Document:

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                                                                    EXHIBIT 10.3

                           FAR EAST ENERGY CORPORATION

                              AMENDED AND RESTATED
                       NONQUALIFIED STOCK OPTION AGREEMENT

                               GENERAL INFORMATION

         Name:                 Michael R. McElwrath

         Award Date:           October 13, 2003

         Number of Shares
         Subject to Option:    1,200,000

         Exercise Price:       $0.65

         Vesting:              One fifth upon the Award Date and one fifth each
                               succeeding anniversary of the Award Date until
                               fully vested

         Expiration Date:      October 13, 2013

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                           FAR EAST ENERGY CORPORATION
                              AMENDED AND RESTATED
                       NONQUALIFIED STOCK OPTION AGREEMENT

         THIS AMENDED AND RESTATED NONQUALIFIED STOCK OPTION AGREEMENT (this
"AGREEMENT") is made as of this 23rd day of December, 2004, by and between Far
East Energy Corporation, a Nevada corporation (the "CORPORATION"), and Michael
R. McElwrath ("PARTICIPANT").

         WHEREAS, the Corporation and the Participant previously entered into a
Stock Option Agreement (the "ORIGINAL OPTION AGREEMENT") dated as of October 13,
2003 (the "AWARD DATE") setting forth the grant of options to purchase 1,200,000
shares of common stock, par value $0.001 per share, of the Corporation (the
"COMMON STOCK") at an exercise price per share of $0.65; and

         WHEREAS, the Participant has entered into an Amended and Restated
Employment Agreement (as hereinafter amended, restated and modified from time to
time, the "EMPLOYMENT AGREEMENT") dated the date hereof with the Corporation
and, in connection therewith, the Corporation and the Participant have agreed to
amend and restate the Original Option Agreement;

         NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises hereinafter set forth and of such other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:

1. GRANT OF OPTION; DEFINED TERMS.

         A. Capitalized terms used herein without definition shall have the
meaning ascribed to such terms in the Employment Agreement.

         B. Subject to the terms and conditions hereinafter set forth, the
Corporation, with the approval and at the direction of the Compensation
Committee of the Board of Directors (the "COMMITTEE"), and the Participant
hereby acknowledge and agree that the Corporation granted to Participant, as of
the Award Date, an option to purchase up to 1,200,000 shares of Common Stock at
a price of U.S.$0.65 per share (as may be adjusted in accordance with Article 5,
the "EXERCISE PRICE") in accordance with the terms of the Original Option
Agreement. Such option is hereinafter referred to as the "OPTION," and the
shares of Common Stock purchasable upon exercise of the Option are hereinafter
referred to as the "SHARES." The Option is intended by the parties hereto to be,
and shall be treated as, a nonqualified stock option (as such term is defined
under Section 422 of the Internal Revenue Code of 1986, as amended).

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         C. The right to exercise 20% of the Option (or a portion thereof) shall
vest and first become exercisable on the Award Date, and an additional 20% shall
vest on each succeeding anniversary of the Award Date until all of the Option is
vested (the "VESTING DATE(S)"), so that all of the Shares subject to the Option
shall be fully vested on October 13, 2007; provided, however, that Participant
has been continuously employed or otherwise retained by the Corporation during
the period from the Award Date until the applicable Vesting Date.

         D. The Option shall be immediately vested and exercisable in accordance
with the terms and conditions of, and to the extent provided in, the Employment
Agreement.

2. TERMINATION OF OPTION. The Option and all rights hereunder with respect
thereto, to the extent such rights shall not have been exercised, shall
terminate and become null and void after October 13, 2013 (the "OPTION TERM").

3. EXERCISE OF OPTION.

         A. Participant may exercise the Option with respect to all or any part
of the number of Shares then exercisable hereunder by giving the Secretary of
the Corporation written notice of intent to exercise. The notice of exercise
shall specify the number of Shares as to which Participant is exercising and the
date of exercise thereof, which date shall be not less than five (5) days after
the giving of such notice (unless an earlier time shall have been mutually
agreed upon in writing). All or any portion of the vested portion of the Option
may be exercised by Participant at any time on or before October 13, 2013.

         B. Notwithstanding anything contained in this Article 3 to the
contrary, the Option may be exercised only in compliance with all applicable
securities laws and only by (i) Participant's completion, execution and delivery
to the Corporation of a notice of exercise and, if required by the Corporation,
an "investment letter" as supplied by the Corporation and (ii) the payment to
the Corporation, as provided in Article 3D hereof, of an amount equal to the
amount obtained by multiplying the Exercise Price by the number of Shares being
purchased pursuant to such exercise as shall be specified by Participant in such
notice of exercise. Except as otherwise provided in the Employment Agreement,
Participant shall not sell, transfer, assign, pledge for a loan, margin,
hypothecate or exchange the Option or the option shares until April 1, 2005,
except pursuant to the laws of descent and except that Participant's estate,
executors or administrators, or personal or legal representatives may exercise
the Option in accordance with the terms of Article 3C hereof in the event of the
death or Disability of Participant.

