Document:

Exhibit 10.2

 

Purchase Option Agreement

 

THE REGISTERED HOLDER
OF THIS PURCHASE OPTION BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION EXCEPT
AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE OPTION AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR
HYPOTHECATE THIS PURCHASE OPTION FOR A PERIOD OF ONE HUNDRED AND EIGHTY DAYS FROM MAY 24, 2012 TO ANYONE OTHER THAN A BONA FIDE
OFFICER OR PARTNER OF AEGIS CAPITAL CORP.

 

THIS PURCHASE OPTION
IS NOT EXERCISABLE PRIOR TO THE COMMENCEMENT DATE (AS DEFINED BELOW) AND IS VOID AFTER 5:00 P.M., EASTERN TIME, MAY 24, 2017.

 

 

PURCHASE OPTION

 

 

For the Purchase of Ordinary Shares

of

Rosetta Genomics Ltd

 

 

1.Purchase
Option. THIS PURCHASE OPTION CERTIFIES THAT, in consideration of funds duly paid by or on behalf of Aegis Capital Corp. (“Holder”),
as registered owner of this Purchase Option, to Rosetta Genomics Ltd. (the “Company”), Holder is entitled, at
any time or from time to time from May 24, 2013 (the “Commencement Date”), and at or before 5:00 p.m., Eastern
time, May 24, 2017 (the  “Expiration Date”), but not thereafter, to subscribe for, purchase and receive,
in whole or in part, up to 14,269 ordinary shares of the Company, par value NIS 0.6 per share (the “Shares”),
subject to adjustment as provided in Section 6 hereof. If the Expiration Date is a day on which banking institutions are authorized
by law to close, then this Purchase Option may be exercised on the next succeeding day which is not such a day in accordance with
the terms herein. During the period ending on the Expiration Date, the Company agrees not to take any action that would terminate
the Purchase Option. This Purchase Option is initially exercisable at $14.375 per Share; provided, however, that
upon the occurrence of any of the events specified in Section 6 hereof, the rights granted by this Purchase Option, including the
exercise price per Share and the number of Shares to be received upon such exercise, shall be adjusted as therein specified. The
term “Exercise Price” shall mean the initial exercise price or the adjusted exercise price, depending on the
context.

 

2.Exercise.

 

2.1Exercise Form. In order to exercise this Purchase Option, the exercise form attached hereto
must be duly executed and completed and delivered to the Company, together with this Purchase Option and payment of the Exercise
Price for the Shares being purchased payable in cash by wire transfer of immediately available funds to an account designated by
the Company or by certified check or official bank check. If the subscription rights represented hereby shall not be exercised
at or before 5:00 p.m., Eastern Time, on the Expiration Date, this Purchase Option shall become and be void without further force
or effect, and all rights represented hereby shall cease and expire.

    	 

    	 

    
 

2.2Cashless
Exercise.  In lieu of exercising this Purchase Option by payment of cash or check payable to the order of the Company
pursuant to Section 2.1 above, Holder may elect to receive the number of Shares equal to the value of this Purchase Option (or
the portion thereof being exercised), by surrender of this Purchase Option to the Company, together with the exercise form attached
hereto, in which event the Company will issue to Holder Shares in accordance with the following formula:

 

	X	=	Y(A-B)	 
	A	 
	Where,	
        

        X
	=	The number of Shares to be issued to Holder;
	 	Y	=	The number of Shares for which the Purchase Option is being exercised;
	 	A	=	The fair market value of one Share; and
	 	B	=	The Exercise Price.
	 	 	 	 	 	 

           
For purposes of this Section 2.2, the fair market value of a Share is defined as follows:

 

(i)if the Company’s
ordinary shares are traded on a securities exchange, the value shall be deemed to be the average closing price over the last 30
trading days for the Company’s ordinary shares trading on such exchange prior to the exercise form being submitted in connection
with the exercise of the Purchase Option;

 

(ii)if the Company’s
ordinary shares are traded or quoted over-the-counter, the value shall be deemed to be the closing bid price over the last 30 trading
days for the Company’s ordinary shares traded or quoted over-the-counter prior to the exercise form being submitted in connection
with the exercise of the Purchase Option; or

 

(iii)if
there is no public market for the Company’s ordinary shares, the value shall be the fair market value thereof, as determined
in good faith by the Company’s Board of Directors.

2.3 Legend.
Each certificate for the securities purchased under this Purchase Option shall bear a legend as follows unless such securities
have been registered under the Securities Act of 1933, as amended (the “Act”):

 

“The securities
represented by this certificate have not been registered under the Securities Act of 1933, as amended (the “Act”),
or applicable state law. Neither the securities nor any interest therein may be offered for sale, sold or otherwise transferred
except pursuant to an effective registration statement under the Act, or pursuant to an exemption from registration under the Act
and applicable state law which, in the opinion of counsel to the Company, is available.”

 

3.Transfer.

