Form 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
From: October 25, 2006
IVANHOE MINES LTD.
(Translation of Registrants Name into English)
Suite 654 999 CANADA PLACE, VANCOUVER, BRITISH COLUMBIA V6C 3E1
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual reports under cover of
Form 20-F or Form 40-F.)
Form 20-F- o Form 40-F- þ
(Indicate by check mark whether the registrant by furnishing the information contained in this form
is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.)
Yes: o No: þ
(If Yes is marked, indicate below the file number assigned to the registrant in connection with
Rule 12g3-2(b): 82-______.)
Enclosed:
Material Change Report
Private Placement Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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IVANHOE MINES LTD.
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Date: October 25, 2006 |
By: |
/s Beverly A. Bartlett
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BEVERLY A. BARTLETT |
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Vice President and
Corporate Secretary |
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Form 51-102F3
Material Change Report
1. |
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REPORTING ISSUER |
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Ivanhoe Mines Ltd. (the Company) |
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654 999 Canada Place |
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Vancouver, British Columbia |
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V6C 3E1 |
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2. |
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DATE OF MATERIAL CHANGE |
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October 18, 2006 |
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3. |
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PRESS RELEASE |
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The press release was issued on October 18, 2006 and was disseminated through the
facilities of recognized newswire services. |
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4. |
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SUMMARY OF MATERIAL CHANGE |
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On October 18, 2006, the Company entered into a private placement agreement (the Private
Placement Agreement) with Rio Tinto International Holdings Limited (Rio Tinto), a
wholly-owned subsidiary of Rio Tinto plc. |
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Under the terms of the Private Placement Agreement: |
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(a) |
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Rio Tinto agreed to acquire, |
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(i) |
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37,089,883 common shares of the Company (representing, upon
completion, 9.95% of the Companys outstanding common shares) at a price of
US$8.18 per share (the First Tranche Private Placement) at a closing
scheduled to occur on October 27, 2006, and |
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(ii) |
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46,304,473 common shares of the Company (representing, upon
completion, an additional 9.95% of the Companys outstanding common shares) at
a price of US$8.38 per share (the Second Tranche Private Placement) at a
closing to occur after the Company enters into an investment agreement with
the Government of Mongolia in respect of the Companys Oyu Tolgoi copper and
gold mining project (the OT Project) in Mongolias South Gobi region that is
mutually acceptable to the Company and Rio Tinto (an Approved OT Investment
Contract) (provided the agreement is entered into within three years) or such
earlier date as Rio Tinto may elect; |
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(b) |
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the Company agreed to issue to Rio Tinto, as part of the First Tranche
Private Placement, 46,026,522 non-transferable common share purchase warrants (the
Series A Warrants) and 46,026,522 non-transferable common share purchase warrants
(the Series B Warrants). Each Series A Warrant will entitle the holder to purchase
one common share of the Company at a price between US$8.38 and US$8.54 for a period
(not exceeding four years) ending one year after the Company enters into an Approved |
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OT Investment Contract. Each Series B Warrant will entitle the holder to purchase one
common share of the Company at a price between US$8.38 and US$9.02 for a period (not
exceeding five years) ending two years after the Company enters into an Approved OT
Investment Contract. The exercise of the Series A Warrants and the Series B Warrants
will be subject to the prior approval of the Companys shareholders; |
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(c) |
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Rio Tinto has the right to acquire additional securities and participate in
future financings by the Company, so as to maintain its proportional equity interest
in the Company; |
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(d) |
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during the first five years, Rio Tinto and its affiliates (collectively, the
Rio Tinto Group) may not, except with the approval of the Companys board of
directors: |
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(i) |
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directly or indirectly, acquire or hold more than 40% of the
Companys outstanding common shares; |
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(ii) |
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make a take-over bid for the Companys outstanding common
shares; or |
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(iii) |
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make any solicitation of proxies to vote any of the
Companys outstanding common shares. |
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Notwithstanding the foregoing, if a take-over bid is made for the Companys
outstanding common shares or the Company publicly announces that its board of
directors has approved an agreement which contemplates a change of control of the
Company, the Rio Tinto Group will be released from this restriction for the purpose
of giving the Rio Tinto Group an opportunity to make a competing take-over bid or
to propose to the Company an alternative change of control transaction. Rio Tinto
will be similarly released from the 40% aggregate shareholding restriction where it
acquires common shares from Robert M. Friedland (Friedland) pursuant to the right
of first refusal granted to it under a shareholders agreement dated October 18,
2006 (the Shareholders Agreement) between Rio Tinto and Friedland if such common
shares would otherwise have been sold to any party other than an institutional
investor who meets certain prescribed criteria under the Private Placement
Agreement; |
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(e) |
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during the first year, Rio Tinto may not sell any common shares of the
Company except to an affiliate or with the approval of the Companys board of
directors. Notwithstanding the foregoing, Rio Tinto may sell its common shares of the
Company pursuant to a take-over bid or a transaction involving a change of control of
the Company; |
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(f) |
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after the first year but before the fifth year, if Rio Tinto proposes to sell
more than 5% of the Companys outstanding common shares to any person other than an
affiliate or an institutional investor who meets certain prescribed criteria under the
Private Placement Agreement and not pursuant to a take-over bid or a transaction
involving a change of control of the Company, the Company will have the right, for a
period of 60 days, to place such common shares with a third party. Rio Tinto and the
Company have agreed to enter into a registration rights agreement pursuant to which
the Company will agree |
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to provide Rio Tinto with registration rights in respect of the
common shares of the Company held by Rio Tinto from time to time; |
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(g) |
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Rio Tinto has the right to nominate directors to the Companys board of
directors in proportion to its shareholdings of the Company. If Rio Tinto is entitled
to nominate more than one director, half of such nominees must be independent
directors as defined under applicable securities laws. Rio Tinto also has the right
to nominate one financially literate, independent director to the audit committee of
the Company; |
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(h) |
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the Company has agreed to use at least 90% of the proceeds received from the
private placement to finance the development of the OT Project; |
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(i) |
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subject to the Rio Tinto Group maintaining a minimum shareholding in the
Company, the Company has granted to Rio Tinto a right of first refusal in respect of
any proposed disposition of an interest in the OT Project; |
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(j) |
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Rio Tinto has the right to participate in the negotiations with the
Government of Mongolia for an Approved OT Investment Contract; |
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(k) |
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subject to the Rio Tinto Group maintaining a minimum shareholding in the
Company, a technical committee will jointly development, operate and manage the OT
Project. The technical committee will consist of two members from the Company, two
members from Rio Tinto and a fifth member who will act as committee chairman and
senior manager of the OT Project. A Company nominee will serve as technical committee
chairman and senior manager for the first five years. During this period, unanimous
consent of all technical committee members will be required for certain material
decisions, including acquisitions and commitments exceeding US$100 million and
material amendments to the long-term OT Project mine plan. After five years, subject
to the Rio Tinto Group maintaining a
minimum shareholding in the Company, Rio Tinto will have the right to appoint the
subsequent chairman and senior manager; |
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(l) |
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Rio Tinto and the Company have agreed to negotiate in good faith to agree
upon one or more technical services agreements pursuant to which Rio Tinto will make
available, at cost during the first five years, its engineering, mining and
metallurgical staff to assist the Company in the mine planning, engineering, design
and construction of the OT Project; and |
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(m) |
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the Company has agreed to divest its joint venture interest in the Monywa
Copper project in Myanmar (the Myanmar Assets) by February 1, 2007, failing which,
Rio Tinto has the right to cause the Company to put the Myanmar Assets to an unrelated
trust whose sole purpose will be to sell the Myanmar Assets. Rio Tinto and the
Company have acknowledged that the divestiture by the Company of its other non-core
assets is also a key objective that the parties intend the Company to pursue. |
Following the completion of the First Tranche Private Placement and the Second Tranche
Private Placement, Rio Tinto will beneficially own 83,394,356 common shares of the Company
(representing, upon completion, 19.9% of the Companys outstanding common shares) and
92,053,044 Series A Warrants and Series B Warrants exercisable (subject to the prior
approval
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of the Companys shareholders) to acquire an additional 92,053,044 common shares
of the Company. If the Series A Warrants and Series B Warrants were to be fully exercised,
Rio Tinto would beneficially own approximately 34.33% of the Companys outstanding common
shares (or 33.35% on a fully diluted basis). |
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On October 18, 2006, Rio Tinto and Friedland, the largest shareholder of the Company,
entered into the Shareholders Agreement pursuant to which Friedland has agreed to vote in
favour of all shareholder resolutions envisaged by the Private Placement Agreement,
including a resolution authorizing the exercise of the Series A Warrants and Series B
Warrants, and has granted to Rio Tinto, for a period of five years, a right of first
refusal over, and/or rights of placement with third parties in relation to, the sale by him
or any of his affiliates of any common shares of the Company to any person, subject to
certain exceptions including sales to permitted transferees or pursuant to a take-over bid
or a transaction involving a change of control of the Company. |
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5. |
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FULL DESCRIPTION OF MATERIAL CHANGE |
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On October 18, 2006, the Company and Rio Tinto entered into the Private Placement Agreement
and Friedland and Rio Tinto entered into the Shareholders Agreement. |
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Private Placement Agreement |
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The material terms and conditions of the Private Placement Agreement are described below. |
First Tranche Private Placement
Pursuant to the First Tranche Private Placement, Rio Tinto will subscribe for and purchase
from the Company, and the Company will issue and sell to Rio Tinto, 37,089,883 common
shares of the Company (the First Tranche Private Placement Shares) at an issue price per
First Tranche Private Placement Share of U.S.$8.18 for an aggregate subscription price of
U.S.$303.4 million in cash.
In conjunction with, and immediately after, the issue of the First Tranche Private
Placement Shares, Rio Tinto will subscribe for and purchase from Ivanhoe, and Ivanhoe will
issue and sell to Rio Tinto:
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Series A Warrants exercisable, subject to the prior approval of the Companys
shareholders, to purchase an additional 46,026,522 common shares of the Company; and |
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(b) |
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Series B Warrants exercisable, subject to the prior approval of the Companys
shareholders, to purchase an additional 46,026,522 common shares of the Company; |
for an aggregate subscription price of U.S.$1,000.00 in cash.
The closing of the First Tranche Private Placement will occur on the fifth business day
following receipt of the approval of the Toronto Stock Exchange and, to the extent
required, the New York Stock Exchange and the NASDAQ Stock Market. Such approval was
received on
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October 20, 2006 and, accordingly, the closing of the First Tranche Private
Placement is scheduled to occur on October 27, 2006.
Second Tranche Private Placement
Pursuant to the Second Tranche Private Placement, Rio Tinto will subscribe for and purchase
from Ivanhoe, and Ivanhoe will issue and sell to Rio Tinto, 46,304,473 additional common
shares of the Company (the Basic Second Tranche Private Placement Shares) at an issue
price per Basic Second Tranche Private Placement Share of U.S.$8.38 for an aggregate
subscription price of approximately U.S.$388 million in cash.
If, upon issuance, the Basic Second Tranche Private Placement Shares would represent less
than 9.95% of the then issued and outstanding common shares of the Company, Rio Tinto will
have the option, exercisable prior to the closing of the Second Tranche Private Placement,
to purchase such additional number of common shares of the Company (the Top Up Shares) as
would, when aggregated with the Basic Second Tranche Private Placement Shares, represent
9.95% of the then issued and outstanding common shares of the Company. The subscription
price per Top Up Share will be the lesser of U.S.$8.38 and, if Rio
Tinto has fully exercised its pre-emptive rights, the closing market price of the Companys
common shares on the Toronto Stock Exchange on the date that Rio Tinto gives notice of its
intention to purchase Top Up Shares.
Rio Tinto obligation to complete the Second Tranche Private Placement is subject to the
shareholders of the Company having approved Rio Tintos right to exercise the Series A
Warrants and the Series B Warrants. See Series A Warrants and Series B Warrants below.
Rio Tintos obligation to complete the Second Tranche Private Placement is also subject to
the Company, or a subsidiary of the Company, having entered into an Approved OT Investment
Contract on or before the third anniversary of the closing date of the First Tranche
Private Placement. For the purposes of the Private Placement Agreement, an Approved OT
Investment Contract is a legally binding and unconditional investment agreement with the
Government of Mongolia under applicable Mongolian law that:
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includes terms granting legal, administrative and tax stability to the
stakeholders of the OT Project for a certain period of time and guaranteeing that the
legal, administrative and/or tax framework in force in Mongolia when the investment
contract is entered into will remain unmodified for the term of the investment
contract notwithstanding any modification, either introduced by law or regulations,
enacted after the execution of the investment contract; |
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(b) |
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has, to the extent required by applicable Mongolian law, been approved,
ratified, consented to or otherwise authorised by all relevant Mongolian governmental
authorities; |
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(c) |
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has been approved by the Companys board of directors; and |
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(d) |
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is mutually acceptable to Company and Rio Tinto, acting reasonably. |
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Rio Tinto may, by notice given before the third anniversary of the closing date of the
First Tranche Private Placement, elect to complete the Second Tranche Private Placement in
the absence of an Approved OT Investment Contract.
The closing of the Second Tranche Private Placement will occur on the earlier of:
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the twentieth business day following the date on which the Company, or a
subsidiary of the Company, enters into an Approved OT Investment Contract; and |
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the tenth business day after Rio Tinto notifies the Company of its election
to complete the Second Tranche Private Placement in the absence of an Approved OT
Investment Contract. |
Series A Warrants and Series B Warrants
Rio Tintos right to exercise the Series A Warrants and the Series B Warrants is subject to
the prior approval of the Companys shareholders (Shareholder Approval) pursuant to a
resolution passed by a majority of the votes cast by holders of the Companys common shares
(excluding any votes cast by members of the Rio Tinto Group) present, in person or by
proxy, at a special meeting of the Companys shareholders to be held on November 30, 2006.
If Rio Tintos right to exercise the Series A Warrants and the Series B Warrants is not so
approved, the Series A Warrants and the Series B Warrants will, by their terms, immediately
terminate.
If Rio Tintos right to exercise the Series A Warrants and the Series B Warrants receives
Shareholder Approval at the special meeting of the Companys shareholders to be held on
November 30, 2006, the Series A Warrants will be exercisable by Rio Tinto at any time
thereafter until the 365th day following the date (the Warrant Determination
Date) which is the earlier of:
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the date upon which the Company, or a subsidiary of the Company, enters into
an Approved OT Investment Contract; and |
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the third anniversary of the closing of the First Tranche Private Placement; |
and the Series B Warrants will be exercisable by Rio Tinto at any time after the date of
Shareholder Approval until the 725th day following the Warrant Determination
Date.
After the date of Shareholder Approval, each Series A Warrant will, subject to adjustment
in accordance with its terms, be exercisable to purchase one (1) common share of the
Company at a price of:
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U.S.$8.38 until the 180th day following the Warrant Determination
Date; and |
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U.S.$8.54 after the 180th day until 365th day following
the Warrant Determination Date. |
After the date of Shareholder Approval, each Series B Warrant will, subject to adjustment
in accordance with its terms, be exercisable to purchase one (1) common share of the
Company at a price of:
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U.S.$8.38 until the 180th day following the Warrant Determination
Date; |
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U.S.$8.54 after the 180th day until 365th day following
the Warrant Determination Date; |
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U.S.$8.88 after the 365th day until the 545th day
following the Warrant Determination Date; and |
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U.S.$9.02 after the 545th day until the 725th day
following the Warrant Determination Date. |
The Series A Warrants and the Series B Warrants are non-transferable by Rio Tinto except to
other members of the Rio Tinto Group.
If all of the Series A Warrants and Series B Warrants were to be exercised, the Company
would receive proceeds of between U.S.$771 million and U.S.$808 million, depending upon the
timing of the exercise of such warrants, and Rio Tinto would own approximately 33.35% of
the Companys issued and outstanding common shares, assuming completion of the Second
Tranche Private Placement.
Use of Proceeds
The Company has agreed to use at least 90% of the proceeds received from the issuance to
Rio Tinto of all common shares of the Company issued, or to be issued, pursuant to the
terms of the Private Placement Agreement to finance the development of the OT Project.
Registration Rights
At the closing of the First Tranche Private Placement, the Company and Rio Tinto will enter
into a registration rights agreement (the Registration Rights Agreement) pursuant to
which the Company will agree to provide Rio Tinto with registration rights in respect of
the common shares of the Company held by Rio Tinto from time to time.
At any time after the first anniversary of the closing of the First Tranche Private
Placement, the Company will, at Rio Tinto written request, file a registration statement
with the United States Securities and Exchange Commission pursuant to the United States
Securities Act of 1933, as amended (the U.S. Securities Act) relating to all of the
common shares of the Company in respect of which Rio Tinto has requested such registration
(a Demand Registration). Rio Tinto is entitled to request up to five Demand Registrations
provided that:
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the aggregate sales price of any common shares of the Company to be
registered pursuant to a Demand Registration must be equal to or greater than U.S.$35
million; |
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no more than two Demand Registrations may be requested in any twelve month
period; and |
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no request for a Demand Registration may be made within 90 days of the date
of effectiveness of any other registration statement filed by the Company pursuant to
the Registration Rights Agreement. |
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If, at any time, the Company files a registration statement under the U.S. Securities Act,
Rio Tinto, will be entitled, subject to certain exceptions, to exercise
piggyback registration rights requiring the Company to include in any such registration
that number of common shares of the Company held by Rio Tinto as Rio Tinto may request,
subject only to certain prescribed limitations provided in the Registration Rights
Agreement.
The Company may, on a limited number of occasions, and in certain prescribed circumstances,
delay the filing or effectiveness of any registration statement required to be filed
pursuant to the Registration Rights Agreement.
Board of Directors
Rio Tinto will be entitled (but not obliged) to nominate a number of qualified individuals
for appointment or election, from time to time, to the board of directors of the Company,
that is proportionate to the percentage of issued and outstanding common shares of the
Company held by the Rio Tinto Group from time to time. Where the number of directors that
Rio Tinto is entitled to nominate is not a whole number, such number will be rounded up to
the nearest whole number if such number ends with a figure of .5 or greater or rounded down
to the nearest whole number if such number ends with a figure less than .5. If at any time
Rio Tinto is entitled to nominate more than one director, then not less than one half of
such nominees must qualify as independent under applicable securities laws. Rio Tinto
will always be entitled to nominate as one of its representatives on the Companys board of
directors an individual who does not necessarily qualify as independent. At all times, the
board of directors of the Company will consist of at least ten directors.
Rio Tinto is also entitled to nominate one financially literate and independent director to
the Companys audit committee.
Pre-emptive Rights
Except in the limited circumstances described below, if the Company proposes, or is
required, to issue additional common shares to one or more third parties (a Dilution
Event), it will offer to Rio Tinto the option to purchase up to that number of additional
common shares that would result in Rio Tinto maintaining the percentage ownership that it
held immediately prior to the Dilution Event in all issued and outstanding common shares of
the Company at a subscription price (i) where the consideration for the common shares
issued pursuant to the Dilution Event is cash, equal to the cash consideration for which
the common shares were issued pursuant to the Dilution Event, or (ii) where the
consideration for the common shares issued pursuant to the Dilution Event is other than
cash, equal to the volume-weighted average trading price of a common share during the ten
trading days immediately preceding the date of the public announcement of the Dilution
Event or the date upon which the common shares were issued pursuant to the Dilution Event,
whichever is earlier.
Rio Tintos pre-emptive rights will be exercisable quarterly except where a Dilution Event
would result in the aggregate percentage interest of the Rio Tinto Group in the total
number of issued and outstanding common shares being reduced by more than 1% or where the
Dilution Event is publicly announced or completed on or after the public announcement, but
before the completion, of a transaction resulting in a person or group of persons acquiring
beneficial
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ownership of more than fifty percent of the total number of issued and
outstanding common shares of the Company (a Company Control Transaction).
If, before the Series A Warrants and the Series B Warrants are fully exercised or expire,
Rio Tinto exercises its right to purchase all or part of the common shares to which it is
entitled in respect of its pre-emptive rights under the Private Placement Agreement, Rio
Tinto will also be entitled to receive, for no additional consideration, anti-dilution
warrants from the Company that would result in Rio Tinto having the right to acquire,
pursuant to the exercise of all outstanding Series A Warrants, Series B Warrants and
anti-dilution warrants, a number of common shares that, upon issuance, would represent the
same percentage of the outstanding common shares of the Company that Rio Tinto would have
owned if all of the then outstanding Series A Warrants, Series B Warrants and anti-dilution
warrants had been fully exercised before the Dilution Event. Each anti-dilution warrant
will entitle Rio Tinto to purchase one common share of the Company at a price equal to the
issue price of the common shares issued pursuant to the Dilution Event.
Rio Tintos pre-emptive rights do not apply to:
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equity incentive securities or equity compensation securities in favour of
directors, officers or service providers of the Company pursuant to an equity
incentive plan adopted by the Company and approved by its shareholders; |
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(b) |
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the exercise of any convertible securities of the Company outstanding as of
the date of the Private Placement Agreement; or |
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any issuance of securities made to all holders of common shares of the
Company on a pro rata basis. |
Restrictions on Share Acquisitions and Dispositions
Rio Tinto has agreed that it will not, for a period of one year following the closing of
the First Tranche Private Placement, dispose of any of its common shares of the Company,
except where such disposition is made with the consent of the Company, pursuant to a
Company Control Transaction or to a member of the Rio Tinto Group. Thereafter, until the
fifth anniversary of the date of the Private Placement Agreement, if Rio Tinto intends to
dispose of common shares of the Company representing 5% or more of the total number of
common shares then issued and outstanding to any person other than a member of the Rio
Tinto Group or an institutional investor that meets certain prescribed criteria under the Private
Placement Agreement, the Company will have the right, for a period of not less than sixty
days, to arrange for the sale of such common shares to a third party selected by the
Company and acceptable to Rio Tinto, acting reasonably, on the same terms upon which Rio
Tinto intended to dispose of such common shares, failing which Rio Tinto may dispose of
such common shares.
Rio Tinto has also agreed that, until the fifth anniversary of the date of the Private
Placement Agreement, Rio Tinto and its affiliates will not, without the prior written
consent of the Company:
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(a) |
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except as specifically contemplated or permitted by the terms of the Private
Placement Agreement, engage in any Specified Activity (as defined below); |
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(b) |
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acquire more than 6.65% of the issued and outstanding common shares of the
Company before fully exercising the Series A Warrants and the Series B Warrants
(other than as provided in the Private Placement Agreement); or |
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(c) |
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after having fully exercised all of the Series A Warrants and the Series B
Warrants, acquire additional common shares that would result in Rio Tinto and its
affiliates holding in excess of 40% of the Companys then issued and outstanding
common shares. |
A Specified Activity means an action by a member of the Rio Tinto Group to (i) make a
takeover bid or a tender offer or participate as a bidder in any takeover bid or tender
offer for any or all issued and outstanding common shares or convertible securities of the
Company; (ii) otherwise acquire any common shares or convertible securities or any rights
or options to acquire any common shares or convertible securities of the Company; (iii)
propose any merger, statutory arrangement or business combination between Company and a
member of the Rio Tinto Group; (iv) make any solicitation of proxies to vote any common
shares of the Company; or (v) form, join or in any way participate in a group within the
meaning of Section 13d-3 of the United States Securities Exchange Act of 1934, as amended,
with respect to any of the foregoing.
The foregoing restrictions will not apply to any share acquisition made pursuant to the
exercise by Rio Tinto of its right of first refusal under the Shareholders Agreement to
purchase any common shares of the Company that Friedland elects to sell to any third party
other than an institutional investor who meets certain prescribed criteria under the
Private Placement Agreement.
If, at any time, a person or persons jointly or in concert (other than a member of the Rio
Tinto Group or a person that is not at arms length to the Rio Tinto Group), publicly
announces its intention to commence a Company Control Transaction, or the Company publicly
announces that its board of directors has approved an agreement which contemplates a
Company Control Transaction, the Rio Tinto Group will be immediately released from the foregoing restrictions but only for
the limited purpose of giving the Rio Tinto Group a reasonable opportunity to propose to
the Company and/or commence an alternative Company Control Transaction.
OT Project Right of First Refusal
Rio Tinto has been granted a right of first refusal in respect of the Companys interests
in the OT Project that is exercisable for a period of sixty days, subject to certain
limited exceptions, if the Company intends to dispose of any interest in the OT Project. In
respect of any such proposed disposition, the Company must first offer such interest to Rio
Tinto at an equivalent price and on equivalent terms and conditions to those available to
the third party to whom such proposed disposition is to be made and from whom the Company
has received an offer on bona fide arms length terms. Rio Tintos right of first refusal
is inoperative unless, at the time the Company proposes to make any such disposition, the
Rio Tinto Group owns a number of
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common shares of the Company at least equal to the number
of First Tranche Private Placement Shares and Basic Second Tranche Private Placement
Shares.
If the Company proposes to dispose of any interest in the OT Project in respect of which
Rio Tinto would be entitled to exercise its right of first refusal but for the fact that
the Rio Tinto Group then owns an insufficient number of common shares of the Company, Rio
Tinto will nonetheless be entitled to exercise its right of first refusal if it commits to
acquire a number of additional common shares of the Company such that it would meet the
minimum threshold necessary in order for the right of first refusal to become operative.
The Private Placement Agreement also provides that Ivanhoe and Rio Tinto will consult with
one another regarding further opportunities for the Rio Tinto Group to participate in the
OT Project.
Technical Committee
Rio Tinto and the Company have agreed to establish a technical committee (the Technical
Committee) to manage all aspects of the engineering, construction, development and
operation of the OT Project. The Company and Rio Tinto will, through the Technical
Committee, cooperatively oversee and supervise all operations in respect of the OT Project.