         C. In the event of the death or Disability of Participant at such time
that Participant shall possess an Option pursuant to the terms of this
Agreement, Participant, Participant's estate, executors or administrators, or
personal or legal representatives (as applicable) shall be entitled to exercise
the Option within three years following Participant's termination of employment
(but not beyond the Option Term). Any person, other than Participant, so
desiring to exercise Participant's Option shall be required, as a condition to
the exercise of the Option, to furnish to the Corporation such documentation as
the Corporation shall deem satisfactory to evidence the

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authority of such person to exercise the Option on behalf of Participant. In the
event of the exercise of such Option by Participant's estate, executors or
administrators, or personal or legal representatives, all references herein to
Participant shall, to the extent applicable, be deemed to refer to and include
such estate, executors or administrators, or personal or legal representatives,
as the case may be.

         D. The Exercise Price shall be paid in full by Participant for the
Shares purchased on or before the exercise date specified in the notice of
exercise, at Participant's option, in one or a combination of the following
methods: (i) in cash or by electronic funds transfer; (ii) by check payable to
the order of the Corporation; (iii) if authorized by the Board of Directors of
the Corporation (the "BOARD"), or the Committee, by a promissory note of the
Participant; (iv) by notice and third party payment in such manner as may be
authorized by the Board or the Committee; (v) by the delivery of shares of
Common Stock of the Corporation already owned by the Participant; or (vi)
pursuant to a "cashless exercise" procedure (the "CASHLESS EXERCISE RIGHT")
pursuant to which the Participant shall surrender to the Corporation this Option
and a notice of exercise, duly completed and executed by the Participant to
evidence the exercise of the Cashless Exercise Right by authorizing the
Corporation to withhold from issuance a number of Shares issuable upon such
exercise of the Option which, when multiplied by the Fair Market Value (as
defined below) of such Shares, is equal to the aggregate Exercise Price (and
such withheld Shares shall no longer be issuable under this Option). Shares of
Common Stock used to satisfy the Exercise Price of an Option shall be valued at
their Fair Market Value on the date of exercise.

         E. The "FAIR MARKET VALUE" shall be determined as follows:

                  (a) if the security at issue is listed on a national
         securities exchange or admitted to unlisted trading privileges on such
         an exchange or quoted on either the National Market System or the Small
         Cap Market of the automated quotation service operated by The Nasdaq
         Stock Market, Inc., the Fair Market Value shall be the last reported
         sale price of that security on such exchange or system on the day for
         which the Fair Market Value is to be determined or, if no such sale is
         made on such day, the average of the highest closing bid and lowest
         asked price for such day on such exchange or system; or

                  (b) if the security at issue is not so listed or quoted or
         admitted to unlisted trading privileges, the Fair Market Value shall be
         the average of the last reported highest bid and lowest asked prices
         quoted on the Electronic Bulletin Board operated by The Nasdaq Stock
         Market, Inc., or, if not so quoted, then by the National Quotation
         Bureau, Inc. on the last business day prior to the day for which the
         Fair Market Value is to be determined; or

                  (c) if the security at issue is not so listed or quoted or
         admitted to unlisted trading privileges and bid and asked prices are
         not reported, the Fair Market Value shall be determined in such
         reasonable manner as may be prescribed from time to time by the Board.

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         F. Upon the exercise of all or any portion of the Option by
Participant, or as soon thereafter as is practicable, the Corporation shall
issue and deliver to Participant (or to any broker or, if acceptable to the
Corporation, to any other person designated by Participant) a certificate or
certificates evidencing such number of Shares as Participant has elected to
purchase. Such certificate or certificates shall be registered in the name of
Participant (or the designated broker or other person) and, if applicable, shall
bear an appropriate investment warranty legend, any legend required by an
applicable securities law, rule or regulation and, if applicable, a legend
referring to the restrictions provided hereunder and under the Employment
Agreement and any legend required by applicable law. Upon the exercise of the
Option and the issuance and delivery of such certificate or certificates,
Participant (or the person to whom such stock certificates are registered) shall
have all the rights of a stockholder with respect to such Shares and to receive
all dividends or other distributions paid or made with respect thereto. In the
event that the capital stock of the Corporation is converted in whole or in part
into securities of any other entity, a determination as to whether the
securities of the other entity so received (if any) shall be subject to the
restrictions set forth in this Agreement shall be made solely by the other
entity.