 

3.1General Restrictions.
The registered Holder of this Purchase Option agrees by his, her or its acceptance hereof, that such Holder will not: (a) sell,
transfer, assign, pledge or hypothecate this Purchase Option for a period of one hundred eighty (180) days following the date of
the issuance hereof (such date of issuance, the “Effective Date”) to anyone other than: a bona fide officer
or partner of Aegis, in each case in accordance with FINRA Conduct Rule 5110(g)(1), or (b) cause this Purchase Option or the securities
issuable hereunder to be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective
economic disposition of this Purchase Option or the securities hereunder, except as provided for in FINRA Rule 5110(g)(2). On and
after one hundred eighty (180) days after the Effective Date, transfers to others may be made subject to compliance with or exemptions
from applicable securities laws. In order to make any permitted assignment, the Holder must deliver to the Company the assignment
form attached hereto duly executed and completed, together with the Purchase Option and payment of all transfer taxes, if any,
payable in connection therewith. The Company shall within five (5) Business Days transfer this Purchase Option on the books of
the Company and shall execute and deliver a new Purchase Option or Purchase Options of like tenor to the appropriate assignee(s)
expressly evidencing the right to purchase the aggregate number of Shares purchasable hereunder or such portion of such number
as shall be contemplated by any such assignment.

    	 

    	 

    
 

3.2 Restrictions
Imposed by the Act. Notwithstanding Section 3.1 hereof, this Purchase Option and/or any or all of the Shares shall not be transferred
unless and until: (i) the Company has received the opinion of counsel for the Holder that this Purchase Option and/or any or all
of the Shares may be transferred pursuant to an exemption from registration under the Act and applicable state securities laws,
the availability of which is established to the reasonable satisfaction of the Company (the Company hereby agreeing that the written
opinion of Zysman Aharoni Gayer and Sullivan & Worcester LLP shall be deemed satisfactory evidence of the availability of an
exemption), or (ii) a registration statement or a post-effective amendment to such registration statement relating to the offer
and sale of this Purchase Option and/or any or all of the Shares has been filed by the Company and declared effective by the U.S.
Securities and Exchange Commission (the “Commission”) and compliance with applicable state securities law
has been established.

 

3.3Legend Removal.
Upon the exercise of the Holder’s rights to cashless exercise pursuant to Section 2.2 hereof and subject to the transfer
restrictions set forth in Section 3.1 hereof, the Company shall, at its own expense, cause its counsel to issue a legal opinion
to the Transfer Agent promptly after the Effective Date if required by the Transfer Agent to effect the removal of the legend hereunder.
If all or any portion of a Purchase Option is exercised at a time when there is an effective registration statement to cover the
resale of the Shares, or if such Shares may be sold under Rule 144 and the Company is then in compliance with the current public
information required under Rule 144, or if the Shares may be sold under Rule 144 without the requirement for the Company to be
in compliance with the current public information required under Rule 144 as to such Shares or if such legend is not otherwise
required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the
staff of the Commission) then such Shares shall be issued free of all legends or sold pursuant to Rule 144, as applicable. The
Company agrees that at such time as such legend is no longer required under this Section 3.3, it will, no later than five business
days following the delivery by a Holder to the Company or the Transfer Agent of a certificate representing Securities issued with
a restrictive legend (such fifth business day, the “Legend Removal Date”), deliver or cause to be delivered
to such Holder a certificate representing such Shares that is free from all restrictive and other legends. The Company Certificates
for Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account
of the Holder’s prime broker with the Depository Trust Company System as directed by such Holder. “Rule 144”
means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

4.New Purchase Options to be Issued.

 

4.1Partial Exercise
or Transfer. Subject to the restrictions in Section 3 hereof, this Purchase Option may be exercised or assigned in whole or
in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Option for cancellation,
together with the duly executed exercise or assignment form and funds sufficient to pay any Exercise Price and/or transfer tax
if exercised pursuant to Section 2.1 hereto, the Company shall cause to be delivered to the Holder without charge a new Purchase
Option of like tenor to this Purchase Option in the name of the Holder evidencing the right of the Holder to purchase the number
of Shares purchasable hereunder as to which this Purchase Option has not been exercised or assigned.

    	 

    	 

    
 

4.2 Lost Certificate.
Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Purchase Option
and of reasonably satisfactory indemnification or the posting of a bond, the Company shall execute and deliver a new Purchase Option
of like tenor and date. Any such new Purchase Option executed and delivered as a result of such loss, theft, mutilation or destruction
shall constitute a substitute contractual obligation on the part of the Company.

 

5.Adjustments.

 

5.1Adjustments
to Exercise Price and Number of Securities. The Exercise Price and the number of Shares underlying the Purchase Option shall
be subject to adjustment from time to time as hereinafter set forth:

 

5.1.1Share Dividends;
Split Ups. If, after the date hereof, and subject to the provisions of Section 5.3 below, the number of outstanding Shares
is increased by a stock dividend payable in Shares or by a split up of Shares or other similar event, then, on the effective day
thereof, the number of Shares purchasable hereunder shall be increased in proportion to such increase in outstanding shares, and
the Exercise Price shall be proportionately decreased.

