Standstill Agreement - Ivanhoe Energy Inc. and Linyi Holdings ltd.
IVANHOE ENERGY INC.
Suite 654 - 999 Canada Place
Vancouver, BC V6C 3E1
October 29, 2002
LINYI HOLDINGS LIMITED
13/F Gloucester Tower
The Landmark
11 Pedder Street
Central
Hong Kong
ATTENTION: ANDREW BURGIN
Dear Sir:
RE: STANDSTILL AGREEMENT
This letter is intended to reflect our recent discussions and, when executed and
delivered by each of us, will constitute a binding agreement (the "Standstill
Agreement") between Ivanhoe Energy Inc. ("Ivanhoe") and Linyi Holdings Ltd.
("Linyi") wherein Linyi will refrain from demanding payment of the Principal
Amount of the Loan under the Amended and Restated Convertible Loan Agreement
between the parties dated August 4, 1999 (the "Loan Agreement") and the
associated Convertible Note (the "Convertible Note") issued by Ivanhoe to Linyi
dated August 4, 1999. A copy of each of the Loan Agreement and the Convertible
Note are attached to this Letter.
We confirm the terms of our Standstill Agreement as follows:
1. INTERPRETATION
Terms denoted with initial capital letters and not otherwise defined
herein have the meanings assigned to them in the Loan Agreement.
2. STANDSTILL
Linyi hereby agrees that it will not, under any circumstances, demand
payment of the Principal Amount under the Loan Agreement and the
Convertible Note before the close of business on March 27, 2003. The
Agreement of Linyi hereunder not to demand payment of the Principal
Amount does not affect its rights with respect to accrued and unpaid
interest, and Linyi may continue to demand payment of any accrued and
unpaid interest on the Principal Amount in accordance with the terms of
the Loan Agreement and the Convertible Note.
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3. CONSIDERATION
In consideration of Linyi's forbearance in demanding payment under the
Loan Agreement and the Convertible Note, Ivanhoe hereby grants to Linyi
an option (the "Option") to convert all or any part of the Principal
Amount and all accrued and unpaid interest up until March 27, 2003 into
common shares of Ivanhoe ("Common Shares"), in whole or in part at a
deemed issue price of US$0.77 per Common Share (the "Conversion
Price"). The Option will be exercisable commencing on the date hereof
and ending on March 27, 2003 (the "Option Period"). Linyi may exercise
the Option at any time during the Option Period by delivering notice in
writing to Ivanhoe to convert all or any part of the Principal amount
and accrued and unpaid interest until March 27, 2003. Upon receipt of
notice of exercise of the Option, Ivanhoe will take all steps necessary
to issue the appropriate number of Common Shares to, or to the
direction of, Linyi, and will deliver to Linyi share certificates
representing such Common Shares. Upon delivery of the share
certificates to Linyi, Ivanhoe will be deemed to have repaid the amount
of the Principal Amount and/or accrued and unpaid interest which is
equal to the Option Price.
Linyi acknowledges that any Common Shares issued to Linyi hereunder
will be subject to restrictions on resale in the United States and
Canada and that certificates representing such Common Shares may be
inscribed with legends describing such restrictions.
4. ADJUSTMENT
The number of Common Shares issuable to the Linyi upon any conversion
of the outstanding Principal Amount and accrued and unpaid interest in
respect thereof, will be subject to adjustment as follows:
(a) if the Common Shares are subdivided, consolidated or changed,
the outstanding Principal Amount and accrued and unpaid
interest in respect thereof, will be convertible at the Option
Price into that number of common shares or other class or kind
of securities of Ivanhoe as would have been held by Linyi
following such subdivision, consolidation or change had Linyi
effected such conversion immediately prior to the subdivision,
consolidation or change; or
(b) in the event of any capital reorganization of Ivanhoe or
reclassification or reclassifications of the Common Shares or
in the event of any merger or amalgamation of Ivanhoe with or
into any other corporation resulting in a reclassification of
the Common Shares or a change of the Common Shares into other
shares or securities or in the event of a transaction whereby
all or substantially all of Ivanhoe's undertakings and assets
become the property of another corporation, Linyi will
thereafter acquire and accept, in lieu of the Common Shares
immediately theretofore receivable upon the conversion of the
outstanding Principal Amount and accrued and unpaid interest
in respect thereof, the kind, class, series and amount of
shares or other securities or property that Linyi would have
been entitled to receive upon such capital reorganization,
reclassification. merger, amalgamation or transaction if, on
the effective date thereof, Linyi had been the holder of the
number of Common Shares that Linyi would have acquired by the
conversion of the
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outstanding Principal Amount and accrued and unpaid interest
in respect thereof immediately before the effective date
thereof. The subdivision or consolidation of Common Shares at
any time outstanding into a greater or lesser number of Common
Shares (whether with or without par value) will not be deemed
to be a capital reorganization or a reclassification of the
capital of Ivanhoe for the purposes of this section 4.
