--------------------------------------------------------------------------------

 

EXHIBIT 10.64
 

 
 
STOCK SUBSCRIPTION AGREEMENT
 
This STOCK SUBSCRIPTION AGREEMENT ("Agreement") is made and entered into as of
June 2, 2008 ("Subscription Date") by and between Far East Energy Corporation, a
Nevada corporation ("Company"), and International Finance Corporation
("Purchaser").
 
 
Preliminary Statement
 
The Purchaser desires to purchase and the Company desires to offer and sell to
the Purchaser the number of shares of the Company's common stock, par value
$0.001 per share ("Company Common Stock") set forth opposite the Purchaser's
signature on the last page of this Agreement (such shares, the "Shares") and a
warrant ("Warrant") to purchase the number of shares of the Company Common Stock
set forth opposite the Purchaser's signature on the last page of this Agreement
("Warrant Shares").
 
 
Agreement
 
The parties, intending to be legally bound, agree as follows:
 
ARTICLE 1
 
SALE OF SECURITIES
 
1.1 Purchase of Securities.  The Purchaser will purchase from the Company the
Shares at a price of U.S. $0.50 per Share in cash (the total price paid for such
Shares, the "Total Purchase Price").  In consideration therefor and pursuant to
the other terms and conditions of this Agreement, the Company agrees to issue to
the Purchaser a stock certificate for the Shares and a Warrant to purchase the
Warrant Shares.  The Purchaser understands that the Company is under no
obligation to sell any Shares or issue any stock certificate or Warrant to the
Purchaser unless the Company accepts and signs this Agreement.
 
1.2 Registration.  The offering and sale of the Shares and the Warrant (the
"Offering") are being made pursuant to (a) an effective Registration Statement
on Form S-3, as amended (No. 333-132631), which became effective on May 10, 2006
(including the Base Prospectus, the "Registration Statement") filed by the
Company with the Securities and Exchange Commission (the "SEC"), (b) if
applicable, certain "free writing prospectuses" (as that term is defined in Rule
405 under the Securities Act of 1933, as amended, the "Securities Act"), that
have or will be filed with the SEC and delivered to the Purchaser on or prior to
the date hereof, and (c) a prospectus supplement containing certain supplemental
information regarding the Shares and terms of the Offering that will be filed
with the SEC (the "Prospectus Supplement") and delivered, or otherwise made
available, to the Purchaser along with the Company's counterpart to this
Agreement.
 
ARTICLE 2
 
DEFINITIONS
 
For purposes of this Agreement, to the extent not defined below, capitalized
terms shall have the meanings provided therefore in the relevant section where
their usage first appears, and the following terms shall have the meanings and
definitions set forth below:
 
2.1 "Accounting Standards" shall mean the generally accepted accounting
principles in the United States, applied consistently, as in effect from time to
time.
 
2.2 "Affiliate" shall mean, with respect to any Person, any Person directly or
indirectly Controlling, Controlled by or under common Control with, that Person.
 
2.3 "Annual Monitoring Report" shall mean the annual monitoring report, in form
and substance satisfactory to the Purchaser and the Company, setting out the
specific social, environmental and developmental impact information to be
provided by the Company in respect of its Operations, as such form of Annual
Monitoring Report may be amended or supplemented from time to time with the
Purchaser's consent.
 
2.4 "Applicable S&E Law" shall mean all applicable statutes, laws, ordinances,
rules and regulations of the People's Republic of China, including but not
limited to any license, permit or other governmental Authorization, imposing
liability or setting standards of conduct concerning any environmental, social,
labor, health and safety or security risks of the type contemplated by the
Performance Standards.
 
2.5 "Articles of Incorporation" shall mean the Articles of Incorporation of the
Company, as amended.
 
2.6 "Assignment Agreements" shall mean the Assignment Agreement-Quinnan PSC,
dated June 17, 2003, by and between Phillips China, Inc., a Delaware corporation
and the Company and the Assignment Agreement-Shouyang PSC, dated June 17, 2003,
by and between Phillips China Inc., a Delaware corporation, and the Company.
 
2.7 "Auditors" shall mean Payne Smith & Jones, P.C. or another independent
accounting firm.
 
2.8 "Authority" shall mean any national, supranational, regional or local
government or governmental, administrative, fiscal, judicial, or
government-owned body, department, commission, authority, tribunal, agency or
entity, or central bank (or any Person, whether or not government owned and
howsoever constituted or called, that exercises the functions of a central
bank).
 
2.9 "Authorizations" shall mean any consent, registration, filing, agreement,
notarization, certificate, license, approval, permit, authority or exemption
from, by or with any Authority, whether given by express action or deemed given
by failure to act within any specified time period and all
corporate,  creditors'  and  stockholders' approvals or consents.
 
2.10 "Base Prospectus" shall mean the prospectus contained in the Registration
Statement.
 
2.11 "Bylaws" shall mean the Amended and Restated Bylaws of the Company.
 
2.12 "CAO" shall mean the Compliance Advisor Ombudsman, the independent
accountability mechanism for the Purchaser that impartially responds to
environmental and social concerns of affected communities and aims to enhance
outcomes.
 
2.13 "CAO's Role" shall mean the following responsibilities of the CAO: (a) to
respond to complaints by persons who have been or are likely to be directly
affected by the social or environmental impacts of the Purchaser's projects; and
(b) to oversee audits of the Purchaser's social and environmental performance,
particularly in relation to sensitive projects, and to ensure compliance with
the Purchaser's social and environmental policies, guidelines, procedures and
systems.
 
2.14 "Certificate of Incumbency and Authority" shall mean a certificate provided
to the Purchaser by the Company in the form of Annex E to this Agreement.
 
2.15 "Coercive Practice" shall have the meaning ascribed to that term in the
Anti-Corruption Guidelines set forth in Annex C to this Agreement.
 
2.16 "Collusive Practice" shall have the meaning ascribed to that term in the
Anti-Corruption Guidelines set forth in Annex C to this Agreement.
 
