exv10wxiy



 





Exhibit (10i)



EMPLOYMENT AGREEMENT BETWEEN FAR EAST ENERGY CORPORATION AND MICHAEL R.
McELWRATH



Far East Energy Corporation, a Nevada corporation (“Company”), and Michael R.
McElwrath (“Executive”) hereby agree as follows:



1. The term of this Agreement shall commence and this Agreement shall be
effective as of October 13, 2003, and shall terminate on October 13, 2008.
Employment of Executive, pursuant to the terms of this Agreement, will continue
thereafter only so long as both Company and Executive want it to do so. This
Agreement may be terminated by the Executive or Company upon thirty (30) days
written notice, subject to payment to Executive of the severance, separation or
contractual default payments of Clause 6 below. It is understood that upon
execution of this Agreement, Executive will tender two weeks notice to his
current employer, and that he will commence full-time duties for Company no
later than two weeks from such notice, and that during said two weeks Executive
will endeavor to provide such services to Company as may be possible subject to
the requirements of his current employer.



2. Executive shall be employed by Company as its Chief Executive Officer (CEO)
and shall have such duties, responsibilities and authority as shall be
consistent with that position. Executive shall report directly and solely to
the Company’s Board of Directors. Company agrees to nominate Executive for
Board Membership at each annual meeting of the stockholders during his
employment hereunder. If Executive is not nominated and elected as a Board
Member at any annual meeting, or is removed as CEO or as a Board Member by the
action of the Board or the shareholders (unless for “Cause” as defined
hereinbelow), then such non-nomination, non-election, or removal from the Board
or from the position of CEO, shall operate as termination of Executive’s
employment and shall trigger the obligation and payment of the lump-sum
separation or termination payment described in Clause 6 below.



3. As a material inducement to Executive to accept the position of CEO of Far
East Energy Corporation, Company shall pay to Executive a signing bonus in the
amount of $56,250.00 immediately upon the effective date of this Agreement. It
is expressly declared and stipulated by the Company and Executive that this
payment is not related to any indebtedness which the Company owes to Executive
(nor is there any such indebtedness at the date of execution hereof), it is
expressly declared and stipulated by the Company and Executive that this is not
a payment to be earned over time by Executive, is not conditioned upon length
of service or services rendered, and is given solely for the purpose of
inducing Executive to accept employment as CEO of Far East Energy. Without the
payment of this signing bonus, Executive would not accept Employment.



4. Executive shall receive an annual base salary of not less than $225,000,
payable in equal semi-monthly installments. Additionally, Executive shall be
eligible to receive, at six-month intervals during the life of this Agreement
(said intervals measured from the effective date of this Agreement) performance
bonuses in the amount of not less than $20,000, with the appropriate
performance criteria to be established by the Compensation Committee of Company
(or the Board, if no Compensation Committee exists) in discussions with
Executive. The initial performance criteria for the first six months of




 









 




Executive’s employment shall be established within 120 days after the effective
date of this Agreement and shall be delivered to the Executive in writing
signed by the necessary representative(s) of the Company. Thereafter, said
criteria shall be established and delivered in writing to Executive no later
than the first day of the appropriate six-month period. At least annually, and
no later than October 1st of each year, the Compensation Committee (or Board,
if there is no Compensation Committee in place) shall review the salary, bonus
and other compensation of Executive based upon performance, competitiveness and
appropriateness in the industry and make such increases, supplemental bonus
payments, or other incentive awards as it sees fit. In no event, however, will
Executive’s base salary ever be less than an annual rate of $225,000, or shall
performance bonuses which Executive may earn be less than $20,000 per six
months. No increase in salary or compensation will operate as a cancellation of
this Agreement, but merely as an amendment to this Clause 4. In addition to the
base salary and other compensation discussed in this Clause 4. Executive shall
be entitled to receive any benefits and fringes (whether subsidized in part, or
paid for in full by Company) including, but not limited to, medical, dental,
life and disability insurance, and 401K Savings and Retirement Plan which
Company now or in the future pays or subsidizes for any of its
professional/technical or management employees, or employees in the same class
as Executive.



5. On the effective date of this Agreement, Executive, in consideration for
other services rendered, and as a material inducement to Executive to accept
employment, shall receive options (the “Supplemental Options”) to acquire one
million two hundred thousand (1,200,000) shares of Far East Energy Corporation
Common Stock at the exercise price of $0.65 per share (the “Supplemental Option
Exercise Price”), said Supplemental Options to be awarded pursuant to the Stock
Option Agreement attached hereto as Exhibit A. With respect to one-half of the
shares to be exercised pursuant to each notice of exercise, in lieu of paying
the Supplemental Option Exercise Price in cash, the Executive or his assigns,
heirs, executors or administrators or personal or legal representatives may
exercise the Supplemental Options via cashless exercise by converting the
Supplemental Option into shares (the “Cashless Exercise Right”) as set forth
more fully in the Stock Option Agreement.




