Exhibit 10.2
TERMS OF AGREEMENT
CONVERSION OF PARTICIPATING INTEREST BY RICHFIRST
Background

(A)   Ivanhoe Energy Inc. (“Ivanhoe”), Pan-China Resources Ltd (“Pan-China”),
Sunwing Energy Ltd (“Sunwing”) and Richfirst Holdings Limited (“Richfirst”) are
parties to a farmout agreement dated 18 January 2004 as supplemented and amended
by three supplemental agreements dated 15 December 2005, 17 January 2006 and 17
February 2006 respectively (the “Farmout Agreement”) relating to the acquisition
by Richfirst from Pan-China of a participating interest in, and representing 40%
of, the contractor’s rights and obligations in a petroleum development and
production sharing contract dated 8 September 1997 between Pan-China and China
National Petroleum Corporation (as amended) for the development and production
of petroleum in the Kongnan Block, Dagang Oilfield, the People’s Republic of
China.   (B)   The Parties hereto have agreed that the value of Richfirst’s
Participating Interest as at the date of this Agreement is equal to the sum of
US$27,386,135.   (C)   Pursuant to the Farmout Agreement, Richfirst has the
right, amongst others, to convert its Participating Interest into Ivanhoe
Shares.   (D)   Ivanhoe, Pan-China, Sunwing and Richfirst have agreed terms and
conditions regarding the conversion of Richfirst’s Participating Interest into
(i) Ivanhoe Shares and (ii) a loan repayable by Ivanhoe to Richfirst.   (E)  
Unless the context otherwise requires, terms defined in the Farmout Agreement
shall have the same meaning when used herein.

Agreement between the Parties

1.   Conversion into and sale of Ivanhoe Shares   1.1   Richfirst shall, and is
hereby deemed to have exercised its conversion rights pursuant to the Farmout
Agreement to, convert US$20,000,000 of the value of its Participating Interest
into Ivanhoe Shares (the “Conversion Shares”).   1.2   The number of Conversion
Shares shall be determined by dividing the sum of US$20,000,000 by the Ivanhoe
Conversion Price. The Ivanhoe Conversion Price shall be US$2.3279 per Conversion
Share and the total number of Conversion Shares to be issued to Richfirst shall
be 8,591,434 Ivanhoe Shares.   1.3   The Conversion Shares shall rank pari passu
with all other issued or outstanding Ivanhoe Shares and shall be issued free of
any encumbrances and all other third party rights of whatsoever nature.   1.4  
Ivanhoe shall issue the Conversion Shares and deliver the relevant share
certificate in respect of the Conversion Shares to Richfirst within 14 days of
the date hereof.   1.5   During the period of 12 months immediately following
the date hereof, Richfirst shall not:

 

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  (A)   during any period of five consecutive trading days, sell more than
250,000 Conversion Shares; and     (B)   during any period of 20 consecutive
trading days, sell more than 750,000 Conversion Shares.

2.   Loan due from Ivanhoe to Richfirst   2.1   The remaining balance of the
value of Richfirst’s Participating Interest of US$7,386,135 shall not be
converted into Ivanhoe Shares and, instead, the amount shall be, and is hereby
assumed and taken up by Ivanhoe to be, an amount due and repayable by Ivanhoe to
Richfirst as a loan (the “Ivanhoe Loan”) and the Ivanhoe Loan shall rank pari
passu with all other unsecured and unsubordinated obligations of Ivanhoe.   2.2
  Subject to Clause 3, the Ivanhoe Loan shall be repayable by Ivanhoe to
Richfirst by 35 instalments of US$205,000 each and a final instalment of
US$211,135 without any set-off or counterclaim and free of any withholding or
other deduction whatsoever unless required by law, in which event Ivanhoe shall
pay to Richfirst such additional amount as shall result in the receipt by
Richfirst of the full amount which will otherwise have been receivable by
Richfirst.   2.3   The first instalment of the Ivanhoe Loan shall be timely paid
by Ivanhoe to Richfirst on 31 March 2006 and each subsequent instalment shall be
timely paid by Ivanhoe to Richfirst on the last day of each following month, and
if such day is not a Business Day then on the immediately preceding Business
Day. Details of the bank account to which such payments are to be remitted from
time to time shall be provided in writing by Richfirst to Ivanhoe.   2.4  
Except for any default in payment, the Ivanhoe Loan shall not bear any interest.
Any amount in default shall bear interest at a rate of 5% per annum from the
date of due payment until the date of actual payment.