2.17 "Control" shall mean the possession, directly or indirectly, by a Person of
the power to direct or cause the direction of the management and policies of
another Person through the ownership of voting securities or otherwise; provided
that the direct or indirect ownership of twenty percent (20%) or more of the
voting power of the total share capital of a Person is deemed to constitute
control of that Person.
 
2.18 "Corrupt Practice" shall have the meaning ascribed to that term in the
Anti-Corruption Guidelines set forth in Annex C to this Agreement.
 
2.19 "Environmental and Social Action Plan" shall mean the plan developed by the
Company, a copy of which is attached as Annex F to this Agreement, setting out
specific social and environmental measures to be undertaken by the Company, to
enable its Operations to comply with the Performance Standards, as such Action
Plan may be amended or supplemented from time to time with the Purchaser's
consent, which was publicly disclosed on July 20, 2007.
 
2.20 "ESHS Management System" shall mean the Company's environmental, social
health, and safety management system enabling it to identify, assess and manage
risks in respect of its Operations on an ongoing basis.
 
2.21 "ESRS" shall mean the environmental and social review summary, agreed by
both the Purchaser and the Company in accordance with the Purchaser's Disclosure
Policies, that was publicly disclosed on July 20, 2007.
 
2.22 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
 
2.23 "Farmout Agreements" shall mean the Farmout Agreement-Qinnan PSC, dated
June 17, 2003, by and between Phillips China Inc., a Delaware corporation, and
the Company, as amended, and Farmout Agreement-Shouyang PSC, dated June 17,
2003, by and between Phillips China Inc., a Delaware corporation, and the
Company.
 
2.24 "Fraudulent Practice" shall have the meaning ascribed to that term in the
Anti-Corruption Guidelines set forth in Annex C to this Agreement.
 
2.25 "Material Adverse Effect" shall mean a material adverse effect on the
assets, properties, operations, or financial condition of the Company and its
Subsidiaries taken as a whole.
 
2.26 "Obstructive Practice" shall have the meaning ascribed to that term in the
Anti-Corruption Guidelines set forth in Annex C to this Agreement.
 
2.27 "Operations" shall mean the operations, activities and facilities of the
Company and the Subsidiaries (including the design, construction, operation,
maintenance, management and monitoring, as applicable in the United States of
America and the People's Republic of China).
 
2.28 "Performance Standards" shall mean the Purchaser's Performance Standards on
Social & Environmental Sustainability, dated April 30, 2006, copies of which
have been delivered to and receipt of which has been acknowledged by the
Company.
 
2.29 "Production Sharing Contracts" shall mean the Production Sharing Contract
for Exploitation of Coalbed Methane Resources in Enhong and Laochang, Yunnan
Province, the People's Republic of China, dated January 25, 2002, by and between
China United Coalbed Methane Corp. Ltd. and the Company, and the Production
Sharing Contract for Exploitation of Coalbed Methane Resources for the Qinnan
Area in Shanxi Province, Qinshui Basin, the People's Republic of China, dated
April 16, 2002, by and between China United Coalbed Methane Corporation Ltd. and
the Phillips China Inc.
 
2.30 "Project Documents" shall mean the Production Sharing Contracts, the
Farmout Agreements, the Assignment Agreements and any amendment or supplement
thereto, or replacement or novation thereof.
 
2.31 "Rules and Regulations" shall mean the rules and regulations of the SEC.
 
2.32 "Sanctionable Practice" shall mean any Corrupt Practice, Fraudulent
Practice, Coercive Practice, Collusive Practice, or Obstructive Practice, as
defined in this Agreement and interpreted in accordance with the Anti-Corruption
Guidelines set forth in Annex C to this Agreement.
 
2.33 "SEC Documents" shall mean the Registration Statement, the Base Prospectus
and any other preliminary prospectus or prospectus filed with the SEC in
connection with the sale and purchase of the Shares pursuant to this Agreement,
and each periodic report on Form 10-K, 10-Q, or 8-K that the Company has filed
under the Securities Act or the Exchange Act and in accordance with the Rules
and Regulations during the twelve months prior to the Subscription Date;
provided, however, that for purposes of Section 9.4, such term shall mean any
and all periodic reports and any other documents or disclosures filed with the
SEC, and any press release or other public disclosure made by the Company
(without regard to a date or time limitations).
 
2.34 "Subsidiary" shall mean with respect to the Company, an Affiliate over
fifty percent (50%) of whose capital is owned, directly or indirectly by the
Company.
 
2.35 "Transaction Documents" shall mean this Agreement and the Warrant.
 
2.36 "World Bank" shall mean the International Bank for Reconstruction and
Development, an international organization established by Articles of Agreement
among its member countries.
 
ARTICLE 3
 
CLOSING; DELIVERY
 
3.1 Closing.  The closing ("Closing") of the purchase and sale of the Shares to
the Purchaser hereunder shall be held at the Company's offices at 363 N. Sam
Houston Parkway E., Suite 380, Houston, Texas 77060, on the third business day
after the satisfaction or waiver (subject to applicable law) of the latest to be
satisfied or waived of the conditions set forth in Article 7 of this Agreement
(other than those conditions that by their nature are to be satisfied at the
Closing), or at such other time and place as the Company and the Purchaser
mutually agree upon. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".  On or before the Subscription Date, the
Company shall deliver to the Purchaser an executed Company Certification and
Subscription Request, substantially in the form of Annex D.
 
3.2 Delivery.  At the Closing, on the basis of the representations and
warranties contained in, and subject to the terms and conditions of, this
Agreement, the Purchaser shall pay the Company the Total Purchase Price in
immediately available funds.  As soon as practicable, and in any case on or
before three (3) business days after the Closing, the Company shall deliver or
cause the delivery to the Purchaser a stock certificate representing the number
of Shares purchased by such Purchaser and a Warrant for the purchase of the
Warrant Shares.  Time shall be of the essence, and delivery at the time and
place specified or otherwise agreed pursuant to this Agreement is a further
condition of the obligation of the Purchaser hereunder.  At the Closing, the
Company shall also deliver the documents and instruments required to be
delivered pursuant to Article 7 hereof.
 