All material activities and operations in respect of the OT Project must be approved by the
Technical Committee before they can be undertaken.
The Technical Committee will consist of two members from the Company, two members from Rio
Tinto and a fifth member who will act as the chairman of the Technical Committee and as the
senior manager of the OT Project. The chairman of the Technical Committee will be an
individual reasonably acceptable to both the Company and Rio Tinto. The Company has the
right to appoint the chairman of
the Technical Committee during the first five years following the closing of the First
Tranche Private Placement. The Companys President and Chief Executive Officer, John
Macken, will serve as the first chairman of the Technical Committee and senior manager of
the OT Project. After five years, Rio Tinto will have the right to appoint the chairman of
the Technical Committee and senior manager of the OT Project.
Rio Tintos right to appoint members and be represented on the Technical Committee will
terminate if, at any time during the period from the closing of the First Tranche Private
Placement until the earlier of (i) the closing of the Second Tranche Private Placement, and
(ii) the third anniversary of the closing of the First Tranche Private Placement, the Rio
Tinto Group beneficially owns, in the aggregate, a number of common shares that is less
than the number of First Tranche Private Placement Shares. Thereafter, Rio Tintos right to
appoint members and be represented on the Technical Committee will terminate if, at any
time, the Rio Tinto Group beneficially owns, in the aggregate, a number of common shares
that is less than the aggregate number of First Tranche Private Placement Shares and Basic
Second Tranche Private Placement Shares.
Any decision of the Technical Committee in respect of which a consensus cannot be reached
among its members will be subject to a vote in respect of which each of the five members of
the Technical Committee will have one vote.
- 12 -
During the five year period following the closing of the First Tranche Private Placement,
the unanimous consent of all Technical Committee members will be required for matters
involving (i) asset acquisitions or contractual commitments requiring expenditures
exceeding U.S.$100 million, (ii) acquisitions of land or mineralization within the
geographical areas comprising the OT Project requiring expenditures exceeding U.S.$10
million, or (iii) any material amendments to the existing OT Project mine plan or the
adoption of any new, long-term mine plan.
Technical Assistance
For as long as Rio Tinto is represented on the Technical Committee, Ivanhoe may request Rio
Tintos assistance with certain matters pertaining to the development and operation of the
OT Project including engineering, mine planning and design, metallurgical and process
design, procurement of plant and equipment and environmental planning and management. Rio
Tinto will provide such services subject to the parties negotiating mutually acceptable
agreements. During the five year period following the closing of the First Tranche Private
Placement, these services will be provided to the Company at Rio Tintos out-of-pocket cost
and, thereafter, at a cost no less favourable than that charged by any Rio Tinto Group
member to any other Rio Tinto Group member.
OT Investment Contract Negotiations
The Company has agreed to keep Rio Tinto fully informed from time to time of the status of
the negotiations with the Government of Mongolia for an Approved OT Investment Contract.
Rio Tinto, acting reasonably, will have the right to consult with the Company from time to
time with respect to all aspects of such negotiations and will be entitled to appoint at
least two individuals acceptable to the Company, acting reasonably, to the group of Company
representatives participating in such negotiations.
Divestiture of Non-Core Assets
The Company has agreed to dispose of the Myanmar Assets by no later than February 1, 2007.
If such disposition does not occur by that date, Rio Tinto has the right to cause the
Company to transfer all of the Myanmar Assets to a trust of which none of the Company, Rio
Tinto, Friedland, their respective affiliates, any person related to any of them or any
person that is a resident of Myanmar or controlled by a resident of Myanmar are trustees or
beneficiaries. In consideration for such transfer, the Company would receive a promissory
note issued by the trust in an amount not less than U.S.$ 40 million plus 50% of the cash
receivable from the Myanmar Assets at the time of their sale. The Company would be entitled
to additional compensation from any future sale of the Myanmar Assets by the trust in an
amount to be determined but not less than 50% of the amount by which such sale proceeds
exceed the amount outstanding under the promissory note.
The Company has also agreed to consult with Rio Tinto and to use if best efforts to
formulate timetables and strategies for the orderly disposition of all of its non-core
assets situated outside of Mongolia.
- 13 -
Shareholders Agreement
Under the terms of the Shareholders Agreement, Friedland has agreed to vote all common
shares of the Company held directly or indirectly by him (the Friedland Shares) in favour
of Rio Tintos right to exercise the Series A Warrants and the Series B Warrants and, for a
period of five years, in favour of any other matter contemplated by the Private Placement
Agreement for which the approval of the Companys shareholders is required.
Friedland has also granted to Rio Tinto, for a period of five years or until he ceases to
beneficially own any common shares of the Company, a right of first refusal, and/or rights
of placement with third parties, in respect of the sale by him or any of his affiliates of
the Friedland Shares to any person, subject to certain exceptions including sales to
permitted transferees or pursuant to a take-over bid or a transaction involving a Company
Control Transaction.
About the Rio Tinto Group
The Rio Tinto Group is a multi-national mining and resources group founded originally in
1873. The Rio Tinto Group consists of Rio Tinto plc (headquartered in London), Rio Tinto
Limited (headquartered in Melbourne) and their respective affiliates. Rio Tinto Limited is
listed on the Australian Stock Exchange and Rio Tinto plc is listed on the London Stock
Exchange and the New York Stock Exchange. The two companies are managed as a single
economic unit by a unified board, with a share in either company entitling the owner to the
same voting rights and dividend payouts.
The Rio Tinto Group is one of the worlds leading mining groups with more than 30,000
employees in 30 businesses that control more than 80 active operations and six exploration
regions globally. The Rio Tinto Groups major products include aluminum, copper, diamonds,
coal, uranium, gold, industrial minerals (borates, titanium dioxide, salt and talc) and
iron ore. The Rio Tinto Group owns or shares an interest in many of the worlds largest
mineral deposits, including the Grasberg copper-gold mine in Indonesia, the Escondida
copper mine in Chile, the Bingham Canyon copper-gold mine and copper smelter in Utah,
United States, the Resolution copper-molybdenum development project in Arizona, United
States, and other copper mines in Australia and South Africa. The Rio Tinto Group is also a
major supplier of minerals into Asian markets.
Following the completion of the First Tranche Private Placement and the Second Tranche
Private Placement, Rio Tinto will beneficially own 83,394,356 common shares of the Company
(representing, upon completion, 19.9% of the Companys outstanding common shares) and
92,053,044 Series A Warrants and Series B Warrants exercisable (subject to the prior
approval of the Companys shareholders) to acquire an additional 92,053,044 common shares
of the Company. If the Series A Warrants and Series B Warrants were to be fully exercised,
Rio Tinto would beneficially own approximately 34.33% of the Companys outstanding common
shares (or 33.35% on a fully diluted basis).
- 14 -
6. |
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RELIANCE ON SUBSECTION 7.1(2) OR (3) OF NATIONAL INSTRUMENT 51-102 |
|
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Not applicable |
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7. |
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OMITTED INFORMATION |
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No information has been intentionally omitted from this form. |
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8. |
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EXECUTIVE OFFICER |
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The name and business number of the executive officer of the Company who is knowledgeable
of the material change and this report is: |
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Beverly Bartlett
654 999 Canada Place
Vancouver, British Columbia
V6C 3E1 |
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Telephone: (604) 688-5755 |
|
9. |
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DATE OF REPORT |
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DATED at Vancouver, British Columbia this 25th day of October, 2006. |
PRIVATE PLACEMENT AGREEMENT
THIS AGREEMENT made as of the 18th day of October, 2006.
BETWEEN:
IVANHOE MINES LTD., a corporation continued under the laws of the Yukon Territory
and with its registered office at 300 204 Black Street, Whitehorse, Yukon, Canada,
Y1A 2M9
(Ivanhoe)
AND:
RIO TINTO INTERNATIONAL HOLDINGS LIMITED, a corporation incorporated under the laws
of England and Wales and with its registered office at 6 St. Jamess Square, London,
SWIY 4LD
(Rio Tinto)
WHEREAS:
A. |
|
capitalized terms used in these recitals without definition have the meanings assigned to
them in Section 1.1 hereof; |
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B. |
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Rio Tinto wishes to make the Equity Investment in Ivanhoe; and |
|
C. |
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the parties are entering into this Agreement to formally document their agreement in respect
of the matters referred to in the foregoing recitals and certain ancillary matters. |
NOW THEREFORE THIS AGREEMENT WITNESSES THAT, in consideration of the premises and the
respective covenants and agreements herein contained, the parties hereto covenant and agree as
follows:
PART 1
DEFINITIONS AND INTERPRETATION
Definitions
1.1 In this Agreement, unless the context otherwise requires, the following terms will have the
meanings hereinafter set forth:
Adjustment Event means any of the events provided in Section 10 of the Series A Warrant
Certificate that would trigger an adjustment to the number of Ivanhoe Shares and the
exercise price for which a Series A Warrant may be exercised;
- 2 -
Affiliate means, in respect of a party to this Agreement, any person which Controls, is
Controlled by, or is under common Control with, such party and, in the case of Rio Tinto,
Affiliate includes any member of the Rio Tinto Group;
Anti-Dilution Ivanhoe Shares has the meaning assigned to it in Section 5.1;
Anti-Dilution Ivanhoe Warrants has the meaning assigned to it in Section 5.6;
Anti-Dilution Offer Notice means a Quarterly Anti-Dilution Offer Notice or a Special
Anti-Dilution Offer Notice, as the context requires;
Anti-Dilution Securities means, collectively, Anti-Dilution Ivanhoe Shares, Anti-Dilution
Ivanhoe Warrants and any Ivanhoe Shares issued pursuant to the exercise of Anti-Dilution
Ivanhoe Warrants;
Applicable Law means all governmental laws (statutory or common), rules, ordinances,
regulations, grants, concessions, franchises, licenses, orders, directives, judgments,
decrees, and other governmental restrictions, including permits and other similar
requirements, whether legislative, municipal, administrative or judicial in nature, having
application, directly or indirectly, to the parties to this Agreement and their respective
Affiliates, or the transactions contemplated by this Agreement;
Approved OT Investment Contract means an OT Investment Contract that has been approved by
the Ivanhoe board of directors and that is mutually acceptable to Ivanhoe and Rio Tinto,
acting reasonably;
Approved OT Investment Contract Date means the date upon which Ivanhoe, or a Subsidiary of
Ivanhoe, enters into an Approved OT Investment Contract;
Arbitration Act means the International Commercial Arbitration Act of the Province of
British Columbia;
Basic Second Tranche Private Placement has the meaning assigned to it in Section 2.3;
Basic Second Tranche Private Placement Shares has the meaning assigned to it in Section
2.3;
Basic Second Tranche Subscription Price has the meaning assigned to it in Section 2.3;
B.C. Securities Act means the Securities Act of the Province of British Columbia;
beneficial ownership has the meaning ascribed to such term in Rule 13d-3 promulgated under
the U.S. Exchange Act and beneficially own shall have a correlative meaning;
Budget means a detailed estimate of all costs to be incurred with respect to a Program,
including a schedule describing when such costs are expected to be incurred;
- 3 -
Business Day means any day upon which banks in Vancouver, British Columbia and London,
England are open for business;
Canadian Hold Period has the meaning assigned to it in Section 12.5;
Canadian Securities Laws means, collectively, the B.C. Securities Act and the applicable
securities laws of the other provinces and territories of Canada, the regulations made and
forms prescribed thereunder together with all applicable published rules, instruments,
policy statements and blanket orders and rulings of the Canadian securities regulatory
authorities;
Canadian securities regulatory authorities has the meaning assigned to it in National
Instrument 14-101 Definitions of the Canadian securities regulatory authorities;
Confidential Information means all material information pertaining to the OT Project, the
OT Investment Contract Negotiations, the contents of the Ivanhoe Disclosure Letter and all
other information, data, knowledge and know-how (including, but not limited to, formulas,
patterns, compilations, programs, devices, methods, techniques and processes) disclosed by
one party hereunder or any of its Representatives to the other party hereunder or any of its
Representatives that derives independent economic value, actual or potential, as a result of
not being generally known to, or readily ascertainable by, third parties, and includes all
analyses, interpretations, compilations, studies and evaluations to the extent that the same
include such information, data, knowledge and know-how generated or prepared by or on behalf
of either party but does not include any such information, data, knowledge or know-how that:
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(i) |
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is publicly available at the time of its disclosure under this Agreement; or |
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(ii) |
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becomes publicly available following disclosure under this Agreement (other
than as a result of disclosure by the receiving party contrary to the terms of this
Agreement); or |
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(iii) |
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was previously disclosed to or otherwise already lawfully in the possession of
the receiving party or any of its Affiliates prior to disclosure under this Agreement
(as can be demonstrated by written records or other reasonable evidence) from a third
party who is not, to the knowledge of the receiving party after due enquiry, under an
obligation of confidentiality to the other party to this Agreement in relation to such
information, data, knowledge or know-how; or |
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(iv) |
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following disclosure under this Agreement, becomes available to the receiving
party or any of its Affiliates (as can be demonstrated by written records or other
reasonable evidence) from a third party who is not, to the knowledge of the receiving
party after due enquiry, under an obligation of confidentiality to the other party to
this Agreement in relation to such information, data, knowledge or know-how; or |
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(v) |
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is independently developed by or on behalf of the receiving party or any of its
Affiliates without reference to information, data, knowledge and know-how previously
disclosed under this Agreement; |
- 4 -
Constating Documents means the charter, the memorandum, the articles of association, the
articles of incorporation, the articles of continuance, the articles of amalgamation, the
by-laws or any other instrument pursuant to which an entity is created, incorporated,
continued, amalgamated or otherwise established, as the case may be, and/or which governs in
whole or in part such entitys affairs, together with any amendments thereto;
Control used as a verb means, with respect to a body corporate, the right in all
circumstances, directly or indirectly, to exercise a majority of the votes which may be cast
at a general meeting of the shareholders of the body corporate or the right to elect or
appoint, directly or indirectly, a majority of the directors of the body corporate and, when
used with respect to any other person, means the actual or legal ability to control the
actions of another, through family relationship, agency, contract or otherwise; and
Control used as a noun means an interest which gives the holder the ability to exercise
any of the foregoing powers;
Development Operations means all Operations involving the preparation for the removal and
recovery of ores, minerals and mineral resources from the OT Project property, including
construction and installation of all mining facilities and any other improvements and
related infrastructure, wheresoever situated, to be used for the mining, handling,
transportation, milling, processing, or other beneficiation of ores, minerals and mineral
resources;
Designated Purchaser has the meaning assigned to it in Section 6.5;
Dilutive Ivanhoe Shares has the meaning assigned to it in Section 5.1;
Eligible Institutional Investor means:
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(i) |
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a bank, loan corporation, trust company, insurance company, credit union or
other entity that is predominantly engaged in financial services activities, that is
supervised and regulated under Applicable Laws in respect of such activities in its
jurisdiction of domicile and that is not Controlled by any person who is not an
Eligible Institutional Investor; |
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(ii) |
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a pension fund that is supervised and regulated as such under Applicable Laws
in its jurisdiction of domicile and that is not Controlled by any person who is not an
Eligible Institutional Investor; |
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(iii) |
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a mutual fund (as that term is defined under Canadian Securities Laws) or an
entity, wheresoever domiciled, that is substantially similar to a mutual fund, that is
supervised and regulated as such under Applicable Laws in its jurisdiction of domicile
and that is not Controlled by any person who is not an Eligible Institutional Investor;
or |
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(iv) |
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an investment manager who is registered or licensed to provide investment
counselling, portfolio management or similar advisory services in respect of securities
or exempt from the requirement to be so registered or licensed, under the Applicable
Laws of its jurisdiction of domicile and who, in relation to the securities it manages,
exercises discretion to vote, acquire or dispose of such securities without |
- 5 -
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the express consent of the beneficial owner, subject to applicable legal
requirements, general investment policies, guidelines, objectives or restrictions; |
who has, for the purposes of Section 6.2 or Section 6.5, as the case may be, certified in
writing that it is purchasing Ivanhoe Shares for investment only and not with a view to
resale or distribution and not as part of, or in contemplation or support of, an Ivanhoe
Control Transaction;
Encumbrance means any mortgage, charge, pledge, hypothecation, security interest, lien,
easement, right-of-way, encroachment, covenant, condition, right-of-entry, lease, license,
assignment, option or claim or any other encumbrance, charge or any title defect of whatever
kind of nature, regardless of form, whether or not registered or registrable and whether or
not consensual or arising by law (statutory or otherwise);
Equity Investment means the First Tranche Private Placement and the Second Tranche Private
Placement;
Equity Investment Securities has the meaning assigned to it in Section 2.13;
Exchange Approval means the written approval, or the written acceptance of Ivanhoes
notice, of the proposed issuance to Rio Tinto of any Ivanhoe Shares or Ivanhoe Convertible
Securities at any time and from time to time pursuant to the terms of this Agreement given,
to the extent required, by each of the TSX, NYSE and NASDAQ;
Exempt Ivanhoe Share Transaction has the meaning assigned to it in Section 5.7;
Existing Licenses means, collectively, those mining licenses, the license numbers and
coordinates of which are listed in Schedule E, relating to the OT Project issued by the
Mineral Resources and Petroleum Authority of Mongolia;
Expansion or Modification Operations means all Operations involving (i) a material
increase in mining or production capacity; (ii) a material change in the recovery process;
or (iii) a material change in waste or tailings disposal methods and, for the purposes of
this definition, an increase or change shall be deemed material if it is anticipated to
cost more than twenty per cent (20%) of the original capital costs attributable to the
development of the mining or production capacity, recovery process or waste or tailings
disposal facility to be expanded or modified;
Feasibility Study Operations means all Operations involving comprehensive studies of the
OT Project in which all geological, engineering, legal, operating, economic, social,
environmental and other relevant factors are considered in sufficient detail such that such
studies could reasonably serve as the basis for a final decision by a financial institution
to finance the development of the OT Project for mineral production;
financially literate has the meaning assigned to it in Multilateral Instrument 52-110
Audit Committees of the Canadian securities regulatory authorities, as amended;
- 6 -
First Closing means the issuance by Ivanhoe to Rio Tinto of those Equity Investment
Securities to be issued pursuant to the First Tranche Private Placement and the payment by
Rio Tinto to Ivanhoe of the First Tranche Subscription Price and all of the other acts,
procedures and deliveries necessary in order to complete and implement the First Tranche
Private Placement and all of the other transactions contemplated by this Agreement that are
to take effect on the First Closing Date;
First Closing Date has the meaning assigned to it in Section 2.2;
First Closing Deadline means the forty-fifth (45th) day following the date of
this Agreement or such later date as the parties to this Agreement may agree in writing;
First Tranche Private Placement has the meaning assigned to it in Section 2.1;
First Tranche Private Placement Shares has the meaning assigned to it in Section 2.1;
First Tranche Subscription Price has the meaning assigned to it in Section 2.1;
Governmental Authority means any national, central, federal, provincial, state, municipal,
county or other government or regional authority, whether executive, legislative or
judicial, and includes any ministry, department, commission, bureau, board, administrative
or other agency or regulatory body or instrumentality thereof;
Independent Ivanhoe Director means, in respect of Ivanhoe, a director who is independent
within the meaning of Multilateral Instrument 52-110 Audit Committees of the Canadian
securities regulatory authorities, as amended and who meets the equivalent independence
criteria prescribed under U.S. Securities Laws and the listing or marketplace rules of the
NYSE and NASDAQ, to the extent applicable to Ivanhoe;
Ivanhoe Change of Control means any person, or group of persons acting jointly or in
concert, acquiring beneficial ownership of more than fifty per cent (50%) of the outstanding
Ivanhoe Shares;
Ivanhoe Continuous Disclosure Documents means, at any time, the following continuous
disclosure documents filed by Ivanhoe (a) pursuant to National Instrument 51-102 Continuous
Disclosure Obligations of the Canadian securities regulatory authorities, as amended and (b)
with the United States Securities and Exchange Commission:
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(i) |
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Ivanhoes then most recently filed annual information form; |
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(ii) |
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Ivanhoes then most recently filed audited annual consolidated
comparative financial statements, together with the notes thereto and the auditors
report thereon and including managements discussion and analysis of financial
condition and results of operations for the periods reported upon; |
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(iii) |
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Ivanhoes unaudited interim comparative consolidated financial
statements, including managements discussion and analysis of financial condition
and results of operations for periods to which such financial statements relate,
filed |
- 7 -
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since the end of the financial year of Ivanhoe to which Ivanhoes then most
recently filed audited annual consolidated comparative financial statements
relate; |
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(iv) |
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all management proxy circulars filed by Ivanhoe during the twelve (12)
months preceding such time; |
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(v) |
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all material change reports filed by Ivanhoe during the twelve (12)
months preceding such time; and |
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(vi) |
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Ivanhoes then most recently filed annual report on Form 40-F; |
Ivanhoe Control Transaction means a transaction which would result, if consummated, in an
Ivanhoe Change of Control;
Ivanhoe Convertible Securities means securities of Ivanhoe which are convertible into,
exchangeable for or exercisable to acquire Ivanhoe Shares;
Ivanhoe Disclosure Letter means the letter to be delivered by Ivanhoe to Rio Tinto upon
the execution of this Agreement in connection with the representations and warranties of
Ivanhoe in Part 12 of this Agreement;
Ivanhoe Meeting has the meaning assigned to it in Section 3.5;
Ivanhoe Share means a common share without par value in the capital of Ivanhoe, as
presently constituted;
Ivanhoe Shareholder Approval means approval by a majority of the votes cast by holders of
Ivanhoe Shares present at the Ivanhoe Meeting in person or by proxy;
Ivanhoe Shareholder Approval Date means the date upon which Ivanhoe obtains Ivanhoe
Shareholder Approval for the Ivanhoe Shareholder Approval Matter;
Ivanhoe Shareholder Approval Matter has the meaning assigned to it in Section 3.5;
Manager has the meaning assigned to it in Section 8.3;
managing party has the meaning assigned to it in Section 8.18;
Material Subsidiary means, collectively, the OT Subsidiary and each other Subsidiary of
Ivanhoe through which Ivanhoe beneficially owns, directly or indirectly, any interest in the
OT Subsidiary, the OT Project or any mineral resource situated in Mongolia;
Mining Operations means all Operations involving the mining, extracting, producing,
beneficiating, handling, milling or other processing of ores, minerals and mineral resources
from the OT Project;
Myanmar Assets means (i) Ivanhoes indirect fifty per cent (50%) interest in the Monywa
Copper Project, a joint venture between Ivanhoes wholly owned Subsidiary, Ivanhoe
- 8 -
Myanmar Holdings Ltd., and Mining Enterprise No. 1, an entity wholly-owned by the Government
of the Union of Myanmar, and (ii) any other rights, interests or investments held, directly
or indirectly, by Ivanhoe in the Union of Myanmar;
NASDAQ means the NASDAQ Stock Market;
non-managing party has the meaning assigned to it in Section 8.18;
Notice has the meaning assigned to it in Section 18.1;
NYSE means the New York Stock Exchange;
Official means any officer of a political party or candidate for political office or any
officer or employee of a Governmental Authority or of a public international organization;
Operations means all material activities undertaken by Ivanhoe or any of its Subsidiaries
on the OT Project property or elsewhere in furtherance of the development, operation and
management of the OT Project, including Development Operations, Pre-Feasibility Study
Operations, Feasibility Study Operations, Mining Operations, Expansion or Modification
Operations and Project Financing Operations but does not include the acquisition by Ivanhoe
or any Subsidiary of Ivanhoe of:
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(i) |
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any securities that are listed or quoted on any stock exchange or securities
market or traded on any over-the-counter market; or |
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(ii) |
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any securities owned, directly or indirectly, by an issuer whose securities are
listed or quoted on any stock exchange or securities market or traded on any
over-the-counter market; |
Ordinary Dilutive Issuance has the meaning assigned to it in Section 5.2;
OT Closing Period has the meaning assigned to it in Section 7.1;
OT Disposal Interest has the meaning assigned to it in Section 7.1;
OT Disposal Notice has the meaning assigned to it in Section 7.1;
OT Disposal Transaction has the meaning assigned to it in Section 7.1;
OT Exercise Period has the meaning assigned to it in Section 7.1;
OT Investment Contract means a legally binding and unconditional investment agreement with
the Government of Mongolia pursuant to the Applicable Laws of Mongolia that:
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(i) |
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includes terms granting legal, administrative and tax stability to the
stakeholders of the OT Project for a certain period of time and guaranteeing that the
legal, administrative and/or tax framework in force in Mongolia when the investment
contract is entered into will remain unmodified for the term of the investment |
- 9 -
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contract notwithstanding any modification, either introduced by law or regulations,
enacted after the execution of the investment contract; and |
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(ii) |
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has, to the extent required by Applicable Law, been approved, ratified,
consented to or otherwise authorised by all relevant Governmental Authorities in
Mongolia; |
OT Investment Contract Negotiations has the meaning assigned to it in Section 10.1;
OT Project means the Oyu Tolgoi copper and gold mineral development project, and all
associated infrastructure wheresoever situated, including:
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(i) |
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those geographical areas in the Omnigov Aimag of Mongolia that are the subject
of the Existing Licenses, a map and schedule of co-ordinates of which is attached as
Schedule E; and |
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(ii) |
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all geographical areas situated within a fifty (50) kilometre radius of the
outer perimeter of the geographical areas that are the subject of the Existing Licenses
in which Ivanhoe or any of its Subsidiaries now holds, or hereafter acquires, an
interest of any nature whatsoever; |
OT Right of First Refusal has the meaning assigned to it in Section 7.1;
OT Subsidiary means Ivanhoe Mines Mongolia Inc. LLC, a wholly-owned Subsidiary of Ivanhoe;
Other Non-Core Assets means those mineral resource interests and assets held, directly or
indirectly, by Ivanhoe, other than the Myanmar Assets and the mineral resource interests and
assets situated in, or pertaining to mineral resource interests and assets situated in,
Mongolia;
Placement Offer has the meaning assigned to it in Section 6.5;
Placement Offer Notice has the meaning assigned to it in Section 6.5;
Placement Offer Period has the meaning assigned to it in Section 6.5;
Placement Shares has the meaning assigned to it in Section 6.5;
Pre-Feasibility Study Operations means all Operations involving comprehensive studies of
the OT Project in which the mining method, in the case of underground mining, or the pit
configuration, in the case of open pit mining, is established, in which an effective method
of mineral processing is determined and which include a financial analysis based on
reasonable assumptions of technical, engineering, legal, operating, economic, social, and
environmental factors and the evaluation of other relevant factors which are sufficient to
determine if all or part of a mineral resource may be classified as a mineral reserve;
- 10 -
Program means a description in reasonable detail of Operations to be conducted and
objectives to be accomplished in respect of the OT Project for any period as determined by
the Technical Committee;
Prohibited Payment by a person is any offer, gift, payment, promise to pay or
authorization of the payment of any money or anything of value, directly or indirectly, to
or for the use or benefit of any Official (including to or for the use or benefit of any
other person if such person knows, or has reasonable grounds for believing, that the other
person would use such offer, gift, payment, promise or authorization of payment for the
benefit of any such Official), for the purpose of influencing any act or decision or
omission of any Official in order to obtain, retain or direct business to, or to secure any
improper benefit or advantage for, the person, its Affiliates or any other person; provided
that any such offer, gift, payment, promise or authorization of payment shall not be
considered a Prohibited Payment if, in such persons reasonable opinion, it is lawful under
Applicable Law which for these purposes includes the laws of Canada, the United States and
England;
Project Financing Operations means all Operations involving any financing approved by the
Technical Committee for the purpose of placing the OT Project into commercial production;
Proportionate Number of Directors has the meaning assigned to it in Section 4.1;
Quarterly Anti-Dilution Offer Notice has the meaning assigned to it in Section 5.2;
Registration Rights Agreement has the meaning assigned to it in Section 2.11;
Regulation S means Regulation S under the U.S. Securities Act;
Representatives means, in relation to a party to this Agreement, its Affiliates and its
and their respective directors, officers, employees and professional advisers;
Rio Tinto Group means Rio Tinto plc (incorporated in England), Rio Tinto Limited
(incorporated in Victoria, Australia) and any other corporation wherever situated in which
Rio Tinto plc and/or Rio Tinto Limited owns or Controls, directly or indirectly, more than
50 per cent of the shares or stock carrying the right to vote at a general meeting (or its
equivalent) of the corporation;
Rio Tinto Representative has the meaning assigned to it in Section 4.1;
Second Closing means the issuance by Ivanhoe to Rio Tinto of those Equity Investment
Securities to be issued pursuant to the Second Tranche Private Placement and the payment by
Rio Tinto to Ivanhoe of the Second Tranche Subscription Price and all of the other acts,
procedures and deliveries necessary in order to complete and implement the Second Tranche
Private Placement and all of the other transactions contemplated by this Agreement that are
to take effect on the Second Closing Date;
Second Closing Date has the meaning assigned to it in Section 2.8;
- 11 -
Second Tranche Private Placement means the Basic Second Tranche Private Placement and, if,
but only if, Rio Tinto exercises the Top Up Option, the Top Up Private Placement;
Second Tranche Private Placement Shares means the Basic Second Tranche Private Placement
Shares and, if, but only if, Rio Tinto exercises the Top Up Option, the Top Up Private
Placement Shares which Rio Tinto has by Notice elected to purchase under the Top Up Option;
Second Tranche Subscription Price means the Basic Second Tranche Subscription Price and,
if, but only if, Rio Tinto exercises the Top Up Option, the Top Up Subscription Price;
Securities Laws means, collectively, Canadian Securities Laws, U.S. Securities Laws and
all other Applicable Laws regulating trading in securities;
Series A Warrants has the meaning assigned to it in Section 2.1;
Series B Warrants has the meaning assigned to it in Section 2.1;
Series A Warrant Certificate means an instrument substantially in the form attached hereto
as Schedule A;
Series B Warrant Certificate means an instrument substantially in the form attached hereto
as Schedule B;
Shareholders Agreement means a shareholders agreement dated as of the date hereof
between Rio Tinto and Robert M. Friedland providing for the matters described in Section
2.12;
Special Anti-Dilution Offer Notice has the meaning assigned to it in Section 5.3;
Special Approval Matters has the meaning assigned to it in Section 8.7;
Special Dilutive Issuance has the meaning assigned to it in Section 5.3;
Specified Activity means, in respect of Ivanhoe and, except as specifically contemplated
or permitted by the terms of this Agreement, any actions by a member of the Rio Tinto Group
to:
|
(i) |
|
make a takeover bid or a tender offer or participate as a bidder in any
takeover bid or tender offer for any or all issued and outstanding Ivanhoe Shares or
Ivanhoe Convertible Securities; |
|
|
(ii) |
|
otherwise acquire, directly or indirectly, any Ivanhoe Shares or Ivanhoe
Convertible Securities or any rights or options to acquire any Ivanhoe Shares or
Ivanhoe Convertible Securities; |
|
|
(iii) |
|
propose any merger, statutory arrangement or business combination between
Ivanhoe and any member of the Rio Tinto Group; |
- 12 -
|
(iv) |
|
make any solicitation of proxies to vote any Ivanhoe Shares; or |
|
|
(v) |
|
form, join or in any way participate in a group within the meaning of Section
13(d)(3) of the U.S. Exchange Act with respect to any of the foregoing; |
Subsidiary means, in respect of a party to this Agreement, a person that is Controlled by
such party;
Technical Committee has the meaning assigned to it in Section 8.1;
Technical Committee Chair has the meaning assigned to it in Section 8.3;
Top Up Option has the meaning assigned to it in Section 2.4;
Top Up Private Placement has the meaning assigned to it in Section 2.5;
Top Up Private Placement Shares has the meaning assigned to it in Section 2.4;
Top Up Share Price has the meaning assigned to it in Section 2.5;
Top Up Subscription Price has the meaning assigned to it in Section 2.5;
Transfer has the meaning assigned to it in Section 6.4;
TSX means the Toronto Stock Exchange;
United States has the meaning ascribed it in Regulation S;
U.S. Exchange Act means the United States Securities Exchange Act of 1934, as amended;
U.S. Person has the meaning ascribed it in Regulation S;
U.S. Securities Act means the United States Securities Act of 1933, as amended;
U.S. Securities Laws means, collectively, the U.S. Securities Act, the U.S. Exchange Act,
the securities laws of the states of the United States, the regulations made and forms
prescribed thereunder together with all applicable published rules, instruments, policy
statements and blanket orders and rulings of the United States Securities and Exchange
Commission;
Warrant Determination Date means the earlier of:
|
(i) |
|
the Approved OT Investment Contract Date; or |
|
|
(ii) |
|
the third (3rd) anniversary of the First Closing Date; and |
Warrant Subscription Price has the meaning assigned to it in Section 2.1.