3.   Conversion of Ivanhoe Loan into Sunwing Shares   3.1   If, during the
repayment period of the Ivanhoe Loan, Sunwing, or a company owning all of the
issued and outstanding shares of Sunwing, (the “Listed Sunwing Entity”) effects
a transaction whereby the Listed Sunwing Entity issues its shares (“Sunwing
Shares”) and obtains a listing of such shares on the New York Stock Exchange or
NASDAQ (or such other exchange as shall be approved in writing by Richfirst)
(“Qualifying Sunwing Listing Transaction”), Ivanhoe may, on giving written
notice (the “Subscription Notice”) to Richfirst not more than 20 days but not
less than 10 days prior to the completion of the Qualifying Sunwing Listing
Transaction, require Richfirst to apply the whole amount of the Ivanhoe Loan (or
such amount thereof as shall be outstanding at the date of the Subscription
Notice) to subscribe for Sunwing Shares (the “Subscription Shares”) in the
Qualifying Sunwing Listing Transaction. Ivanhoe may not exercise its right under
this Clause 3 more than once.   3.2   The subscription price payable by
Richfirst in respect of each Subscription Share shall be a price equal to the
issue price of each Sunwing Share issued in the Qualifying Sunwing Listing
Transaction, less a 10% discount (the “Subscription Price”).

 

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3.3   The total number of Subscription Shares to be issued to Richfirst in the
event of a Qualifying Sunwing Listing Transaction shall be determined by
dividing the amount of the Ivanhoe Loan outstanding at the date of the
Subscription Notice by the Subscription Price.   3.4   If the Subscription Price
is not an amount in Dollars, then the Subscription Price shall be converted into
Dollars by reference to the average (mean) 10 a.m. spot rates quoted by the
Federal Reserve Bank of New York and published on its official website for the
currency in which the Subscription Price is calculated and Dollars for the
30 day period immediately preceding the date of the Subscription Notice.   3.5  
Richfirst shall subscribe for the Subscription Shares in respect of the
Qualifying Sunwing Listing Transaction with the benefit of the relevant
prospectus, offering memorandum, listing document or public disclosure document
issued by the Listed Sunwing Entity in respect of the Qualifying Sunwing Listing
Transaction.   3.6   The Subscription Shares issued to Richfirst pursuant to
this Clause 3 shall not be subject to any lock up or disposal restrictions
except as may be imposed under applicable law.

4.   Reassignment of Participating Interest       As a result of the conversion
of its Participating Interest into the Conversion Shares and the Ivanhoe Loan on
the date hereof, Richfirst shall be deemed to have re-assigned its Participating
Interest to Pan-China and the Parties hereto acknowledge and confirm that
Richfirst shall cease to have any right to any revenue arising from or any
obligation for the payment of any costs or expenses or other liability in
respect of or attributable to such Participating Interest.

5.   Date       The date of this Agreement is 18 February 2006.

6.   Agreement       The Parties hereto mutually agree with the terms and
conditions set out above and acknowledge their agreement and acceptance by
signing below.

         
Agreed and accepted:
  Agreed and accepted:    
 
       
 
       
/s/ Patrick Chua
  /s/ Patrick Chua    
 
       
Ivanhoe Energy Inc.
  Pan-China Resources Ltd    
 
       
 
       
Agreed and accepted:
  Agreed and accepted:    
 
       
 
       
/s/ Patrick Chua
  /s/ Zhang Ji Jing    
 
       
Sunwing Energy Ltd
  Richfirst Holdings Limited