4. RIGHTS PRIOR TO EXERCISE. Participant shall have no equity interest in the
Corporation or any voting, dividend, liquidation or dissolution rights with
respect to any capital stock of the Corporation solely by reason of having an
Option or having executed this Agreement. Prior to the exercise of all or a
portion of the Option, as set forth in Article 3A hereof, and the issuance and
delivery of a certificate or certificates evidencing the Shares purchased
pursuant to the exercise of all or a portion of such Option, Participant shall
have no interest in, or any voting, dividend, liquidation or dissolution rights
with respect to, the Shares, except to the extent that Participant has exercised
all or a portion of such Option and has been issued and received delivery of a
certificate or certificates evidencing the Shares purchased pursuant to such
exercise.

5. ADJUSTMENT OF PURCHASE AND NUMBER OF SHARES.

         A. ADJUSTMENT. The number and kind of securities purchasable upon the
exercise of this Option and the Exercise Price shall be subject to adjustment
from time to time upon the happening of certain events as follows:

                  (a) Reclassification, Consolidation or Merger. At any time
         while this Option remains outstanding and unexpired, in case of (i) any
         reclassification or change of outstanding securities issuable upon
         exercise of this Option (other than a change in par value, or from par
         value to no par value per share, or from no par value per share to par
         value or as a result of a subdivision or combination of outstanding
         securities issuable upon the exercise of the Option), (ii) any
         consolidation or merger of the Corporation with or into another
         corporation (other than a merger with another corporation in which the
         Corporation is a continuing corporation and which does not result in
         any reclassification or change, other than a change in par value, or
         from par value to no par value per share, or from no par value per
         share to par value, or as a result of a subdivision or combination of
         outstanding securities issuable upon the exercise of this Option), or
         (iii) any sale or

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         transfer to another corporation of the property of the Corporation as
         an entirety or substantially as an entirety, the Corporation, or such
         successor or purchasing corporation, as the case may be, shall without
         payment of any additional consideration therefore, execute a new Option
         providing that the holder of this Option shall have the right to
         exercise such new Option (upon terms not less favorable to the holder
         than those then applicable to this Option) and to receive upon such
         exercise, in lieu of each share of Common Stock theretofore issuable
         upon exercise of this Option, the kind and amount of shares of stock,
         other securities, money or property receivable upon such
         reclassification, change , consolidation, merger, sale or transfer.
         Such new Options shall provide for adjustments which shall be as nearly
         equivalent as may be practicable to the adjustments provided for in
         this Section 5A. The provisions of this Section 5A(a) shall similarly
         apply to successive reclassifications, changes, consolidations,
         mergers, sales and transfers.

                  (b) Subdivision or Combination of Shares. If the Corporation
         at any time while this Option remains outstanding and unexpired, shall
         subdivide or combine its capital stock, the Exercise Price shall be
         proportionately reduced, in case of subdivision of such shares as of
         the effective date of such subdivision, or, if the Corporation shall
         take a record of holders of its capital stock for the purpose of so
         subdividing, as of such record date, whichever is earlier, or shall be
         proportionately increased, in the case of combination of such shares,
         as of the effective date of such combination, or, if the Corporation
         shall take a record of holders of its capital stock for the purpose of
         so combining, as of such record date, whichever is earlier.

                  (c) Stock Dividends. If the Corporation at any time which this
         Option is outstanding and unexpired shall pay a dividend in shares of,
         or make other distribution of shares of, its capital stock, then the
         Exercise Price shall be adjusted, as of the date the Corporation shall
         take a record of the holders of its capital stock for the purpose of
         receiving such dividend or other distribution (or if no such record is
         taken, as at the date of such payment or other distribution), to that
         price determined by multiplying the Exercise Price in effect
         immediately prior to such payment or other distribution by a fraction
         (i) the numerator of which shall be the total number of shares of
         capital stock outstanding immediately prior to such dividend or
         distribution, and (ii) the denominator of which shall be the total
         number of shares of capital stock outstanding immediately after such
         dividend or distribution. The provisions of this Section 5A(c) shall
         not apply under any of the circumstances for which an adjustment is
         provided in Section 5A(a) or 5A(b).

                  (d) Liquidating Dividends, Etc. If the Corporation at any time
         while this Option is outstanding and unexpired makes a distribution of
         its assets to the holders of its capital stock as a dividend in
         liquidation or by way of return of capital or other than as a dividend
         payable out of earnings or surplus legally available for dividends
         under applicable law or any distribution to such holders made in
         respect of the sale of all or substantially all of the Corporation's
         assets (other than under the circumstances provided

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         for in the Sections 5A(a) through (c)), the holder of this Option shall
         be entitled to receive upon the exercise hereof, in addition to the
         shares of Common Stock receivable upon such exercise, and without
         payment of any consideration other than the Exercise Price, an amount
         in cash equal to the value of such distribution per share of Common
         Stock multiplied by the number of shares of Common Stock which, on the
         record date for such distribution, are issuable upon exercise of this
         Option (with no further adjustment being made following any event which
         causes a subsequent adjustment in the number of shares of Common Stock
         issuable upon the exercise hereof ), and an appropriate provision
         therefor should be made a part of any such distribution. The value of a
         distribution which is paid in other than cash shall be determined in
         good faith by the Board.