     The Supplemental Options shall vest according to the following schedule,
and shall be exercisable, in whole or in part until, October 13, 2013:




	 	(i)	 	240,000 of the Supplemental Option shares shall vest on the effective
date of this Employment Agreement;
	 
	 	(ii)	 	240,000 of the Supplemental Option shares shal1 vest one year from
the effective date of this employment agreement;
	 
	 	(iii)	 	240,000 of the Supplemental Option shares shall vest two years from
the effective date of this employment agreement;
	 
	 	(iv)	 	240,000 of the Supplemental Option shares shall vest three
years the effective date of this employment agreement; and
	 
	 	(v)	 	240,000 of the Supplemental Option shares shall vest four years from
the effective date of this employment agreement.





Options that have not previously vested shall vest immediately and fully
upon the death or disability of Executive, or in the event Company is
purchased or a Change of Control of Company occurs. In the event of death
or disability of Executive prior to April 1, 2005, Executive’s estate,
heirs, executors,



 









 






administrators, or personal or legal representatives as the case may be,
may not offer or sell any securities covered hereby until April 1, 2005.
“Change of Control” shall be deemed to have occurred if (l) any “person”
or “‘group” is or becomes the “beneficial owner” directly or indirectly,
of securities of Company representing 50% or more of the combined voting
power of Company’s then outstanding securities, or (2) the stockholders
of Company approve a merger or consolidation of company with any other
corporation or entity other than a merger or consolidation winch would
result in the voting securities of Company continuing to represent more
than 50% of the combined voting power of the voting securities of Company
or such surviving entity outstanding immediately after such merger or
consolidation.


6. As a material inducement to Executive to secure his services as Chief
Executive Officer, Company agrees that in the event that Executive is
terminated by Company for any reason (other than for “‘Cause” as defined herein
below), including by reference any termination effected by the occurrences set
forth in Clause 2 above, or is terminated after a Change in Control; or in the
event that Company becomes insolvent or seeks rebel or protection through
bankruptcy proceedings, makes a liquidation or distribution of its assets, or
simply ceases operations, all of which (insolvency, bankruptcy, distribution of
assets, and cessation of operations) shall be considered to constitute
constructive termination of Executive, Company shall immediately pay to
Executive a single lump-sum severance or separation payment of One Hundred
Thousand Dollars ($100,000). “Cause” shall mean gross misappropriation or theft
of company funds, conviction of a felony, or complete and total abandonment of
duties for thirty consecutive days (other than for reason of disability).
Additionally, if Company shall fail to pay any regular semi-monthly base salary
installment to Executive and should such failure to pay continue for more than
10 days, Executive may, at his option declare this agreement to be in default
and shall thereupon be entitled to an immediate lump-sum payment equal to One
Hundred Thousand Dollars ($100,000). Executive shall retain all of his rights
in, and ownership of, all stock options vested as of the date of termination,
or that would vest within thirty, (30) days following the date of termination
or separation, or contractual default.





Any termination by the Company or by Executive shall be communicated in
writing to the other party at least thirty (30) days before the date on
which the termination is proposed to take effect. With respect to any
termination by the Company for “Cause”, the notice shall set forth in
detail the facts and circumstances alleged to provide a basis for such
termination.




Any controversy or claim arising with regard to tile severance or
separation payment required under this Agreement shall be settled by
Expedited Arbitration in accordance with the provisions of the Texas
Arbitration Act with Texas law being applied. The controversy or claim
shall be submitted to an arbitrator appointed by the Presiding Judge of
the Harris County, Texas Judicial District Court and shall occur within
thirty days of the date of severance, separation, or termination and
within ten days of the court’s appointment of an arbitrator. The decision
of the arbitrator shall be final and binding upon the parties hereto and
shall be delivered in writing signed by the arbitrator to each of the
parties hereto. Should the arbitrator rule in favor of Executive, then
any award or sums due and owing to Executive hereunder shall be increased
by an amount equal to one month of Executive’s last effective base salary
for each month or part thereof that



 









