Terms of Agreement Dated Feb.18, 2006



 






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:




 









 












	 	(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”).




 









 






	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