         B. NOTICE OF ADJUSTMENTS. Whenever any of the Exercise Price or the
number of shares of Common Stock purchasable under the terms of this Option at
that Exercise Price shall be adjusted pursuant to Section 5A hereof, the
Corporation shall promptly make a certificate signed by its Chief Executive
Officer, President or a Vice President and by its Treasurer or Assistant
Treasurer or its Secretary or Assistant Secretary, setting forth in reasonable
detail the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis upon which the Board made any determination hereunder), and the Exercise
Price and number of shares of Common Stock purchasable at that Exercise Price
after giving effect to such adjustment, and shall promptly cause copies of such
certificate to be mailed (by First Class and Postage Prepaid) to the registered
holder of this Option.

6. HEADINGS. The headings and other captions contained in this Agreement are for
convenience of reference only, and shall not be used in interpreting, construing
or enforcing any of the provisions of this Agreement.

7. ENTIRE AGREEMENT. This Agreement, together with the Employment Agreement,
sets forth all of the promises, agreements, conditions, understandings,
warranties and representations between the parties hereto with respect to the
Shares, and there are no promises, agreements, conditions, understandings,
warranties or representations, oral or written, express or implied, between them
with respect to the Shares other than as set forth herein and in the Employment
Agreement. Any and all prior agreements between the parties hereto with respect
to any stock acquisition rights regarding the Shares are hereby revoked. This
Agreement, together with the Employment Agreement, is, and is intended by the
parties to be, an integration of any and all prior agreements or understandings,
oral or written, with respect to the Option and the Shares.

8. NOTICES. Any and all notices provided for herein shall be sufficient if in
writing, and sent by hand delivery, by an overnight delivery service that
produces a signed receipt evidencing delivery or by certified or registered mail
(return receipt requested and first class postage prepaid), in the case of the
Corporation, to its principal office, and in the case of Participant, to
Participant's address as shown on the Corporation's records.

9. INVALID OR UNENFORCEABLE PROVISIONS. The provisions of this Agreement shall
be

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deemed severable, and the invalidity or unenforceability of any one or more of
the provisions hereof shall not affect the validity and enforceability of the
other provisions hereof. Participant agrees that the breach or alleged breach by
the Corporation of (a) any covenant contained in another agreement (if any)
between the Corporation and Participant or (b) any obligation owed to
Participant by the Corporation, shall not affect the validity or enforceability
of the covenants and agreements of Participant set forth herein.

10. MODIFICATIONS. No change or modification of this Agreement shall be valid
unless the same is in writing and signed by the parties hereto; provided,
however, that Participant hereby covenants and agrees to execute any amendment
to this Agreement which shall be required or desirable (in the opinion of the
Corporation or its counsel) in order to comply with any rule or regulation
promulgated or proposed under the Internal Revenue Code of 1986, as amended, by
the Internal Revenue Service.

11. INCORPORATION OF EMPLOYMENT AGREEMENT BY REFERENCE. The Option is granted
pursuant to the terms of the Employment Agreement, the terms of which are
incorporated herein by reference, and the Option shall in all respects be
interpreted in accordance with the Employment Agreement. To the extent that any
conflict may exist between any term or provision of this Agreement and any term
or provision of the Employment Agreement (other than with respect to matters
that, pursuant to the Employment Agreement, may be altered in this Agreement),
such term or provision of the Employment Agreement shall control.

12. GOVERNING LAW. The validity, construction, interpretation and effect of this
Agreement shall exclusively be governed by and determined in accordance with the
laws of Texas (other than the conflicts-of-law or choice-of-law rules thereof),
except to the extent preempted by federal law, which solely to the extent of
such preemption shall govern. Venue shall lie only in the State and Federal
Courts in and for the County of Harris, Texas, as to all disputes arising under
this Agreement, and such venue is hereby consented to by the Corporation and
Participant.

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

14. AMENDMENT AND RESTATEMENT. This Agreement constitutes an amendment,
modification and restatement of the Original Option Agreement. This Agreement
contains the entire understanding between the parties hereto and supersedes the
Original Option Agreement.

                            [SIGNATURE PAGE FOLLOWS.]

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         IN WITNESS WHEREOF, the Corporation has caused its duly authorized
officer to execute and attest to this Agreement, and to apply the corporate seal
hereto, and Participant has placed his or her signature hereon, effective as of
this 23rd day of December, 2004.