 

5.1.2 Aggregation
of Shares. If, after the date hereof, and subject to the provisions of Section 5.3 below, the number of outstanding Shares
is decreased by a consolidation, combination or reclassification of Shares or other similar event, then, on the effective date
thereof, the number of Shares purchasable hereunder shall be decreased in proportion to such decrease in outstanding shares and
the Exercise Price shall be proportionately increased.

 

5.1.3 Replacement
of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding Shares other than
a change covered by Section 5.1.1 or 5.1.2 hereof or that solely affects the par value of such Shares, or in the case of any share
reconstruction or amalgamation or consolidation of the Company with or into another corporation (other than a consolidation or
share reconstruction or amalgamation in which the Company is the continuing corporation and that does not result in any reclassification
or reorganization of the outstanding Shares), or in the case of any sale or conveyance to another corporation or entity of the
property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder
of this Purchase Option shall have the right thereafter (until the expiration of the right of exercise of this Purchase Option)
to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the
kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization,
share reconstruction or amalgamation, or consolidation, or upon a dissolution following any such sale or transfer, by a Holder
of the number of Shares of the Company obtainable upon exercise of this Purchase Option immediately prior to such event; and if
any reclassification also results in a change in Shares covered by Section 5.1.1 or 5.1.2, then such adjustment shall be made pursuant
to Sections 5.1.1, 5.1.2 and this Section 5.1.3. The provisions of this Section 5.1.3 shall similarly apply to successive reclassifications,
reorganizations, share reconstructions or amalgamations, or consolidations, sales or other transfers.

    	 

    	 

    
 

5.1.4 Changes
in Form of Purchase Option. This form of Purchase Option need not be changed because of any change pursuant to this Section
5.1, and Purchase Options issued after such change may state the same Exercise Price and the same number of Shares as are stated
in the Purchase Options initially issued pursuant to this Agreement. The acceptance by any Holder of the issuance of new Purchase
Options reflecting a required or permissive change shall not be deemed to waive any rights to an adjustment occurring after the
Commencement Date or the computation thereof.

 

5.2 Substitute
Purchase Option. In case of any consolidation of the Company with, or share reconstruction or amalgamation of the Company with
or into, another corporation (other than a consolidation or share reconstruction or amalgamation which does not result in any reclassification
or change of the outstanding Shares), the corporation formed by such consolidation or share reconstruction or amalgamation shall
execute and deliver to the Holder a supplemental Purchase Option providing that the holder of each Purchase Option then outstanding
or to be outstanding shall have the right thereafter (until the stated expiration of such Purchase Option) to receive, upon exercise
of such Purchase Option, the kind and amount of shares of stock and other securities and property receivable upon such consolidation
or share reconstruction or amalgamation, by a holder of the number of Shares of the Company for which such Purchase Option might
have been exercised immediately prior to such consolidation, share reconstruction or amalgamation, sale or transfer. Such supplemental
Purchase Option shall provide for adjustments which shall be identical to the adjustments provided for in this Section 5. The above
provision of this Section shall similarly apply to successive consolidations or share reconstructions or amalgamations.

 

5.3 Elimination of Fractional
Interests. The Company shall not be required to issue certificates representing fractions of Shares upon the exercise of the
Purchase Option, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by rounding any fraction up or down, as the case may be, in accordance
with any resolution by the Company’s General Assembly or Board of Directors or, if no such resolution is made, to the nearest
whole number of Shares or other securities, properties or rights.

 

6.Reservation and Listing. The
Company shall at all times reserve and keep available out of its authorized shares, solely for the purpose of issuance upon exercise
of the Purchase Options, such number of Shares or other securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Purchase Options and payment of the Exercise Price therefor,
in accordance with the terms hereby, all Shares and other securities issuable upon such exercise shall be duly and validly issued,
fully paid and non-assessable and not subject to preemptive rights of any shareholder. As long as the Purchase Options shall be
outstanding, the Company shall use its commercially reasonable efforts to cause all Shares issuable upon exercise of the Purchase
Options to be listed (subject to official notice of issuance) on all national securities exchanges (or, if applicable, on the OTC
Bulletin Board or any successor trading market) on which the Shares may then be listed and/or quoted.

 

7.Certain Notice Requirements.

 

7.1Holder's
Right to Receive Notice. Nothing herein shall be construed as conferring upon the Holders the right to vote or consent or to
receive notice as a shareholder for the election of directors or any other matter, or as having any rights whatsoever as a shareholder
of the Company. If, however, at any time prior to the expiration of the Purchase Options and their exercise, any of the events
described in Section 7.2 shall occur, then, in one or more of said events, the Company shall give written notice of such event
at least ten days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of
the closing of the transfer books, as the case may be. Notwithstanding the foregoing, the Company shall deliver to each Holder
a copy of each notice given to the other shareholders of the Company at the same time and in the same manner that such notice is
given to the shareholders.