ARTICLE 4
 
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
 
The Company represents and warrants to the Purchaser that, as of the
Subscription Date, except as set forth in the disclosure schedule delivered to
the Purchaser and signed by the Company in connection with the execution and
delivery of this Agreement (the "Company Disclosure Schedule"), the following
representations and warranties are true and correct:
 
4.1 Organization and Standing.  The Company and each of its Subsidiaries have
been duly incorporated or formed, as applicable, and are validly existing, and
in good standing under the laws of their respective jurisdiction of
incorporation or formation.  The Company and each of its Subsidiaries have all
requisite power and authority to own and operate its properties and assets and
to carry on their business as presently conducted.  The Company and each of its
Subsidiaries are qualified to do business as a foreign entity in every
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect.  Other than Far East Energy (Bermuda), Ltd., none of the
Company's Subsidiaries are a "significant subsidiary" as such term is defined in
Rule 405 of the Rules and Regulations.
 
4.2 Power.  The Company has all requisite power and authority to execute and
deliver the Transaction Documents and to carry out and perform its obligations
under the terms of the Transaction Documents.
 
4.3 Validity.  The execution, delivery, and performance of the Transaction
Documents by the Company have been duly authorized by all requisite action, and
each of the Transaction Documents constitutes the legal, valid, and binding
obligation of the Company enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, or similar laws relating to
or affecting the enforcement of creditors' rights.
 
4.4 No Conflict. The execution and delivery of the Transaction Documents, the
issuance, sale and delivery of the Shares and the Warrant by the Company under
this Agreement, the performance by the Company of its obligations under the
Transaction Documents and/or the consummation of the transactions contemplated
hereby and the application of the proceeds from the sale of the Shares, as
described under "Use of Proceeds" in the most recent prospectus relating to the
sale of the Shares, will not conflict with, result in the breach or violation
of, or constitute (with or without the giving of notice or the passage of time
or both) a violation of, or default under, (a) any material bond, debenture,
note or other evidence of indebtedness, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument or under any material
lease, license, franchise, permit, to which the Company is a party or by which
it or its properties may be bound or affected, (b) the Articles of Incorporation
or the Bylaws, or (c) any statute or law, judgment, decree, rule, regulation,
ordinance or order of any Authority applicable to the Company, any of its
Subsidiaries or their respective properties, except in the case of clause
(c) for such conflicts, breaches, violations or defaults that would not be
likely to have a Material Adverse Effect.
 
4.5 Status of Authorizations. Except for the filings with the SEC and as
required by any "blue sky" laws and for Authorizations set forth in Section 4.5
of the Company Disclosure Schedule, the Company need not give any notice to,
make any filing with, or obtain any Authorization of any Authority in order to
consummate the transactions contemplated by this Agreement. The Company and its
Subsidiaries possess all necessary Authorizations from any Authority that are
necessary for the operation of their respective business as currently conducted,
except where such failure to possess could not reasonably be expected to have a
Material Adverse Effect and except for those not yet required to be obtained in
which the failure to possess could reasonably be expected to have a Material
Adverse Effect, which the Company and its Subsidiaries intend to obtain in due
course.  Neither the Company nor any of its Subsidiaries has received any
written notice of proceedings relating to the revocation or modification of any
such Authorization which, if the subject of an unfavorable decision, ruling or
finding, could reasonably be expected to have a Material Adverse Effect.
 
4.6 No Amendments.  Neither the Articles of Incorporation nor the Bylaws have
been amended since March 15, 2005.
 
4.7 Authorized Capital. The authorized, subscribed and paid-in capital and
options and warrants of the Company at the time immediately prior to the Closing
and immediately after the Closing are set forth in Section 4.7 of the Company
Disclosure Schedule, subject to any exercise of warrants, options or other right
to purchase or otherwise acquire equity securities of the Company outstanding on
the Subscription Date.  All of the issued and outstanding shares of Common Stock
were validly issued, fully paid and nonassessable.  All subscriptions, warrants,
options, convertible securities, and other rights (contingent or other) to
purchase or otherwise acquire equity securities of the Company issued and
outstanding as of the Subscription Date, or material contracts, commitments,
understandings, or arrangements by which the Company or any of its Subsidiaries
is or may be obligated to issue shares of Common Stock, or securities or rights
convertible or exchangeable for shares of Common Stock, are in all material
respects as set forth in the SEC Documents.  Except as set forth in the SEC
Documents, or as a result of exercises of stock options pursuant to the
Company's stock option and incentive plans, no Common Stock nor any
subscription, warrant, option, convertible security, or other right (contingent
or other) to purchase or otherwise acquire equity securities of the Company is
outstanding on the Subscription Date.
 
4.8 Shares Duly Authorized. The Shares are duly and validly authorized and when
issued and delivered against payment pursuant to the terms of this Agreement
will be duly and validly issued, fully paid, and nonassessable, and will be free
of any liens or encumbrances with respect to the issuance thereof; provided,
however, that the transfer of the Shares shall be subject to federal securities
laws at the time a transfer is proposed.  The Shares will conform to the
description of the material terms thereof contained in the Base Prospectus under
the caption "Description of Capital Stock".
 
4.9 No Immunity. Neither the Company nor any of its Subsidiaries nor any of its
or their properties enjoys any right of immunity from set off, suit or execution
with respect to the Company's obligations under any Transaction Document or
otherwise.
 
4.10 Financial Condition. Except as the Company may have publicly disclosed (and
then solely to the extent so disclosed) in the SEC Documents, press releases or
in other "public disclosures" as such term is defined in Section 101(e) of
Regulation FD of the Exchange Act, in each case, filed or made through and
including the date hereof, since March 31, 2008, there has not been any Material
Adverse Effect.
 