- 13 -
Interpretation
1.2 |
|
For the purposes of this Agreement, except as otherwise expressly provided: |
|
(a) |
|
this Agreement means this agreement, including the schedules hereto, and not
any particular part, section or other portion hereof, and includes any agreement,
document or instrument entered into, made or delivered pursuant to the terms hereof, as
the same may, from time to time, be supplemented or amended and in effect; |
|
|
(b) |
|
all references in this Agreement to a designated Part, Section,
Subsection or other subdivision or to a schedule are references to the designated
part, section, subsection or other subdivision of, or schedule to, this Agreement; |
|
|
(c) |
|
the words hereof, herein, hereto and hereunder and other words of
similar import refer to this Agreement as a whole and not to any particular part,
section, subsection or other subdivision or schedule unless the context or subject
matter otherwise requires; |
|
|
(d) |
|
the division of this Agreement into parts, sections and other portions and the
insertion of headings are for convenience of reference only and are not intended to
interpret, define or limit the scope, extent or intent of this Agreement or any
provision hereof; |
|
|
(e) |
|
unless otherwise provided herein, all references to currency in this Agreement
are to lawful money of the United States of America and, for greater certainty, $
means United States dollars; |
|
|
(f) |
|
a reference in this Agreement to a statute includes all regulations made
thereunder, all amendments to the statute or regulations in force from time to time,
and any statute or regulation that supplements or supersedes such statute or
regulations; |
|
|
(g) |
|
the singular of any term includes the plural, and vice versa, and words
importing any gender include all genders, and the word including is not limiting
whether or not non-limiting language (such as without limitation or but not limited
to or words of similar import) is used with reference thereto; |
|
|
(h) |
|
words importing persons include individuals, corporations, limited and
unlimited liability companies, general and limited partnerships, associations, trusts,
unincorporated organizations, joint ventures, Governmental Authorities and other
entities; |
|
|
(i) |
|
in the event that any date on which any action is required to be taken
hereunder by any of the parties hereto is not a Business Day, such action will be
required to be taken on the next succeeding day which is a Business Day; and |
|
|
(j) |
|
all references to approval, authorization or consent in this Agreement
mean written approval, authorization or consent. |
- 14 -
Schedules
1.3 |
|
Attached to and forming part of this Agreement are the following Schedules: |
Schedule A Form of Series A Warrant Certificate
Schedule B Form of Series B Warrant Certificate
Schedule C Form of Registration Rights Agreement
Schedule D Agreed Terms for Disposition of Myanmar Assets
Schedule E Existing Licenses, OT Project Map and Co-ordinates
PART 2
EQUITY INVESTMENT
First Tranche Private Placement
2.1 |
|
Subject to the terms and conditions of this Agreement, on the First Closing Date, |
|
(a) |
|
Rio Tinto will subscribe for and purchase from Ivanhoe, and Ivanhoe will issue
and sell to Rio Tinto, thirty seven million, eighty nine thousand, eight hundred and
eighty three (37,089,883) Ivanhoe Shares (the First Tranche Private Placement Shares)
at an issue price per First Tranche Private Placement Share of eight dollars and
eighteen cents ($8.18) for an aggregate subscription price (the First Tranche
Subscription Price) of three hundred and three million, three hundred and ninety five
thousand, two hundred and forty two dollars and ninety four cents ($303,395,242.94) in
cash ; and |
|
|
(b) |
|
immediately after the issue of the First Tranche Private Placement Shares, Rio
Tinto will subscribe for and purchase from Ivanhoe, and Ivanhoe will issue and sell to
Rio Tinto: |
|
(iii) |
|
share purchase warrants (the Series A Warrants) exercisable,
subject to Section 3.5, to purchase an additional forty six million, twenty six
thousand, five hundred and twenty two (46,026,522) Ivanhoe Shares in accordance
with the terms described in Section 3.1; and |
|
|
(iv) |
|
share purchase warrants (the Series B Warrants) exercisable,
subject to Section 3.5, to purchase an additional forty six million, twenty six
thousand, five hundred and twenty two (46,026,522) Ivanhoe Shares in accordance
with the terms described in Section 3.2, |
for an aggregate subscription price (the Warrant Subscription Price) of one
thousand dollars ($1,000) in cash,
(collectively, the First Tranche Private Placement).
- 15 -
First Closing Date
2.2 Subject to the terms and conditions of this Agreement, the First Tranche Private Placement will
be completed and closed on the date (the First Closing Date) which is the fifth (5th)
Business Day following Exchange Approval for the issuance of the Equity Investment Securities and
any Ivanhoe Shares to be issued pursuant to the exercise the Series A Warrants and the Series B
Warrants or such later date as the parties to this Agreement may agree in writing.
Second Tranche Private Placement
2.3 Subject to the terms and conditions of this Agreement, on the Second Closing Date, Rio Tinto
will subscribe for and purchase from Ivanhoe, and Ivanhoe will issue and sell to Rio Tinto, (the
Basic Second Tranche Private Placement) forty six million, three hundred and four thousand, four
hundred and seventy three (46,304,473) Ivanhoe Shares (the Basic Second Tranche Private Placement
Shares) at an issue price per Basic Second Tranche Private Placement Share of eight dollars and
thirty eight cents ($8.38) for an aggregate subscription price (the Basic Second Tranche
Subscription Price) of three hundred and eighty eight million, thirty one thousand, four hundred
and eighty three dollars and seventy four cents ($388,031,483.74) in cash.
Top Up Option
2.4 For as long as Rio Tinto has the right to complete the Basic Second Tranche Private Placement,
Rio Tinto will also have the option (the Top Up Option) exercisable by Notice to Ivanhoe given:
|
(a) |
|
within fifteen (15) Business Days of the Approved OT Investment Contract Date;
or |
|
|
(b) |
|
if Rio Tinto gives Notice to Ivanhoe that Rio Tinto is making the election
contemplated by Section 2.9, as of the date of the Notice given pursuant to Section
2.9; |
to purchase up to that number of additional Ivanhoe Shares, if any (the Top Up Private Placement
Shares) which, when aggregated with the Basic Second Tranche Private Placement Shares, represent
upon issuance, nine and ninety five-hundredths per cent (9.95%) of the total number of Ivanhoe
Shares then issued and outstanding, at an issue price per Top Up Private Placement Share equal to
the Top Up Share Price.
Top Up Share Price
2.5 |
|
The issue price per Top Up Private Placement Share (the Top Up Share Price) will be: |
|
(a) |
|
if, during the period commencing on the First Closing Date and ending on the
date that Rio Tinto gives Notice pursuant to Section 2.4, Rio Tinto fully exercises
its rights under Part 5 in respect of each issuance of Dilutive Ivanhoe Shares, an
amount equal to the lesser of, |
|
(i) |
|
eight dollars and thirty eight cents ($8.38), or |
- 16 -
|
(ii) |
|
the closing market price of Ivanhoe Shares on the TSX on the
date of the Notice given by Rio Tinto to Ivanhoe pursuant to Section 2.4; or |
|
(b) |
|
in all other circumstances, eight dollars and thirty eight cents ($8.38); |
for an aggregate subscription price (the Top Up Subscription Price) in cash equal to the product
obtained by multiplying the total number of Top Up Private Placement Shares which Rio Tinto has by
Notice elected to purchase under the Top Up Option by the Top Up Share Price. Subject to the terms
and conditions of this Agreement, on the Second Closing Date, Rio Tinto will subscribe for and
purchase from Ivanhoe, and Ivanhoe will issue and sell to Rio Tinto, the total number of Top Up
Private Placement Shares which Rio Tinto has by Notice elected to purchase under the Top Up Option
in accordance with the terms thereof (the Top Up Private Placement).
Adjustments for Corporate Events
2.6 |
|
If an Adjustment Event occurs: |
|
(a) |
|
in the case of the First Tranche Private Placement, during the period
commencing on the date hereof and ending on the First Closing Date, |
|
(i) |
|
the number of First Tranche Private Placement Shares to be
issued to Rio Tinto on the First Closing Date and the issue price per First
Tranche Private Placement Share; and |
|
|
(ii) |
|
the number of Series A Warrants and Series B Warrants to be
issued to Rio Tinto on the First Closing Date and the exercise price of the
Series A Warrants and the Series B Warrants; |
|
(b) |
|
in the case of the Second Tranche Private Placement, during the period
commencing on the date hereof and ending on the Second Closing Date, the number of
Basic Second Tranche Private Placement Shares to be issued to Rio Tinto on the Second
Closing Date and the issue price per Second Tranche Private Placement Share; |
|
|
(c) |
|
at any time when Rio Tinto is entitled to exercise its pre-emptive rights
pursuant to Part 5, during the period commencing on the date that Rio Tinto becomes
entitled to exercise its rights under Section 5.2 or Section 5.3, as the case may be,
and ending upon the date that Rio Tinto exercises such rights or allows them to lapse,
whichever is earlier, the number of Anti-Dilution Ivanhoe Shares and Anti-Dilution
Warrants, if any (provided that the Anti-Dilution Notice given to Rio Tinto does not
reflect an appropriate adjustment in respect of the Adjustment Event) and the issue
price per Anti-Dilution Ivanhoe Share; |
|
|
(d) |
|
at any time after the First Tranche Private Placement, the number of First
Tranche Private Placement Shares referred to in Sections 7.2 and 8.2; or |
|
|
(e) |
|
at any time after the Second Tranche Private Placement, the number of Basic
Second Tranche Private Placement Shares referred to in Sections 7.2 and 8.2, |
- 17 -
will be adjusted in accordance with Section 2.7.
Procedure for Adjustments
2.7 |
|
Any adjustment required in any of the circumstances described in Section 2.6 with respect to: |
|
(a) |
|
unissued Ivanhoe Shares will be effected by adjusting the number of Ivanhoe
Shares, and the price per share at which, Rio Tinto would have been entitled to
purchase such Ivanhoe Shares prior to the Adjustment Event (the Original Issuance
Terms) to the number of Ivanhoe Shares, and the price per share at which, Rio Tinto
would have been entitled to purchase such Ivanhoe Shares if Rio Tinto: |
|
(i) |
|
had been the holder of a share purchase warrant having the
Original Issuance Terms but otherwise having the terms set out in the Series A
Warrant Certificate; and |
|
|
(ii) |
|
was entitled to fully exercise such share purchase warrant
after the Adjustment Event; |
|
(b) |
|
unissued Series A Warrants, Series B Warrants or Anti-Dilution Warrants will be
effected by adjusting the number of Series A Warrants, Series B Warrants or
Anti-Dilution Warrants, as the case may be, that Rio Tinto would have been entitled to
acquire, and the exercise price of such Series A Warrants, Series B Warrants or
Anti-Dilution Warrants, as the case may be, prior to the Adjustment Event, to: |
|
(i) |
|
that number of Series A Warrants, Series B Warrants or
Anti-Dilution Warrants, as the case may be, equal to the maximum number of
Ivanhoe Shares that such Series A Warrants, Series B Warrants or Anti-Dilution
Warrants would be exercisable to acquire after the Adjustment Event; and |
|
|
(ii) |
|
the exercise price per Ivanhoe Share at which such Series A
Warrants, Series B Warrants or Anti-Dilution Warrants would be exercisable
after the Adjustment Event; |
|
|
|
had such Series A Warrants, Series B Warrants or Anti-Dilution Warrants, as the case
may be, been issued and outstanding prior to the Adjustment Event; and |
|
|
(c) |
|
issued First Tranche Private Placement Shares or Basic Second Tranche Private
Placement Shares referred to in Sections 7.2 and 8.2 will be effected by adjusting the
number of First Tranche Private Placement Shares or Basic Second Tranche Private
Placement Shares, as the case may be, referred to in Sections 7.2 and 8.2 prior to the
Adjustment Event to a number of First Tranche Private Placement Shares or Basic Second
Tranche Private Placement Shares, as the case may be, that gives effect to the
Adjustment Event. |
If the application of the adjustment provisions in this Section 2.7 results in any adjustment that
is inequitable to either party, the parties will endeavour to agree upon a basis for an alternative
- 18 -
adjustment mechanism that is equitable to both parties and, in the case of paragraphs (a) and (b)
above, results in Rio Tinto receiving a number of Ivanhoe securities for consideration that is
equivalent to what Rio Tinto would have received, and for the consideration it would have paid, had
the Adjustment Event not occurred. If at any time a dispute arises with respect to any such
adjustment and the parties are unable to resolve the dispute through negotiation, such dispute will
be resolved in the manner provided in the Series A Warrant Certificate.
Second Closing Date
2.8 Subject to the terms and conditions of this Agreement, the Second Tranche Private Placement
will be completed and closed on the date (the Second Closing Date) which is the earlier of:
|
(a) |
|
the twentieth (20th) Business Day following the Approved OT
Investment Contract Date; or |
|
|
(b) |
|
the tenth (10th) Business Day following the date upon which Rio
Tinto gives Notice to Ivanhoe that Rio Tinto is making the election contemplated by
Section 2.9, |
or such later date as the parties to this Agreement may agree in writing. Ivanhoe will promptly
give Notice to Rio Tinto by fax once it has entered into an Approved OT Investment Contract.
Acceleration of Second Tranche Private Placement
2.9 Rio Tinto may, in its sole discretion, at any time prior to the date which is the earlier of:
|
(a) |
|
the Approved OT Investment Contract Date; or |
|
|
(b) |
|
the third (3rd) anniversary of the First Closing Date; |
give Notice to Ivanhoe that Rio Tinto is electing to complete the Second Tranche Private Placement
in the absence of an Approved OT Investment Contract.
Termination of Rio Tintos Obligation to Complete Second Tranche Private Placement
2.10 Rio Tintos obligation (but not its right) to complete the Second Tranche Private Placement
will terminate if Ivanhoe Shareholder Approval for the Ivanhoe Shareholder Approval Matter is not
obtained within sixty (60) days of the First Closing Date.
Registration Rights Agreement
2.11 On or before the First Closing Date, Ivanhoe and Rio Tinto will enter into a registration
rights agreement in substantially the form attached hereto as Schedule C (the Registration
Rights Agreement).
Shareholders Agreement
2.12 The parties acknowledge that Rio Tinto has entered into a Shareholders Agreement with Robert
M. Friedland providing for:
- 19 -
|
(a) |
|
a covenant by Robert M. Friedland to vote all of the Ivanhoe Shares he
beneficially owns, directly or indirectly, at the Ivanhoe Meeting in favour of the
Ivanhoe Shareholder Approval Matter; |
|
|
(b) |
|
a covenant by Robert M. Friedland to refrain from disposing of any Ivanhoe
Shares that Robert M. Friedland beneficially owns, directly or indirectly, on or before
the First Closing Date; and |
|
|
(c) |
|
the grant by Robert M. Friedland to Rio Tinto of a right of first refusal to
purchase any Ivanhoe Shares that Robert M. Friedland beneficially owns, directly or
indirectly, that he or any of his Affiliates intends to sell or otherwise dispose of
during the period commencing on the First Closing Date and ending on the fifth
(5th) anniversary of the First Closing Date. |
Rio Tintos obligation to complete the First Tranche Private Placement will be subject to the
Shareholders Agreement remaining in full force and effect on the First Closing Date.
Exchange Approval
2.13 Rio Tintos obligations to purchase, and Ivanhoes obligation to issue and sell, the Ivanhoe
Shares and the Series A Warrants and Series B Warrants representing the Equity Investment
(collectively, the Equity Investment Securities) is subject to Exchange Approval for the issuance
of the Equity Investment Securities, any Ivanhoe Shares to be issued pursuant to the exercise of
the Series A Warrants and the Series B Warrants, the Top Up Option and the Top Up Private Placement
Shares that (i) is not conditional on the approval of the holders of the Ivanhoe Shares on any
matter except Rio Tintos right to exercise the Series A Warrants and the Series B Warrants and
(ii) does not exclude the vote of any of the Ivanhoe Shares beneficially owned, directly or
indirectly, by Robert M. Friedland. Ivanhoe covenants and agrees to promptly apply for, and use its
best efforts to expeditiously obtain, Exchange Approval for the issuance of the Equity Investment
Securities, any Ivanhoe Shares to be issued pursuant to the exercise of the Series A Warrants and
the Series B Warrants, the Anti-Dilution Securities, the Top Up Option and the Top Up Private
Placement Shares, provided that if Exchange Approval is not obtained for the issuance of the
Anti-Dilution Securities, Ivanhoe may not issue any Dilutive Ivanhoe Shares or Ivanhoe Convertible
Securities (other than Ivanhoe Convertible Securities issued pursuant to an Exempt Ivanhoe Share
Transaction) at any time during which Rio Tinto is entitled to rights under Part 5 if Ivanhoe is
unable to obtain, prior to issuance of such Dilutive Ivanhoe Shares or Ivanhoe Convertible
Securities, as the case may be, the written approval, or the written acceptance of Ivanhoes
notice, of the proposed issuance to Rio Tinto of the Anti-Dilution Securities related thereto
given, to the extent required, by each of the TSX, NYSE and NASDAQ. Ivanhoe will promptly give
Notice to Rio Tinto by fax once it has obtained any such Exchange Approval and/or if any such
Exchange Approval is not required and/or not obtained.
Use of Proceeds
2.14 Ivanhoe covenants and agrees that it will use not less than ninety per cent (90%) of the
proceeds from the sale of the Ivanhoe Shares hereunder and from the exercise of the Series A
Warrants and Series B Warrants to fund expenditures in respect of Operations.
- 20 -
Second Closing Force Majeure
2.15 Without prejudice to Rio Tintos rights to terminate the Second Tranche Private Placement, the
obligations of Rio Tinto to complete the Second Tranche Private Placement will be suspended, and
Rio Tintos rights under this Agreement will be preserved, for the period that Ivanhoe is prevented
by any cause, whether foreseeable or unforeseeable, beyond its reasonable control from completing
the Second Tranche Private Placement. Ivanhoe will promptly give Notice to Rio Tinto if it is so
prevented from completing the Second Tranche Private Placement, stating therein the reasons
therefor, and the expected duration thereof. Ivanhoe will resume performance as soon as reasonably
possible.