    	 

    	 

    
 

7.2 Events Requiring
Notice. The Company shall be required to give the notice described in this Section 7 upon one or more of the following events:
(i) if the Company shall take a record of the holders of its Shares for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of retained earnings,
as indicated by the accounting treatment of such dividend or distribution on the books of the Company, (ii) the Company shall offer
to all the holders of its ordinary shares any additional shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor, or (iii) a dissolution,
liquidation or winding up of the Company (other than in connection with a consolidation or share reconstruction or amalgamation)
or a sale of all or substantially all of its property, assets and business shall be proposed.

 

7.3 Notice of
Change in Exercise Price. The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to Section
5 hereof, send notice to the Holders of such event and change (“Price Notice”). The Price Notice shall describe
the event causing the change and the method of calculating same and shall be certified as being true and accurate by the Company's
Chief Financial Officer.

 

7.4 Transmittal
of Notices. All notices, requests, consents and other communications under this Purchase Option shall be in writing and shall
be deemed to have been duly made when hand delivered, or mailed by express mail or private courier service: (i) if to the registered
Holder of the Purchase Option, to the address of such Holder as shown on the books of the Company, or (ii) if to the Company, to
following address or to such other address as the Company may designate by notice to the Holders:

 

If to the Holder:

 

Aegis Capital Corp.

810 Seventh Avenue, 11th Floor

New York, New York 10019

		Attn:	Mr. David Bocchi, Managing Director of
	 	 	Investment
Banking 

Fax
No.: (212) 813-1047

 

Copy to:

 

Zysman Aharoni Gayer and Sullivan & Worcester
LLP

1290 Avenue of the Americas, 29th Floor

New York, NY 10104

Attn: Oded Har-Even, Esq.

Fax No. (212) 660 3001

    	 

    	 

    
 

If to the Company:

 

Rosetta Genomics Ltd

10 Plaut Street, Science Park

Rehovot 76707 Israel

Attention: Kenneth A. Berlin

Fax No: 972-73-222-0701

 

Copy to:

 

Brian Keane, Esq.

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

One Financial Center

Boston, MA 02111

Attention:
Brian Keane, Esq.

Fax
No.: (617) 542-2241

 

8.Miscellaneous.

 

8.1Amendments.
The Company and Aegis may from time to time supplement or amend this Purchase Option without the approval of any of the Holders
in order to cure any ambiguity, to correct or supplement any provision contained herein that may be defective or inconsistent with
any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder that the Company
and Aegis may deem necessary or desirable and that the Company and Aegis deem shall not adversely affect the interest of the Holders.
All other modifications or amendments shall require the written consent of and be signed by the party against whom enforcement
of the modification or amendment is sought.

 

8.2 Headings.
The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Purchase Option.

 

8.3. Entire
Agreement. This Purchase Option (together with the other agreements and documents being delivered pursuant to or in connection
with this Purchase Option) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and
supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.

 

8.4 Binding
Effect. This Purchase Option shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and
their permitted assignees, respective successors, legal representative and assigns, and no other person shall have or be construed
to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Purchase Option or any provisions
herein contained.

 

8.5 Governing
Law; Submission to Jurisdiction. This Purchase Option shall be governed by and construed and enforced in accordance with the
laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any
action, proceeding or claim against it arising out of, or relating in any way to this Purchase Option shall be brought and enforced
in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York,
and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to
such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the
Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid,
addressed to it at the address set forth in Section 8 hereof. Such mailing shall be deemed personal service and shall be legal
and binding upon the Company in any action, proceeding or claim. The Company and the Holder agree that the prevailing party(ies)
in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys' fees and expenses relating
to such action or proceeding and/or incurred in connection with the preparation therefor.

    	 

    	 

    
 

8.6 Waiver,
etc. The failure of the Company or the Holder to at any time enforce any of the provisions of this Purchase Option shall not
be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Purchase Option or any
provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Purchase Option.
No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Purchase Option shall be effective
unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought;
and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.

 

8.7 Execution
in Counterparts. This Purchase Option may be executed in one or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto. Such counterparts may be delivered by facsimile transmission or other electronic transmission.

 

[Remainder of page intentionally
left blank]

    	 

    	 

    
 

IN WITNESS WHEREOF, the Company has caused
this Purchase Option to be signed by its duly authorized officer as of the ______ day of ____________, 2012.

 

 

	Rosetta Genomics Ltd.	 
	 	 	 
	 	 	 
	By:	 	 
	 	Name: Kenneth A. Berlin	 
	 	Title: Chief Executive Officer	 

 

    	 

    	 

    
 

[Form to be used to
exercise Purchase Option:]

 

 

 

Date: __________, 20___

 

 

 

The undersigned
hereby elects irrevocably to exercise the Purchase Option for ______ ordinary shares of the Company and hereby makes payment of
$____ (at the rate of $____ per Share) in payment of the Exercise Price pursuant thereto. Please issue the Shares as to which this
Purchase Option is exercised in accordance with the instructions given below and, if applicable, a new Purchase Option representing
the number of Shares for which this Purchase Option has not been exercised.