4.11 Financial Statements. The consolidated financial statements of the Company
and its Subsidiaries and the related notes thereto included in the SEC Documents
present fairly, in all material respects, the financial position and the
liabilities of the Company and its Subsidiaries as of the dates indicated and
the results of operations and cash flows for the periods therein specified
subject, and in the case of unaudited statements only, to normal year-end audit
adjustments.  Except as set forth in such financial statements (or the notes
thereto), such financial statements (including the related notes) have been
prepared in accordance with the Accounting Standards.
 
4.12 Taxes. The Company and each of its Subsidiaries has timely filed all
federal, state, local and foreign income and franchise and other tax returns
required to be filed by any jurisdiction to which it is subject and has paid all
taxes due in accordance therewith, except where the failure to so timely file or
pay would not be likely to result in a Material Adverse Effect.
 
4.13 Litigation.  Except as disclosed in the SEC Documents, neither the Company
nor its Subsidiaries are engaged in any litigation, action, suit or proceeding
before any court, governmental agency or body, domestic or foreign, now pending
or, to the actual knowledge of the Company, threatened in writing against the
Company or its Subsidiaries wherein an unfavorable decision, ruling or finding
would reasonably be expected to have a Material Adverse Effect.
 
4.14 Compliance.  Neither the Company nor any of its Subsidiaries (a) is in
violation of its Articles of Incorporation or Bylaws (or other applicable
governing documents) (b) is in default, and no event has occurred which, with
notice or lapse of time or both, would constitute a default, in the due
performance or observance of terms and conditions contained in any material
indenture, mortgage deed of trust, loan agreement or other agreement or
instrument to which it is a party or by which it is bound or to which any of its
properties or assets is subject or (c) is in violation of any law, ordinance,
rule or regulation of any foreign, federal, state or local government or any
agency thereof, or any writ, order or decree, to which it or its property or
assets may be subject or has failed to obtain any Authorization necessary to the
ownership of its properties or the conduct of its business, except, in the case
of clause (b) and (c) where such default, violation failure would not be likely
to result in a Material Adverse Effect.
 
4.15 Environmental Matters. To the best of the Company's knowledge and belief,
there are no material social or environmental risks or issues in respect of its
Operations other than those identified by the disclosed ESRS.  The Company has
not received nor is aware of (a) any existing or threatened complaint, order,
directive, claim, citation or notice from any Authority or (b) any material
written communication from any Person, in either case, concerning the failure of
its Operations to comply with any matter covered by the Performance Standards,
which has, or could reasonably be expected to have, a Material Adverse Effect or
any material adverse impact on the implementation or conduct of the Operations
in accordance with the Performance Standards.
 
4.16 Sanctionable Practices.  The Company has not committed or engaged in nor
has it authorized its Affiliates or any person acting on the Company's or its
Affiliate's behalf to commit or engage in, with respect to the transactions
contemplated by the Transaction Documents and the Project Documents, any
Sanctionable Practices.
 
4.17 Insurance. The Company's insurance policies cover such risks and contain
such policy limits, types of coverage and deductibles as are, in the Company's
judgment, adequate to insure fully against the material risks to which the
Company and its Subsidiaries and its or their employees, business, properties
and other assets would reasonably be expected to be exposed in the operation of
the business as currently conducted.  All of the Company's insurance policies
are valid and enforceable policies, all premiums due and payable under such
policies have been paid and the Company is otherwise in compliance in all
material respects with the terms of such policies and bonds.  The Company has no
knowledge or belief of any threatened termination of, or material premium
increase with respect to, any of such policies.
 
4.18 Registration Statement. The Registration Statement is effective under the
Securities Act and no stop order preventing or suspending the effectiveness of
the Registration Statement or suspending or preventing the use of the Base
Prospectus and the Prospectus Supplement has been issued by the SEC and no
proceedings for that purpose have been instituted or, to the knowledge of the
Company, are threatened by the SEC.
 
4.19 Project Documents.  Each Project Document is a valid and binding agreement,
enforceable against the Company and its Subsidiaries, as applicable, in
accordance with its terms, except as such enforceability (a) may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and (b) is subject to general principles of equity (regardless of
whether enforceability is considered in a proceeding at equity or at law) and,
except to the extent described in any SEC Document, the Company and any
Subsidiary of the Company are not in any material default and have no knowledge
of any material default of the counterparties thereto, under any such Project
Document.
 
4.20 All Material Facts Disclosed. The Registration Statement, Base Prospectus,
and Prospectus Supplement filed with the SEC and the documents incorporated
therein (a) conform in all material respects to the requirements of the
Securities Act and the Rules and Regulations, and (b) do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made, in light of the circumstances under which
they were made, not misleading.
 
ARTICLE 5
 
COVENANTS OF THE COMPANY
 
 
The Company covenants with the Purchaser as follows:
 
5.1 Environmental.  The Company and its Subsidiaries shall:
 
(a) undertake its Operations in compliance with the Environmental and Social
Action Plan and otherwise comply with the Performance Standards, and use its
reasonable efforts, including exercising any voting or approval rights it might
have under any Project Document or other agreement governing construction or
operations relating to the Company's properties or assets to ensure that its
agents, contractors and subcontractors comply with the Performance Standards the
Environmental, Health and Safety Guidelines of the World Bank Group, and
Applicable S&E Law;
 
(b) periodically review the form of the Annual Monitoring Report and advise the
Purchaser as to whether revision of the form is necessary or appropriate in
light of changes to the Operations, or in light of environmental or social risks
identified by the ESHS Management System, and revise the form of the Annual
Monitoring Report as agreed with the Purchaser;
 
(c) use all reasonable efforts to ensure the continuing operation of the ESHS
Management System to assess and manage the social and environmental performance
of the Operations and to comply with the Performance Standards;
 
(d) not amend the Environmental and Social Action Plan in any material respect
without the prior written consent of the Purchaser;
 
(e) not undertake, or invest in any Person engaged in, any of the activities set
forth on Annex B to this Agreement;
 