 






has passed beyond the date of Executive’s termination or separation.
Should Company fail to comply with the decision of the arbitrator, or
should Company unsuccessfully appeal (any appeal shall be through the
courts of the State of Texas) the decision of the arbitrator, then any
award or sums due and owing to Executive hereunder shall be increased by
an amount equal to one month of Executive’s last effective base salary
for each month or part thereof that passes beyond the date of the
arbitrator’s initial decision or determination. Should the arbitrator in
the initial arbitration proceeding, or any court in any appeal thereof
determine that Company acted in bad faith, or frivolously, in claiming
“Cause” as its reason for termination, or in failing to immediately
tender to Executive the severance or separation payment set forth in this
Clause 6, Executive shall be entitled to receive and Company shall be
ordered to pay to Executive as a penalty an additional One Hundred
Thousand Dollars ($100,000.00) in addition to the One Hundred Thousand
Dollars ($100,000) initially required, as well as any additional sums due
or awarded hereunder. The prevailing party in the arbitration proceeding
or in any appeal shall be entitled to recover attorney’s fees, court
costs and all associated costs from the non-prevailing party.


7. If the Company shall at any time be merged or consolidated into or with any
other corporation or entity, the provisions of this agreement shall survive any
such transaction and shall be binding on and inure to the benefit and
responsibility of the corporation resulting from such merger or consolidation
of the corporation to which such assets will be transferred (and this provision
shall apply in the event of any subsequent merger, consolidation, or transfer),
and the Company, upon the occasion of any of the above-described transactions,
shall include in the appropriate agreements the obligation that the payments
herein agreed to be paid to or for the benefit of Michael R. McElwrath, his
beneficiaries or estate, shall be paid, and that the provisions of this Clause
7 be performed.



8. Executive, will nominate at least two outside Directors to the Board as soon
as is possible, intending to accomplish this within ninety (90) to
one-hundred-and-eighty (180) days. It is intended that these Directors be
prominent individuals within the energy industry.



9. Any controversy or claim arising under this Agreement shall be settled by
Arbitration in accordance with the provisions of the Texas Arbitration Act with
Texas law being applied. To the full extent controllable by stipulation of the
parties hereto, this Agreement and the accompanying Stock Option Agreement
shall be interpreted under Texas law. The controversy or claim shall be
submitted to an arbitrator appointed by the Presiding Judge of the Harris
County, Texas Judicial District Court. The decision of the arbitrator shall be
final and binding upon the parties hereto and shall be delivered in writing
signed by the arbitrator to each of the parties hereto. The prevailing party in
the arbitration proceeding or in any appeal shall be entitled to recover
attorney’s fees, court costs and all associated costs from the non-prevailing
party, if the dispute is related to the severance or separation payment in
Clause 6 above, the expedited arbitration provisions of Clause 6 shall apply
and the provisions of said Clause 6 shall control.



10 Any notice, request, or other communication required or permitted pursuant
to this Agreement shall be in writing and shall be deemed duly given when
received by the party to whom it shall be given or three days after being
mailed by certified, registered, or express mail, postage prepaid, addressed as
follows:




 









 





	 	 	 	 	 
	

	 	If to Company:
	

	 	 	 	Far East Energy Corporation
	

	 	 	 	400 North Sam Houston Parkway East
	

	 	 	 	Suite 205
	

	 	 	 	Houston, Texas 77060
	 
	 	 	 	 
	

	 	With copies to:
	

	 	 	 	Woltjen Law Firm
	

	 	 	 	4144 North Central Expressway, Suite 410 Dallas, Texas 75204
	

	 	 	 	Attention: Kevin Woltjen
	 
	 	 	 	 
	

	 	If to Executive:
	

	 	 	 	Michael R. McElwrath
	

	 	 	 	7 Stargazer Place
	

	 	 	 	The Woodlands, Texas 77381






11. This Agreement may be executed in counterparts, each of which, when taken
together, shall constitute one original Agreement.




     IN WITNESS WHEREOF, Company has caused its duly authorized officer and
directors to execute and attest to this Agreement, and to apply the corporate
seal hereto, and Participant has placed his or her signature hereon, effective
as of the first date above.



	 	 	 	 
	 	FAR EAST ENERGY CORPORATION
	 	
BY:


Name:

Title:	 	


/s/ Joe Cooper



Joe Cooper

President
	 	By:


Name:

Title:	 	
/s/ Jawaharlal Gondi



Jawaharlal Gondi

Director
	 	By:


Name:

Title:	 	
/s/ Tun Aye Sai



Tun Aye Sai

Director
	 	EXECUTIVE:
	 	By:


Name:	 	
/s/ Michael R. McElwrath



Michael R. McElwrath