 

or

 

The undersigned
hereby elects irrevocably to convert its right to purchase ___ Shares under the Purchase Option for ______ Shares, as determined
in accordance with the following formula:

 

	 	X	=	Y(A-B)	 
	A	 

 

	Where,	X	=	The number of Shares to be issued to Holder;
	 	Y	=	The number of Shares for which the Purchase Option is being exercised;
	 	A	=	The fair market value of one Share which is equal to $_____; and
	 	B	=	The Exercise Price which is equal to $______ per share

 

The undersigned
agrees and acknowledges that the calculation set forth above is subject to confirmation by the Company and any disagreement with
respect to the calculation shall be resolved by the Company in its sole discretion.

 

Please issue
the Shares as to which this Purchase Option is exercised in accordance with the instructions given below and, if applicable, a
new Purchase Option representing the number of Shares for which this Purchase Option has not been converted.

 

Signature

 

 

 

Signature Guaranteed

    	 

    	 

    
 

INSTRUCTIONS FOR REGISTRATION OF SECURITIES

 

Name:

 

 

 

(Print in Block Letters)

 

 

 

Address:

  

 

 

 

 

 

 

NOTICE: The signature
to this form must correspond with the name as written upon the face of the Purchase Option without alteration or enlargement or
any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership
on a registered national securities exchange.

    	 

    	 

    
 

[Form to be used to assign Purchase Option:]

 

 

ASSIGNMENT

 

 

(To be executed by the registered Holder
to effect a transfer of the within Purchase Option):

 

 

 

FOR VALUE RECEIVED, __________________
does hereby sell, assign and transfer unto the right to purchase shares of Rosetta Genomics Ltd (the “Company”)
evidenced by the Purchase Option and does hereby authorize the Company to transfer such right on the books of the Company.

 

 

 

Dated: __________, 20__

 

 

 

 

Signature

 

 

 

 

Signature Guaranteed

 

 

 

 

NOTICE: The signature
to this form must correspond with the name as written upon the face of the within Purchase Option without alteration or enlargement
or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.To:

 

Far East
Energy Corporation

363 N. Sam
Houston Parkway E. Ste. 380

Houston,
Texas 77060

Attn: Bruce
Huff

 

May __, 2012

 

Dear Bruce:

 

We refer to the Facility Agreement dated
as of 28 November 2011 (as amended, the “Facility Agreement”), among Far East Energy (Bermuda), Ltd., Far East
Energy Corporation, acting as Guarantor and Standard Chartered Bank, acting as Lender. Capitalized terms used herein and not otherwise
defined shall have the meanings given to such terms in the Facility Agreement.

 

We write in response to your recent request
to:

 

		1.	exercise the option to extend the maturity date under the facility by 3 months in accordance with
section 6.2 (Extension Option) of the Facility Agreement; provided that the extension will be effective only upon the date
(the “Extension Date”) of the delivery by the Borrower or the Guarantor to the Lender of an extension notice
together with either (x) reasonable evidence of an offer in connection with a potential strategic transaction involving the Guarantor
or (y) a refinancing plan, in each case, acceptable in form and substance to the Lender (acting in its sole discretion) and if
at the time of the delivery to the Lender of such information, no Default has occurred and is continuing;

 

		2.	waive the right of first refusal set forth in section 21.21(a) (Future Mandate) of the Facility
Agreement to lead arrange any long term financing of the Project or any existing or future asset of the Guarantor (for the avoidance
of doubt, all parties recognize and reaffirm that any additional financial indebtedness that is incurred would, in accordance with
section 21.16(c) (Financial Indebtedness) of the Facility Agreement be used to prepay in full the Loans);

 

		3.	waive until the Termination Date of August 30, 2012 the event of default under section 22.18 (Ministry
of Commerce Approval) of the Facility Agreement that would arise on May 30, 2012 if the relevant Ministry of Commerce approval
is not obtained by such date; provided that the Borrower agrees to procure a written update (as further described in the amendment
letter) from CUCBM on the progress of the MOFCOM approval if such approval is not obtained by June 30, 2012; and

 

		4.	confirm that the Lender will extend its commitment to make available amounts in excess of U.S.$
20,000,000 for the period from May 30, 2012 until August 30, 2012 (if the Borrower has failed to obtain the relevant MOFCOM approval
by August 30, 2012, any unused commitments (i.e., U.S.$ 5 million) will be cancelled); provided, however, that all conditions precedent
to draw such amounts, including, without limitation, the condition set forth in section 4.2(f) of the Facility Agreement (i.e.,
provision of satisfactory evidence of approval by the MOFCOM of the extension of the PSC), will remain unmodified; provided, further,
that such amounts would only be available if (x) updates (reasonably satisfactory to the Lender in form and substance) are provided
at the time of such proposed drawdown regarding: (i) the status of the strategic transaction process; and (ii) the status of arrangements
for third party financings; and (y) such amounts would be used to meet expenses that are paid with at least 50% of funds from sources
other than the drawdown proceeds.