(f) within ninety (90) days after the end of each calendar year end, deliver to
the Purchaser the Annual Monitoring Report in a form and substance substantially
satisfactory to the Purchaser and the Company consistent with the requirements
of this Agreement confirming compliance with the Environmental and Social Action
Plan, the social and environmental covenants of this Agreement and Applicable
S&E Law or, as the case may be, identifying any non-compliance or failure, and
the actions being taken to remedy any such deficiency; and
 
(g) within three (3) business days after its occurrence and discovery thereof by
any executive officer of the Company or any other Company employee that (i) has
primary management responsibilities or primary oversight responsibility for the
implementation and monitoring of the ESHS Management System or (ii) is
designated under the ESHS Management System as having primary responsibility for
any such matter, notify the Purchaser, of any social, labor, health and safety,
security or environmental incident, accident or circumstance having, or which
could reasonably be expected to have, any material adverse impact on the
implementation or operation of the Operations in compliance with the Performance
Standards or a Material Adverse Effect, specifying in each case the nature of
the incident, accident, or circumstance and the impact or effect arising or
likely to arise therefrom, and the measures the Company is taking or plans to
take to address them and to prevent any future similar event and keep the
Purchaser informed of the on-going implementation of those measures.
 
(h) publicly disclose any new concession areas acquired by the Company or any of
its Subsidiaries, to the extent not otherwise included in the  SEC Documents or
the Company's other public disclosures.
 
5.2 Access.  Upon the Purchaser's request, and with reasonable prior notice to
the Company, the Company shall permit representatives of the Purchaser and the
CAO, during normal office hours, to (a) visit any of the sites and premises
where the business of the Company or its Subsidiaries is conducted; (b) inspect
any of the sites, facilities, plants and equipment of the Company or its
Subsidiaries; (c) have access to the books of account and all records of the
Company and its Subsidiaries; and (d) have access to those employees, agents,
contractors and subcontractors of the Company and its Subsidiaries who have or
may have knowledge of matters with respect to which the Purchaser seeks
information; provided that no such reasonable notice shall be required in the
event of a default under or breach of any Transaction Document; provided,
further, that in the case of the CAO, such access shall only be for the purpose
of carrying out the CAO's Role.
 
5.3 Sanctionable Practices.  The Company agrees not to engage in (and the
Company shall not authorize or permit any Affiliate or any other Person acting
on its behalf to engage in) with respect to any transaction contemplated by the
Transaction Documents and the Project Documents, any Sanctionable Practice.  The
Company further covenants that should the Purchaser notify the Company of its
concern that there has been a violation of the provisions of this paragraph, the
Company shall cooperate in good faith with it and its representatives in
determining whether such a violation has occurred, and shall respond promptly
and in reasonable detail to any notice from the Purchaser, and shall furnish
documentary support for such response upon the Purchaser's request.
 
5.4 Insurance.  The Company shall insure and keep insured with financially sound
and reputable insurers, all its assets and business, including all of the
Operations, against material risks, including the insurances specified in
Annex A, under forms of policies and with insurers reasonably acceptable to the
Purchaser; provided, however that the obligations under this Section 5.4 will
not apply to the insurance coverage described in Sections 1(a) and (c) of Annex
A to this Agreement until such time as the Company begins production outtake at
the wells covered by the Project Documents.
 
5.5 Use of Proceeds.  The Company shall not use the proceeds of the Offering in
reimbursement of, or for expenditures in the territories of any country which is
not a member of the World Bank or for goods produced in or services supplied
from any such country.
 
5.6 Information Rights and Reporting.  The Company agrees as follows:
 
(a) As long as the Company has a class of equity securities registered under
Section 12(g) of the Exchange Act or is subject to Section 15(d) of the Exchange
Act, the Company shall file electronically with the SEC or otherwise make
publicly available, all quarterly and annual financial statements that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K.
 
(b) As long as the Company does not have a class of equity securities registered
under Section 12(g) of the Exchange Act or is not subject to Section 15(d) of
the Exchange Act,  then the Company shall provide to the Purchaser: (i) within
one hundred and twenty (120) days after the end of each fiscal year, audited
annual financial statements (a balance sheet as of the end of such financial
year and the related statements of income, stockholders' equity and cash flows
for the financial year then ended) for the Company on a consolidated basis,
prepared in accordance with the Accounting Standards and certified by the
Auditors; and (ii) within sixty (60) days after the end of each quarter of each
fiscal year (excluding the fourth quarter of each fiscal year) quarterly
financial statements (a balance sheet as of the end of such quarter and the
related statements of income, stockholders' equity and cash flows for the
quarter then ended) for the Company on a consolidated basis, prepared in
accordance with the Accounting Standards (other than the inclusion of footnotes
and subject to customary year end adjustments).
 
(c) The Company will disclose in its periodic reports on Form 10-K, 10-Q, or 8-K
(or applicable successor reports) filed under the Exchange Act with the SEC or
otherwise made publicly available as contemplated in clause (a) above, or
otherwise prepared and provided in accordance with clause (b) above, all
payments made to the government of the People's Republic of China in all
material respects, which shall include the material tax, royalty and other
material payments made annually by the Company or any Affiliate to local and/or
national governments in the People's Republic of China under any concession
agreement, host country agreement or the Project Documents.
 
(d) The Company shall provide to the Purchaser a copy of any management letters
delivered by the Auditors and such other information as the Purchaser from time
to time reasonably requests with regard to any material developments in or
affecting the Company's business.
 
(e) The Company shall provide the Purchaser with any annual business plan and
any annual budget of the Company.
 
(f) The Company shall provide the Purchaser with any copies of material filings
made with respect to the Company with government agencies, including
notification of material litigation which could reasonably be expected to have a
Material Adverse Effect.
 
5.7 Anti-Money Laundering Provision. The Company will institute, maintain and
comply with appropriate internal procedures and controls, satisfactory to
Purchaser, and follow best international banking standards, for the purpose of:
 
(a) preventing the Company or any of its affiliates from being used for money
laundering, the financing of terrorist activity, fraud, or other corrupt or
illegal purposes or practices; and
 
(b) ensuring that the Company will not enter into any transaction with, or for
the benefit of, any individuals or institutions named on lists of sanctioned
persons promulgated by the United Nations Security Council or its committees
resolutions in connection with money laundering or anti-terrorism matters.
 