5. APPROVALS
Ivanhoe's obligations under this Standstill Agreement are subject to
approval of the board of directors of Ivanhoe and approval of the
transaction by the Toronto Stock Exchange.
6. GENERAL
This Standstill Agreement is subject to the following additional terms
and conditions:
(a) except as otherwise expressly provided herein, neither party
may assign any right, title or interest in this Standstill
Agreement without the written consent of the other party, and
any purported assignment without such consent will be void;
(b) this Standstill Agreement constitutes the entire agreement
between the parties with respect to the forbearance of the
payment of the Principal Amount and accrued interest and
supersedes every previous agreement, communication,
expectation, negotiation, representation, warranty or
understanding whether oral or written, express or implied,
statutory or otherwise, between the parties with respect to
the subject matter of this Standstill Agreement;
(c) each party will execute and deliver such further agreements
and documents and do such further acts and things as any party
reasonably requests to evidence, carry out or give full effect
to the intent of this Standstill Agreement;
(d) this Standstill Agreement is and will be deemed to have been
made in British Columbia, Canada for all purposes and will be
governed exclusively by and construed and enforced in
accordance with the laws prevailing in British Columbia and
the rights and remedies of the parties will be determined in
accordance with those laws. Each of the parties hereby attorns
to the non-exclusive jurisdiction of the courts of British
Columbia;
(e) this Standstill Agreement will enure to the benefit of and
binding upon the respective legal representatives and
successors of the parties;
(f) this Standstill Agreement may be executed in any number of
counterparts with the same effect as if all parties to this
Standstill Agreement had signed the same document and all
counterparts will construed together and constitute one and
the same document; and
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(g) a reference to "approval", "authorization" or "consent" means
written approval, authorization or consent.
Yours Truly,
IVANHOE ENERGY INC.
Per: "John O'Keefe"
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Authorized Signatory
Agreed to this 29th day of October, 2002
LINYI HOLDINGS LIMITED
Per: "Kevin O'Shaughnessy"
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Authorized Signatory
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CONVERTIBLE NOTE
US $1,000,000 29 October 2002
FOR VALUE RECEIVED, Ivanhoe Energy Inc., a Yukon corporation (the "Maker")
hereby promises to pay to, or to the order of, LINYI HOLDINGS LIMITED, or its
successors and assigns ("Payee"), on the date which is 90 days after written
demand, but in any event, as per the Standstill Agreement dated 29 October, 2002
(the "Agreement"), not before March 27, 2003, at the address of the Payee being
13th Floor, Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong
Kong, or at such other place as Payee may designate, in lawful money of the
United States of America, in cash or by certified cheque or bank draft or by
wire transfer of immediately available and freely transferable funds, the
aggregate principal amount of One Million Dollars ($1,000,000).
This note shall bear interest from May 26, 1999, until repaid at an annual rate
equal to two and one-half per cent (2 1/2%) over Citibank's prime rate for U.S.
dollar loans made at New York in the United States of America (the "Prime Rate")
as from time to time in effect (computed on the basis of actual days elapsed
over a year of 365 or 366 days as applicable), provided that such rate shall not
exceed the maximum rate permitted by applicable law. Each change in such rate
resulting from a change in the Prime Rate shall be effective as of the date such
change in the Prime Rate becomes effective.
This Note is convertible, in whole or in part, at the sole option of the Payee
in accordance with the terms of the Agreement into fully paid and non-assessable
common shares (as presently constituted) in the capital of the Maker at a deemed
price per share of Cdn. $1.21 (US$0.77).
Subject to the Agreement, the principal and interest evidenced by this Note may
be converted by the Payee into common shares of the Maker at any time upon
delivery to the Maker of written notice of such conversion. Upon any such
conversion, this Note shall, subject to the issuance and delivery of the common
shares of the Maker to which the Payee is then entitled, be deemed to have been
repaid to the extent of the amount so converted, the Maker shall have no further
obligations hereunder in respect of the amount so converted, and from and after
the date of such conversion. Notwithstanding any such conversion, the Maker will
remain obliged to repay, in accordance with the terms of the Agreement, any
principal and the interest that the Payee does not elect to convert into common
shares of the Maker.
If, at the time of the conversion of this Note, there are restrictions on resale
under applicable securities legislation in respect of the common shares so
acquired, the Maker may, on the advice of counsel, endorse the certificates
representing such shares to such effect.
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This Note confers on the Payee the right to acquire common shares as constituted
on the date hereof. If prior to the conversion of this Note at any time or from
time to time there shall be any reorganization or reclassifications of the share
capital of the Maker, the number of common shares which are issuable upon
conversion of this Note will be subject to adjustment as per section 5 of the
Agreement.
The Maker waives presentment for payment, notice of nonpayment, notice of
protest and protest of this Note.
This Note shall be governed by and construed in accordance with the laws of the
Province of British Columbia and the federal laws of Canada applicable therein.
IVANHOE ENERGY INC.
By:
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Authorized Signatory