 

In consideration for our agreement to such
requests, you have offered to provide:

 

		a.	updates (reasonably satisfactory to us in form and substance) on the following items:

 

		·	status of the MOFCOM approval process;

 

    	 

    	 

    

 

		·	status of the strategic transaction process;

 

		·	status of arrangements for third party
financings; and

 

		·	cash flow statement (including sources
and uses of funds through the Termination Date); and

 

		b.	an agreed capital expenditure plan through the final maturity of the bridge, together with monthly
updates on the status of cash expenditures

 

		c.	additional control over the Borrower’s and Guarantor’s accounts that are currently
outside the Security (and therefore not governed by the Account Charge Agreement), including:

 

		·	provision at the beginning of each month
of account balance updates for all accounts of Borrower and Guarantor, together with projected expenses to be paid over the following
month and the provision of a reconciliation report reconciling such projected expenses to the actual expenses incurred for the
applicable month, which reconciliation report shall be provided within ten (10) Business Days following the last day of the month
covered by the account balance and projected expense report; 

 

		·	amendment of the Account Charge Agreement
(or a new account control agreement shall be entered into) to ensure that such accounts are subject to the Security (other than
accounts to the extent that the funds held therein are used for payroll, the payment of employment withholding and related Taxes
or the funding of an employee benefit plan and other accounts to the extent in which a lien thereon is prohibited by operation
of law or as agreed to by the Lender); provided, however, that the Borrower and/or Guarantor may continue to temporarily invest
the balances in such revenue generating investments (such investments would be allowed pursuant to a “permitted investments”
regime); and

 

		·	prior to the payment of any expenses by
the Borrower or the Guarantor, the Lender shall have the right to approve such expenses (such approval to not to be unreasonably
withheld or delayed), unless such expenses are either: 

 

(i) incurred by the Borrower
or the Guarantor (as applicable) in the ordinary course of business consistent with past practice and (a) is reasonably necessary
in the Borrower’s or the Guarantor’s respective business or (b) relate to a contractual obligation of the Borrower
or the Guarantor (as applicable) in existence on or prior to the date hereof or

 

(ii) incurred by the Borrower
or the Guarantor (as applicable) in connection with the due diligence, negotiation or execution of any strategic transaction involving
the Borrower or the Guarantor or any financing or equity fund raising of the Borrower or the Guarantor and such expenses are reasonably
determined to be in the best interests of the Borrower or the Guarantor; provided that from and after the date hereof, without
the approval of the Lender (such approval not to be unreasonably withheld or delayed) such expenses incurred under this clause
(ii) shall not exceed the greater of U.S.$ 250,000 each calendar month and an average of U.S.$ 250,000 during any three calendar
month period; provided further that, notwithstanding the foregoing, the Borrower or the Guarantor (as applicable) may pay such
expenses if the Borrower shall provide to the Lender a report that is accepted by the Lender (acting reasonably) reflecting that
the Group has sufficient liquidity to meet its reasonably expected expenses through the earlier of the Termination Date and the
date of the consummation of any strategic transaction.

 

		d.	a one-time amendment fee of U.S.$ 800,000 (inclusive of the U.S.$ 500,000 extension fee, set forth
in section 6.2(b) (Extension Option) of the Facility Agreement), primarily payable for the exercise of the extension option,
the waiver of the right of first refusal and the extension of the commitment to make available amounts in excess of U.S.$ 20,000,000
for the period from May 30, 2012 until August 30, 2012. Such fee would be capitalized with U.S.$ 300,000 of such fee payable within
10 days of the date that the amendments are agreed (and the related amendment letter is executed) and the remainder payable on
the later of (1) the Extension Date and (2) the earlier of (i) August 30, 2012, (ii) the date that any additional amount is drawn
under the Facility Agreement (with the proceeds of such draw) and (iii) the date that amounts are drawn under any third party financing
(with the proceeds of the first draw of such financing).

    	 

    	 

    

 

 

We have considered this request and are
prepared to proceed on the terms described above and in the attached form of amendment letter.

 

We have attached a form of amendment letter
that would implement this proposed amendment. Please do not hesitate to contact us with any comments or questions.

 

 

Regards,

 

 

__________________

For and on behalf of Standard Chartered Bank

Name:

Title:

 

 

 

 

    	 

    	 

    

 

Schedule
I

 

Form
of Amendment Letter

 

 

This amendment letter agreement (this “Letter”)
is made this ____ day of May, 2012 among:

 

		(i)	Far East Energy (Bermuda), Ltd., acting as Borrower (and any successors and assigns in such
capacity);

 

		(ii)	Far East Energy Corporation, acting as Guarantor (and any successors and assigns in such
capacity); and

 

		(iii)	Standard Chartered Bank, acting as Lender (and any successors and assigns in such capacity).

