereof by surrendering it, at the office of the Warrant Agent, or
at the office of its successor as Warrant Agent, in the Borough of
Manhattan, City and State of New York by delivering the following:
(i) the subscription form, as set forth in the Warrant, duly
executed, and (ii) payment in full in lawful money of the
United States, in cash, good certified check or good bank draft
payable to the order of the Company (or as otherwise agreed to by
the Company), the Warrant Price for each full share of Common Stock
as to which the Warrant is exercised and any and all applicable
taxes due in connection with the exercise of the Warrant, and
(iii) the original Warrant Certificate; provided, however,
that the Warrant shall not be exercisable and the Company shall not
be obligated to issue Common Stock unless, at the time the holder
seeks to exercise the Warrant, a prospectus relating to the Warrant
Stock is current and the Common Stock has been registered or
qualified or deemed to be exempt under the securities laws of the
United States and the state of residence of the holder of the
Warrant.
(b) Issuance of
Certificates . As soon as practicable after the exercise of any
Warrant and the clearance of the funds in payment of the Warrant
Price and the delivery to the Warrant Agent of the original Warrant
Certificate, the Company shall issue to the registered holder of
such Warrant a certificate or certificates for the number of full
shares of Common Stock to which he is entitled, registered in such
name or names as may be directed by him, her or it, and if such
Warrant shall not have been exercised in full, a new countersigned
Warrant for the number of shares as to which such Warrant shall not
have been exercised. Subject to Section 8.3 and
notwithstanding the foregoing, the Company shall not be obligated
to deliver any securities pursuant to the exercise of a Warrant and
shall have no obligation to settle such Warrant exercise unless a
registration statement under the Securities Act with respect to the
Common Stock is effective and such securities are qualified for
sale or exempt from qualification under applicable securities laws
of the state or other jurisdiction in which the registered holder
reside. In no event will the Company be required to net cash settle
the warrant exercise. Warrants may not be exercised by, or
securities issued to, any registered holder in any state in which
such exercise
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would be unlawful. Except as
otherwise provided in the Warrant, each certificate for Warrant
Stock initially issued upon the exercise of a Warrant pursuant to
an exemption from qualification or registration under any
applicable securities laws, and each certificate for Warrant Stock
issued to any subsequent transferee of any such certificate, shall
(if required by law or issued pursuant to any exemption from
registration) be stamped or otherwise imprinted with a legend in
form and substance satisfactory to the Company.
(c) Valid Issuance .
All Warrant Stock issued upon the proper exercise of the Warrant in
conformity with this Agreement shall be validly issued, fully paid
and non-assessable.
(d) Date of Issuance .
Each person in whose name any such certificate for shares of Common
Stock is issued shall for all purposes be deemed to have become the
holder of record of such shares on the date on which the Warrant
was surrendered and payment of the Warrant Price was made,
irrespective of the date of delivery of such certificate, except
that, if the date of such surrender and payment is not a Trading
Day, such person shall be deemed to have become a holder of such
shares at the close of business on the next succeeding Trading
Day.
5. Adjustments and
Anti-Dilution Provisions .
5.1 Common Stock
Distributions, etc . In case the Company shall (a) pay a
dividend or make a distribution on its Common Stock in shares of
Common Stock, (b) split or otherwise subdivide its outstanding
Common Stock into a greater number of shares or (c) combine
its outstanding Common Stock into a smaller number of shares, the
Warrant Price in effect immediately prior thereto shall be adjusted
so that the price shall equal the price determined by multiplying
the Warrant Price in effect immediately prior to such event by a
fraction, of which (i) the numerator shall be the number of
shares of Common Stock outstanding immediately prior to such event
and (ii) the denominator shall be the number of shares of
Common Stock outstanding immediately after such event. An
adjustment made pursuant to this Section 5.1 shall become
effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately
after the effective date in the case of subdivision or
combination.
5.2 Rights, Options or
Warrants Issuances . In case the Company shall issue rights,
options or warrants to all or substantially all holders of its
Common Stock entitling them (for a period commencing no earlier
than the record date described below and expiring not more than
60 days after such record date) to subscribe for or purchase
shares of Common Stock (or Convertible Securities) at a price per
share (or having an initial conversion price per share) less than
the Current Market Price Per Share on the record date for the
determination of stockholders entitled to receive such rights or
warrants, the Warrant Price in effect immediately prior thereto
shall be adjusted so that the same shall equal the price determined
by multiplying the Warrant Price in effect immediately prior to
such record date by a fraction, of which (a) the numerator
shall be the number of shares of Common Stock outstanding on such
record date plus the number of shares of Common Stock that the
aggregate offering price of the total number of shares of Common
Stock so offered (or the aggregate initial conversion price of the
Convertible Securities so offered, which shall be determined by
multiplying the number of shares of Common Stock issuable upon
exercise of such Convertible Securities by the initial conversion
price per share of Common Stock pursuant to the terms of such
Convertible Securities) would purchase at the Current Market Price
Per Share on such record date, and (b) the denominator shall
be the number of shares of Common Stock outstanding on such record
date plus the number of additional shares of Common Stock offered
(or into which the Convertible Securities so offered are
convertible); provided, however, that no adjustment shall be made
if the Company issues or distributes to the holder the rights,
options or warrants which the holder would have been entitled to
receive had this Warrant been exercised prior to the record date.
Any such adjustment shall be made successively
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whenever any such rights, options or
warrants are issued, and shall become effective immediately after
the applicable record date therefor unless such rights, options or
warrants are not immediately exercisable, in which case, any such
adjustments shall be made at the time such rights, options or
warrants become exercisable.
5.3 Distributions Other
Than Common Stock . If the Company after the date hereof shall
distribute to all or substantially all holders of any class of
Common Stock evidences of its indebtedness, cash or other assets,
shares of capital stock of any class or any other securities or
rights, options or warrants to subscribe therefor (excluding
(a) shares of Common Stock, rights, options or warrants
referred to in Section 5.1 and (b) the distribution of
rights to all holders of Common Stock pursuant to the adoption of a
stockholders’ rights plan or the detachment of such rights
under the terms of such stockholders’ rights plan), then in
each such case the Warrant Price shall be determined by multiplying
the Warrant Price in effect immediately before the record date of
such distribution by a fraction (i) the numerator of which
shall be such closing bid price per share of Common Stock on the
last Trading Day of the Common Stock immediately prior to such
record date, less the then fair market value (as determined in good
faith by the Board of Directors) of the portion of the assets or
evidences of indebtedness so distributed or of such shares of
capital stock, subscription rights or warrants applicable to one
share of the Common Stock and (ii) the denominator of which
shall be the closing bid price per share of Common Stock per share
of the Common Stock on the last Trading Day of the Common Stock
immediately prior to such record date; provided, however, that no
adjustment need be made for any transaction referred to in this
Section 5.3 if the registered holders of the Warrants are
entitled to participate in the transaction on the same basis as
holders of Common Stock participate in the transaction.
5.4 Effect of
Reclassification, Consolidation, Merger or Sale on Exercise
Privilege . If any of the following shall occur, namely:
(a) any reclassification or change of shares of Common Stock
issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination, or any
other change for which an adjustment is provided in this
Section 5); (b) any consolidation or merger or
combination to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation
and which does not result in any reclassification of, or change
(other than in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or
combination) in, outstan
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