PART 3
THE WARRANTS
Series A Warrants
3.1 Subject to adjustment in accordance with the terms of the Series A Warrant Certificate, each
Series A Warrant will be exercisable to purchase one (1) Ivanhoe Share at a price of:
|
(a) |
|
eight dollars and thirty eight cents ($8.38) during the period commencing on
the Ivanhoe Shareholder Approval Date and ending on the one hundred and eightieth
(180th) day after the Warrant Determination Date; and |
|
|
(b) |
|
eight dollars and fifty four cents ($8.54) during the period commencing on the
one hundred and eighty first (181st) day after the Warrant Determination
Date and ending on the three hundred and sixty-fifth (365th) day after the
Warrant Determination Date. |
The Series A Warrants will automatically terminate if Rio Tintos right to exercise the Series A
Warrants does not receive Ivanhoe Shareholder Approval at the Ivanhoe Meeting. Subject to the
foregoing, any Series A Warrants that remain unexercised after the three hundred and sixty-fifth
(365th) day following the Warrant Determination Date will immediately expire and be null
and void. The terms and attributes of the Series A Warrants are described in the Series A Warrant
Certificate.
Series B Warrants
3.2 Subject to adjustment in accordance with the terms of the Series B Warrant Certificate, each
Series B Warrant will be exercisable to purchase one (1) Ivanhoe Share at a price of:
|
(a) |
|
eight dollars and thirty eight cents ($8.38) during the period commencing on
the Ivanhoe Shareholder Approval Date and ending on the one hundred and eightieth
(180th) day after the Warrant Determination Date; |
|
|
(b) |
|
eight dollars and fifty four cents ($8.54) during the period commencing on the
one hundred and eighty first (181st) day after the Warrant Determination
Date and ending on the three hundred and sixty-fifth (365th) day after the
Warrant Determination Date; |
- 21 -
|
(c) |
|
eight dollars and eighty eight cents ($8.88) during the period commencing on
the three hundred and sixty-sixth (366th) day after the Warrant
Determination Date and ending on the five hundred and forty-fifth (545th)
day after the Warrant Determination Date; and |
|
|
(d) |
|
nine dollars and two cents ($9.02) during the period commencing on the five
hundred and forty-sixth (546th) day after the Warrant Determination Date and
ending on the seven hundred and twenty-fifth (725th) day after the Warrant
Determination Date. |
The Series B Warrants will automatically terminate if Rio Tintos right to exercise the Series B
Warrants does not receive Ivanhoe Shareholder Approval at the Ivanhoe Meeting. Subject to the
foregoing, any Series B Warrants that remain unexercised after the seven hundred and twenty-fifth
(725th) day following the Warrant Determination Date will immediately expire and be null
and void. The terms and attributes of the Series B Warrants are described in the Series B Warrant
Certificate.
Transferability of Warrants
3.3 Notwithstanding any other provision of this Agreement, Rio Tinto will have no right to Transfer
any of the Series A Warrants or the Series B Warrants other than to any person who is a member of
the Rio Tinto Group who covenants and agrees in writing with Ivanhoe to assume all of Rio Tintos
obligations under this Agreement in respect of the Series A Warrants or the Series B Warrants or
any Ivanhoe Shares acquired by it.
Right to Exercise Warrants
3.4 Under no circumstances will any of the Series A Warrants or the Series B Warrants be
exercisable unless and until:
|
(a) |
|
Rio Tintos right to exercise the Series A Warrants and the Series B Warrants
has received Ivanhoe Shareholder Approval; and |
|
|
(b) |
|
Rio Tintos right to exercise the Series A Warrants and the Series B Warrants
has been approved, to the extent required in the reasonable opinion of Rio Tinto, under
the Investment Canada Act (Canada). |
Ivanhoe Shareholder Approval
3.5 Ivanhoe covenants and agrees to use its best efforts to convene, within forty five (45) days
of, but in any event no later than sixty (60) days after, the date of this Agreement, a special
meeting of the holders of Ivanhoe Shares (the Ivanhoe Meeting) for the purpose of procuring
Ivanhoe Shareholder Approval for Rio Tintos right to exercise the Series A Warrants and the Series
B Warrants (the Ivanhoe Shareholder Approval Matter). Ivanhoe covenants and agrees to solicit
proxies for the Ivanhoe Meeting in favour of the Ivanhoe Shareholder Approval Matter and, for that
purpose, to prepare and mail to holders of Ivanhoe Shares, as soon as reasonably practicable after
the date of this Agreement, a management proxy circular in which the Ivanhoe board of directors
will make a written recommendation to holders of Ivanhoe Shares to vote such Ivanhoe Shares at the
Ivanhoe Meeting in favour of the Ivanhoe Shareholder Approval Matter. Ivanhoe will provide to Rio
- 22 -
Tinto and its counsel the reasonable opportunity to review and provide comments in respect of the
Ivanhoe management proxy circular to be prepared and mailed in respect of the Ivanhoe Meeting.
PART 4
BOARD OF DIRECTORS
Board Representation
4.1 From and after the First Closing Date, Rio Tinto will be entitled (but not obliged) to nominate
that number of individuals who meet the qualification criteria set out in Section 4.3 (each, a Rio
Tinto Representative) for appointment or election, from time to time, to the board of directors of
Ivanhoe, as a proportion of the board of directors of Ivanhoe (the Proportionate Number of
Directors), as is equal to the percentage of issued and outstanding Ivanhoe Shares held by Rio
Tinto and its Affiliates at that time (disregarding any unissued Ivanhoe Shares underlying any
unexercised Series A Warrants or Series B Warrants). Where such calculation results in the
Proportionate Number of Directors not being a whole number, such Proportionate Number of Directors
shall be rounded up to the nearest whole number where such calculation ends with a figure .5 or
greater and shall be rounded down to the nearest whole number where such calculation ends with a
figure less than .5. At all times, Rio Tinto shall be entitled to nominate as one of its Rio Tinto
Representatives an individual who is not qualified as an Independent Ivanhoe Director. If at any
time Rio Tinto is entitled to nominate more than one Rio Tinto Representative, then not less than
one half of such Rio Tinto Representatives must qualify as Independent Ivanhoe Directors. At all
times, the board of directors of Ivanhoe shall consist of at least ten (10) directors. Where a
matter is specified in this Agreement to require the approval of the board of directors of Ivanhoe,
the Rio Tinto Representatives shall be entitled to vote for or against such approval.
Appointment or Election of Rio Tinto Representatives
4.2 Rio Tinto may give Notice to Ivanhoe at any time and from time to time identifying the
individuals Rio Tinto intends to nominate as its Rio Tinto Representatives, accompanied by evidence
satisfactory to Ivanhoe, acting reasonably, that each such individual meets the requirements of
Section 4.3. Ivanhoe will, within thirty (30) days following receipt of such Notice, cause the
individuals nominated by Rio Tinto as its Rio Tinto Representatives to be elected or appointed to
Ivanhoes board of directors in any manner permitted by Applicable Law and Ivanhoes Constating
Documents, provided that if such Notice is received by Ivanhoe after the date upon which Ivanhoe
delivers a management proxy circular to its shareholders in respect of a meeting of its
shareholders at which directors are to be elected but prior to the date upon which the election of
directors at such meeting takes place, Ivanhoe will cause the individuals nominated by Rio Tinto as
its Rio Tinto Representatives to be elected or appointed to Ivanhoes board of directors within
thirty (30) days following the date of such meeting. Unless and until Rio Tinto gives Notice to
Ivanhoe, as provided above, nominating new individuals to replace any incumbent Rio Tinto
Representatives on Ivanhoes board of directors, Ivanhoe will continue to include the incumbent Rio
Tinto Representatives among Ivanhoes management nominees for election to the board of directors at
each meeting of the shareholders of Ivanhoe at which directors are to be elected. If, at any time,
Rio Tinto ceases to be entitled to nominate a number of Rio Tinto Representatives equal to the
number of incumbent Rio Tinto Representatives, Rio Tinto will promptly procure the resignation of
such number of incumbent Rio Tinto Representatives as exceeds Rio Tintos entitlement hereunder.
- 23 -
Qualifications and Remuneration of Rio Tinto Representatives
4.3 |
|
Each Rio Tinto Representative will be an individual who: |
|
(a) |
|
consents in writing to act as a director of Ivanhoe; and |
|
|
(b) |
|
is not disqualified from acting as a director of Ivanhoe under Applicable Law
(except if such disqualification is based on the residency of such individual). |
Ivanhoe will compensate the Rio Tinto Representatives on basis no less favourable than the basis
upon which it compensates its incumbent Independent Ivanhoe Directors.
Audit Committee Representation
4.4 For as long as Rio Tinto remains entitled to nominate at least one (1) Rio Tinto Representative
to Ivanhoes board of directors, Rio Tinto will be entitled to nominate, and Ivanhoes board of
directors will appoint, a Rio Tinto Representative selected by Rio Tinto to the audit committee of
Ivanhoes board of directors provided that such Rio Tinto Representative is:
|
(a) |
|
an Independent Ivanhoe Director; and |
|
|
(b) |
|
financially literate. |
PART 5
PRE-EMPTIVE RIGHTS
Pre-emptive Share Rights
5.1 If, at any time after the First Closing Date, Ivanhoe proposes, or becomes obliged, to issue
any Ivanhoe Shares (other than an issuance of Ivanhoe Shares pursuant to an Exempt Ivanhoe Share
Transaction) (Dilutive Ivanhoe Shares), Ivanhoe will offer, by Anti-Dilution Offer Notice, and
Rio Tinto will have the right, exercisable in accordance with the terms of this Part 5, to purchase
a number of additional Ivanhoe Shares (the Anti-Dilution Ivanhoe Shares) that would result in Rio
Tinto and its Affiliates beneficially owning, after the issuance of the Anti-Dilution Ivanhoe
Shares to Rio Tinto and the Dilutive Ivanhoe Shares to each of the other persons to whom Ivanhoe
issues such Dilutive Ivanhoe Shares, the same percentage of issued and outstanding Ivanhoe Shares
that Rio Tinto and its Affiliates beneficially owned immediately before the issuance of the
Anti-Dilution Ivanhoe Shares and the Dilutive Ivanhoe Shares.
Quarterly Anti-Dilution Offer Notices
5.2 If, at any time and from time to time, an issuance of Dilutive Ivanhoe Shares is not a Special
Dilutive Issuance (an Ordinary Dilutive Issuance), Ivanhoe will give Notice to Rio Tinto (a
Quarterly Anti-Dilution Offer Notice) not later than the earlier of:
|
(a) |
|
the last day of the calendar quarter in which the Ordinary Dilutive Issuance
occurred; or |
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|
(b) |
|
the fifth (5th) Business Day following the date upon which an
Ivanhoe Control Transaction is publicly announced during such calendar quarter. |
Subject to Section 5.4, the Quarterly Anti-Dilution Offer Notice will describe the number, price
and payment terms of all Dilutive Ivanhoe Shares issued pursuant to each Ordinary Dilutive Issuance
that occurred during the calendar quarter or period then ended and the Anti-Dilution Ivanhoe Shares
offered to Rio Tinto. Upon its receipt of a Quarterly Anti-Dilution Offer Notice, Rio Tinto will
have the right, for a period of twenty (20) Business Days, to purchase some or all of the
Anti-Dilution Ivanhoe Shares described in the Quarterly Anti-Dilution Offer Notice. The payment
terms of the Anti-Dilution Ivanhoe Shares offered to Rio Tinto shall be no less favourable than the
payment terms of the Dilutive Ivanhoe Shares described in the Quarterly Anti-Dilution Offer Notice.
Special Anti-Dilution Offer Notices
5.3 If, at any time and from time to time, an issuance of Dilutive Ivanhoe Shares (i) results in
the aggregate percentage interest of Rio Tinto and its Affiliates in the total number of issued and
outstanding Ivanhoe Shares being reduced by more than one per cent (1%) or (ii) is publicly
announced or completed at any time on or after the public announcement, but before the completion,
of an Ivanhoe Control Transaction (a Special Dilutive Issuance), Ivanhoe will give Notice to Rio
Tinto (a Special Anti-Dilution Offer Notice) as of the date of the public announcement, if any,
of the Special Dilutive Issuance or the date upon which the Special Dilutive Issuance occurs,
whichever is earlier. Subject to Section 5.4, the Special Anti-Dilution Offer Notice will describe
the number, price and payment terms of the Dilutive Ivanhoe Shares issued, or to be issued,
pursuant to the Special Dilutive Issuance and the Anti-Dilution Ivanhoe Shares offered to Rio
Tinto. Upon its receipt of a Special Anti-Dilution Offer Notice, Rio Tinto will have the right, for
a period of twenty (20) Business Days after the date upon which the Special Dilutive Share Issuance
occurs, to purchase some or all of the Anti-Dilution Ivanhoe Shares described in the Special
Anti-Dilution Offer Notice. The payment terms of the Anti-Dilution Ivanhoe Shares offered to Rio
Tinto shall be no less favourable than the payment terms of the Dilutive Ivanhoe Shares described
in the Special Anti-Dilution Offer Notice.
Consideration
5.4 If the consideration paid by the persons to whom Ivanhoe issues Dilutive Ivanhoe Shares is:
|
(a) |
|
cash, the price at which the Anti-Dilution Ivanhoe Shares will be issued to Rio
Tinto will be an amount in cash equal to the price for which each such Dilutive Ivanhoe
Share was issued; or |
|
|
(b) |
|
other than cash, the price at which the Anti-Dilution Ivanhoe Shares will be
issued to Rio Tinto will be an amount in cash equal to the volume-weighted average
price of an Ivanhoe Share on the TSX or such other stock exchange or securities market
on which the majority of the trading volume of Ivanhoe Shares occurs during the ten
(10) trading days immediately preceding the date of the public announcement of the
Ordinary Dilutive Share Issuance or the Special Dilutive Issuance, as the case may be,
or the date upon which the Dilutive Ivanhoe Shares are issued, whichever is earlier. |
- 25 -
Acceptance
5.5 Rio Tinto may accept Ivanhoes offer as to the full number of Anti-Dilution Ivanhoe Shares
offered to it or any lesser number, by Notice given to Ivanhoe prior to the expiration of the
period of time within which Rio Tinto may exercise its rights in accordance with Section 5.2 or
Section 5.3, as the case may be, in which event Ivanhoe will, within ten (10) Business Days
thereafter, sell and Rio Tinto will buy, upon the terms specified, the number of Anti-Dilution
Ivanhoe Shares agreed to be purchased by Rio Tinto. Rio Tintos rights to purchase any
Anti-Dilution Ivanhoe Shares offered to it pursuant to an Anti-Dilution Offer Notice will
immediately terminate if and when Rio Tinto fails to exercise its rights under this Part 5 to
subscribe for and purchase the maximum number of the Anti-Dilution Ivanhoe Shares which it has the
right to purchase hereunder and, as a result of the issuance of Dilutive Ivanhoe Shares to persons
other than Rio Tinto, Rio Tintos percentage holding of the issued and outstanding Ivanhoe Shares
is reduced. Notwithstanding the foregoing, a failure by Rio Tinto to fully exercise its rights
under this Part 5 in respect of any Ordinary Dilutive Issuance or Special Dilutive Issuance is
without prejudice to Rio Tintos right to acquire Anti-Dilution Ivanhoe Shares in respect of any
subsequent Ordinary Dilutive Issuance or Special Dilutive Issuance.
Pre-emptive Warrant Rights
5.6 If, at any time prior to the exercise or expiry of all of the Series A Warrants and Series B
Warrants, Rio Tinto exercises its right to purchase all or part of the Anti-Dilution Ivanhoe Shares
to which it is entitled, Rio Tinto will also be entitled to receive, for no additional
consideration, a number of additional share purchase warrants (the Anti-Dilution Ivanhoe
Warrants) that would result in Rio Tinto having the right to acquire, pursuant to the exercise of
all outstanding Series A Warrants, Series B Warrants and Anti-Dilution Ivanhoe Warrants, a number
of Ivanhoe Shares that, upon issuance, would represent the same percentage of the outstanding
Ivanhoe Shares that Rio Tinto would have beneficially owned if all of the then outstanding Series A
Warrants, Series B Warrants and Anti-Dilutive Ivanhoe Warrants had been fully exercised immediately
before the issuance of the Dilutive Ivanhoe Shares and Anti-Dilution Ivanhoe Shares. Each
Anti-Dilution Ivanhoe Warrant will entitle Rio Tinto to purchase one (1) Ivanhoe Share at a price
equal to the issue price per share of the Anti-Dilution Ivanhoe Shares. If, when the Anti-Dilution
Ivanhoe Warrants are issued, any Series A Warrants remain unexercised and outstanding, that number
of the Anti-Dilution Ivanhoe Warrants bearing the same proportion as such outstanding number of
Series A Warrants bears to the total number of Series A Warrants and Series B Warrants outstanding
will have the same terms and attributes as the Series A Warrants and the remainder of the
Anti-Dilution Ivanhoe Warrants will have the same terms and attributes as the Series B Warrants.
Exempt Ivanhoe Share Transactions
5.7 Rio Tintos pre-emptive rights under this Part 5 will not apply to any issuance of Ivanhoe
Shares or Ivanhoe Convertible Securities pursuant to any of the following transactions (each, an
Exempt Ivanhoe Share Transaction):
|
(a) |
|
the award or exercise of any bona fide equity incentive securities or equity
compensation securities in favour of directors, officers, employees or service
providers of Ivanhoe or any of its Affiliates pursuant to any bona fide equity |
- 26 -
|
|
|
incentive plan adopted by Ivanhoe and approved by the holders of Ivanhoe Shares from
time to time; |
|
(b) |
|
the exercise of any Ivanhoe Convertible Securities outstanding as of the date
hereof; or |
|
|
(c) |
|
any issuance of Ivanhoe Shares or Ivanhoe Convertible Securities made to all
holders of Ivanhoe Shares on a pro rata basis. |
Termination of Pre-emptive Rights
5.8 If, at any time on or after the fifth (5th) anniversary of the First Closing Date,
Rio Tinto and its Affiliates beneficially own, in the aggregate, a number of Ivanhoe Shares
representing less than seven and one-half per cent (7.5%) of the total number of Ivanhoe Shares
issued and outstanding at such time, Rio Tintos rights under this Part 5 will immediately
terminate and be of no further force or effect.
Specific Performance and Injunction
5.9 Ivanhoe specifically acknowledges that its obligations under this Part 5 are an integral part
of the transactions contemplated by this Agreement. Ivanhoe, therefore, specifically acknowledges
and agrees that the breach of any of the terms of this Part 5 by it would cause Rio Tinto
irreparable harm which may not be compensable in damages. Ivanhoe further acknowledges and agrees
that it is essential to the effective enforcement of this Agreement that Rio Tinto be entitled to
equitable remedies including, but not limited to, specific performance and injunction without being
required to show irreparable harm. Ivanhoe acknowledges and agrees that the terms of this
Agreement are just and reasonable having regard to all the circumstances.
PART 6
IVANHOE SHARE ACQUISITIONS
AND DISPOSITIONS
Standstill Covenant
6.1 Rio Tinto hereby covenants and agrees that, until the fifth (5th) anniversary of the
date of this Agreement, the Rio Tinto Group will not, except with the prior approval of Ivanhoe by
way of a resolution passed by Ivanhoes board of directors acting by simple majority or as provided
in Section 6.2 or Section 6.3:
|
(a) |
|
engage in any Specified Activity; |
|
|
(b) |
|
prior to having fully exercised all of the Series A Warrants and the Series B
Warrants, directly or indirectly acquire, alone or jointly or in concert with any other
person, any Ivanhoe Shares or Ivanhoe Convertible Securities (other than the Equity
Investment Securities, Anti-Dilution Securities, Ivanhoe Shares acquired pursuant to
the exercise of the Series A Warrants and the Series B Warrants, the Top Up Option, the
Top Up Private Placement Shares or Ivanhoe Shares or Ivanhoe Convertible |
- 27 -
|
|
|
Securities acquired through an issuance made to all holders of Ivanhoe Shares on a
pro rata basis) representing, in the aggregate, more than six and sixty
five-hundredths per cent (6.65%) of the then issued and outstanding Ivanhoe Shares
from time to time; or |
|
|
(c) |
|
after having fully exercised all of the Series A Warrants and the Series B
Warrants, directly or indirectly acquire, alone or jointly or in concert with any other
person, any Ivanhoe Shares or Ivanhoe Convertible Securities if, following such
acquisition, the Rio Tinto Group and all persons with whom the Rio Tinto Group is
acting jointly or in concert, would beneficially own or exercise control or direction,
or be deemed, under Applicable Law, to beneficially own, or exercise control or
direction over, more than forty per cent (40%) of the then issued and outstanding
Ivanhoe Shares. |
For the purposes of this Section 6.1, the parties to the Shareholders Agreement and their
respective Affiliates will not be construed to be acting jointly or in concert with one another in
exercising their respective rights and performing their respective obligations thereunder.
Exercise of Rights Under Shareholders Agreement
6.2 Nothing in Section 6.1 will be construed to restrict Rio Tinto from acquiring any Ivanhoe
Shares that Robert M. Friedland beneficially owns, directly or indirectly, pursuant to any rights
of first refusal in favour of Rio Tinto arising under the Shareholders Agreement by reason of any
proposed sale or disposition of Ivanhoe Shares by Robert M. Friedland or any of his Affiliates to
any person who is not an Eligible Institutional Investor.
Ivanhoe Control Transaction
6.3 If, at any time and from time to time, a person or persons jointly or in concert (other than
the Rio Tinto Group or a person that is not at arms length to the Rio Tinto Group), publicly
announces its intention to commence an Ivanhoe Control Transaction, or Ivanhoe publicly announces
that its board of directors has approved an agreement which contemplates an Ivanhoe Control
Transaction, the Rio Tinto Group shall be immediately released from the restrictions of Section
6.1 but only for the limited purpose of giving the Rio Tinto Group a reasonable opportunity to
propose to Ivanhoe and/or commence an alternative Ivanhoe Control Transaction. Unless an Ivanhoe
Control Transaction results in an Ivanhoe Change of Control within seventy-five (75) days after the
Rio Tinto Group is released from the restrictions of Section 6.1 or, after the end of such period,
Rio Tinto or any of its Affiliates is actively pursuing an alternative Ivanhoe Control Transaction
that was commenced during such period, such restrictions will be deemed to have been re-imposed as
of the later of the end of such seventy-five (75) day period and the date that Rio Tinto or any
such Affiliate completes or ceases actively pursuing its alternative Ivanhoe Control Transaction,
pending their expiry or the public announcement of another Ivanhoe Control Transaction as
contemplated above. For the purposes of this Section 6.3:
|
(a) |
|
Rio Tinto or any of its Affiliates will be deemed to be actively pursuing an
alternative Ivanhoe Control Transaction at a particular time if, at that time, Rio
Tinto or any such Affiliate has made a formal bid (as defined under Canadian
Securities Laws) that has not expired (and, for greater certainty, which may be
extended), for a |
- 28 -
|
|
|
sufficient number of Ivanhoe Shares to effect an Ivanhoe Change of Control or Rio
Tinto or any such Affiliate is engaged in active negotiations with Ivanhoe with
respect to such alternative Ivanhoe Control Transaction; and |
|
(b) |
|
nothing in the Shareholders Agreement will be construed as creating a
non-arms length relationship between the parties to the Shareholders Agreement or
their respective Affiliates. |
Restriction on Disposition of Securities
6.4 Until the first (1st) anniversary of the First Closing Date, Rio Tinto covenants and
agrees that the Rio Tinto Group will not, except:
|
(a) |
|
pursuant to an Ivanhoe Control Transaction; or |
|
|
(b) |
|
with the prior written consent of Ivanhoe, evidenced by a resolution passed by
the Ivanhoe board of directors acting by simple majority; or |
|
|
(c) |
|
to any person who is a member of the Rio Tinto Group who covenants and agrees
in writing with Ivanhoe to assume all of Rio Tintos obligations under this Agreement
in respect of any Ivanhoe Shares or Ivanhoe Convertible Securities transferred to it; |
directly or indirectly, offer, sell, contract to sell, grant any option or right to purchase, make
any short sale, transfer, assign, gift, enter into any derivative transaction in respect of, or
otherwise dispose of, alienate or create any Encumbrance in respect of (or announce any intention
to effect the foregoing) (any of the foregoing, a Transfer) any Ivanhoe Shares or Ivanhoe
Convertible Securities (or any voting rights or other rights attributable thereto) beneficially
owned, directly or indirectly, by the Rio Tinto Group, whether now owned or hereafter acquired, or
in respect of which the Rio Tinto Group exercises control or direction. Rio Tinto agrees that any
purported Transfer of any such Ivanhoe Shares or Ivanhoe Convertible Securities by the Rio Tinto
Group contrary to the terms of this Section 6.4 will be null and void and of no legal effect and
acknowledges that Ivanhoe will be entitled to refuse to recognize any such purported Transfer.
Placement Rights
6.5 If, at any time after the first (1st) anniversary of the First Closing Date but
before the fifth (5th) anniversary of the date hereof, Rio Tinto intends to Transfer a
number of Ivanhoe Shares representing five per cent (5%) or more of the total number of Ivanhoe
Shares then issued and outstanding (the Placement Shares) to any person who is not:
|
(a) |
|
a member of the Rio Tinto Group who covenants and agrees in writing with
Ivanhoe to assume all of Rio Tintos obligations under this Agreement in respect of the
Placement Shares; or |
|
|
(b) |
|
an Eligible Institutional Investor; |
and the proposed Transfer is not being made pursuant to an Ivanhoe Control Transaction, Rio Tinto
will promptly thereafter give to Ivanhoe a Notice (the Placement Offer Notice) offering to
Ivanhoe
- 29 -
the right to arrange for the sale of the Placement Shares to a third party (a Designated
Purchaser) selected by Ivanhoe in its absolute discretion, specifying the asking price for each
such Placement Share and the terms of payment in respect of the proposed sale (the Placement
Offer). The Placement Offer must be open for acceptance for not less than sixty (60) days (the
Placement Offer Period). During the Placement Offer Period, Ivanhoe will have the right to
arrange for the sale to a Designated Purchaser of all, but not less than all, of the Placement
Shares at the price and on the terms indicated in the Placement Offer Notice. Such right may be
exercised by Ivanhoe giving Notice to Rio Tinto within the Placement Offer Period advising of
Ivanhoes intention to arrange for the purchase of the Placement Shares by a Designated Purchaser.
