PROMISSORY NOTE DUE JULY 11, 2011




Exhibit 10.2




NEITHER THE ISSUANCE AND SALE OF THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES
ACT”), AND THIS SECURITY MAY NOT BE CONVERTED BY OR ON BEHALF OF ANY U.S. PERSON UNLESS REGISTERED
UNDER THE U.S. SECURITIES ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.



UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY SHALL NOT TRADE THE
SECURITY BEFORE NOVEMBER 12, 2008.




CONVERTIBLE PROMISSORY NOTE



THIS CONVERTIBLE PROMISSORY NOTE is made as of the 11th day of July, 2008 by Ivanhoe
Energy Inc., a company duly incorporated under the laws of the Yukon Territory (“Ivanhoe”), in
favour of Talisman Energy Canada, an Alberta general partnership (“Talisman”).




PROMISE TO PAY AND AGREEMENT:



FOR VALUE RECEIVED, Ivanhoe hereby acknowledges itself indebted to Talisman and promises to pay to
Talisman, its successors and permitted assigns, the principal amount of FORTY MILLION DOLLARS
($40,000,000) (the “Principal Amount”) on July 11, 2011 (the “Maturity Date”), provided that upon
the occurrence of an Event of Default (as such term is defined in the Fixed and Floating Charge
Debenture (the “Debenture”) of even date granted by Ivanhoe to Talisman) the Principal Amount and
any interest accrued thereon shall be payable on demand in accordance with Article 9 of the
Debenture and in the manner provided for herein.



All references in this Convertible Promissory Note to $ or “dollars” means lawful currency of
Canada.



Ivanhoe hereby promises to pay to Talisman interest on the unpaid portion of the Principal Amount
at the Prime Rate plus two percent (2%) per annum, calculated daily and not compounded, such
interest to be payable semi-annually on July 11 and January 11 (commencing January 11, 2009) of
each year or upon demand in accordance with this Convertible Promissory Note, whichever shall first
occur; and if Ivanhoe should at any time default in the payment of any Principal Amount or any
interest thereon, Ivanhoe shall pay interest on the amount in default both before and after demand,
default and/or judgment at the Prime Rate plus two percent (2%) per annum, calculated and
compounded daily until each such amount is paid indefeasibly and in full. Accrued and unpaid
interest on any Principal Amount converted hereunder shall be payable at the date of the next
scheduled semi-annual interest payment, on the Maturity Date or upon demand in accordance with this
Convertible Promissory Note, whichever first occurs.



PREPAYMENT:  Ivanhoe shall not in any event make any prepayment under or in connection with this
Convertible Promissory Note; provided however that if and whenever the Principal Amount outstanding
under this Convertible Promissory Note is TEN MILLION DOLLARS ($10,000,000) or less, then all but
not less than all of such remaining Principal Amount that is not converted in accordance with the
terms of this Convertible Promissory Note before the date of prepayment, and any and all interest
accrued thereon, may be prepaid by Ivanhoe without bonus or penalty upon 90 days written notice by
Ivanhoe to Talisman setting forth Ivanhoe’s




 









 







intention to so prepay the remaining Principal Amount and all accrued interest under this
Convertible Promissory Note, but without prejudice to the right of Talisman to convert all or a
portion of such remaining Principal Amount to Common Shares, as provided below, prior to the date
of such prepayment.



CONVERSION:  Subject to and in compliance with the conversion procedures set forth in Schedule “A”
to this Convertible Promissory Note which forms part of this Convertible Promissory Note, Talisman
shall have the right from time to time to convert all or a portion of the Principal Amount then
outstanding under this Convertible Promissory Note into fully paid and non-assessable common shares
of Ivanhoe (“Common Shares”) at a conversion price of $3.13 per Common Share at any time and from
time to time prior to the Maturity Date, subject to adjustment in certain circumstances as provided
for in Schedule “A”.



For purposes of this Convertible Promissory Note, “Prime Rate” means the rate of interest expressed
as a rate per annum that the main branch of Royal Bank of Canada in the City of Calgary uses as a
reference rate for calculating interest on dollar denominated commercial demand loans made by such
bank in Canada and that it refers to as its “prime rate”. The interest rate payable hereunder
shall vary automatically without notice to any interested party hereto whenever there is a
variation in such rate.



