Standstill Agreement - Ivanhoe Energy Inc. and Linyi Holdings Ltd.
IVANHOE ENERGY INC.
Suite 654 - 999 Canada Place
Vancouver, BC V6C 3E1
May 5, 2003
LINYI HOLDINGS LIMITED
13/F Gloucester Tower
The Landmark
11 Pedder Street
Central
Hong Kong
ATTENTION: ANDREW BURGIN
Dear Sir:
RE: AMENDED 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 "Amended
Standstill Agreement") between Ivanhoe Energy Inc. ("Ivanhoe") and Linyi
Holdings Limited. ("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. The terms of the Loan Agreement and the Convertible
Note were amended by a Standstill Agreement between Ivanhoe and Linyi dated
October 29, 2002 (the "Original Standstill Agreement"). A copy of the Original
Standstill Agreement is attached to this Letter.
We confirm the terms of our Amended 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 December 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
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interest on the Principal Amount in accordance with the terms of the Loan
Agreement and the Convertible Note.
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 December 27, 2003 into common
shares of Ivanhoe ("Common Shares"), in whole or in part at a deemed issue
price of US$0.50 per Common Share (the "Conversion Price"). The Option
will be exercisable commencing on the date hereof and ending on December
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 December 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
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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 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 Amended 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 Amended Standstill
Agreement without the written consent of the other party, and any
purported assignment without such consent will be void;
(b) this Amended 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 Amended 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 Amended Standstill Agreement;
(d) this Amended 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 Amended Standstill Agreement will enure to the benefit of and
binding upon the respective legal representatives and successors of
the parties;
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(f) this Amended Standstill Agreement may be executed in any number of
counterparts with the same effect as if all parties to this Amended
Standstill Agreement had signed the same document and all
counterparts will construed together and constitute one and the same
document; and
(g) a reference to "approval", "authorization" or "consent" means
written approval, authorization or consent.
Yours Truly,
IVANHOE ENERGY INC.
Per: /s/ "J. O'Keefe"
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Authorized Signatory
Agreed to this 5th day of May, 2003
LINYI HOLDINGS LIMITED
Per: /s/ "Andrew Burgin"
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Authorized Signatory