The Placement Offer Period will end immediately upon Ivanhoe having given Notice to Rio Tinto that
it is waiving its right to arrange for the sale to a Designated Purchaser of the Placement Shares.
If Ivanhoe notifies Rio Tinto in accordance with this Section 6.5 of its intention to arrange for
the sale to a Designated Purchaser of the Placement Shares, then a binding agreement of purchase
and sale will exist between Rio Tinto and Ivanhoe, as agent for the Designated Purchaser with
respect to such Placement Shares at and for a cash price equal to that described in the Placement
Offer Notice, and on the terms and conditions therein contained, unless, within five (5) Business
Days of its receipt of such notice, Rio Tinto, acting reasonably, notifies Ivanhoe that it rejects
the sale of shares to the Designated Purchaser. If Ivanhoe fails to so notify Rio Tinto or,
provided that Rio Tinto has not rejected the sale of shares to the Designated Purchaser, fails to
complete the sale of the Placement Shares to the Designated Purchaser within the Placement Offer
Period, then Ivanhoe will be conclusively deemed to have waived its right to arrange for the sale
of the Placement Shares under this Section 6.5 and Rio Tinto may, within sixty (60) days after the
expiry of the Placement Offer Period sell the Placement Shares at a cash price per Placement Share
not less, and on terms and conditions no less favourable to Rio Tinto, than the price per Placement
Share and terms and conditions set forth in the Placement Offer Notice. In the event that Rio Tinto
does not sell the Placement Shares within the sixty (60) day period referred to above or if the
terms of any proposed sale are less favourable to Rio Tinto than those set out in the Placement
Offer Notice or if Rio Tinto rejects the sale of shares to the Designated Purchaser, then the
provisions of this Section 6.5 will once again apply. Ivanhoe agrees to comply with all Applicable
Laws, including applicable Canadian Securities Laws, in connection with the purchase and sale of
any Placement Shares.
PART 7
OT PROJECT PARTICIPATION
Right of First Refusal
7.1 Subject to Section 7.2, if, at any time and from time to time after the First Closing Date,
Ivanhoe proposes to, directly or indirectly, offer, sell, contract to sell, grant any option or
right to purchase, transfer, assign, gift, otherwise dispose of, alienate or create any Encumbrance
in respect of any beneficial or legal ownership interest including, without limitation, any
participating interest, carried interest, royalty interest or voting interest, in the OT Project
(the OT Disposal Interest) to a third party in any transaction other than a transaction
contemplated by Section 7.3 (an OT Disposal Transaction), Ivanhoe may only effect such OT
Disposal Transaction on bona fide arms length terms and must give Notice (an OT Disposal Notice)
to Rio Tinto, identifying the third party offeror and its ultimate beneficial owner(s), if and to
the extent reasonably known, and offering the OT Disposal Interest to Rio Tinto on the same (or, as
near as is possible, financially equivalent)
- 30 -
terms and conditions upon which Ivanhoe has received an offer from a third party to convey the OT
Disposal Interest to such third party. Upon receiving an OT Disposal Notice, Rio Tinto or, at its
direction, an Affiliate of Rio Tinto, will have the right (the OT Right of First Refusal) to
acquire all, but not less than all, of the OT Disposal Interest for the consideration stipulated in
the OT Disposal Notice (provided that if all or any part of the consideration offered by the third
party is non-monetary, Rio Tinto or, at its direction, an Affiliate of Rio Tinto, may elect to
furnish the same non-monetary consideration or to pay to Ivanhoe an amount of money equal to the
fair market value, as determined by the parties, acting reasonably, of the non-monetary
consideration offered by the third party). If the parties, acting reasonably, are unable to agree
upon the fair market value of any such non-monetary consideration, such fair market value will be
conclusively determined by an internationally recognized investment bank mutually acceptable to the
parties, acting reasonably, and that has not been engaged by either of the parties or their
respective Affiliates in any capacity during the preceding twelve (12) months. Rio Tinto or, at its
direction, an Affiliate of Rio Tinto, may exercise the OT Right of First Refusal by providing
Notice to Ivanhoe within sixty (60) days of receipt by Rio Tinto of the OT Disposal Notice (the OT
Exercise Period). If Rio Tinto or its Affiliate, as applicable, exercises the OT Right of First
Refusal, then a binding agreement of purchase and sale will exist between Rio Tinto or its
Affiliate, as applicable, and Ivanhoe with respect to the OT Disposal Interest for the
consideration stipulated in the OT Disposal Notice (subject to Rio Tintos or its Affiliates, as
applicable right to pay cash in lieu of any non-monetary consideration as hereinbefore provided),
and on the terms and conditions therein contained. If the OT Right of First Refusal is not
exercised prior to the expiry of the OT Exercise Period, Ivanhoe will have the right for a period
of sixty (60) days following the OT Exercise Period (the OT Closing Period) to convey the OT
Disposal Interest to the third party from whom it received the offer that was specifically named in
the OT Disposal Notice for consideration having a value equal to or higher than the value of the
consideration for which Ivanhoe offered the OT Disposal Interest to Rio Tinto and on terms and
conditions no less favourable to Ivanhoe than those set out in the OT Disposal Notice. If Ivanhoe
does not convey the OT Disposal Interest to such third party by the expiry of the OT Closing
Period, such OT Disposal Interest will again become subject to the OT Right of First Refusal.
Ivanhoe covenants and agrees that it will not, on or before the First Closing Date, enter into any
OT Disposal Transaction that would, after the First Closing Date, require Ivanhoe to deliver an OT
Disposal Notice to Rio Tinto.
Condition Precedent
7.2 The OT Right of First Refusal will be inoperative unless, at the time that Ivanhoe proposes to
enter into an OT Disposal Transaction, Rio Tinto and its Affiliates beneficially own (disregarding
any unissued Ivanhoe Shares underlying any unexercised Series A Warrants or Series B Warrants), in
the aggregate, a number of Ivanhoe Shares that is equal to or greater than the aggregate of the
First Tranche Private Placement Shares and the Basic Second Tranche Private Placement Shares.
Notwithstanding the foregoing, if at any time before Rio Tinto and its Affiliates beneficially own
(disregarding any unissued Ivanhoe Shares underlying any unexercised Series A Warrants or Series B
Warrants), in the aggregate, a number of Ivanhoe Shares that is equal to or greater than the
aggregate of the First Tranche Private Placement Shares and the Basic Second Tranche Private
Placement Shares, Ivanhoe, or a Subsidiary of Ivanhoe will not enter into any legally binding
commitment with a third party to effect an Ivanhoe Disposal Transaction unless:
- 31 -
|
(a) |
|
such legally binding commitment is conditional upon the exercise or waiver by
Rio Tinto of the OT Right of First Refusal; and |
|
|
(b) |
|
upon entering into such legally binding commitment, Ivanhoe promptly delivers
to Rio Tinto an OT Disposal Notice. |
Provided that Rio Tinto gives Notice to Ivanhoe that Rio Tinto is making the election contemplated
by Section 2.9 at or before the end of the OT Exercise Period, Rio Tinto will have the right to
exercise the OT Right of First Refusal in accordance with the terms of Section 7.1.
Exempt Dispositions
7.3 The disposition of an OT Disposal Interest pursuant to any of the following transactions will
be deemed not to be an OT Disposal Transaction to which the OT Right of First Refusal applies:
|
(a) |
|
any disposition of an OT Disposal Interest by a wholly-owned Subsidiary of
Ivanhoe to another wholly-owned Subsidiary of Ivanhoe; |
|
|
(b) |
|
any disposition or series of dispositions of an OT Disposal Interest to the
Government of Mongolia or any entity beneficially owned or Controlled by the Government
of Mongolia; |
|
|
(c) |
|
any disposition or series of dispositions of an OT Disposal Interest to one or
more third parties mandated by the Government of Mongolia; or |
|
|
(d) |
|
an Ivanhoe Control Transaction. |
OT Project Participation Discussions
7.4 From and after the date hereof, the parties undertake to consult with one another from time to
time with respect to possible opportunities for the Rio Tinto Group to participate in the OT
Project on a basis other than, or in addition to, the basis contemplated by this Agreement. Such
participation may include, without limitation, a member of the Rio Tinto Group having a direct
participating interest in the OT Project. The parties acknowledge that:
|
(a) |
|
on the date hereof, no member of the Rio Tinto Group is a related party of
Ivanhoe for the purposes of Canadian Securities Laws; |
|
|
(b) |
|
as a result of the Equity Investment, the members of the Rio Tinto Group may
become related parties of Ivanhoe for the purposes of Canadian Securities Laws; and |
|
|
(c) |
|
unless exempt, material transactions entered into between Ivanhoe and its
related parties (other than any transaction entered into between Ivanhoe and Rio Tinto
or an Affiliate of Rio Tinto pursuant to Section 7.1) are subject to special rules
under Canadian Securities Laws, including requirements for independent valuations and
prior approval by disinterested shareholders. The parties further acknowledge that the
OT Right of First Refusal has been negotiated by the parties at arms length and |
- 32 -
|
|
|
that any exercise by Rio Tinto or any of its Affiliates of the OT Right of First
Refusal at a time when Rio Tinto and such Affiliate is a related party of Ivanhoe
would not be subject to special rules under Canadian Securities Laws, including
requirements for independent valuations and/or prior approval by disinterested
shareholders by reason of the application of Section 5.1(h)(iii) of Ontario
Securities Commission Rule 61-501 Insider Bids, Issuer Bids, Business Combination
and Related Party Transactions. |
The obligations of the parties in this Section 7.4 are limited to discussing possible opportunities
for the Rio Tinto Group to participate in the OT Project on a basis other than, or in addition to,
the basis contemplated by this Agreement and nothing in this Section 7.4 is intended to create any
legally binding obligations on the part of either Ivanhoe or Rio Tinto to participate in any
transaction.
Specific Performance and Injunction
7.5 Ivanhoe specifically acknowledges that the right of first refusal contained in Section 7.1 is
an integral part of the transactions contemplated by this Agreement. Ivanhoe, therefore,
specifically acknowledges and agrees that the breach of any of the terms of Section 7.1 would cause
Rio Tinto irreparable harm that may not be compensable in damages. Ivanhoe further acknowledges
and agrees that it is essential to the effective enforcement of this Agreement that Rio Tinto be
entitled to equitable remedies including, but not limited to specific performance and injunction
without being required to show irreparable harm. Having regard to the significant investment being
made by Rio Tinto in Ivanhoe, Ivanhoe acknowledges and agrees that the terms of this Agreement are
just and reasonable having regard to all the circumstances.
PART 8
TECHNICAL COMMITTEE
Establishment and Purpose
8.1 As of the First Closing Date, Ivanhoe and Rio Tinto will establish a committee (the Technical
Committee) through which Ivanhoe and Rio Tinto will consult with one another in good faith and use
reasonable efforts to reach a consensus with respect to the objectives, procedures, methods and
actions to be taken in furtherance of the development, operation and management of the OT Project.
Ivanhoe and Rio Tinto will, through the Technical Committee, cooperatively oversee and supervise
all Operations in respect of the OT Project and, in particular, but without limitation, will:
|
(a) |
|
define the roles and responsibilities of the Manager; |
|
|
(b) |
|
review the conduct of the OT Project by the Manager; |
|
|
(c) |
|
receive and discuss reports of the Manager; |
|
|
(d) |
|
give general directions as to the manner in which the Manager is to carry out
the OT Project; |
- 33 -
|
(e) |
|
consult with the Manager regarding staffing matters in respect of the OT
Project; |
|
|
(f) |
|
assist the Manager in promoting best practices in matters of health, safety,
environment and community relations; |
|
|
(g) |
|
determine the policies, nature and content of Programs and Budgets for the OT
Project; |
|
|
(h) |
|
consider and approve or reject Programs and Budgets in accordance with the
provisions of this Agreement and review and modify any approved Programs and Budgets
during their currency; |
|
|
(i) |
|
review and discuss potential mine optimisation opportunities in respect of the
OT Project; and |
|
|
(j) |
|
have any other functions as are provided in this Agreement. |
The parties may, by mutual written agreement, expand, reduce or change the scope of the functions
of the Technical Committee hereunder at any time and from time to time.
Composition
8.2 The Technical Committee shall consist of two (2) members appointed by Ivanhoe, two (2) members
appointed by Rio Tinto and the Technical Committee Chair. Each of Ivanhoe and Rio Tinto may
terminate the appointment of any member appointed by it to the Technical Committee and appoint
another person in his or her place. Each of Ivanhoe and Rio Tinto may appoint one or more
alternates to act in the absence of one or more of its regular members. Any alternate so acting
shall be deemed a member. Appointments by a party (including alternates) may be made or changed by
Notice to the other party. Rio Tintos right to appoint members and be represented on the
Technical Committee will immediately terminate if:
|
(a) |
|
at any time during the period commencing on the First Closing Date and ending
on the earlier of, |
|
(i) |
|
the Second Closing Date, or |
|
|
(ii) |
|
the third (3rd) anniversary of the First Closing
Date, |
|
|
|
Rio Tinto and its Affiliates beneficially own (disregarding any unissued Ivanhoe
Shares underlying any unexercised Series A Warrants or Series B Warrants), in the
aggregate, a number of Ivanhoe Shares that is less than the First Tranche Private
Placement Shares; or |
|
|
(b) |
|
at any time after the earlier of, |
|
(i) |
|
the Second Closing Date, or |
|
|
(ii) |
|
the third (3rd) anniversary of the First Closing
Date, |
- 34 -
Rio Tinto and its Affiliates beneficially own (disregarding any unissued Ivanhoe
Shares underlying any unexercised Series A Warrants or Series B Warrants), in the
aggregate, a number of Ivanhoe Shares that is less than the aggregate of the First
Tranche Private Placement Shares and the Basic Second Tranche Private Placement
Shares.
Technical Committee Chair
8.3 The Technical Committee will be chaired by an individual (the Technical Committee Chair)
reasonably acceptable to both Ivanhoe and Rio Tinto. The Technical Committee Chair will also act
as senior project manager of the OT Project (the Manager) and shall serve in both roles for a
fixed period of office as determined by the parties or, if sooner, until he resigns or becomes
unable to act.
Ivanhoe Appointment Right
8.4 Subject to Section 8.3, during the period commencing on the First Closing Date and ending on
the fifth (5th) anniversary of the First Closing Date, Ivanhoe will have the right to
appoint the Technical Committee Chair, who will contemporaneously act as the Manager provided that
any such appointee shall cease to act as Technical Committee Chair and Manager on the fifth
(5th) anniversary of the First Closing Date. The parties acknowledge that Ivanhoe
intends to appoint John Macken as the initial Technical Committee Chair and Manager. Ivanhoe will
have the right to appoint one or more successor individuals to act as the Technical Committee Chair
and Manager until the fifth (5th) anniversary of the First Closing Date provided that
any such appointee shall cease to act as Technical Committee Chair and Manager on the fifth
(5th) anniversary of the First Closing Date and further provided that any such successor
individual has the professional qualifications, experience, skills and expertise that a reasonable
person would consider necessary in order for such individual to effectively act as the Manager and
is acceptable to Rio Tintos members of the Technical Committee, acting reasonably.
Rio Tinto Appointment Right
8.5 Subject to Section 8.3, from the fifth (5th) anniversary of the First Closing Date, and
thereafter for an indefinite period of time, Rio Tinto will have the right to appoint the Technical
Committee Chair, who will contemporaneously act as the Manager. Any individual appointed by Rio
Tinto to act as the Technical Committee Chair and Manager will have the professional
qualifications, experience, skills and expertise that a reasonable person would consider necessary
in order for such individual to effectively act as the Manager and will be acceptable to Ivanhoes
members of the Technical Committee, acting reasonably. Rio Tinto will have the right to appoint one
or more successor individuals to act as the Technical Committee Chair and Manager provided that any
such successor individual has the professional qualifications, experience, skills and expertise
that a reasonable person would consider necessary in order for such individual to effectively act
as the Manager and is acceptable to Ivanhoes members of the Technical Committee, acting
reasonably.
Majority Decisions
8.6 Any decision of the Technical Committee in respect of which a consensus cannot be reached among
its members will be subject to a vote by such members. Each member of the Technical
- 35 -
Committee, including the Technical Committee Chair, shall have one (1) vote. All decisions of the
Technical Committee, other than decisions requiring unanimity under Section 8.7, shall be
determined by a simple majority vote of the members.
Unanimous Decisions
8.7 During the period commencing on the First Closing Date and ending on the fifth (5th)
anniversary of the First Closing Date, any decision of the Technical Committee with respect to any
of the following matters (Special Approval Matters):
|
(a) |
|
the acquisition, or the adoption of any Program and Budget that contemplates
the acquisition, of any assets or property or group of related assets and/or properties
(or of a financial lease or other similar commitment) at a total cost (or value if
leased) of more than one hundred million dollars ($100,000,000); |
|
|
(b) |
|
the entry into or the amendment of any contract or legally binding commitment
or series of related contracts or commitments (whether at one time or over a period of
time) under which Ivanhoe is required to or otherwise may incur expenditures of more
than one hundred million dollars ($100,000,000) over the term of the contract(s) or
commitment(s); |
|
|
(c) |
|
any material amendment to the long term mine plan in respect of the OT Project
adopted by Ivanhoe prior to the date of this Agreement or the adoption of any new long
term mine plan; or |
|
|
(d) |
|
the entry into any contract or legally binding commitment or series of related
contracts or commitments (whether at one time or over a period of time) involving the
direct or indirect acquisition of any interest of any nature whatsoever in any land or
mineralization within the geographical area comprising the OT Project for aggregate
cash consideration exceeding ten million dollars ($10,000,000); |
shall only be determined by the affirmative vote of each member of the Technical Committee and
shall not be referred for resolution to the Ivanhoe board of directors or the Ivanhoe shareholders
or to Arbitration pursuant to Part 16 of this Agreement.
Resolutions Contractually Binding on the Parties
8.8 Duly passed resolutions of the Technical Committee within the scope of its functions as set out
in this Agreement are contractually binding on each party provided that, under no circumstances
will the Technical Committee have the power to create any legally binding obligations in favour of
third parties on the part of Ivanhoe, Rio Tinto or any of their respective Affiliates.
Meetings
8.9 The Technical Committee shall hold regular meetings at least quarterly in such places as the
Technical Committee may agree. The Technical Committee Chair shall give thirty (30) days Notice of
such meetings to each member of the Technical Committee. Notice of a meeting given to the parties
in accordance with Section 18.1 will be deemed proper and adequate notice to the members
- 36 -
of the Technical Committee. Any member of the Technical Committee may call a special meeting upon
fourteen (14) days Notice to the other members. In case of an emergency, reasonable Notice of a
special meeting shall suffice. The period of Notice required under this Section 8.9 may be reduced
by agreement of a representative of each party entitled to vote at the meeting. Failure to comply
with any of the requirements for convening of a meeting of the Technical Committee as set out in
this Agreement will, unless the parties otherwise agree, invalidate all of the resolutions passed
at that meeting. Subject to the procedural rules set out in this Part 8, the Technical Committee
shall establish its own rules for the conduct of its affairs.
Quorum
8.10 There shall be a quorum if a majority of members that includes at least one member
representing each of Ivanhoe and Rio Tinto is present. If a quorum is not present within 90 minutes
after the time appointed for commencement of a meeting of the Technical Committee, that meeting
must be adjourned to the same time and day of the next week at the same place, provided, however,
that if either Ivanhoe or Rio Tinto is unrepresented at two consecutive properly called meetings,
then a quorum shall exist at the second meeting if the other party is represented by at least one
appointed member, and a vote by such partys attending members shall be considered the vote
required for the purposes of the conduct of all business for which Notice was properly given, other
than in respect of any Special Approval Matters.
Agendas and Minutes
8.11 Each Notice of a meeting of the Technical Committee shall include an itemized agenda prepared
by the Technical Committee Chair in the case of a regular meeting or by the member calling the
meeting in the case of a special meeting, but any matters may be considered if a member adds the
matter to the agenda by Notice to the other members at least five (5) days before the meeting or,
at the meeting, with the unanimous consent of all of the members present at the meeting. The
Technical Committee Chair shall prepare minutes of all meetings and shall distribute copies of such
minutes to the other members as soon as possible and in any event within thirty (30) days after the
conclusion of each meeting. Any member may electronically record the proceedings of a meeting with
the consent of each of the other members present at the meeting. Each member of the Technical
Committee shall sign and return or object to the minutes prepared by the Technical Committee Chair
within thirty (30) days after receipt, and failure to do either shall be deemed acceptance of the
minutes as prepared by the Technical Committee Chair. The minutes, when signed or deemed accepted
by all members, shall be the official record of the decisions made by the Technical Committee. If
a member timely objects to minutes proposed by the Technical Committee Chair, the members of the
Technical Committee shall seek, for a period not to exceed thirty (30) days from receipt by the
Technical Committee Chair of notice of the objections, to agree upon minutes acceptable to all
members. If the Technical Committee does not reach agreement on the minutes of the meeting within
such thirty (30) day period, the minutes of the meeting as prepared by the Technical Committee
Chair together with the changes proposed by other members shall collectively constitute the record
of the meeting.
- 37 -
Circulating resolutions
8.12 Without prejudice to Section 8.7, a resolution in writing signed by a member appointed by each
party will be as valid as if it had been passed at a duly convened meeting of the Technical
Committee. Such resolution may consist of one or several documents executed as counterparts.
Costs
8.13 All costs incurred by a member of the Technical Committee in serving on, and attending
meetings of, the Technical Committee shall be borne by the party who appointed such member. If
other personnel employed in Operations are required to attend a meeting of the Technical Committee,
reasonable costs incurred in connection with such attendance shall be paid by Ivanhoe as expenses
related to Operations.
Action Without Meeting in Person
8.14 In lieu of meetings in person, the Technical Committee may conduct meetings by telephone or
video conference or by other means of electronic communication by which all persons participating
in the meeting are able to hear the entire meeting and be heard by all other persons attending the
meeting, in each case as the Technical Committee determines. The meeting shall be deemed to occur
in the place where the greatest number of members is present, failing which where the Technical
Committee Chair is located. Minutes of such meetings shall be prepared in accordance with Section
8.11.
Matters Requiring Technical Committee Approval
8.15 All Operations will be undertaken pursuant to Programs and Budgets approved by the Technical
Committee and, without limiting the generality of the foregoing, none of the following Operations
will be undertaken except as approved by the Technical Committee pursuant to a Program and Budget,
or otherwise, in accordance with Section 8.6 or Section 8.7, as the case may be:
|
(a) |
|
Pre-Feasibility Study Operations; |
|
|
(b) |
|
Feasibility Study Operations; |
|
|
(c) |
|
Development Operations; |
|
|
(d) |
|
Mining Operations; |
|
|
(e) |
|
Expansion or Modification Operations; |
|
|
(f) |
|
Project Financing Operations; |
|
|
(g) |
|
any suspension or termination of Operations unless, in the reasonable opinion
of the Manager, such suspension or termination is required, in case of emergency, to
protect life or property, to protect Ivanhoes interest in the OT Project or to comply
with Applicable Law; and |
- 38 -
|
(h) |
|
Operations involving any Special Approval Matters. |
Notwithstanding the foregoing, if the Technical Committee for any reason fails to adopt a Program
and Budget, the Manager shall have the authority, subject only to the direction of the Ivanhoe
board of directors, to continue Operations at levels sufficient to maintain any then subsisting
Operations and to maintain Ivanhoes interest in the OT Project in good standing.
Presentation of Programs and Budgets
8.16 Proposed Programs and Budgets shall be prepared by the Manager for a period of one (1) year or
any other period as approved by the Technical Committee, and shall be submitted to the Technical
Committee for review and consideration. Any proposed Program and Budget may contemplate
Pre-Feasibility Study Operations, Feasibility Study Operations, Development Operations, Mining
Operations and Expansion or Modification Operations, or any combination thereof, and shall be
reviewed and adopted upon a vote of the Technical Committee in accordance with Section 8.6 or
Section 8.7, as the case may be. Each Program and Budget adopted by the Technical Committee,
regardless of length, shall be reviewed at least once a year at a meeting of the Technical
Committee. During the period encompassed by any Program and Budget, and at least three (3) months
prior to its expiration, a proposed Program and Budget for the succeeding period shall be prepared
by the Manager and submitted to the Technical Committee for review and consideration.
Review and Adoption of Proposed Programs and Budgets
8.17 Within thirty (30) days after submission of a proposed Program and Budget, each of Ivanhoe and
Rio Tinto shall submit in writing to the Technical Committee:
|
(a) |
|
notice that such party approves any or all of the components of the proposed
Program and Budget; |
|
|
(b) |
|
modifications proposed by such party to the components of the proposed Program
and Budget; or |
|
|
(c) |
|
notice that such party rejects any or all of the components of the proposed
Program and Budget. |
Without prejudice to Section 8.7, if a party fails to give any of the foregoing responses within
the allotted time, the failure shall be deemed to be a vote by such party for adoption of the
Managers proposed Program and Budget. If a party makes a timely submission to the Technical
Committee requesting modifications to, or rejecting, a proposed Program and Budget, then the
parties, acting through their respective representatives on the Technical Committee, shall seek for
a period of time not to exceed twenty (20) days to develop a complete Program and Budget acceptable
to both parties. The Technical Committee Chair shall then call a Technical Committee meeting in
accordance with Section 8.9 for purposes of reviewing and voting upon the proposed Program and
Budget, provided however that the Technical Committee shall make the final determination of the
Program and Budget notwithstanding the inability to accommodate a partys objections.