5.8 Provision of Information. If at any time the Purchaser notifies the Company
in writing that the Purchaser no longer wishes to receive the information or
documentation required to be delivered pursuant to Section 5.1(f), 5.1(g),
5.6(b), 5.6(d) or 5.6(e), the Company shall immediately discontinue providing
such information and documentation to the Purchaser.  Thereafter, if the
Purchaser notifies the Company in writing that it again wishes to begin
receiving such information and documentation, the Company shall immediately
again begin providing such information and documentation to the Purchaser as
required by such Sections.
 
ARTICLE 6
 
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
 
The Purchaser represents and warrants to the Company, as of the Subscription
Date, with respect to the Offering as follows:
 
6.1 Organization and Standing.  The Purchaser is an international organization,
established by Articles of Agreement among its member countries.
 
6.2 Power.  The Purchaser has all requisite power to execute and deliver the
Transaction Documents and to carry out and perform its obligations under the
terms of the Transaction Documents.
 
6.3 Validity.  The execution, delivery, and performance of the Transaction
Documents by the Purchaser have been duly authorized by all requisite action,
and each of the Transaction Documents constitutes the legal, valid, and binding
obligation of the Purchaser enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, or similar laws relating to
or affecting the enforcement of creditors' rights.
 
6.4 No Conflict. The execution and delivery of the Transaction Documents, the
performance by the Purchaser of its obligations under the Transaction Documents
and/or the consummation of the transactions contemplated hereby will not
conflict with, result in the breach or violation of, or constitute (with or
without the giving of notice or the passage of time or both) a violation of, or
default under, (a) the Articles of Agreement of the Purchaser, or (b) any
statute or law, judgment, decree, rule, regulation, ordinance or order of any
Authority applicable to the Purchaser or their respective properties, except in
the case of such conflicts, breaches, violations or defaults that would not be
likely to have a Material Adverse Effect.
 
6.5 Status of Authorizations.  The Purchaser need not give any notice to, make
any filing with, or obtain any Authorization of any Authority in order to
consummate the transactions contemplated by this Agreement, other than any such
notices or filings that have been made by the Purchaser.
 
6.6 Underwriter.  The Purchaser is not an "underwriter" within the meaning of
Section 2(a)(11) of the Securities Act in connection with its purchase of the
Shares and Warrant.
 
6.7 Receipt of Base Prospectus.  Purchaser acknowledges receipt of the Base
Prospectus prior to the date of any "offer" or "sale" (as such terms are defined
in the Securities Act) of the Shares and the Warrant.
 
6.8 Residence; Accredited Investor.  Purchaser's principal residence is the
District of Columbia, United States.  Purchaser is an "accredited investor"
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
 
ARTICLE 7                                
 
CONDITIONS OF PURCHASER'S OBLIGATIONS
 
The obligations of the Purchaser to consummate the transactions under this
Agreement shall be subject to the satisfaction of each of the conditions set
forth below, unless waived by the Purchaser, on or prior to the date of the
Closing.
 
7.1 Agreement. The Transaction Documents will be entered into and shall be in
full force and effect.
 
7.2 Representations, Warranties and Obligations. The representations and
warranties of the Company set forth in Article 4 of this Agreement will be true
and correct in all material respects as the Closing Date and the Subscription
Date as though made on and as of such date; the Company will have performed all
obligations and complied in all material respects with all covenants required to
be performed or complied with by the Company under this Agreement on or prior to
the date of the Closing.  The Purchaser shall have received a certificate of the
Chief Executive Officer or Chief Financial Officer of the Company to that
effect.
 
7.3 Authorizations. The Company has obtained and provided to the Purchaser
copies of all necessary Authorizations listed in Section 4.5 of the Company
Disclosure Schedule and resolutions of the Board of Directors of the Company
and/or a committee thereof relating to transactions contemplated by this
Agreement and all of those Authorizations and resolutions are in full force and
effect.
 
7.4 Opinion of Counsel.  The Purchaser will have received an opinion of counsel
to the Company in form and substance reasonably satisfactory to the Purchaser.
 
7.5 Expenses.  The Company shall have paid Purchaser all fees and expenses owing
to the Purchaser which are due on the date of the Closing, and all expenses
owing pursuant to Section 9.1 of this Agreement as of the date of the Closing
and for which the Company has received an invoice.
 
7.6 Documents. The Purchaser is satisfied that the Project Documents are fully
effective and unconditional and that there is no default under any of the
Project Documents.
 
7.7 No Material Adverse Effect.  Since December 31, 2007, nothing has occurred
which has or may reasonably be expected to have a Material Adverse Effect.
 
7.8 Insurance Requirements.  The Purchaser has received copies of all insurance
policies evidencing compliance with the requirements of Annex A to this
Agreement (other than the insurance coverage described in Sections 1(a) and (c)
of Annex A to this Agreement), including the renewal certificate for the ACE
policy and a copy of the Huatai policy upon receipt by the project company,
together with a certification from the Company's insurers or insurance agents
confirming that all premiums for the following policies have been paid: (a)
Control of Well, (b) Excess Liability and (c) ACE DIC/DIL Foreign Liability.
 
7.9 Company Certifications.  The Purchaser has received certifications by the
Company, substantially in the form of Annex D to this Agreement, with respect to
the conditions specified and expressed to be effective as of the date of the
Closing.
 
7.10 Certificate of Incumbency and Authority.  The Purchaser has received a
Certificate of Incumbency and Authority.
 
ARTICLE 8
 
CANCELLATION RIGHT
 
8.1 Cancellation of Purchaser's Subscription.  Notwithstanding any other
provision of this Agreement, the Purchaser may, by written notice to the
Company, cancel the right of the Company to request a subscription of any of the
Shares if at any time prior to the date of the Closing: (a) in the reasonable
opinion of the Purchaser, a Material Adverse Effect has occurred, (b) there
exists any situation which reasonably demonstrates that performance by the
Company of its obligations under any of the Transaction Documents cannot be
expected, or (c) the date of the Closing has not occurred on or before June 30,
2008 (other than as a result of the Purchaser's breach of this
Agreement).  Notwithstanding any other provision of this Agreement, the Company
may, by written notice to the Purchaser, terminate this Agreement if the date of
the Closing has not occurred on or before June 30, 2008 (other than as a result
of the Company's breach of this Agreement).
 