This Convertible Promissory Note and all rights hereunder are not transferable by the holder
thereof except with the written consent of Ivanhoe, which consent shall not be unreasonably
withheld, provided that this Convertible Promissory Note and all rights hereunder may be assigned
to Talisman Energy Inc. or any of its direct or indirect wholly owned subsidiaries.



This Convertible Promissory Note shall be governed by and construed in accordance with the laws of
the Province of Alberta and the laws of Canada applicable therein.



In the event that any day on which any action is required to be taken hereunder is not a Business
Day, then such action shall be required to be taken on or before 5:00 p.m. (Calgary time) on the
next succeeding day that is a Business Day. For purposes of this Convertible Promissory Note, a
“Business” Day is a day on which Canadian chartered banks are open for banking business in the City
of Calgary.



The payment of any Principal Amount and any interest thereon shall be made by bank wire pursuant to
wire transfer instructions provided by Talisman, unless Ivanhoe is otherwise notified by Talisman.



Ivanhoe hereby waives grace, demand, presentment for payment, notice of dishonour or default,
protest and diligence in collecting.



Each of the provisions contained in this Convertible Promissory Note is distinct and severable and
a declaration of invalidity or unenforceability of any such provision by a court of competent
jurisdiction shall not affect the validity or enforceability of any other provision hereof or
thereof.




 









 







IN WITNESS WHEREOF Ivanhoe makes and delivers this Convertible Promissory Note as of the date first
above written.




	 	 	 	 	 
	 	
IVANHOE ENERGY INC.


 	 
	 	Per:  	/s/  “Ian S. Barnett”
 	 
	 	 	Authorized Signatory	 
	 



 









 







SCHEDULE “A” TO CONVERTIBLE PROMISSORY NOTE




Conversion Provisions





	A.	 	Manner of Exercise of Right to Convert






	 	(a)	 	In order to exercise the right of conversion under the Convertible Promissory
Note to which this schedule is attached, Talisman shall deliver to Ivanhoe a notice of
election to convert as of the day of delivery of such notice (the “Conversion Date”)
duly signed by Talisman:






	 	i.	 	stating that Talisman elects to convert all or a portion of the
outstanding Principal Amount of the Convertible Promissory Note, specifying the
Principal Amount to be so converted;
	 
	 	ii.	 	indicating the address to which the certificate(s) representing
the Common Shares issuable upon conversion are to be delivered; and
	 
	 	iii.	 	(1)  certifying that Talisman is not a “U.S. Person” (as defined
in Regulation S promulgated under the United States Securities Act of 1933, as
amended (the “U.S. Securities Act”)) and the Convertible Promissory Note is not
being converted on behalf of a U.S. Person or (2) accompanied by a written
opinion of counsel to the effect that the Convertible Promissory Note and the
Common Shares delivered upon conversion thereof have been registered under the
U.S. Securities Act or are exempt from registration thereunder.






	 	(b)	 	Each notice of election to convert less than all of the then outstanding
Principal Amount under the Convertible Promissory Note must be for a minimum Principal
Amount of FIVE MILLION DOLLARS ($5,000,000), and no more than four (4) notices of
election to convert may be delivered by Talisman to Ivanhoe in any one (1) year
calendar period.






	 	(c)	 	Upon delivery of the notice of election to convert in accordance with
subsection (a) above, Talisman shall be entitled to be entered in the books of Ivanhoe
as at the Conversion Date as the holder of the number of Common Shares into which the
portion of the Convertible Promissory Note is converted in accordance with the terms of
this Convertible Promissory Note, and as soon as practicable thereafter, Ivanhoe shall
deliver to Talisman, a certificate for such Common Shares.






	 	(d)	 	Notwithstanding anything herein contained, Common Shares will only be issued
and registered upon conversion of this Convertible Promissory Note in compliance with
the securities laws of any applicable jurisdiction, and, without limiting the
generality of the foregoing, in the event that this Convertible Promissory Note is
converted prior to the expiry of any applicable hold period under applicable securities
legislation, the certificates representing the Common Shares thereby issued will bear
such legend or legends as may, in the opinion of




 









 








	 	 	 	counsel to Ivanhoe, be necessary in order to avoid a violation of any securities
laws of any province of Canada or the United States or to comply with the
requirements of any stock exchange on which the Common Shares are listed