                                      CORPORATION:

                                      FAR EAST ENERGY CORPORATION

                                      By: /s/ John Mihm
                                          --------------------------------------
                                              John Mihm, Director

                                      PARTICIPANT:

                                      By: /s/ Michael R. McElwrath
                                          --------------------------------------
                                              Michael R. McElwrath

                                       8<PAGE>

                                                                    EXHIBIT 10.4

                           FAR EAST ENERGY CORPORATION

                              AMENDED AND RESTATED
                       NONQUALIFIED STOCK OPTION AGREEMENT

                               GENERAL INFORMATION

                  Name:                Michael R. McElwrath

                  Award Date:          January 29, 2002

                  Number of Shares
                  Subject to Option:   100,000

                  Exercise Price:      $0.65

                  Vesting:             One fifth on July 29, 2002 and one fifth
                                       each succeeding anniversary of the Award
                                       Date until fully vested

                  Expiration Date:     January 29, 2009

<PAGE>

                           FAR EAST ENERGY CORPORATION
                              AMENDED AND RESTATED
                       NONQUALIFIED STOCK OPTION AGREEMENT

         THIS AMENDED AND RESTATED NONQUALIFIED STOCK OPTION AGREEMENT (this
"AGREEMENT") is made as of this 23rd day of December, 2004, by and between Far
East Energy Corporation, a Nevada corporation (the "CORPORATION"), and Michael
R. McElwrath ("PARTICIPANT").

         WHEREAS, the Corporation and the Participant previously entered into a
Stock Option Agreement (the "ORIGINAL OPTION AGREEMENT") dated as of January 29,
2002 (the "AWARD DATE") setting forth the grant of options to purchase 100,000
shares of common stock, par value $0.001 per share, of the Corporation (the
"COMMON STOCK") at an exercise price per share of $0.65; and

         WHEREAS, the Participant has entered into an Amended and Restated
Employment Agreement (as hereinafter amended, restated and modified from time to
time, the "EMPLOYMENT AGREEMENT") dated the date hereof with the Corporation
and, in connection therewith, the Corporation and the Participant have agreed to
amend and restate the Original Option Agreement;

         NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises hereinafter set forth and of such other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:

1. GRANT OF OPTION; DEFINED TERMS.

         A. Capitalized terms used herein without definition shall have the
meaning ascribed to such terms in the Employment Agreement.

         B. Subject to the terms and conditions hereinafter set forth, the
Corporation, with the approval and at the direction of the Compensation
Committee of the Board of Directors (the "COMMITTEE"), and the Participant
hereby acknowledge and agree that the Corporation granted to Participant, as of
the Award Date, an option to purchase up to 100,000 shares of Common Stock at a
price of U.S.$0.65 per share (as may be adjusted in accordance with Article 5,
the "EXERCISE PRICE") in accordance with the terms of the Original Option
Agreement. Such option is hereinafter referred to as the "OPTION," and the
shares of Common Stock purchasable upon exercise of the Option are hereinafter
referred to as the "SHARES." The Option is intended by the parties hereto to be,
and shall be treated as, a nonqualified stock option (as such term is defined
under Section 422 of the Internal Revenue Code of 1986, as amended).

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         C. The right to exercise 20% of the Option (or a portion thereof) shall
vest and first become exercisable on July 29, 2002, and an additional 20% shall
vest on each succeeding anniversary of the Award Date until all of the Option is
vested (the "VESTING DATE(S)"), so that all of the Shares subject to the Option
shall be fully vested on January 29, 2006; provided, however, that Participant
has been continuously employed or otherwise retained by the Corporation during
the period from the Award Date until the applicable Vesting Date.

         D. The Option shall be immediately vested and exercisable in accordance
with the terms and conditions of, and to the extent provided in, the Employment
Agreement.

2. TERMINATION OF OPTION. The Option and all rights hereunder with respect
thereto, to the extent such rights shall not have been exercised, shall
terminate and become null and void after January 29, 2009 (the "OPTION TERM").

3. EXERCISE OF OPTION.

         A. Participant may exercise the Option with respect to all or any part
of the number of Shares then exercisable hereunder by giving the Secretary of
the Corporation written notice of intent to exercise. The notice of exercise
shall specify the number of Shares as to which Participant is exercising and the
date of exercise thereof, which date shall be not less than five (5) days after
the giving of such notice (unless an earlier time shall have been mutually
agreed upon in writing). All or any portion of the vested portion of the Option
may be exercised by Participant at any time on or before January 29, 2009.

         B. Notwithstanding anything contained in this Article 3 to the
contrary, the Option may be exercised only in compliance with all applicable
securities laws and only by (i) Participant's completion, execution and delivery
to the Corporation of a notice of exercise and, if required by the Corporation,
an "investment letter" as supplied by the Corporation and (ii) the payment to
the Corporation, as provided in Article 3D hereof, of an amount equal to the
amount obtained by multiplying the Exercise Price by the number of Shares being
purchased pursuant to such exercise as shall be specified by Participant in such
notice of exercise. Except as otherwise provided in the Employment Agreement,
Participant shall not sell, transfer, assign, pledge for a loan, margin,
hypothecate or exchange the Option or the option shares until April 1, 2005,
except pursuant to the laws of descent and except that Participant's estate,
executors or administrators, or personal or legal representatives may exercise
the Option in accordance with the terms of Article 3C hereof in the event of the
death or Disability of Participant.