 

We refer to the Facility Agreement dated
as of 28 November 2011 (as amended, the “Facility Agreement”), among Far East Energy (Bermuda), Ltd., Far East
Energy Corporation, acting as Guarantor and Standard Chartered Bank, acting as Lender. Capitalized terms used herein and not otherwise
defined shall have the meanings given to such terms in the Facility Agreement.

 

The parties hereto wish to execute this
Letter in order to reflect their agreement that, effective as of the Lender’s confirmation that the Lender’s legal
counsel has confirmed that all of the Guarantor’s and Borrower’s accounts are subject to the Security (and the Account
Charge Agreement has been amended accordingly)):

 

		A.	The Facility Agreement is amended as follows:

 

		1.	effective on the delivery to the Lender by the Borrower
or the Guarantor of: (x) an extension notice and (y)(i) reasonable evidence of an offer in connection with a potential strategic
transaction involving the Guarantor, the proceeds of which would be used to prepay in full the Loans; or (ii) a refinancing plan
for the Facility; in each case, in form and substance acceptable to the Lender (acting in its sole discretion), and provided that,
at the time of such delivery, no Default is continuing, the Lender confirms that the requirements of Section 6.2 (Extension
option) shall have been met (such date on which all of the terms and conditions of this Section A(1) are satisfied, the “Extension
Date”) and accordingly, the definition of “Termination Date”, as set forth in Section 1.1 (Definitions)
is amended and restated to read as follows:

 

“Termination Date”
means the date which is 12 Months after the date of this Agreement (except that, if the Termination Date would otherwise fall on
a day which is not a Business Day, it will instead be the immediately preceding Business Day).”

 

		2.	the Lender hereby waives its right of first refusal
to lead arrange any long term financing of the Project or any existing or future asset of the Guarantor or the right to act as
joint or sole lead manager or joint book-runner in respect of any relisting or equity fundraising of the Guarantor, as set forth
in section 21.21 (Future Mandate) of the Facility Agreement (for the avoidance of doubt, all parties recognize and reaffirm
that any additional financial indebtedness that is incurred or proceeds that are raised would, in accordance with section 21.16(c)
(Financial Indebtedness) of the Facility Agreement be used to prepay in full the Loans);

 

    	 

    	 

    

 

		3.	the Lender hereby waives its rights under Section
22.18 (Ministry of Commerce approval) until the Termination Date (then in-effect pursuant to paragraph A1 above); provided
that, if the approval by the Ministry of Commerce, the government of the PRC of the extension of the PSC as contemplated in the
Fifth Modification Agreement, is not received by June 30, 2012, the Borrower shall procure that CUCBM provides the Lender with
a written update by June 30, 2012 regarding the status of such approval, in form and substance acceptable to the Lender (acting
in its sole discretion), which shall include background as to: (i) the reason for the delay in receiving such approval by such
date; (ii) CUCBM’s estimate of the date that such approval would be received; and (iii) CUCBM’s view of the remaining
steps that need to be taken for such approval to be obtained. The failure to provide an acceptable report shall result in an immediate
Default.

 

		4.	Section 5.5 (Cancellation of Commitment) is
hereby amended by adding at the end of such section: “; provided, however, that if the Borrower has failed, within nine
months of the date of the first Utilisation under this Facility, to provide to the Lender satisfactory evidence of approval by
the Ministry of Commerce, the government of the PRC of the extension of the PSC as contemplated in the Fifth Modification Agreement,
the Commitment which, at that time, is unutilised shall be immediately cancelled.”.

 

		5.	Clause (ii)(c) of Section 4.2(f) (Further conditions
precedent) is hereby amended by adding the following at the end of such clause:

 

“, the Borrower has provided
to the Lender a written update regarding the status of (x) any potential strategic transaction involving the Guarantor, the proceeds
of which would be used to prepay in full the Loans; and (y) the refinancing plan for the Facility; in each case, in form and substance
acceptable to the Lender (acting in its sole discretion) and the Borrower may utilize the proceeds of such draw to meet expenses
only if at least 50% of such expenses are able to be satisfied with funds from sources other than the drawdown proceeds.”

 

		6.	Clause (h) of Section 19.3 (Information: miscellaneous)
is hereby amended by adding the following at the end of such clause:

 

“and an update on the
status of the Borrower’s and the Guarantor’s cash expenditures through to the Termination Date; provided, further,
that as soon as reasonably practicable, and, in any case, no later than May 30, 2012, the Borrower and the Guarantor shall provide
to the Lender a plan (acceptable in form and substance to the Lender) for capital expenditure through to the Termination Date”.