- 39 -
Information and Access
8.18 The party who is, from time to time, entitled to appoint the Manager (the managing party)
shall keep the members of the Technical Committee advised of all Operations by submitting in
writing to the members of the Technical Committee:
|
(a) |
|
monthly progress reports that include statements of expenditures and
comparisons of such expenditures to the adopted Budget; |
|
|
(b) |
|
quarterly summaries of geological and other technical data acquired; |
|
|
(c) |
|
copies of reports concerning Operations; |
|
|
(d) |
|
a detailed final report within ninety (90) days after completion of each
Program and Budget, which shall include comparisons between actual and budgeted
expenditures and comparisons between the objectives and results of Programs; |
|
|
(e) |
|
quarterly technical, exploration, community relations and health, safety and
environmental reports in respect of the OT Project; |
|
|
(f) |
|
copies of any reports submitted to any Governmental Authority and quarterly
summaries of all communications with Governmental Authorities (other than reports
submitted to, or communications, with Governmental Authorities pursuant to Securities
Laws); and |
|
|
(g) |
|
such other reports as any member of the Technical Committee may reasonably
request. |
Subject to Part 17, at all reasonable times the managing party shall keep the other party (the
non-managing party) fully informed of Operations and shall provide the non-managing partys
representative on the Technical Committee, or another representative of the non-managing party upon
the request of one of the non-managing partys members of the Technical Committee, access to, and
the right to inspect and, at the non-managing partys cost and expense, copies of all maps, drill
logs and other drilling data, core, pulps, reports, surveys, assays, analyses, production reports,
operations, technical, accounting and financial records, and other Confidential Information, to the
extent preserved or kept by the managing party, subject to Part 17. In addition, the managing party
shall allow the non-managing party, at the non-managing partys sole risk, cost and expense, and
subject to reasonable safety regulations, to inspect the Operations at all reasonable times, so
long as the non-managing party does not unreasonably interfere with Operations.
No Illegal Delegation or Limitation of Authority
8.19 The rights and powers of the Technical Committee are derived solely from, and do not exceed
those specifically contemplated by, the terms of this Agreement. Under no circumstances will
anything in this Part 8 be construed as:
|
(a) |
|
a delegation by the Ivanhoe board of directors to the Technical Committee of
any of the powers of the Ivanhoe board of directors that is contrary to Applicable Law;
or |
- 40 -
|
(b) |
|
other than with respect to Operations, a limitation on the authority of the
Ivanhoe board of directors under Applicable Law to manage the business and affairs of
Ivanhoe, |
provided that Ivanhoe will effect and carry out, and cause its Subsidiaries to effect and carry
out, any decision of the Technical Committee unless the Ivanhoe board of directors in good faith
determines that a reasonable basis exists for the conclusion, and a majority of the directors of
Ivanhoe conclude, that an approval, ratification, acquiescence or act related to such decision
would be contrary to Applicable Law.
Nothing in this Section 8.19 is intended to, or will, limit Rio Tinto from pursuing any and all
legal or equitable remedies available to it under Applicable Law for any breach by Ivanhoe of its
obligations under this Agreement including, without limitation, Section 8.8.
For greater certainty, nothing in this Part 8 is intended, or will, grant to any member of the
Technical Committee the powers of, or the authority to act as, a director of Ivanhoe or any of its
Subsidiaries.
PART 9
TECHNICAL ASSISTANCE
Access
9.1 If, at any time and from time to time after the First Closing Date while Rio Tinto maintains a
representative on the Technical Committee, Ivanhoe, acting reasonably, requests the Rio Tinto
Groups assistance with technical matters pertaining to the development and operation of the OT
Project including, without limitation, engineering, mine planning and design, metallurgical and
process design, procurement of plant and equipment (subject to any contractual restrictions by
which the Rio Tinto Group is bound) and environmental planning and management (subject to resources
being available within the Rio Tinto Group), the parties will expeditiously negotiate in good faith
and endeavour to agree upon one or more technical services agreements pursuant to which Rio Tinto
will procure for Ivanhoe or its Subsidiaries:
|
(a) |
|
reasonable access to the Rio Tinto Groups engineering, mine planning and
design, metallurgical and process design and environmental staff; |
|
|
(b) |
|
reasonable access to the Rio Tinto Groups technology, research and technical
facilities relating to engineering, mine planning and design, metallurgical and process
design and environmental issues; |
|
|
(c) |
|
based on any recommendations of the Technical Committee, the secondment to the
OT Project of one or more Rio Tinto Group employees to assist in the development and
operation of the OT Project; and |
|
|
(d) |
|
such other reasonable access to the experience, ability and expertise of the
Rio Tinto Group in the development and operation of major mining projects as the
parties may agree from time to time. |
- 41 -
The obligations of the parties in this Section 9.1 are limited to negotiating in good faith and
endeavouring to agree upon one or more technical services agreements and nothing in this Section
9.1 is intended to create any legally binding obligations on the part of Rio Tinto to provide any
assistance with technical matters pertaining to the development and operation of the OT Project.
Compensation
9.2 The parties agree that any technical services agreement entered into pursuant to Section 9.1
will provide that, during the period commencing on the First Closing Date and ending on the fifth
(5th) anniversary of the First Closing Date, any technical assistance or services of the
nature contemplated by Section 9.1 will be provided at a cost to Ivanhoe or its Subsidiaries equal
to Rio Tintos out-of pocket cost in providing the technical assistance or services (including all
direct and indirect and ancillary costs and expenses, but excluding any element of profit) and,
after the fifth (5th) anniversary of the First Closing Date, any technical assistance or
services of the nature contemplated by Section 9.1 will be provided at a cost to Ivanhoe or its
Subsidiaries that is no less favourable than that charged by members of the Rio Tinto Group to
other members of the Rio Tinto Group as compensation for the provision of similar technical
assistance or services (including all direct and indirect and ancillary costs and expenses
incurred). In addition, where Ivanhoe or its Subsidiaries participate at any time in Rio Tinto
group programmes (such as collaborative forums and professional training) then they shall
contribute to the cost of such programmes on the same basis as applies to other members of the Rio
Tinto Group.
PART 10
OT INVESTMENT CONTRACT
Approved OT Investment Contract
10.1 The parties acknowledge that Ivanhoe is engaged in negotiations with representatives of the
Government of Mongolia respecting the terms of an OT Investment Contract (the OT Investment
Contract Negotiations) and that obtaining an OT Investment Contract that qualifies as an Approved
OT Investment Contract is a key objective that the parties intend to pursue in furtherance of the
transactions contemplated by this Agreement.
OT Investment Contract Negotiations
10.2 Ivanhoe agrees to keep Rio Tinto fully informed from time to time of the status of the OT
Investment Contract Negotiations. Rio Tinto, acting reasonably, will have the right to consult with
Ivanhoe from time to time with respect to all aspects of the OT Investment Contract Negotiations
and will be entitled, by Notice to Ivanhoe, to appoint at least two (2) individuals acceptable to
Ivanhoe, acting reasonably, to the Ivanhoe group of representatives participating in the OT
Investment Contract Negotiations. All information obtained by the parties or their representatives
pertaining to the OT Investment Contract Negotiations will be Confidential Information and subject
to Part 17 hereof.
- 42 -
Assistance and Cooperation
10.3 The parties hereby covenant and agree to cooperate with, and provide reasonable assistance
to, one another to obtain and maintain the support of the Government of Mongolia for the joint
development and operation of the OT Project by Ivanhoe and Rio Tinto in accordance with the terms
of this Agreement. Rio Tinto will, at Ivanhoes request, provide reasonable assistance to Ivanhoe
in demonstrating to the Government of Mongolia Rio Tintos experience, ability and expertise in the
development and operation of major mining projects, which may include making one or more
presentations to selected representatives of the Government of Mongolia and hosting visits by
selected representatives of the Government of Mongolia to the sites of mutually agreed mining
projects currently operated by Rio Tinto.
PART 11
DIVESTITURE OF NON-CORE ASSETS
Myanmar Assets
11.1 The parties acknowledge that the divestiture of the Myanmar Assets by Ivanhoe and those of its
Subsidiaries that hold an interest in the Myanmar Assets and will remain Subsidiaries of Ivanhoe
after such divestiture is a key objective that the parties intend Ivanhoe to pursue in furtherance
of the transactions contemplated by this Agreement. Ivanhoe agrees to dispose, and to procure that
each of its Subsidiaries that holds an interest therein and is to remain a Subsidiary of Ivanhoe
after such disposition disposes, of its entire interest in the Myanmar Assets in accordance with
the terms described in Schedule D.
Other Non-Core Assets
11.2 The parties acknowledge that the divestiture of the Other Non-Core Assets by Ivanhoe and those
of its Subsidiaries that hold an interest in the Other Non-Core Assets and will remain Subsidiaries
of Ivanhoe after such divestiture is also a key objective that the parties intend Ivanhoe to pursue
in furtherance of the transactions contemplated by this Agreement. From and after the First Closing
Date, Ivanhoe will consult with Rio Tinto in good faith and use its best efforts to formulate
timetables and strategies for the orderly disposition of all Other Non-Core Assets as soon as
reasonably practicable, having regard to the best interests of the holders of Ivanhoe Shares as a
whole. Ivanhoe will use its best efforts to divest itself, and will procure that each of its
Subsidiaries that holds an interest therein and is to remain a Subsidiary of Ivanhoe after such
divestiture divests itself, of its interest in the Other Non-Core Assets in accordance with such
timetables and strategies, provided that the precise timing and terms of any disposition by Ivanhoe
or any such Subsidiary of any Other Non-Core Assets will be subject to the prior approval of the
Ivanhoe board of directors in its absolute and exclusive discretion, acting reasonably and in good
faith.
- 43 -
PART 12
REPRESENTATIONS, WARRANTIES,
COVENANTS AND ACKNOWLEDGEMENTS
Representations and Warranties of Both Parties
12.1 Each party warrants and represents to the other that:
|
(a) |
|
it is a corporation duly incorporated, organized and validly existing and
current with respect to all filings required under the laws of its jurisdiction of
incorporation, it has the corporate power and authority, and is duly licensed or
qualified, to carry on its business and is in good standing in its jurisdiction of
incorporation and those jurisdictions where necessary in order to carry out the
purposes of this Agreement and no proceedings have been taken or authorized by it or,
to the best of its knowledge, by any other person, with respect to the bankruptcy,
insolvency, liquidation, dissolution or winding-up of such party; |
|
|
(b) |
|
its execution and delivery of this Agreement, including all matters
contemplated hereby, has been authorized by all necessary corporate action and the
party has the corporate power and authority to enter into and perform its obligations
under this Agreement; |
|
|
(c) |
|
none of the execution and delivery of this Agreement, the implementation of the
transactions contemplated by this Agreement or the fulfillment of, or compliance with,
the terms and provisions hereof by the party do or will, with the giving of notice or
the lapse of time or otherwise, |
|
(i) |
|
result in the breach of, or violate any term or provision of,
the partys or any of its Affiliates Constating Documents, |
|
|
(ii) |
|
conflict with, result in the breach of, constitute a default
under, or accelerate or permit the acceleration of the performance required by,
any material agreement to which the party or any of its Affiliates is a party
or by which it or any of its Affiliates is bound or to which any of its or any
of its Affiliates material assets are subject or any Applicable Law to which
the party or any of its Affiliates is subject, or |
|
|
(iii) |
|
result in the creation or crystallisation of any Encumbrance
upon the partys interest in this Agreement; |
|
(d) |
|
except as otherwise specifically contemplated by this Agreement, no exemption,
consent, approval, order or authorization of, or registration or filing with any court,
Governmental Authority or any third party is required by, or with respect to, the party
or any of its Affiliates in connection with the execution, delivery and performance of
this Agreement by the party or the consummation by the party of the transactions
contemplated by this Agreement; |
- 44 -
|
(e) |
|
there is not, to the best of the partys knowledge, any order or decree of a
court of competent jurisdiction or any Governmental Authority restraining, interfering
with or enjoining such partys ability to perform its obligations under, or to complete
any of the transactions contemplated by, this Agreement; and |
|
|
(f) |
|
this Agreement has been duly executed and delivered by it and is a valid and
binding obligation of the party enforceable against it in accordance with its terms
subject to bankruptcy, insolvency and other laws affecting the enforcement of
creditors rights generally and to general principles of equity. |
Additional Representations and Warranties of Ivanhoe
12.2 Ivanhoe makes the following additional representations and warranties to Rio Tinto:
|
(a) |
|
Ivanhoe and each of the Material Subsidiaries is a corporation duly
incorporated, organized and validly existing and current with respect to all filings
required under the laws of its jurisdiction of incorporation, is duly qualified to
carry on its business and is in good standing in its jurisdiction of incorporation and
in each jurisdiction in which the conduct of its business or the ownership, leasing or
operation of its property and assets requires such qualification and no proceedings
have been taken or authorized by Ivanhoe or any of the Material Subsidiaries or, to the
best of Ivanhoes knowledge, by any other person, with respect to the bankruptcy,
insolvency, liquidation, dissolution or winding-up of any Material Subsidiary of
Ivanhoe; |
|
|
(b) |
|
Ivanhoe and each of the Material Subsidiaries has all requisite corporate power
and authority to carry on its business as now conducted and as currently proposed to be
conducted, to own, lease and operate its property and assets; |
|
|
(c) |
|
Ivanhoe and each of its Subsidiaries has conducted and is conducting its
business in compliance in all material respects with all Applicable Laws of each
jurisdiction in which its business is carried on, including with respect to the
Material Subsidiaries, the Applicable Laws of Mongolia, and Ivanhoe and each Material
Subsidiary holds all necessary licences, permits, approvals, consents, certificates,
registrations and authorizations, whether governmental, regulatory or otherwise, to
enable its business to be carried on as now conducted and its property and assets to be
owned, leased and operated, and the same are validly existing and in good standing and
none of the same contain or is subject to any term, provision, condition or limitation
which has or may have a material adverse effect on the operation of Ivanhoe or any of
the Material Subsidiaries businesses or which may adversely change or terminate such
licence, permit, approval, consent, certification, registration or authorization by
virtue of the completion of the transactions contemplated hereby; |
|
|
(d) |
|
except as disclosed in the Ivanhoe Disclosure Letter, (i) Ivanhoes direct or
indirect ownership interest in each of the Material Subsidiaries is held free and clear
of all mortgages, liens, charges, pledges, security interests, Encumbrances, claims or
demands whatsoever, (ii) no person, firm, or company has any agreement, or option |
- 45 -
|
|
|
or right or privilege (whether pre-emptive or contractual) capable of becoming an
agreement for the purchase of all or any part of the securities representing such
ownership interest, (iii) all such securities have been validly issued and are
outstanding as fully paid and non-assessable, (iv) each Material Subsidiary is
directly or indirectly beneficially wholly-owned by Ivanhoe, and (v) except for the
securities of the Subsidiaries of Ivanhoe, neither Ivanhoe nor its Subsidiaries own
any securities or ownership interest in any other person; |
|
(e) |
|
the authorized capital of Ivanhoe consists of an unlimited number of Ivanhoe
Shares and an unlimited number of preferred shares without par value, of which that
number of Ivanhoe Shares and preferred shares disclosed in the Ivanhoe Disclosure
Letter are issued and outstanding as fully paid and non-assessable shares; |
|
|
(f) |
|
based solely on publicly available filings under Securities Laws, Robert M.
Friedland is the beneficial owner, directly or indirectly, of the number issued and
outstanding Ivanhoe Shares disclosed in the Ivanhoe Disclosure Letter; |
|
|
(g) |
|
except as disclosed in the Ivanhoe Disclosure Letter, no person, firm or
corporation has any agreement, option, right or privilege, whether pre-emptive,
contractual or otherwise, capable of becoming an agreement for the purchase,
acquisition, subscription for or issuance of any of the unissued shares of Ivanhoe or
any of its Material Subsidiaries, or other securities convertible, exchangeable or
exercisable for shares of Ivanhoe or any of the Material Subsidiaries; |
|
|
(h) |
|
the Ivanhoe Continuous Disclosure Documents provide, full, true and plain
disclosure of all material facts relating to Ivanhoe and do not contain, any
misrepresentation or any untrue, false or misleading statement of a material fact or
omit to state any material fact required to be stated therein or necessary to make any
statement therein, in the light of the circumstances in which it is made, not false or
misleading; |
|
|
(i) |
|
Ivanhoe is, and will on the First Closing Date and the Second Closing Date be,
a reporting issuer, not in default of its obligations under Canadian Securities Laws,
and no material change relating to Ivanhoe (except in respect of the transactions
contemplated by this Agreement) has occurred with respect to which the requisite
material change report has not been filed under Canadian Securities Laws and no such
disclosure has been made on a confidential basis; |
|
|
(j) |
|
there has not been any reportable event (within the meaning of National
Instrument 51-102 Continuous Disclosure Obligations of the Canadian securities
regulatory authorities, as amended) with the present or former auditors of Ivanhoe; |
|
|
(k) |
|
the auditors of Ivanhoe who audited the financial statements for the year ended
December 31, 2005 and who provided their audit report thereon are independent public
accountants in accordance with the Rules of Professional Conduct of the Institute of
Chartered Accountants of British Columbia; |
- 46 -
|
(l) |
|
the currently issued and outstanding Ivanhoe Shares are listed and posted for
trading on the TSX, the NYSE and NASDAQ, and Ivanhoe is in compliance with all rules
and policies of such exchanges; |
|
|
(m) |
|
as of the Second Closing Date, the then issued and outstanding Ivanhoe Shares
will be listed and posted for trading on at least one of the TSX, the NYSE and NASDAQ,
and Ivanhoe will be in compliance with all rules and policies of each such exchange
upon which the issued and outstanding Ivanhoe Shares are then listed; |
|
|
(n) |
|
other than as disclosed in the Ivanhoe Continuous Disclosure Documents, since
December 31, 2005, |
|
(iv) |
|
there has been no material change (actual, anticipated,
proposed or prospective, whether financial or otherwise) in the business,
affairs, operations, assets, liabilities (contingent or otherwise) prospects,
financial position, capital or control of Ivanhoe or its Subsidiaries, taken
as a whole; |
|
|
(v) |
|
Ivanhoe and its Subsidiaries have carried on their respective
businesses in the ordinary course and there has been no transaction entered
into by Ivanhoe or its Subsidiaries which is material to Ivanhoe and its
Subsidiaries, taken as a whole, other than those in the ordinary course of
business; and |
|
|
(vi) |
|
there has been no material change in the capital or long term
debt of Ivanhoe or its Subsidiaries, taken as a whole; |
|
(o) |
|
other than as disclosed in the Ivanhoe Disclosure Letter: |
|
(i) |
|
Ivanhoe and its Subsidiaries are not liable for the debts,
liabilities or other obligations of any third party whether by way of guarantee
or indemnity or other contingent or indirect obligation; |
|
|
(ii) |
|
all indebtedness of Ivanhoe and its Subsidiaries is being paid
in the ordinary course of business; and |
|
|
(iii) |
|
neither Ivanhoe nor any of its Subsidiaries is a party to any
agreement restricting Ivanhoe or any such Subsidiary from engaging in any line
of business which Ivanhoe or any of its Subsidiaries currently engages or
proposes to engage in or competing with any other person in any business in
which Ivanhoe or any of its Subsidiaries currently engages or proposes to
engage in; |
|
(p) |
|
Ivanhoe has not, since December 31, 2005, directly or indirectly declared or
paid any dividend or declared or made any other distribution on any of its securities
of any class, or directly or indirectly, redeemed, purchased or otherwise acquired any
of its securities, or agreed to do any of the foregoing; |
|
|
(q) |
|
other than as disclosed in the Ivanhoe Continuous Disclosure Documents, Ivanhoe
has not entered into nor has any present intention to enter into any agreement to |
- 47 -
|
|
|
acquire any securities in any other corporation or entity or to acquire or lease any
other business operations which are material to the business and operations of
Ivanhoe and its Subsidiaries, taken as a whole; |
|
(r) |
|
there is no action, suit, proceeding or investigation in respect of Ivanhoe and
the Subsidiaries, taken as a whole, pending or, to the knowledge of Ivanhoe or its
directors and officers, threatened against or affecting Ivanhoe and its Subsidiaries,
taken as a whole, at law or in equity or before or by any Governmental Authority which
could in any way materially and adversely affect Ivanhoe or its Subsidiaries, taken as
a whole, or the condition (financial or otherwise) of Ivanhoe or its Subsidiaries,
taken as a whole; |
|
|
(s) |
|
no order, ruling or determination by any Governmental Authority or stock
exchange having the effect of suspending the sale or ceasing the trading of any
securities of Ivanhoe has been issued or made and is continuing in effect and no
proceedings for that purpose have been instituted or are pending or, to Ivanhoes
knowledge after due inquiry, contemplated or threatened by any such authority or under
any Securities Laws; |
|
|
(t) |
|
other than as disclosed in the Ivanhoe Continuous Disclosure Documents, neither
Ivanhoe nor any of its Subsidiaries is in violation of its Constating Documents or
resolutions of its securityholders, directors, or any committee of its directors, or in
default in the performance or observance of any material terms, obligation, agreement,
covenant or condition contained in any contract, indenture, trust, deed, mortgage, loan
agreement, note, lease or other agreement or instrument to which it is a party or by
which it or its property may be bound and there exists no state of facts which, after
notice or lapse of time or both, or otherwise, would constitute a default under or
breach of a material obligation, agreement, covenant or condition of any of such
documents and all such contracts, indentures, trusts, deeds, mortgages, loan
agreements, notes, leases and other agreements are in good standing; |
|
|
(u) |
|
all financial statements forming part of the Ivanhoe Continuous Disclosure
Documents are complete and comply with Securities Laws in all material respects, and
fairly present the consolidated financial position of Ivanhoe as of the dates and for
the periods indicated, and have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis throughout such
periods; |
|
|
(v) |
|
Ivanhoe is subject to the reporting requirements under Section 12 of the U.S.
