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STOCK SUBSCRIPTION AGREEMENT

Stock Subscription Agreement

STOCK SUBSCRIPTION AGREEMENT | Document Parties: Far East Energy Corporation | International Finance Corporation You are currently viewing:
This Stock Subscription Agreement involves

Far East Energy Corporation | International Finance Corporation

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Title: STOCK SUBSCRIPTION AGREEMENT
Governing Law: New York     Date: 8/6/2008
Industry: Oil and Gas Operations     Law Firm: Baker McKenzie     Sector: Energy

STOCK SUBSCRIPTION AGREEMENT, Parties: far east energy corporation , international finance corporation
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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   Envir


 
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