 

		B.	As soon as reasonably practicable, and, in any case, no later than 30 days after the date of this
Letter, the Account Charge Agreement shall be amended (or a new account control agreement shall be entered into) to provide for
the following (the amendments documentation will be prepared and circulated under separate cover):

 

    	 

    	 

    

 

		1.	provision at the beginning of each month of account
balance updates for all accounts of the Borrower and the Guarantor, together with (i) projected fees and expenses to be paid over
the following month and the provision of a reconciliation report reconciling such projected expenses to the actual expenses incurred
for the applicable month, which reconciliation report shall be provided to the Lender within ten (10) Business Days following
the last day of the month covered by the account balance and projected expense report;

 

		2.	creation of security over the balances in all accounts
of the Borrower and the Guarantor (other than accounts to the extent that the funds held therein are used for payroll, the payment
of employment withholding and related Taxes or the funding of an employee benefit plan and other accounts to the extent in which
a lien thereon is prohibited by operation of law or as agreed to by the Lender) (in addition to the security already created over
the accounts currently subject to the Account Charge Agreement); provided, however, that the Borrower may continue to temporarily
invest the balances in such revenue generating investments (such investments would be allowed pursuant to a “permitted investments”
regime); and

 

		3.	prior to the payment of any expense by the Borrower
or the Guarantor (as applicable), the Lender shall have the right to approve such expenses (such approval not to be unreasonably
withheld or delayed), unless such expenses are either: (a) incurred by the Borrower or the Guarantor (as applicable) in the ordinary
course of business consistent with past practice and (i) are reasonably necessary in the Borrower’s or the Guarantor’s
respective business or (ii) relate to a contractual obligation of the Borrower or the Guarantor in existence on or prior to the
date hereof or (b) incurred by the Borrower or the Guarantor (as applicable) in connection with the due diligence, negotiation
or execution of any strategic transaction involving the Borrower or the Guarantor or any financing or equity fund raising of the
Borrower or the Guarantor and such expenses are reasonably determined to be in the best interests of the Borrower or the Guarantor;
provided that from and after the date hereof, without the approval of the Lender (such approval not to be unreasonably withheld
or delayed) such expenses incurred under this subclause 3(b) shall not exceed the greater of U.S.$ 250,000 each calendar month
and an average of U.S.$ 250,000 during any three calendar month period; provided further that, notwithstanding the foregoing,
the Borrower or the Guarantor (as applicable) may pay such expenses if the Borrower shall provide to the Lender a report that
is accepted by the Lender (acting reasonably) reflecting that the Group has sufficient liquidity to meet its reasonably expected
expenses through the earlier of the Termination Date and the date of the consummation of any strategic transaction.

 

		C.	Subject to terms and conditions of this Section C, the parties hereby agree that in consideration
of the amendments above, a one-time amendment fee of U.S.$ 800,000 (the “Amendment Fee”). The Amendment Fee
will be due on the date hereof and will be payable as follows:

 

 

		1.	U.S.$ 300,000 of the Amendment Fee will be payable
within 10 days of the date hereof and;

 

		2.	the remainder of the Amendment Fee will be payable
on the the later of (i) the Extension Date and (ii) the earlier of:

 

		a.	August 30, 2012;

 

		b.	the date that any additional amount is drawn under
the Facility Agreement other than the payment described in paragraph C(1) above, with the proceeds of such draw; and

 

		c.	the date that amounts are drawn under any third party
financing pursuant to section 21.16(c) (Financial Indebtedness) of the Facility Agreement, with the proceeds of the first
draw of such financing; and

 

 

    	 

    	 

    

 

		3.	the Borrower or Guarantor may make such payments as
cash payments via wire transfer to the Lender; provided, however, to the extent that the Amendment Fee is not paid on the relevant
due date by the Borrower or Guarantor through a cash payment, such amount due will be deemed drawn from the then remaining un-cancelled,
undrawn Commitment available; provided, further, that, to the extent that any relevant condition precedent to make such payment
has not been met, the Parties agree to waive such condition to make such drawing.

 

This Letter may be executed in counterparts,
all of which together shall constitute a single instrument. Additionally, any party hereto may execute this Letter by facsimile
or other electronic means, and any counterpart so executed shall be treated for all purposes as the original signature of the relevant
party.

 

The Facility Agreement and the other Finance
Documents shall remain in full force and effect and are hereby ratified and confirmed in all respects.

 

This Letter shall be governed by and construed
in accordance with the laws of the State of New York, and the other provisions of Section 12 (Governing Law and Enforcement)
of the Facility Agreement are hereby incorporated herein as if set forth in this Letter.

    	 

    	 

    

 

 

___________________________________

for and on behalf of Far East Energy (Bermuda),
Ltd., acting as Borrower

Name:

Title:

 

 

 

 

 

___________________________________

for and on behalf of Far East Energy Corporation, acting as Guarantor

Name:

Title:

 

 

 

 

 

___________________________________

for and on behalf of Standard Chartered Bank, acting as Lender

Name:

Title:

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