ARTICLE 9
 
MISCELLANEOUS
 
9.1 Expenses.  Within ten (10) days of the receipt of any invoice or other
written request, the Company shall pay to the Purchaser, as the Purchaser may
direct, or, as the case may be, reimburse the Purchaser any amount paid by the
Purchaser, on account of: (a) all taxes, duties, fees or other charges payable
on or in connection with the execution, issue, delivery or registration of this
Agreement and any other documents related to it and (b) the reasonable fees and
expenses of the Purchaser's counsel incurred in connection with the preparation
of the investment by the Purchaser provided for under this Agreement, and the
preparation and/or review, execution and, where appropriate, translation and
registration of this Agreement and any other documents related to it.  In the
event that Purchaser brings any action or proceeding, to enforce the terms and
conditions of this Agreement and the Purchaser is the prevailing party (as
determined by the court, agency or other authority before which such action,
proceeding or arbitration is commenced), the reasonable costs and expenses
incurred by the Purchaser in relation to such efforts to enforce or protect its
rights under this Agreement and any other documents related to it, including
reasonable legal and other professional consultants' fees.  The provisions of
this Section 9.1 shall survive the execution and delivery of this Agreement.
 
9.2 Survival.  The representations and warranties contained herein shall survive
the execution and delivery of this Agreement and the sale of the Shares and
Warrant.  The covenants herein shall survive the execution and delivery of this
Agreement for so long as the Purchaser "beneficially owns" (within the meaning
of Rule 13d-3 under the Exchange Act) 1,000,000 Shares (including any Warrant
Shares) (the "Threshold Shares").  The Threshold Shares shall be subject to
appropriate and equitable adjustment in the event of stock splits, dividends,
subdivisions, recapitalizations and similar transactions.
 
9.3 Assignment; Successors and Assigns.  This Agreement may not be assigned by
either party without the prior written consent of the other party.  This
Agreement and all provisions thereof shall be binding upon, inure to the benefit
of, and are enforceable by the parties hereto and their respective successors
and permitted assigns.
 
9.4 Confidentiality.  The Purchaser acknowledges and agrees that it has received
and may in the future receive Confidential Information regarding the Company and
the Purchaser's disclosure of such Confidential Information would cause
substantial harm and damages to the Company and its Subsidiaries. The Purchaser
shall hold any Confidential Information it receives from the Company in
confidence, and shall not, without the consent of the Company, reveal any
Confidential Information to any Person other than the Purchaser's directors,
officers, employees, employees of the World Bank, attorneys, independent
auditors, rating agencies, contractors and consultants (including, without
limitation, technical and financial advisors) who need to know such information
in connection with the performance of their duties for the
Purchaser.  "Confidential Information" shall mean any written information
concerning the businesses and affairs of the Company that the Company has
provided or shall in the future provide to the Purchaser that is clearly and
conspicuously identified as "Confidential Information" but excluding information
that: (a) in contained in any SEC Documents; (b) is or becomes available to the
public from a source other than the Purchaser; (c) was available to the
Purchaser prior to its disclosure to the Purchaser by the Company; (d) was or is
developed by the Purchaser independently of, and without reference to, the
Confidential Information; (e) is required to be disclosed by action of any
court, tribunal or regulatory authority or by any requirement of law, legal
process, regulation, or governmental order, decree or rule, or is necessary for
the Purchaser to disclose in connection with any proceeding in any court or
tribunal or before any regulatory authority in order to preserve its rights; (f)
the Company agrees in writing may be disclosed; or (g) is or becomes available
to the Purchaser from sources which to the Purchaser's knowledge are under no
obligation of confidentiality to the Company.  In the event that the Purchaser
receives a request or is required to disclose any Confidential Information
pursuant to clause (e) above, the Purchaser shall (to the extent permitted by
law), promptly notify the Company of the existence of such request or
requirement to disclose such Confidential Information.
 
9.5 Notices.  All notices, requests, and other communications under the
Transaction Documents shall be in writing and will be deemed to have been duly
given and received (a) when personally delivered, (b) when sent by facsimile
upon confirmation of receipt, (c) one business day after the day on which the
same has been delivered prepaid to a nationally recognized courier service, or
(d) five business days after the deposit in the United States mail, registered
or certified, return receipt requested, postage prepaid, in each case addressed
to the Company at 363 N. Sam Houston Parkway E., Suite 380, Houston, Texas
77060, Attn: Chief Executive Officer, facsimile number, (832) 598-0479, with a
copy to Amar Budarapu, Esq., Baker & McKenzie LLP, 2300 Trammell Crow Center,
2001 Ross Avenue, Dallas, Texas 75201, facsimile number, (214) 978-3099, and as
to the Purchaser addressed to International Finance Corporation, 2121
Pennsylvania Avenue, N.W., Washington, D.C. 20433, facsimile number, (202)
974-4768, Attn: Director, Oil Gas, Mining and Chemicals Department, with a copy
(in the case of communications relating to payments) sent to the attention of
the Director, Department of Financial Operations, at facsimile number (202)
522-7419.  Any party hereto from time to time may change its address, facsimile
number, or other information for the purpose of notices to that party by giving
notice specifying such change to the other parties hereto.  The Purchaser and
the Company may each agree to accept notices and other communications to it
under the Transaction Documents by electronic communications pursuant to
procedures reasonably approved by it; provided that approval of such procedures
may be limited to particular notices or communications.
 