         C. In the event of the death or Disability of Participant at such time
that Participant shall possess an Option pursuant to the terms of this
Agreement, Participant, Participant's estate, executors or administrators, or
personal or legal representatives (as applicable) shall be entitled to exercise
the Option within three years following Participant's termination of employment
(but not beyond the Option Term). Any person, other than Participant, so
desiring to exercise Participant's Option shall be required, as a condition to
the exercise of the Option, to furnish to the Corporation such documentation as
the Corporation shall deem satisfactory to evidence the

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authority of such person to exercise the Option on behalf of Participant. In the
event of the exercise of such Option by Participant's estate, executors or
administrators, or personal or legal representatives, all references herein to
Participant shall, to the extent applicable, be deemed to refer to and include
such estate, executors or administrators, or personal or legal representatives,
as the case may be.

         D. The Exercise Price shall be paid in full by Participant for the
Shares purchased on or before the exercise date specified in the notice of
exercise, at Participant's option, in one or a combination of the following
methods: (i) in cash or by electronic funds transfer; (ii) by check payable to
the order of the Corporation; (iii) if authorized by the Board of Directors of
the Corporation (the "BOARD"), or the Committee, by a promissory note of the
Participant; (iv) by notice and third party payment in such manner as may be
authorized by the Board or the Committee; (v) by the delivery of shares of
Common Stock of the Corporation already owned by the Participant; or (vi)
pursuant to a "cashless exercise" procedure (the "CASHLESS EXERCISE RIGHT")
pursuant to which the Participant shall surrender to the Corporation this Option
and a notice of exercise, duly completed and executed by the Participant to
evidence the exercise of the Cashless Exercise Right by authorizing the
Corporation to withhold from issuance a number of Shares issuable upon such
exercise of the Option which, when multiplied by the Fair Market Value (as
defined below) of such Shares, is equal to the aggregate Exercise Price (and
such withheld Shares shall no longer be issuable under this Option). Shares of
Common Stock used to satisfy the Exercise Price of an Option shall be valued at
their Fair Market Value on the date of exercise.

         E. The "FAIR MARKET VALUE" shall be determined as follows:

                  (a) if the security at issue is listed on a national
         securities exchange or admitted to unlisted trading privileges on such
         an exchange or quoted on either the National Market System or the Small
         Cap Market of the automated quotation service operated by The Nasdaq
         Stock Market, Inc., the Fair Market Value shall be the last reported
         sale price of that security on such exchange or system on the day for
         which the Fair Market Value is to be determined or, if no such sale is
         made on such day, the average of the highest closing bid and lowest
         asked price for such day on such exchange or system; or

                  (b) if the security at issue is not so listed or quoted or
         admitted to unlisted trading privileges, the Fair Market Value shall be
         the average of the last reported highest bid and lowest asked prices
         quoted on the Electronic Bulletin Board operated by The Nasdaq Stock
         Market, Inc., or, if not so quoted, then by the National Quotation
         Bureau, Inc. on the last business day prior to the day for which the
         Fair Market Value is to be determined; or

                  (c) if the security at issue is not so listed or quoted or
         admitted to unlisted trading privileges and bid and asked prices are
         not reported, the Fair Market Value shall be determined in such
         reasonable manner as may be prescribed from time to time by the Board.

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         F. Upon the exercise of all or any portion of the Option by
Participant, or as soon thereafter as is practicable, the Corporation shall
issue and deliver to Participant (or to any broker or, if acceptable to the
Corporation, to any other person designated by Participant) a certificate or
certificates evidencing such number of Shares as Participant has elected to
purchase. Such certificate or certificates shall be registered in the name of
Participant (or the designated broker or other person) and, if applicable, shall
bear an appropriate investment warranty legend, any legend required by an
applicable securities law, rule or regulation and, if applicable, a legend
referring to the restrictions provided hereunder and under the Employment
Agreement and any legend required by applicable law. Upon the exercise of the
Option and the issuance and delivery of such certificate or certificates,
Participant (or the person to whom such stock certificates are registered) shall
have all the rights of a stockholder with respect to such Shares and to receive
all dividends or other distributions paid or made with respect thereto. In the
event that the capital stock of the Corporation is converted in whole or in part
into securities of any other entity, a determination as to whether the
securities of the other entity so received (if any) shall be subject to the
restrictions set forth in this Agreement shall be made solely by the other
entity.