Exchange Act, has filed all reports required to be filed pursuant to Section 13 of the
U.S. Exchange Act (as hereinafter defined), and is not in default of its obligations
under the U.S. Exchange Act; |
|
|
(w) |
|
the First Tranche Private Placement Shares to be issued to Rio Tinto on the
First Closing Date have been duly reserved and approved by all requisite corporate
action for future issuance and will, when issued, be duly and validly issued, fully
paid and non-assessable and free of all Encumbrances; |
- 48 -
|
(x) |
|
the Series A Warrants and Series B Warrants to be issued to Rio Tinto on the
First Closing Date have been approved by all requisite corporate action and will, upon
issuance, have been duly created and will, when issued, be duly and validly issued
Ivanhoe Convertible Securities free of all Encumbrances; |
|
|
(y) |
|
the Basic Second Tranche Private Placement Shares to be issued to Rio Tinto on
the Second Closing Date have been duly reserved and approved by all requisite corporate
action for future issuance and will, when issued, be duly and validly issued, fully
paid and non-assessable and free of all Encumbrances; |
|
|
(z) |
|
the Top Up Option has been approved by all requisite corporate action and is a
duly and validly issued Ivanhoe Convertible Security free of all Encumbrances; |
|
|
(aa) |
|
the Top Up Private Placement Shares to be issued upon the due exercise of the
Top Up Option have been duly reserved and approved by all requisite corporate action
for future issuance and will, when issued following the due exercise by Rio Tinto of
the Top Up Option, be duly and validly issued, fully paid and non-assessable and free
of all Encumbrances; |
|
|
(bb) |
|
the Ivanhoe Shares to be issued upon the due exercise of any Series A Warrants
and the Series B Warrants have been duly reserved and approved by all requisite
corporate action for future issuance and will, when issued following the due exercise
by Rio Tinto of the Series A Warrants and the Series B Warrants, be duly and validly
issued, fully paid and non-assessable and free of all Encumbrances; |
|
|
(cc) |
|
the Anti-Dilution Ivanhoe Shares to be issued upon the due exercise by Rio
Tinto of its rights under Part 5 of this Agreement have been duly reserved and approved
by all requisite corporate action for future issuance and will, when issued following
the due exercise, from time to time, by Rio Tinto of its rights under Part 5 of this
Agreement, be duly and validly issued, fully paid and non-assessable and will be free
of all Encumbrances; |
|
|
(dd) |
|
the Anti-Dilution Warrants to be issued upon the due exercise by Rio Tinto of
its rights under Part 5 of this Agreement have been approved by all requisite corporate
action, will, upon issuance, have been duly created and will, when issued, be duly and
validly issued Ivanhoe Convertible Securities free of all Encumbrances; |
|
|
(ee) |
|
the Ivanhoe Shares to be issued upon the due exercise of any Anti-Dilution
Warrants have been duly reserved and approved by all requisite corporate action for
future issuance and will, when issued following the due exercise by Rio Tinto of any
such Anti-Dilution Warrants, be duly and validly issued, fully paid and non-assessable
and will be free of all Encumbrances; |
|
|
(ff) |
|
the First Tranche Private Placement Shares, the Second Tranche Private
Placement Shares and any additional Ivanhoe Shares issued or to be issued to Rio Tinto
upon the due exercise by Rio Tinto of the Series A Warrants and the Series B Warrants
or of its rights under Part 5 will have been approved for listing or quotation on the
TSX, the NYSE and NASDAQ; |
- 49 -
|
(gg) |
|
to the best of its knowledge and belief, neither Ivanhoe nor any of its
Subsidiaries or any person acting on behalf of Ivanhoe or any of its Subsidiaries, has
made any Prohibited Payment with respect to the conduct of business of Ivanhoe or any
of its Subsidiaries or any transaction contemplated by this Agreement or with respect
to the OT Project, including in connection with obtaining licenses, permits,
concessions or other authorizations for the OT Project; |
|
|
(hh) |
|
with respect to the OT Project, except as disclosed in the Ivanhoe Disclosure
Letter or as otherwise permitted by this Agreement (i) no person, other than the OT
Subsidiary, owns, or, other than the Government of Mongolia in accordance with the
Applicable Laws of Mongolia, has the right to acquire, any interest in the OT Project;
(ii) the OT Subsidiary is a wholly owned subsidiary of Ivanhoe and no person, other
than the Government of Mongolia under the Applicable Laws of Mongolia, has the right to
acquire any interest in any securities of the OT Subsidiary; (iii) the OT Subsidiary
has all necessary licenses, permits, approvals, consents, certificates, registrations
and authorizations necessary to carry on the Operations as currently conducted
including all land use certificates necessary to access all of those areas to which the
Existing Licenses pertain; (iv) neither Ivanhoe nor any of the Material Subsidiaries
has received any notice of default of any of its obligations under any licence, permit,
approval, consent, certificate, registration or authorization related the OT Project
the termination of which would have a material adverse effect on Ivanhoe or any of the
Material Subsidiaries; and (v) nothing in this Agreement conflicts with or could
reasonably be expected to cause Ivanhoe or any of the Material Subsidiaries to breach
any of its obligations under any licence, permit, approval, consent, certificate,
registration or authorization related to the OT Project; |
|
|
(ii) |
|
to the best of Ivanhoes knowledge: (i) the Existing Licenses are validly held
by the OT Subsidiary, (ii) there is no reason why any part of the Existing Licenses
will be surrendered, released or reduced in any way, (iii) the Existing Licenses have
been properly granted and issued by the appropriate Governmental Authority; (iv) all
terms of, and all requirements for holding, the Existing Licenses have been met
including the timely payment of all annual license fees and compliance with all
environmental bonding obligations; (v) all filings required to be made with the
appropriate Governmental Authority in respect of the Existing Licenses have been made;
(vi) all work required in order for the OT Subsidiary to hold the Existing Licenses has
been performed and all fees payable to the appropriate Governmental Authority in
respect thereof have been paid to date; (vii) the Existing Licenses are clear of
defects in title and are not the subject of any unsatisfied penalties or unresolved
disputes; (viii) the Existing Licenses are free and clear of all Encumbrances and are
not subject to the claims of any third party other than the Government of Mongolia in
accordance with the Applicable Laws of Mongolia; (ix) there are no mineral licenses or
tenures conflicting with the Existing Licenses; and (x) there is no proposal to list
the Existing Licenses as part of a Special Purpose Territory; |
|
|
(jj) |
|
there are no pending or threatened actions, suits, claims or proceedings, and
there have been no previous transactions involving Ivanhoe or any of its Subsidiaries |
- 50 -
|
|
|
affecting the geographical areas that are the subject of the Existing Licenses which
have not been for fair consideration; |
|
|
(kk) |
|
except as disclosed in the Ivanhoe Disclosure Letter, |
|
(i) |
|
to the best of Ivanhoes knowledge, the conditions existing on
or with respect to the geographical area that is subject to the Existing
Licenses and the activities of Ivanhoe and the Material Subsidiaries thereon
are not in violation of any laws (including without limitation any
environmental laws), nor causing or permitting any damage or impairment to the
health, safety, or enjoyment of any person at or on such property or in the
general vicinity of such property; |
|
|
(ii) |
|
to the best of Ivanhoes knowledge, there have been no past
violations by it of any environmental laws or other laws affecting or
pertaining to the geographical area that is subject to the Existing Licenses,
nor any past creation of damage or threatened damage to the air, soil, surface
waters, groundwater, flora, fauna, or other natural resources on, about or in
the general vicinity of such property; and |
|
|
(iii) |
|
none of Ivanhoe or any of the Material Subsidiaries has
received inquiry from or notice of a pending investigation from any
Governmental Authority or of any administrative or judicial proceeding
concerning the violation of any laws; |
|
(ll) |
|
Ivanhoe acknowledges that Rio Tinto will rely on the representations and
warranties made herein by Ivanhoe in completing the transactions contemplated by this
Agreement; |
|
|
(mm) |
|
save and except as otherwise provided in this Section 12.2, to the best of
Ivanhoes knowledge, having made due inquiry internally and of its Subsidiaries, all
written historic or current factual information in relation to Ivanhoe, its
Subsidiaries or the OT Project given by Ivanhoe or any of its Representatives to Rio
Tinto or any of its Representatives in the course of or in connection with the due
diligence conducted by Rio Tinto and its Representatives on and before the date hereof,
is complete and accurate in all material respects and not misleading in any material
respect; |
|
|
(nn) |
|
Ivanhoe Mines Aruba Holdings LLC was formed under the Aruba exempt company
regime and has made an irrevocable election to be treated as a flow through entity for
Aruban taxation purposes; and |
|
|
(oo) |
|
Ivanhoe Mines Delaware LLC has not elected to be treated as a corporation for
US taxation. |
Additional Representations and Warranties of Rio Tinto
12.3 Rio Tinto makes the following additional representations and warranties to Ivanhoe:
- 51 -
|
(a) |
|
Rio Tinto is making the Equity Investment as principal for its own account, not
for the benefit of any other person outside the Rio Tinto Group, for investment only
and not with a view to the resale or distribution of all or any of the Equity
Investment Securities or any underlying Ivanhoe Shares nor for the purposes of
acquiring Control of Ivanhoe either by itself or in concert with any other person; |
|
|
(b) |
|
Rio Tinto is resident in, or otherwise subject to, the Applicable Laws of
England and Wales and is an accredited investor, as defined under National Instrument
45-106 Prospectus and Registration Exemptions of the Canadian securities regulatory
authorities; |
|
|
(c) |
|
Rio Tinto is not (and is not purchasing the Equity Investment Securities for
the account or benefit of) a U.S. Person and did not execute or deliver this
Agreement in the United States; |
|
|
(d) |
|
Rio Tinto has not received or been provided with a prospectus, offering
memorandum or similar document and the decision to enter into this Agreement and make
the Equity Investment has not been based on representations as to fact or otherwise
made by or on behalf of Ivanhoe except as expressly set forth herein or by any officer,
director, employee or agent of Ivanhoe; |
|
|
(e) |
|
no person has made to Rio Tinto any written or oral representation: |
|
(i) |
|
that any person will resell or repurchase any of the Equity
Investment Securities or any underlying Ivanhoe Shares to be acquired by Rio
Tinto pursuant to the Equity Investment; |
|
|
(ii) |
|
that any person will refund the purchase price of the Equity
Investment; or |
|
|
(iii) |
|
as to the future price or value of any of the Equity
Investment Securities or any underlying Ivanhoe Shares; |
|
(f) |
|
Rio Tinto is knowledgeable of, or has been independently advised as to, the
Applicable Laws of Rio Tintos jurisdiction of residence which would apply to the
transactions contemplated by this Agreement, if there are any, and the issuance of the
Equity Investment Securities to Rio Tinto contemplated hereunder complies with all such
Applicable Laws and save as provided in this Agreement will not cause Ivanhoe to become
subject to or comply with any disclosure, prospectus or reporting requirements under
any such Applicable Laws nor to make any filings or disclosures or seek any approvals
of any kind whatsoever from any regulatory authority of any kind whatsoever in Rio
Tintos jurisdiction of residence; and |
|
|
(g) |
|
Rio Tinto acknowledges that Ivanhoe will rely on the representations and
warranties made herein by Rio Tinto in completing the transactions contemplated by this
Agreement. |
- 52 -
Knowledge
12.4 For the purposes of any representation or warranty in this Part 12 made to a partys
knowledge, the term knowledge means actual knowledge of:
|
(a) |
|
the indicated conclusion in respect of the relevant matter; or |
|
|
(b) |
|
facts that would reasonably lead to the indicated conclusion in respect of the
relevant matter; |
on the part of the directors and executive officers of the representing party.
Statutory Resale Restrictions
12.5 Rio Tinto acknowledges that:
|
(a) |
|
the Equity Investment Securities will be issued pursuant to registration and
prospectus exemptions under Canadian Securities Laws and will be subject to a hold
period of four (4) months (the Canadian Hold Period) during which such securities may
not be resold in Canada except pursuant to a prospectus or an exemption from the
applicable prospectus requirement; |
|
|
(b) |
|
the Equity Investment Securities have not been and will not, except pursuant to
the Registration Rights Agreement, be registered under the U.S. Securities Act or any
applicable state securities laws and the sale contemplated hereby is being made in
reliance on an exemption from such registration requirements; and |
|
|
(c) |
|
under Canadian Securities Laws, a person or combination of persons holding more
than 20% of the outstanding Ivanhoe Shares is deemed, in the absence of evidence to the
contrary, to hold a sufficient number of Ivanhoe Shares to affect materially the
control of Ivanhoe and is subject, under Canadian Securities Laws, to special resale
restrictions and disclosure requirements. |
Legending of Certificates
12.6 Rio Tinto acknowledges that, in accordance with the requirements of Canadian Securities Laws
and U.S. Securities Laws, the certificates representing securities of Ivanhoe to be issued pursuant
to the terms of this Agreement will be inscribed with the following restrictive legends:
|
(a) |
|
certificates representing the First Tranche Private Placement Shares, the
Second Tranche Private Placement Shares, any Anti-Dilution Ivanhoe Shares, the Series A
Warrant Certificate, the Series B Warrant Certificate, any warrant certificate
representing Anti-Dilution Warrants and, if issued pursuant to the exercise of, prior
to the expiration of the Canadian Hold Period with respect to, the Series A Warrants,
the Series B Warrants or any Anti-Dilution Warrants, as the case may be, any underlying
Ivanhoe Shares: |
- 53 -
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES SHALL NOT
TRADE THE SECURITIES BEFORE [INSERT THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE ISSUE
DATE].;
|
(b) |
|
certificates representing all Ivanhoe Shares: |
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE U.S. SECURITIES ACT) NOR THE
SECURITIES ACT OF ANY STATE OF THE UNITED STATES. THESE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS THEYHAVE BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT AND THE SECURITIES LAWS OF ALL APPLICABLE STATES OF THE UNITED STATES OR
AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE BUT
CANNOT BE TRADED THROUGH THE FACILITIES OF THE EXCHANGE SINCE THEY ARE NOT FREELY
TRANSFERABLE AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT GOOD
DELIVERY IN SETTLEMENT OF TRANSACTIONS ON THE TORONTO STOCK EXCHANGE.;
|
(c) |
|
the Series A Warrant Certificate and the Series B Warrant Certificate and any
certificate representing Anti-Dilution Warrants: |
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE U.S.
SECURITIES ACT), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THIS WARRANT
MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR FOR THE ACCOUNT OR BENEFIT OF A U.S.
PERSON (AS DEFINED IN REGULATION S UNDER THE U.S. SECURITIES ACT) OR A PERSON IN THE UNITED
STATES UNLESS THIS WARRANT AND THE UNDERLYING SECURITIES ISSUABLE UPON THE EXERCISE THEREOF
HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND THE SECURITIES LAWS OF ALL APPLICABLE
STATES OF THE UNITED STATES OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS
AVAILABLE.
Rio Tinto may, at any time and from time to time, exchange a certificate bearing a restrictive
legend for a certificate bearing no such legend upon having furnished evidence satisfactory to
Ivanhoe, acting reasonably, which may include an opinion of counsel, that the removal of such
restrictive legend would not be contrary to Applicable Law.
Canadian Regulatory Matters
12.7 The parties acknowledge that, insofar as Rio Tinto is a non-Canadian for the purposes of the
Investment Canada Act (Canada), the unfettered right of Rio Tinto to exercise the Series A Warrants
and the Series B Warrants may be subject to review and approval by the relevant Governmental
Authority for the purposes of the Investment Canada Act (Canada). Likewise, the unfettered right of
Rio Tinto to exercise the Series A Warrants or the Series B Warrants may require notification or
exemption under the Competition Act (Canada). Rio Tinto covenants and agrees to submit
applications and/or notifications to the Governmental Authorities responsible for administering the
Investment Canada Act (Canada) and the Competition Act (Canada) unless, in the reasonable opinion
of Rio Tinto, based upon the advice of counsel, compliance under the Investment Canada Act (Canada)
or the Competition Act (Canada) is not required. Ivanhoe covenants and agrees
- 54 -
to provide such assistance to Rio Tinto in submitting such applications or notifications as Rio
Tinto may reasonably request. If, at any time prior to the full exercise or expiry of the Series A
Warrants and the Series B Warrants, Ivanhoe or any of its Subsidiaries proposes to acquire,
directly or indirectly, any operating business or mineral resource interests or assets located in
Canada, Ivanhoe will, at the earliest reasonable opportunity, consult with Rio Tinto regarding such
proposed acquisition.
Survival of Representations and Warranties
12.8 The representations and warranties of the parties contained in this Part 12 shall survive the
First Closing Date and the Second Closing Date and shall continue in full force and effect for the
benefit of the party entitled to rely upon them until the earlier of two (2) years from the Second
Closing Date or five (5) years after the First Closing Date.
PART 13
CONDITIONS PRECEDENT
First Closing Conditions for the Benefit of Rio Tinto
13.1 The obligations of Rio Tinto to complete the First Tranche Private Placement are subject to
the satisfaction, on or before the First Closing Date, of the following conditions, any of which
may be waived by Rio Tinto without prejudice to its right to rely on any other or others of them:
|
(a) |
|
the representations and warranties of Ivanhoe contained in Sections 12.1 and
12.2 will be true in all material respects immediately prior to the First Closing Date
with the same effect as though made at and as of such time; |
|
|
(b) |
|
the statements made by Ivanhoe or any of its Subsidiaries in any certificate
delivered in support of an opinion required to be delivered hereunder will be true in
all material respects immediately prior to the First Closing Date with the same effect
as though made at and as of such time; |
|
|
(c) |
|
each of the acts and undertakings of Ivanhoe to be performed on or before the
First Closing Date pursuant to the terms of this Agreement will have been duly
performed by it; |
|
|
(d) |
|
there will have been no material adverse change in the business, assets or
financial condition of Ivanhoe (provided that any decline in the market price of any
precious or base metal will not be considered a material adverse change); |
|
|
(e) |
|
the Shareholders Agreement will remain in full force and effect; |
|
|
(f) |
|
Ivanhoe and Rio Tinto will have entered into the Registration Rights Agreement;
and |
|
|
(g) |
|
Ivanhoe will have obtained Exchange Approval for the issuance to Rio Tinto of
the Equity Investment Securities, any Ivanhoe Shares to be issued pursuant to the
exercise of the Series A Warrants and the Series B Warrants, the Top Up Option and the
Top Up Private Placement Shares subject only to (i) the approval of the holders |
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|
|
|
of the Ivanhoe Shares of Rio Tintos right to exercise the Series A Warrants and the
Series B Warrants and (ii) the filing, after the First Closing Date, of documents
customary for similar transactions and the payment of applicable listing fees. |
First Closing Conditions for the Benefit of Ivanhoe
13.2 The obligations of Ivanhoe to complete the First Tranche Private Placement are subject to the
satisfaction, on or before the First Closing Date, of the following conditions, any of which may be
waived by Ivanhoe without prejudice to its right to rely on any other or others of them:
|
(a) |
|
the representations and warranties of Rio Tinto contained in Sections 12.1 and
12.3 will be true in all material respects immediately prior to the First Closing Date
with the same effect as though made at and as of such time; |
|
|
(b) |
|
each of the acts and undertakings of Rio Tinto to be performed on or before the
First Closing Date pursuant to the terms of this Agreement will have been duly
performed by it; |
|
|
(c) |
|
there will have been no material adverse change in the business, assets or
financial condition of Rio Tinto (provided that any decline in the market price of any
precious or base metal will not be considered a material adverse change); and |
|
|
(d) |
|
Ivanhoe will have obtained Exchange Approval for the issuance to Rio Tinto of
the Equity Investment Securities, any Ivanhoe Shares to be issued pursuant to the
exercise of the Series A Warrants and the Series B Warrants, the Top Up Option and the
Top Up Private Placement Shares subject only to (i) the approval of the holders of the
Ivanhoe Shares of Rio Tintos right to exercise the Series A Warrants and the Series B
Warrants and (ii)the filing, after the First Closing Date, of documents customary for
similar transactions and the payment of applicable listing fees. |
Second Closing Conditions for the Benefit of Rio Tinto
13.3 The obligations of Rio Tinto to complete the Second Tranche Private Placement are subject to
the satisfaction, on or before the Second Closing Date, of the following conditions, any of which
may be waived by Rio Tinto without prejudice to its right to rely on any other or others of them:
|
(a) |
|
Ivanhoe, or a Subsidiary of Ivanhoe, will have entered into an Approved OT
Investment Contract or Rio Tinto will have given Notice to Ivanhoe pursuant to Section
2.9 of Rio Tintos election to complete the Second Tranche Private Placement in the
absence of an Approved OT Investment Contract. |
|
|
(b) |
|
the representations and warranties of Ivanhoe contained in Sections 12.1 and
12.2 will be true in all material respects immediately prior to the First Closing Date
with the same effect as though made at and as of such time; |
|
|
(c) |
|
the statements made by Ivanhoe or any of its Subsidiaries in any certificate
delivered in support of an opinion required to be delivered hereunder will be true in
all material |
- 56 -
|
|
|
respects immediately prior to the First Closing Date with the same effect as though
made at and as of such time; |
|
(d) |
|
the representations and warranties of Ivanhoe contained in Sections 12.1 and
Section 12.2(a),(b),(c),(h),(i),(m),(r),(s),(u),(v),(y),(bb),(cc),(dd),(ee),(gg), (hh),
(ii) and (ll) will be true in all material respects immediately prior to the Second
Closing Date with the same effect as though made at and as of such time; |
|
|
(e) |
|
each of the acts and undertakings of Ivanhoe to be performed on or before the
Second Closing Date pursuant to the terms of this Agreement will have been duly
performed by it; and |
|
|
(f) |
|
unless previously terminated by mutual written agreement between Ivanhoe and
Rio Tinto, the Registration Rights Agreement will remain in full force and effect. |
Second Closing Conditions for the Benefit of Ivanhoe
13.4 The obligations of Ivanhoe to complete the Second Tranche Private Placement are subject to the
satisfaction, on or before the First Closing Date, of the following conditions, any of which may be
waived by Ivanhoe without prejudice to its right to rely on any other or others of them:
|
(a) |
|
the representations and warranties of Rio Tinto contained in Sections 12.1 and
12.3 will be true in all material respects immediately prior to the First Closing Date
with the same effect as though made at and as of such time; |
|
|
(b) |
|
the representations and warranties of Rio Tinto contained in Section 12.1 and
Section 12.3 will be true in all material respects immediately prior to the Second
Closing Date with the same effect as though made at and as of such time; and |
|
|
(c) |
|
each of the acts and undertakings of Rio Tinto to be performed on or before the
Second Closing Date pursuant to the terms of this Agreement will have been duly
performed by it. |
Notice of Inaccuracy or Non-Compliance
13.5 Each party will give prompt notice to the other of the occurrence, or failure to occur, at any
time from the date hereof:
|
(a) |
|
until the First Closing Date, of any event or state of facts which occurrence
or failure would or would be likely to: |
|
(i) |
|
cause any of the representations or warranties of such party
contained herein to be untrue or inaccurate in any material respect on the date
hereof or at the First Closing Date; or |
|
|
(ii) |
|
result in the failure to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by any party hereunder
prior to the First Closing Date; and |
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|
(b) |
|
until earlier of the Second Closing Date or the third (3rd)
anniversary of the First Closing Date, of any event or state of facts which occurrence
or failure would or would be likely to: |
|
(i) |
|
cause any of the representations or warranties of such party
referred to in Section 13.3 or Section 13.4, as the case may be, to be untrue
or inaccurate in any material respect on the date hereof or at the Second
Closing Date; or |
|
|
(ii) |
|
result in the failure to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by any party hereunder
prior to the Second Closing Date. |
PART 14
AMENDMENT AND TERMINATION
Amendment
14.1 This Agreement may, at any time and from time to time before the First Closing Date, be
amended by written agreement of the parties hereto. Without limiting the generality of the
foregoing, any such amendment may:
|
(a) |
|
change the time for, or mode of performance of, any of the obligations of the
parties hereto; |
|
|
(b) |
|
waive any inaccuracies or modify any representation contained herein or any
document to be delivered pursuant hereto; or |
|
|
(c) |
|
waive compliance with or modify any of the covenants herein contained or waive
or modify performance of any of the obligations of the parties hereto. |
Termination by Agreement
14.2 This Agreement may, at any time, be terminated by unanimous agreement in writing of the
parties hereto notwithstanding anything contained herein.
Termination for Non-Fulfilment
14.3 This Agreement shall terminate if the conditions precedent set forth in Sections 13.1 and 13.2
are not satisfied or waived, as therein contemplated on or before the First Closing Deadline.
Unilateral Right of Termination
14.4 Either party may immediately terminate this Agreement by Notice to the other party (the
non-terminating party) in the event that:
|
(a) |
|
a receiver, liquidator, assignee, custodian, trustee, sequestrator or other
similar official for the non-terminating party or for a substantial part of the assets
of the non-terminating party is appointed and such appointment is neither made
ineffective nor |
- 58 -
|
|
|
discharged within twenty one (21) days after the making thereof, or such appointment
is consented to, requested by, or acquiesced in by the affected party; or |
|
(b) |
|
the non-terminating party commences a voluntary proceeding under any applicable
bankruptcy, insolvency or similar law of any jurisdiction (including, without
limitation, any laws relating to a reorganization, arrangement or compromise of its
debts) now or hereafter in effect, or consents to the entry of an order for relief in
an involuntary proceeding under any such law or to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or
other similar official of any substantial part of its assets; or makes a general
assignment for the benefit of its creditors; or takes corporate or other action in
furtherance of any of the foregoing; or |
|
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(c) |
|
entry is made against the non-terminating party of a judgment, decree or order
for relief affecting a substantial part of its assets by a court of competent
jurisdiction in an involuntary proceeding commenced under any applicable bankruptcy,
insolvency or other similar law of any jurisdiction now or hereafter in effect. |
Notice of Termination
14.5 If any of the conditions contained in:
|
(a) |
|
Section 13.1 shall not be fulfilled or performed on or before the First Closing
Deadline, Rio Tinto may terminate this Agreement by notice to Ivanhoe whereupon Rio
Tinto shall be released from all obligations hereunder, all rights of specific
performance by any of the parties hereto shall terminate and, unless Rio Tinto can show
that the non-fulfillment or non-performance of the condition or conditions by reason of
which Rio Tinto has rescinded this Agreement were reasonably capable of being performed
by Ivanhoe, Ivanhoe shall also be released from all obligations hereunder provided that
any of the aforesaid conditions, having been inserted herein for the exclusive benefit
of Rio Tinto, may be waived in whole or in part by Rio Tinto without prejudice to its
rights of rescission in the event of the non-fulfilment or non-performance of any other
condition; or |
|
|
(b) |
|
Section 13.2 shall not be fulfilled or performed on or before the First Closing
Deadline, Ivanhoe may terminate this Agreement by notice to Rio Tinto and in such event
Ivanhoe shall be released from all obligations hereunder, all rights of specific
performance by any of the parties hereto shall terminate and, unless Ivanhoe can show
that the non-fulfillment or non-performance of the condition or conditions by reason of
which Ivanhoe has rescinded this Agreement were reasonably capable of being performed
by Rio Tinto, Rio Tinto shall also be released from all obligations hereunder, provided
that any of the aforesaid conditions, having been inserted herein for the exclusive
benefit of Ivanhoe, may be waived in whole or in part by Ivanhoe without prejudice to
its rights of rescission in the event of the non-fulfilment or non-performance of any
other condition. |
- 59 -
Right to Cure
14.6 If a party hereto determines at any time prior to the First Closing Deadline that it intends
to terminate this Agreement or any other transactions contemplated hereby because of any
unfulfilled condition precedent contained in this Agreement to be fulfilled by the other party, it
shall so notify the other party forthwith upon making such determination whereupon the other party
shall have the right and opportunity to take such steps, at its own expense, as may be necessary
for the purpose of fulfilling such condition precedent within a reasonable period of time not
exceeding five (5) Business Days, but in no event later than the First Closing Deadline.
Survival
14.7 In the event of any termination of this Agreement, the provisions hereof will become void and
neither party will have any liability to the other party in respect of this Agreement, except in
respect of any breach of this Agreement which occurred on or before the First Closing Deadline.
Notwithstanding the foregoing, this Section 14.7, Part 17 and Sections 18.1, 18.4, 18.8 and 18.10
shall survive any termination of this Agreement.
PART 15
IMPLEMENTATION
Time and Place
15.1 Subject to the terms and conditions hereof, the First Tranche Private Placement will be
completed at the First Closing, to be held at 11:00 a.m. (Vancouver time) on the First Closing Date
and the Second Tranche Private Placement will be completed at the Second Closing, to be held at
11:00 a.m. (Vancouver time) on the Second Closing Date, in each case at Suite 654-999 Canada Place,
Vancouver, British Columbia or at such other time and place as the parties may agree.
