Exhibit 10.6
MAGELLAN PETROLEUM CORPORATION
NONQUALIFIED STOCK OPTION
PERFORMANCE AWARD AGREEMENT
     This Agreement, made as of the grant date indicated in Section 3 below (the
“Grant Date”), by and between Magellan Petroleum Corporation, a Delaware
corporation (the “Company”), and the undersigned individual (the “Optionee”),
pursuant to the Magellan Petroleum Corporation 1998 Stock Option Plan, as
amended on October 24, 2007, as further amended and renamed the “1998 Stock
Incentive Plan” on December 11, 2008 and as further amended on March 19, 2009
and May 27, 2009 (the “Plan”). Terms used but not defined herein shall have the
same meaning as in the Plan).
     Whereas, the Optionee has commenced service to the Company as a consultant
as of the date hereof;
     Whereas, the Company wishes to (a) recognize Optionee’s extensive
experience and proven leadership in the oil and gas business; (b) acknowledge
Optionee’s potential to contribute to the success of the Company; and
(c) provide a proper long-term equity-based incentive for Optionee to expend his
maximum effort for the growth and success of the Company; and
     Whereas, the Company, acting through the Compensation Committee and the
full Board of Directors has previously approved the award of Nonqualified Stock
Options (“Options”) under the Plan to the Optionee (“Award”).
     Now, Therefore, in consideration of the terms and conditions of this
Agreement and pursuant to the Plan, the parties agree as follows:

1.   Grant of Options. The Company hereby awards to the Optionee the right and
option to purchase from the Company, at the exercise price set forth in
Section 3 below, all or any part of the aggregate number of shares of common
stock, par value $0.01 per share, of the Company, as such common shares are
presently constituted (the “Stock”), set forth in said Section 3.   2.   Terms
and Conditions. It is understood and agreed that the Options evidenced hereby
shall at all times be subject to the provisions of the Plan (which are
incorporated herein by reference) and the following terms and conditions:

  (f)   Expiration Date. The Options evidenced hereby shall expire on the date
specified in Section 3 below, or earlier as provided in Section 7 of the Plan.  
  (g)   Exercise of Option. The Options evidenced hereby shall be exercisable
from time to time by (i) providing written notice of exercise ten (10) days
prior to the date of

 

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      exercise specifying the number of shares for which the Options are being
exercised, addressed to the Company at its principal place of business, and
(ii) either:

  (A)   Cash Only Exercise — submitting the full cash purchase price of the
exercised Stock; or     (B)   Cashless Exercise — submitting appropriate
authorization for the sale of Stock in an amount sufficient to provide the full
purchase price in accordance with Section 5(d) of the Plan, or     (C)  
Combination — tendering a combination of (i) and (ii) above.

  (h)   Withholding Taxes. Without regard to the method of exercise and payment,
the Optionee shall pay to the Company, upon notice of the amount due, any
withholding taxes payable with respect to such exercise, which payment may be
made with shares of Stock which would otherwise be issued pursuant to the
Options.     (i)   Vesting. The shares covered by the Options shall vest in full
upon the attainment of either of the following mutually acceptable performance
goals: (i) upon monetizing the uncontracted gas reserves held by Magellan
Petroleum Australia Limited, the Company’s wholly-owned subsidiary) at the
Amadeus Basin fields, or (ii) upon the Closing Price of the Company’s Stock
being at or above $1.50 per share of Stock for a period of sixty
(60) consecutive trading days. For purposes of this Section 2(d), the term
“Closing Price” shall mean either: (i) if the Stock is listed on a national
securities exchange or quoted on the NASDAQ National Market or NASDAQ Capital
Market, then the Closing Price per share of the Stock shall be the last sale
price per share of the Common Stock in the principal trading market for the
Common Stock on such date, as reported by the exchange or NASDAQ, as the case
may be; (ii) if the Stock is not listed on a national securities exchange or
quoted on the NASDAQ National Market or NASDAQ Capital Market, but is traded in
the over-the-counter market, then the “Closing Price” per share of the Stock
shall be the closing bid price per share for the Stock on such date, as reported
by the OTC Bulletin Board or the National Quotation Bureau, Incorporated or
similar publisher of such quotations.     (j)   Acceleration. The Options
evidenced hereby shall immediately be accelerated and vest in full upon a
“change of control” of the Company as defined in Section 15 of the Plan or upon
a termination by the Company without cause of Optionee’s service as a consultant
under Optionee’s Consulting Agreement with the Company.     (h)   Compliance
with Laws and Regulations. The Options evidenced hereby are subject to
restrictions imposed at any time on the exercise or delivery of shares in
violation of the By-Laws of the Company or of any law or governmental regulation
that the Company may find to be valid and applicable.     (i)   Interpretation.
Optionee hereby acknowledges that this Agreement is governed by the Plan, a copy
of which Optionee hereby acknowledges having received, and by such
administrative rules and regulations relative to the Plan and not inconsistent

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      therewith as may be adopted and amended from time by the Committee (the
“Rules”). Optionee agrees to be bound by the terms and provisions of the Plan
and the Rules.

3.   Option Data.

         
 
  Optionee’s Name:   J. Thomas Wilson  
 
  Number of shares of Stock    
 
  Subject to this Option:   125,000 shares  
 
  Grant Date:   February 2, 2009  
 
  Exercise Price Per Share:   $1.20 per share  
 
  Expiration Date:   February 2, 2019

4.   Award of Options Contingent Upon Shareholder Approval and Completion of the
Equity Financing.

  (a)   Conditions. The award of the Options to the Optionee hereby are
expressly conditioned upon, and shall only take effect, if

  (i)   the Company’s shareholders approve an amendment and restatement of the
Plan at either (X) the Company’s 2008 annual meeting of shareholders to be held
in the near future, or (Y) at any subsequent annual or special meeting of
shareholders of the Company held on or before December 31, 2009, which approval
is required under the terms of the Plan and the listing requirements of the
Nasdaq Stock Market, Inc.; and     (ii)   the Company completes the proposed
equity investment by Young Energy Prize Fund, S.A. (“YEP”) in the Company
pursuant to that Securities Purchase Agreement, dated February 9, 2009 (as
amended) between the Company and YEP, as amended.

  (b)   Acknowledgement. Optionee acknowledges and agrees that, should the
conditions described in Sections 4(a)(i) and 4(a)(ii) above not be satisfied,
then the Award of Options evidenced hereby shall be null and void and of no
further force and effect.

5.   Miscellaneous. This Agreement and the Plan (a) contains the entire
Agreement of the parties relating to the subject matter of this Agreement and
supersedes any prior agreements or understandings with respect thereto; and
(b) shall be binding upon and inure to the benefit of the Company, its
successors and assigns and the Optionee, his heirs, devisees and legal
representatives. In the event of the Optionee’s death or a judicial
determination of his incompetence, reference in this Agreement to the Optionee
shall be deemed to refer to his legal representative, heirs or devisees, as the
case may be.

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* * * * * *
     In Witness Whereof, the Company has caused this instrument to be executed
by its authorized officer, as of the Grant Date identified in Section 3.

              Agreed to:   MAGELLAN PETROLEUM CORPORATION    
 
           
/s/ J. Thomas Wilson
 
Optionee: J. Thomas Wilson
  By:   /s/ William H. Hastings
 
Name: William H. Hastings    
 
      Title: President and CEO    

Date: July 9, 2009

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