9.6 Governing Law; Jurisdiction.
 
(a) The Transaction Documents, and the provisions, rights, obligations, and
conditions set forth therein, and the legal relations between the parties
thereto, including all disputes and claims, whether arising in contract, tort,
or under statute, shall be governed by and construed in accordance with the laws
of the State of New York without giving effect to its conflict of law provisions
that would cause the applications of any other law (other than Section 5-1401 of
the New York General Obligations Law).
 
(b) For the exclusive benefit of the Purchaser, the Company irrevocably agrees
that any legal action, suit or proceeding arising out of or relating to the
Transaction Documents may be brought in the courts of the United States of
America located in the Southern District of New York or in the courts of the
State of New York located in the Borough of Manhattan. By the execution of the
Transaction Documents, the Company irrevocably submits to the jurisdiction of
any such court in any such action, suit or proceeding. Final judgment against
the Company in any such action, suit or proceeding shall be conclusive and may
be enforced in any other jurisdiction, including the People's Republic of China,
by suit on the judgment, a certified or exemplified copy of which shall be
conclusive evidence of the judgment, or in any other manner provided by law.
 
(c) Nothing in the Transaction Documents shall affect the right of the Purchaser
to commence legal proceedings or otherwise sue the Company in any other
appropriate jurisdiction, or concurrently in more than one jurisdiction, or to
serve process, pleadings and other legal papers upon the Company in any manner
authorized by the laws of any such jurisdiction.
 
(d) The Company also irrevocably consents, if for any reason its authorized
agent for service of process of summons, complaint and other legal process in
any action, suit or proceeding is not present in New York, New York, to the
service of such papers being made out of the courts of the United States of
America located in the Southern District of New York and the courts of the State
of New York located in the Borough of Manhattan by mailing copies of the papers
by registered United States air mail, postage prepaid, to the Company at its
address specified pursuant to Section 9.5.  In such a case, the Purchaser shall
also send by facsimile, or have sent by facsimile, a copy of the papers to the
Company.
 
(e) Service in the manner provided in Sections 9.6(d) in any action, suit or
proceeding will be deemed personal service, will be accepted by the Company as
such and will be valid and binding upon the Company for all purposes of any such
action, suit or proceeding.
 
(f) The Company irrevocably waives to the fullest extent permitted by applicable
law: (i) any objection which it may have now or in the future to the laying of
the venue of any action, suit or proceeding in any court referred to in this
Section 9.6; (ii) any claim that any such action, suit or proceeding has been
brought in an inconvenient forum; (iii) its right of removal of any matter
commenced by the Purchaser in the courts of the State of New York to any court
of the United States of America; and (iv) any and all rights to demand a trial
by jury in any such action, suit or proceeding brought against such party by the
Purchaser.
 
(g) To the extent that the Company may be entitled in any jurisdiction to claim
for itself or its assets immunity in respect of its obligations under the
Transaction Documents from any suit, execution, attachment (whether provisional
or final, in aid of execution, before judgment or otherwise) or other legal
process or to the extent that in any jurisdiction that immunity (whether or not
claimed) may be attributed to it or its assets, the Company irrevocably agrees
not to claim and irrevocably waives such immunity to the fullest extent
permitted now or in the future by the laws of such jurisdiction.
 
(h) The Company hereby acknowledges that the Purchaser shall be entitled under
applicable law, including the provisions of the International Organizations
Immunities Act, to immunity from a trial by jury in any action, suit or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby brought against the Purchaser in any court of the United
States of America. The Company hereby waives any and all rights to demand a
trial by jury in any action, suit or proceeding arising out of or relating to
the Transaction Documents or the transactions contemplated by the Transaction
Documents, brought against the Purchaser in any forum in which the Purchaser is
not entitled to immunity from a trial by jury.
 
(i) To the extent that the Company may, in any action, suit or proceeding
brought in any of the courts referred to in Section 9.6(b) or any other court in
the United States of America, the People's Republic of China or elsewhere
arising out of or in connection with this Agreement, be entitled to the benefit
of any provision of law requiring the Purchaser in such action, suit or
proceeding to post security for the costs of the Company, or to post a bond or
to take similar action, the Company hereby irrevocably waives such benefit, in
each case to the fullest extent now or in the future permitted under the laws of
the United States of America or any state thereof of the People's Republic of
China or, as the case may be, the jurisdiction in which such court is located.
 
9.7 Severability.  In the event that any provision of this Agreement or the
application of any provision hereof is declared to be illegal, invalid, or
otherwise unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall not be affected except to the extent necessary to delete
such illegal, invalid, or unenforceable provision unless that provision held
invalid shall substantially impair the benefits of the remaining portions of
this Agreement.
 
9.8 Headings.  The headings in this Agreement are for convenience of reference
only and shall not constitute a part of this Agreement, nor shall they affect
its meaning, construction, or effect.
 
9.9 Counterparts.  This Agreement may be executed in multiple counterparts, each
of which shall be deemed to be an original instrument and all of which together
shall constitute one and the same instrument.  Facsimile or electronic
signatures shall be deemed originals for all purposes hereunder.
 
9.10 Entire Agreement.  This Agreement embodies the entire understanding and
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings relating to the subject
matter hereof.
 
9.11 Further Assurances.  The parties agree to execute and deliver all such
further documents, agreements and instruments and take such other and further
action as may be necessary or appropriate to carry out the purposes and intent
of this Agreement.
 

 
 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Purchaser has caused this Agreement to be signed by the
undersigned thereto duly authorized, as of the Subscription Date.
 

 

 U.S. $2,250,000.00    INTERNATIONAL FINANCE CORPORATION  Amount of Investment  
     (U.S. $0.50 per Share)                4,500,000    By:  /s/ Delanson D.
Crist      (Number of Shares)    Name:  Delanson D. Crist          Title:
 Acting Director Oil, Gas, Mining and Chemicals Department          1,575,000  
     (Number of Warrant Shares)                This Agreement is hereby
confirmed, agreed and accepted by the Company as of the Subscription Date.      
           FAR EAST ENERGY CORPORATION      By:      /s/ Randall D. Keys        
 Name:  Randall D. Keys      Title:  Chief Financial Officer