	B.	 	Adjustment of Conversion Rights




If and whenever at any time after the date hereof while the Principal Amount or any portion thereof
under the Convertible Promissory Note remains outstanding, there is:





	 	(a)	 	a reclassification of the Common Shares at any time outstanding or change of
the Common Shares into other shares or into other securities, whether of Ivanhoe or of
another body corporate; or
	 
	 	(b)	 	other capital reorganization, including a subdivision or a consolidation of the
outstanding Common Shares or an issuance of Common Shares, or securities convertible
into or exchangeable for Common Shares, as a stock dividend or other distribution to
all or substantially all of the holders of Common Shares; or
	 
	 	(c)	 	an amalgamation or merger of Ivanhoe with or into any other corporation or
other entity (other than with a wholly-owned subsidiary of Ivanhoe which does not
result in any reclassification of the outstanding Common Shares or a change of the
Common Shares into other shares); or
	 
	 	(d)	 	a transfer of the undertaking or assets of Ivanhoe as an entirety or
substantially as an entirety to another corporation or other entity in which the
holders of Common Shares are entitled to receive shares, other securities or other
property,






	 	 	(any of such events being called a “Capital Reorganization”), Talisman will be entitled to
receive upon the conversion, after the date of such Capital Reorganization, of all or a
portion of the Principal Amount outstanding, and will accept for the same aggregate
consideration in lieu of the number of Common Shares to which Talisman was previously
entitled upon such conversion, the aggregate number of shares, other securities or other
property which Talisman would have been entitled to receive as a result of such Capital
Reorganization if, on the effective date thereof, Talisman had been the registered holder of
the number of Common Shares into which the Principal Amount being converted was convertible
immediately prior to such Capital Reorganization. The adjustments provided for in this
provision are cumulative and shall apply to successive events requiring any adjustment under
this provision. Ivanhoe will take all steps necessary to ensure that, on a Capital
Reorganization, Talisman will, if it exercises its conversion rights hereunder, receive the
aggregate number of shares, other securities or other property to which it is entitled as a
result of the Capital Reorganization. Appropriate adjustments will be made as a result of
any such Capital Reorganization in the application of the provisions set forth in this
Convertible Promissory Note with respect to the rights and interests thereafter of Talisman
under this Convertible Promissory Note to the end that the conversion provisions set forth
in this Convertible Promissory Note will thereafter correspondingly be made applicable as
nearly as may reasonably be in relation to any
shares, other securities or other property thereafter deliverable upon the conversion of
this Convertible Promissory Note.




 









 








	C.	 	No Requirement to Issue Fractional Shares




Ivanhoe shall not be required to issue fractional Common Shares upon the conversion of this
Convertible Promissory Note. If any fractional interest in a Common Share would, except for the
provisions of this Section, be deliverable upon the conversion of any principal amount of the
Convertible Promissory Note, Ivanhoe may, at its sole option, satisfy such fractional interest by
paying to Talisman an amount in lawful money of Canada equal (to the nearest amount) to the
corresponding fraction of the value of a Common Share on the Conversion Date, determined by the
directors of Ivanhoe acting in good faith which determination shall be conclusive, provided that
Ivanhoe shall not be required to make any payment, calculated as aforesaid, that is less than
$10.00.





	D.	 	Ivanhoe to Reserve Shares




Ivanhoe shall at all times while the Convertible Promissory Note remains outstanding reserve and
keep available out of its authorized but unissued Common Shares solely for the purpose of issue
upon conversion of this Convertible Promissory Note as provided herein such number of Common Shares
as shall then be issuable upon the conversion of this Convertible Promissory Note. All Common
Shares which shall be so issuable shall be duly and validly issued as fully paid and
non-assessable.





	E.	 	Reduction of Principal Amount and Cancellation of Converted Note




The Principal Amount owing under this Convertible Promissory Note shall be reduced by any amount
converted in accordance with the provisions of this Convertible Promissory Note as of the
applicable Conversion Date. Upon conversion of the entire Principal Amount outstanding under this
Convertible Promissory Note and payment of all interest owing under this Convertible Promissory
Note, this Convertible Promissory Note shall be surrendered by Talisman to Ivanhoe for
cancellation.





	F.	 	Legends




Certificates evidencing Common Shares issuable upon conversion of the Convertible Note shall bear
such legend or legends as may be required pursuant to applicable securities laws of Canada, the
United States and any other applicable jurisdiction.