4. RIGHTS PRIOR TO EXERCISE. Participant shall have no equity interest in the
Corporation or any voting, dividend, liquidation or dissolution rights with
respect to any capital stock of the Corporation solely by reason of having an
Option or having executed this Agreement. Prior to the exercise of all or a
portion of the Option, as set forth in Article 3A hereof, and the issuance and
delivery of a certificate or certificates evidencing the Shares purchased
pursuant to the exercise of all or a portion of such Option, Participant shall
have no interest in, or any voting, dividend, liquidation or dissolution rights
with respect to, the Shares, except to the extent that Participant has exercised
all or a portion of such Option and has been issued and received delivery of a
certificate or certificates evidencing the Shares purchased pursuant to such
exercise.

5. ADJUSTMENT OF PURCHASE AND NUMBER OF SHARES.

         A. ADJUSTMENT. The number and kind of securities purchasable upon the
exercise of this Option and the Exercise Price shall be subject to adjustment
from time to time upon the happening of certain events as follows:

                  (a) Reclassification, Consolidation or Merger. At any time
         while this Option remains outstanding and unexpired, in case of (i) any
         reclassification or change of outstanding securities issuable upon
         exercise of this Option (other than a change in par value, or from par
         value to no par value per share, or from no par value per share to par
         value or as a result of a subdivision or combination of outstanding
         securities issuable upon the exercise of the Option), (ii) any
         consolidation or merger of the Corporation with or into another
         corporation (other than a merger with another corporation in which the
         Corporation is a continuing corporation and which does not result in
         any reclassification or change, other than a change in par value, or
         from par value to no par value per share, or from no par value per
         share to par value, or as a result of a subdivision or combination of
         outstanding securities issuable upon the exercise of this Option), or
         (iii) any sale or

                                        4
<PAGE>

         transfer to another corporation of the property of the Corporation as
         an entirety or substantially as an entirety, the Corporation, or such
         successor or purchasing corporation, as the case may be, shall without
         payment of any additional consideration therefore, execute a new Option
         providing that the holder of this Option shall have the right to
         exercise such new Option (upon terms not less favorable to the holder
         than those then applicable to this Option) and to receive upon such
         exercise, in lieu of each share of Common Stock theretofore issuable
         upon exercise of this Option, the kind and amount of shares of stock,
         other securities, money or property receivable upon such
         reclassification, change , consolidation, merger, sale or transfer.
         Such new Options shall provide for adjustments which shall be as nearly
         equivalent as may be practicable to the adjustments provided for in
         this Section 5A. The provisions of this Section 5A(a) shall similarly
         apply to successive reclassifications, changes, consolidations,
         mergers, sales and transfers.

                  (b) Subdivision or Combination of Shares. If the Corporation
         at any time while this Option remains outstanding and unexpired, shall
         subdivide or combine its capital stock, the Exercise Price shall be
         proportionately reduced, in case of subdivision of such shares as of
         the effective date of such subdivision, or, if the Corporation shall
         take a record of holders of its capital stock for the purpose of so
         subdividing, as of such record date, whichever is earlier, or shall be
         proportionately increased, in the case of combination of such shares,
         as of the effective date of such combination, or, if the Corporation
         shall take a record of holders of its capital stock for the purpose of
         so combining, as of such record date, whichever is earlier.

                  (c) Stock Dividends. If the Corporation at any time which this
         Option is outstanding and unexpired shall pay a dividend in shares of,
         or make other distribution of shares of, its capital stock, then the
         Exercise Price shall be adjusted, as of the date the Corporation shall
         take a record of the holders of its capital stock for the purpose of
         receiving such dividend or other distribution (or if no such record is
         taken, as at the date of such payment or other distribution), to that
         price determined by multiplying the Exercise Price in effect
         immediately prior to such payment or other distribution by a fraction
         (i) the numerator of which shall be the total number of shares of
         capital stock outstanding immediately prior to such dividend or
         distribution, and (ii) the denominator of which shall be the total
         number of shares of capital stock outstanding immediately after such
         dividend or distribution. The provisions of this Section 5A(c) shall
         not apply under any of the circumstances for which an adjustment is
         provided in Section 5A(a) or 5A(b).

                  (d) Liquidating Dividends, Etc. If the Corporation at any time
         while this Option is outstanding and unexpired makes a distribution of
         its assets to the holders of its capital stock as a dividend in
         liquidation or by way of return of capital or other than as a dividend
         payable out of earnings or surplus legally available for dividends
         under applicable law or any distribution to such holders made in
         respect of the sale of all or substantially all of the Corporation's
         assets (other than under the circumstances provided

                                        5
<PAGE>

         for in the Sections 5A(a) through (c)), the holder of this Option shall
         be entitled to receive upon the exercise hereof, in addition to the
         shares of Common Stock receivable upon such exercise, and without
         payment of any consideration other than the Exercise Price, an amount
         in cash equal to the value of such distribution per share of Common
         Stock multiplied by the number of shares of Common Stock which, on the
         record date for such distribution, are issuable upon exercise of this
         Option (with no further adjustment being made following any event which
         causes a subsequent adjustment in the number of shares of Common Stock
         issuable upon the exercise hereof ), and an appropriate provision
         therefor should be made a part of any such distribution. The value of a
         distribution which is paid in other than cash shall be determined in
         good faith by the Board.

         B. NOTICE OF ADJUSTMENTS. Whenever any of the Exercise Price or the
number of shares of Common Stock purchasable under the terms of this Option at
that Exercise Price shall be adjusted pursuant to Section 5A hereof, the
Corporation shall promptly make a certificate signed by its Chief Executive
Officer, President or a Vice President and by its Treasurer or Assistant
Treasurer or its Secretary or Assistant Secretary, setting forth in reasonable
detail the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis upon which the Board made any determination hereunder), and the Exercise
Price and number of shares of Common Stock purchasable at that Exercise Price
after giving effect to such adjustment, and shall promptly cause copies of such
certificate to be mailed (by First Class and Postage Prepaid) to the registered
holder of this Option.

6. HEADINGS. The headings and other captions contained in this Agreement are for
convenience of reference only, and shall not be used in interpreting, construing
or enforcing any of the provisions of this Agreement.

7. ENTIRE AGREEMENT. This Agreement, together with the Employment Agreement,
sets forth all of the promises, agreements, conditions, understandings,
warranties and representations between the parties hereto with respect to the
Shares, and there are no promises, agreements, conditions, understandings,
warranties or representations, oral or written, express or implied, between them
with respect to the Shares other than as set forth herein and in the Employment
Agreement. Any and all prior agreements between the parties hereto with respect
to any stock acquisition rights regarding the Shares are hereby revoked. This
Agreement, together with the Employment Agreement, is, and is intended by the
parties to be, an integration of any and all prior agreements or understandings,
oral or written, with respect to the Option and the Shares.

8. NOTICES. Any and all notices provided for herein shall be sufficient if in
writing, and sent by hand delivery, by an overnight delivery service that
produces a signed receipt evidencing delivery or by certified or registered mail
(return receipt requested and first class postage prepaid), in the case of the
Corporation, to its principal office, and in the case of Participant, to
Participant's address as shown on the Corporation's records.

9. INVALID OR UNENFORCEABLE PROVISIONS. The provisions of this Agreement shall
be

                                        6
<PAGE>

deemed severable, and the invalidity or unenforceability of any one or more of
the provisions hereof shall not affect the validity and enforceability of the
other provisions hereof. Participant agrees that the breach or alleged breach by
the Corporation of (a) any covenant contained in another agreement (if any)
between the Corporation and Participant or (b) any obligation owed to
Participant by the Corporation, shall not affect the validity or enforceability
of the covenants and agreements of Participant set forth herein.

10. MODIFICATIONS. No change or modification of this Agreement shall be valid
unless the same is in writing and signed by the parties hereto; provided,
however, that Participant hereby covenants and agrees to execute any amendment
to this Agreement which shall be required or desirable (in the opinion of the
Corporation or its counsel) in order to comply with any rule or regulation
promulgated or proposed under the Internal Revenue Code of 1986, as amended, by
the Internal Revenue Service.

11. INCORPORATION OF EMPLOYMENT AGREEMENT BY REFERENCE. The Option is granted
pursuant to the terms of the Employment Agreement, the terms of which are
incorporated herein by reference, and the Option shall in all respects be
interpreted in accordance with the Employment Agreement. To the extent that any
conflict may exist between any term or provision of this Agreement and any term
or provision of the Employment Agreement (other than with respect to matters
that, pursuant to the Employment Agreement, may be altered in this Agreement),
such term or provision of the Employment Agreement shall control.

12. GOVERNING LAW. The validity, construction, interpretation and effect of this
Agreement shall exclusively be governed by and determined in accordance with the
laws of Texas (other than the conflicts-of-law or choice-of-law rules thereof),
except to the extent preempted by federal law, which solely to the extent of
such preemption shall govern. Venue shall lie only in the State and Federal
Courts in and for the County of Harris, Texas, as to all disputes arising under
this Agreement, and such venue is hereby consented to by the Corporation and
Participant.

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

14. AMENDMENT AND RESTATEMENT. This Agreement constitutes an amendment,
modification and restatement of the Original Option Agreement. This Agreement
contains the entire understanding between the parties hereto and supersedes the
Original Option Agreement.

                            [SIGNATURE PAGE FOLLOWS.]

                                        7
<PAGE>

         IN WITNESS WHEREOF, the Corporation has caused its duly authorized
officer to execute and attest to this Agreement, and to apply the corporate seal
hereto, and Participant has placed his or her signature hereon, effective as of
this 23rd day of December, 2004.

                                    CORPORATION:

                                    FAR EAST ENERGY CORPORATION

                                    By: /s/ John Mihm
                                        ----------------------------------------
                                            John Mihm, Director

                                    PARTICIPANT:

                                    By: /s/ Michael R. McElwrath
                                        ----------------------------------------
                                            Michael R. McElwrath

                                        8

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