First Closing Deliveries by Ivanhoe
15.2 At the First Closing, Ivanhoe will deliver the following to Rio Tinto:
|
(a) |
|
a duly issued certificate representing the First Tranche Private Placement
Shares, registered in the name of Rio Tinto; |
|
|
(b) |
|
a duly issued Series A Warrant Certificate representing the Series A Warrants
to be issued pursuant to the First Tranche Private Placement, registered in the name of
Rio Tinto; |
|
|
(c) |
|
a duly issued Series B Warrant Certificate representing the Series B Warrants
to be issued pursuant to the First Tranche Private Placement, registered in the name of
Rio Tinto; |
|
|
(d) |
|
a duly executed counterpart copy of the Registration Rights Agreement; |
- 60 -
|
(e) |
|
certified copies of the resolutions of the board of directors of Ivanhoe
approving this Agreement and the consummation of the transactions contemplated by this
Agreement; |
|
|
(f) |
|
a certificate of a senior officer of Ivanhoe that all of the representations
and warranties of Ivanhoe contained in Section 12.1 and 12.2 hereof are true and
correct as of the First Closing Date; |
|
|
(g) |
|
favourable corporate, enforceability, securities, title and other legal
opinions, dated the First Closing Date and addressed to Rio Tinto and its counsel, in
form and substance satisfactory to Rio Tinto and its counsel, acting reasonably, with
respect to such matters contemplated by this Agreement as Rio Tinto and its counsel may
reasonably request; and |
|
|
(h) |
|
written evidence of any and all Exchange Approvals obtained. |
First Closing Deliveries by Rio Tinto
15.3 At the First Closing, Rio Tinto will deliver to Ivanhoe:
|
(a) |
|
a wire transfer confirmation in form and substance satisfactory to Ivanhoe,
acting reasonably, evidencing the initiation of a wire transfer to Ivanhoe, in
accordance with the instructions given by Ivanhoe, of the First Tranche Subscription
Price and the Warrant Subscription Price; |
|
|
(b) |
|
a duly executed counterpart copy of the Registration Rights Agreement; |
|
|
(c) |
|
certified copies of the resolutions of the board of directors of Rio Tinto
approving this Agreement and the consummation of the transactions contemplated by this
Agreement; |
|
|
(d) |
|
a certificate of a senior officer of Rio Tinto that all of the representations
and warranties of Rio Tinto contained in Section 12.1 and 12.3 hereof are true and
correct as of the First Closing Date; and |
|
|
(e) |
|
favourable corporate, enforceability and other legal opinions, dated the First
Closing Date and addressed to Ivanhoe and its counsel, in form and substance
satisfactory to Ivanhoe and its counsel, acting reasonably, with respect to such
matters contemplated by this Agreement as Ivanhoe and its counsel may reasonably
request. |
Second Closing Deliveries by Ivanhoe
15.4 At the Second Closing, Ivanhoe will deliver to Rio Tinto
|
(a) |
|
a duly issued certificate representing the Second Tranche Private Placement
Shares, registered in the name of Rio Tinto; |
- 61 -
|
(b) |
|
a certificate of a senior officer of Ivanhoe that those representations and
warranties of Ivanhoe referred to in Section 13.3(b) hereof are true and correct as of
the First Closing Date and that those representations and warranties of Ivanhoe
referred to in Section 13.3(d) hereof are true and correct as of the Second Closing
Date; and |
|
|
(c) |
|
favourable corporate and securities legal opinions, dated the Second Closing
Date and addressed to Rio Tinto and its counsel, in form and substance satisfactory to
Rio Tinto and its counsel, acting reasonably, with respect to such matters pertaining
to the creation and issuance of the Second Tranche Private Placement Shares as Rio
Tinto and its counsel may reasonably request. |
Second Closing Deliveries by Rio Tinto
15.5 At the Second Closing, Rio Tinto will deliver to Ivanhoe:
|
(a) |
|
a wire transfer confirmation in form and substance satisfactory to Ivanhoe,
acting reasonably, evidencing the initiation of a wire transfer to Ivanhoe, in
accordance with the instructions given by Ivanhoe, of the Second Tranche Subscription
Price; and |
|
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(b) |
|
a certificate of a senior officer of Rio Tinto that those representations and
warranties of Rio Tinto referred to in Section 13.4(a) hereof are true and correct as
of the First Closing Date and that those representations and warranties of Rio Tinto
referred to in Section 13.4(b) hereof are true and correct as of the Second Closing
Date. |
PART 16
ARBITRATION
Single Arbitrator
16.1 Any matter in dispute under this Agreement will be determined by a single arbitrator to be
appointed by the parties hereto. The parties agree that the arbitrator has the power and authority
to grant equitable remedies including, but not limited to specific performance and injunction,
including pursuant to Sections 5.9, 7.5 and 17.5. The parties further agree that, notwithstanding
the foregoing, a court has the power and authority to grant temporary injunctive relief until any
matter in dispute is determined by the arbitrator.
Notice of Intent to Arbitrate
16.2 Either party may refer any matter in dispute under this Agreement to arbitration by Notice to
the other party and, within thirty (30) days after receipt of such Notice, the parties will agree
on the appointment of an arbitrator, who will be capable of commencing the arbitration within
twenty one (21) days of his appointment. No person will be appointed as an arbitrator hereunder
unless such person agrees in writing to act.
- 62 -
Effect of Lack of Agreement on Arbitration
16.3 If the parties cannot agree on a single arbitrator as provided in Section 16.2 either party
may request a court of competent jurisdiction to appoint a single arbitrator in accordance with the
Arbitration Act.
Procedural Matters
16.4 Except as specifically provided in this Part, an arbitration hereunder will be conducted in
accordance with the Arbitration Act in the English language. The arbitrator will fix a time and
place in Vancouver, British Columbia for the purpose of hearing the evidence and representations of
the parties, all of which will be in camera, and he will preside over the arbitration and determine
all questions of procedure not provided for under the Arbitration Act or this Part. After hearing
any evidence and representations that the parties may submit, the arbitrator will make an award and
reduce the same to writing and deliver one copy thereof to each of the parties. The award will be
kept confidential by the parties except to the extent that disclosure is required by Securities
Laws or stock exchange rules. The decision of the arbitrator will be made within forty five (45)
days after his appointment, subject to any reasonable delay due to unforeseen circumstances. The
expense of the arbitration will be paid as specified in the award. The parties agree that the
award of the single arbitrator will be final and binding upon each of them and will not be subject
to appeal.
PART 17
CONFIDENTIALITY, USE
AND DISCLOSURE OF INFORMATION
Confidential Information
17.1 Except as provided in Sections 17.2 and 17.3, or with the prior written consent of the other
party, each party will keep confidential and not disclose to any third party or the public any
Confidential Information and will keep any Confidential Information disclosed to it secure and in
such a way so as to prevent unauthorized access by any third party and shall not make any copies of
it in any form except for the purpose of supplying the same to those to whom disclosure is
permitted in accordance with this Agreement.
Permitted Disclosure of Confidential Information
17.2 Either party may disclose Confidential Information to a partys Representatives, for the sole
purpose of such partys exercise of its rights and performance of its obligations under this
Agreement and the performance of purely internal corporate control functions. The party disclosing
Confidential Information pursuant to this Section 17.2 will disclose such Confidential Information
to only those Representatives who have a bona fide need to have access to such Confidential
Information for the purpose for which disclosure to such parties is permitted under this Section
17.2 and who have knowledge of the requirement to protect the Confidential Information from further
disclosure, and who have agreed with the disclosing party to use such Confidential Information
solely for such purpose and to otherwise observe the provisions of this Part 17. The party
disclosing Confidential Information will be responsible and liable for any use or disclosure of the
Confidential Information by such Representatives in violation of this Agreement.
- 63 -
Disclosure Required By Law
17.3 Notwithstanding anything contained in this Part 17, a party may disclose any Confidential
Information if, in the opinion of the disclosing partys legal counsel:
|
(a) |
|
such disclosure is legally required to be made in a judicial, administrative or
governmental proceeding pursuant to a valid subpoena or other applicable order in
respect of a party or any of its Affiliates; or |
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(b) |
|
such disclosure is legally required to be made (in the ordinary course of
events and not, for example, solely as a consequence of any public offering of debt,
shares or other securities) pursuant to Securities Laws, rules and regulations or, the
rules or regulations of a stock exchange or similar trading market applicable to the
disclosing party or any of its Affiliates. |
Prior to any disclosure of Confidential Information under this Section 17.3, so far as it is lawful
to do so, the disclosing party will give the other party at least five (5) days prior Notice
(unless less time is permitted by such rules, regulations or proceeding) and, in making such
disclosure, the disclosing party will disclose only that portion of Confidential Information
required to be disclosed and will take all reasonable steps to preserve the confidentiality
thereof, including, without limitation, obtaining protective orders and supporting the other party
in intervention in any such proceeding.
Public Announcements
17.4 Prior to either party or any of their respective Affiliates making or issuing any press
release or other public announcement or disclosure of the subject matter of this Agreement or any
Confidential Information, a party will first consult with the other party at the earliest
opportunity, and in any event not later than 48 hours before the proposed time of announcement, as
to the content and timing of such announcement or disclosure, unless in the good faith judgment of
such party, there is not sufficient time to consult with the other party before such announcement
or disclosure must be made under Applicable Laws; but in such event, the disclosing party will
notify the other party before such announcement or disclosure is made if at all reasonably possible
and, if not, as soon as reasonably possible thereafter. This Section 17.4 shall not be construed
so as to prevent either party or their respective Affiliates from fully and timely complying with
their continuous disclosure obligations under Applicable Law and stock exchange rules.
Remedies
17.5 Without prejudice to any other rights or remedies which either party may have, each party
acknowledges and agrees that damages may not be an adequate remedy for any actual breach or
threatened breach by either party of the provisions of this Part 17 and either party shall be
entitled to seek the remedies of injunction, specific performance and other equitable relief for
any threatened or actual breach of any such provision by the other party or its Representatives and
no proof of special damages shall be necessary for the enforcement by either party of its rights
under this Part 17.
- 64 -
Existing Confidentiality Agreement
17.6 Ivanhoe hereby agrees with Rio Tinto (acting as agent for Rio Tinto Mining and Exploration
Limited) that, as of the date hereof, the Confidentiality and Nondisclosure Agreement dated July
26, 2005 between Ivanhoe and Rio Tinto Mining and Exploration Limited is terminated and the parties
agree that any and all claims in relation to such agreement are hereby extinguished. Ivanhoe will,
at the request of Rio Tinto, enter into a legally binding agreement with Rio Tinto Mining and
Exploration Limited to evidence, and give effect to, this Section 17.6.
PART 18
GENERAL PROVISIONS
Notices
18.1 All notices, payments and other required or permitted communications (each a Notice) to
either party will be in writing, and will be addressed respectively as follows:
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If to Rio Tinto:
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Rio Tinto International Holdings Limited |
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6 St. Jamess Square |
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London |
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SW1Y 4LD |
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United Kingdom |
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Attention:
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Company Secretary |
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Fax:
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44 20 7930 3249 |
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With a copy to:
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Chief Executive Copper Group |
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Rio Tinto plc |
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6 St. James Square |
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London SW1Y 4LD |
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Fax:
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44 20 7930 3249 |
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If to Ivanhoe:
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Ivanhoe Mines Ltd. |
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654 999 Canada Place |
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Vancouver, B.C. V6C 3E1 |
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Attention:
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Corporate Secretary |
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Fax:
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604 682 2060 |
or at such other address or fax number or to such other contact person as a party may give Notice
to the other party. All Notices will be given by registered mail with acknowledgement of receipt,
or by courier, or by fax, with confirmation by registered mail or courier with acknowledgement of
receipt. All Notices will be effective and will be deemed given:
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if delivered by hand, immediately; |
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in the case of delivery by mail or courier, two Business Days after the date of
posting (if posted or couriered to an address in the same country) or five Business
Days after the date of posting (if sent by courier to an address in another country);
and |
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in the case of fax, on receipt by the sender of a transmission control report
from the dispatching machine showing the relevant number of pages and the correct
destination fax machine number and indicating that the transmission has been made
without error. |
but if the result is that a Notice would be taken to be given or made on a day which is not a
Business Day in the place to which the notice or communication is sent or is received later than
4:00 pm (local time), it will be taken to have been given or made at the commencement of the next
Business Day in that place.
Waiver
18.2 The failure of either party to insist on the strict performance of any provision of this
Agreement or to exercise any right, power or remedy upon a breach hereof will not constitute a
waiver of any provision of this Agreement or limit such partys right thereafter to enforce any
provision or exercise any right.
Modification
18.3 No modification of this Agreement will be valid unless made in writing and duly executed by
both parties.
Further Assurances
18.4 Each of the parties will take, from time to time and without additional consideration, such
further actions and execute such additional instruments as may be reasonably necessary or
convenient to implement and carry out the intent and purpose of this Agreement.
Entire Agreement
18.5 This Agreement contains the entire understanding of the parties and supersedes all prior
agreements and understandings, whether written or oral, between the parties relating to the subject
matter hereof.
Assignment
18.6 Except as expressly permitted elsewhere in this Agreement, neither party may assign its rights
or obligations under this Agreement without the prior written consent of the other party.
Successors and Assigns
18.7 This Agreement will be binding upon and inure to the benefit of the respective successors and
permitted assigns of the parties.
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Use of Rio Tinto Name
18.8 Ivanhoe shall not and shall procure that its Affiliates will not, without the prior written
consent of Rio Tinto, in any press release, public announcement or other publication include or
refer to Rio Tinto or the name of any other member of the Rio Tinto Group or to the Rio Tinto
group of companies generally, except as may be required by Applicable Law or the rules of any stock
exchange.
Time
18.9 Time is of the essence of this Agreement.
Governing Law
18.10 This Agreement will be governed by and interpreted in accordance with the laws of British
Columbia and the laws of Canada applicable therein without regard for any conflict of laws or
choice of laws principles that would permit or require the application of the laws of any other
jurisdiction.
Counterparts
18.11 This Agreement may be executed in any number of counterparts, and it will not be necessary
that the signatures of both parties be contained on any counterpart. Each counterpart will be
deemed an original, but all counterparts together will constitute one and the same instrument.
Either party may deliver an executed copy of this Agreement by facsimile or e-mail transmission,
provided such party shall thereafter deliver to the other party an original executed copy of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.
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RIO TINTO INTERNATIONAL HOLDINGS LIMITED |
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By |
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Title:
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IVANHOE MINES LTD. |
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By |
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Title:
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SCHEDULE A
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE SHALL NOT TRADE THE SECURITIES BEFORE l, 2007.
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE U.S. SECURITIES ACT), OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED
STATES OR BY OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON (AS DEFINED IN REGULATION S UNDER THE
U.S. SECURITIES ACT) OR A PERSON IN THE UNITED STATES UNLESS THIS WARRANT AND THE UNDERLYING
SECURITIES ISSUABLE UPON THE EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
AND THE SECURITIES LAWS OF ALL APPLICABLE STATES OF THE UNITED STATES OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
SERIES A WARRANTS TO PURCHASE COMMON SHARES
OF
IVANHOE MINES LTD.
(Incorporated under the laws of the Yukon Territory)
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CERTIFICATE
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46,026,522 |
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NUMBER A -1
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SERIES A
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WARRANTS
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THIS CERTIFIES THAT, for value received, RIO TINTO INTERNATIONAL HOLDINGS LIMITED
(the Holder) is entitled, at any time during the Exercise Period, to purchase, at the Exercise
Price, one Common Share in the capital of IVANHOE MINES LTD. (the Company), in respect of each
Series A Warrant evidenced by this Series A Warrant certificate, by surrendering to the Company at
its principal office located at Suite 654 999 Canada Place, Vancouver, British Columbia, Canada
V6C 3E1, Attention: Corporate Secretary, this Series A Warrant certificate, together with a
Subscription Form, duly completed and executed, and a bank draft, certified cheque or wire transfer
payable to the order of the Company, in lawful money of the United States of America an amount
equal to the product of the then prevailing Exercise Price multiplied by the number of Common
Shares stipulated in the Subscription Form as being subscribed for pursuant to the exercise of the
Series A Warrants evidenced by this Series A Warrant certificate.
These Series A Warrants and the Common Shares issuable upon the exercise of these Series
- 2 -
A Warrants have not been and will not be registered under the United States Securities Act of
1933, as amended (the U.S. Securities Act) or any state securities laws. These Series A Warrants
may not be exercised in the United States or by or on behalf of any U.S. Person (as defined in
Regulation S under the U.S. Securities Act) or person in the United States, unless these Warrants
and the Common Shares issuable upon exercise hereof have been registered under the U.S. Securities
Act and any applicable state securities laws or unless an exemption from such registration is
available.
1. Definitions
1.1 In this Warrant, including the preamble, unless there is something in the subject matter or
context inconsistent therewith, the following expressions shall have the following meanings namely:
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Applicable Law has the meaning assigned to it in the Private Placement
Agreement; |
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(b) |
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Business Day has the meaning assigned to it in the Private Placement
Agreement; |
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(c) |
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Common Shares means the common shares without par value in the capital of the
Company as such shares are constituted on the date of the Private Placement Agreement,
as the same may be reorganized, reclassified or redesignated pursuant to any of the
events set out in Part 10 hereof; |
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(d) |
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Company means Ivanhoe Mines Ltd., a corporation continued under the laws of
the Yukon Territory, and its successors; |
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(e) |
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Company Shareholder Approval means approval of the Holders right to exercise
the Series A Warrants to acquire the maximum number of Common Shares that may be
acquired by the Holder from time to time pursuant to this Series A Warrant certificate
given by a majority of the votes cast by holders of Common Shares present in person or
by proxy at a special meeting of holders of Common Shares convened pursuant to the
terms of the Private Placement Agreement; |
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(f) |
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Company Shareholder Approval Date means the date upon which Company
Shareholder Approval is obtained by the Company; |
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Current Market Price of the Common Shares at any date, means the weighted
average of the sale prices per Common Share at which the Common Shares have traded on
the Exchange, or, if the Common Shares in respect of which a determination of current
market price is being made are not listed thereon, on such stock exchange or securities
market on which such shares are listed or quoted as may be selected for such purpose by
the Companys board of directors, or, if the Common Shares are not listed on any stock
exchange, then on the over-the-counter market, for any twenty (20) consecutive trading
days selected by the Company commencing not more than forty five (45) trading days and
ending not fewer than five (5) trading days
before such date; provided, however, if such Common Shares are not traded during
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such forty (40) trading day period for at least twenty (20) consecutive trading
days, the simple average of the following prices established for each of twenty (20)
consecutive trading days selected by the Company commencing not more than forty five
(45) trading days before such date: |
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the average of the bid and ask prices for each day on which
there was no trading, and |
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the closing price of the Common Shares for each day on which
there was trading, |
or, in the event that, at any date, the Common Shares are not listed on any stock
exchange or securities market or on the over-the-counter market, the current market
price shall be as determined by the Companys board of directors or such firm of
independent chartered accountants as may be selected by the Companys board of
directors, acting reasonably and in good faith in their sole discretion; for these
purposes, the weighted average price for any period shall be determined by dividing
the aggregate sale prices during such period by the total number of Common Shares
sold during such period;
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Exchange means the Toronto Stock Exchange; |
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Exercise Clearance Date means the later of: |
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the Company Shareholder Approval Date; and |
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the Regulatory Approval Date; |
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Exercise Period means the period of time commencing on the Exercise Clearance
Date and ending on the the three hundred and sixty-fifth (365th) day after
the Warrant Determination Date; |
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Exercise Price means an amount per Common Share in lawful money of the United
States of America equal to, |
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eight dollars and thirty eight cents ($8.38) during the period
of time commencing on the Company Shareholder Approval Date and ending on the
one hundred and eightieth (180th) day after the Warrant
Determination Date; and |
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eight dollars and fifty four cents ($8.54) during the period
commencing on the one hundred and eighty first (181st) day after the
Warrant Determination Date and ending on the three hundred and sixty-fifth
(365th) day after the Warrant
Determination Date;
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unless such price shall have been adjusted in accordance with the provisions of Part
10, in which case it shall mean the adjusted price in effect at such time;
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Expiry Time means (i) immediately upon termination of the Ivanhoe Meeting, if
the Company Shareholder Approval is not obtained at the Ivanhoe Meeting, or (ii) 5:00
oclock in the afternoon, Vancouver time, on the last day of the Exercise Period, if
the Company Shareholder Approval is obtained at the Ivanhoe Meeting; |
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Holder means Rio Tinto International Holdings Limited, a corporation
incorporated under the laws of England and Wales and its successors; |
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(n) |
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Ivanhoe Meeting has the meaning assigned to it in the Private Placement
Agreement; |
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Notice has the meaning assigned to it in the Private Placement Agreement; |
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person means an individual, corporation, partnership, unincorporated
syndicate, unincorporated organization, trust, trustee, executor, administrator, or
other legal representative, or any group or combination thereof; |
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Private Placement Agreement means the agreement made as of the
18th day of October 2006 between the Company and the Holder providing for,
among other things, the issuance of the Series A Warrants; |
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Regulatory Approval means approval under the Investment Canada Act (Canada)
of the Holders right to exercise the Series A Warrants, to the extent such approval is
required in the reasonable opinion of the Holder; |
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Regulatory Approval Date means the date upon which the Holder delivers to the
Company written evidence of Regulatory Approval; |
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Rio Tinto Group has the meaning assigned to it in the Private Placement
Agreement; |
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(u) |
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Series A Warrants means the share purchase warrants of the Company evidenced
by, and governed by the terms of, this Series A Warrant certificate; |
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(v) |
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Subscription Form means the form of subscription annexed hereto as Appendix
1; and |
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(w) |
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Subsidiary has the meaning assigned to it in the Private Placement Agreement; |
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(x) |
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Warrant Determination Date has the meaning assigned to it in the Private
Placement Agreement; |
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this Series A Warrant certificate, Series A Warrant, herein, hereby,
hereof, hereto, hereunder and similar expressions mean or refer to this Series A
Warrant certificate and any deed or instrument supplemental or ancillary thereto and
any appendices or schedules hereto or thereto and not to any particular article,
section, subsection, clause, subclause or other portion hereof. |
2. Exercise Period
2.1 The Series A Warrants shall be exercisable during the Exercise Period.
3. Expiry Time
3.1 After the Expiry Time, all rights under any Series A Warrants evidenced hereby which remain
unexercised at the Expiry Time shall wholly cease and terminate and such Series A Warrants shall
be null and void and of no value or effect.
4. Exercise Procedure
4.1 The Holder may exercise its rights hereunder to purchase Common Shares during the Exercise
Period by delivering to the Company in accordance with Part 24 hereof:
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this Series A Warrant certificate, with the Subscription Form duly completed
and executed by the Holder or its legal representative or attorney, duly appointed by
an instrument in writing in form and manner satisfactory to the Company; and |
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a bank draft or certified cheque payable, or wire transfer confirmation in
writing evidencing payment, to the order of the Company, in lawful money of the United
States of America an amount equal to the product of the then prevailing Exercise Price
multiplied by the number of Common Shares stipulated in the Subscription Form as being
subscribed for pursuant to the exercise of the Series A Warrants evidenced by this
Series A Warrant certificate. |
5. Entitlement to Certificate
5.1 Upon delivery and payment as provided in Part 4, the Company shall cause to be issued to the
Holder the Common Shares subscribed for up to the maximum number that the Holder is entitled to
purchase pursuant to this Series A Warrant certificate and the Holder shall become a shareholder of
the Company in respect of such Common Shares with effect from the date of such delivery and payment
and shall be entitled to delivery of a certificate or certificates evidencing such Common Shares
and the Company shall cause such certificate or certificates to be delivered to the Holder in
accordance with Part 24 hereof within three (3) Business Days of such delivery and payment.
6. Partial Exercise
6.1 The Holder may subscribe for and purchase a number of Common Shares less than the number
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the Holder is entitled to purchase pursuant to this Series A Warrant certificate. In the event of any
such partial subscription and purchase prior to the Expiry Time, the Holder shall be entitled to
receive, without charge, a new Series A Warrant certificate in respect of the balance of the Common
Shares of which the Holder was entitled to purchase pursuant to this Series A Warrant certificate
and which were then not purchased.
7. No Fractional Shares
7.1 Notwithstanding any adjustments provided for in Part 10 hereof or otherwise, the Company shall
not be required upon the exercise of any Series A Warrants, to issue fractional Common Shares in
satisfaction of its obligations hereunder. To the extent that the Holder would be entitled to
purchase a fraction of a Common Share, such right may be exercised in respect of such fraction only
in combination with other rights which, in the aggregate, entitle the Holder to purchase a whole
number of Common Shares.
8. Not a Shareholder
8.1 Nothing in this Series A Warrant certificate or in the holding of the Series A Warrants
evidenced hereby shall be construed as conferring upon the Holder any right or interest whatsoever
as a shareholder of the Company.
9. Covenants
9.1 The Company hereby covenants and agrees that:
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so long as any Series A Warrants evidenced hereby remain outstanding, it shall
reserve and there shall remain unissued out of its authorized capital a sufficient
number of Common Shares to satisfy the maximum right of purchase provided for herein; |
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all Common Shares which shall be issued upon the exercise of any Series A
Warrants hereunder shall, upon payment therefor of the then prevailing Exercise Price,
be issued as fully paid and non-assessable Common Shares; and |
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it will at its expense expediously use its best efforts to obtain the listing
of such Common Shares (subject to issue and notice of issue) on each stock exchange,
securities market or over-the-counter market on which the Common Shares may be listed
from time to time. |
10. Adjustment to Exercise Price
10.1 The Exercise Price in effect at any time is subject to adjustment from time to time in the
events and in the manner provided in this Part 10.
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10.2 If, and whenever at any time after the date hereof, the Company:
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issues Common Shares or securities exchangeable for or convertible into Common
Shares to all or substantially all the holders of the Common Shares as a stock
dividend; or |
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makes a distribution on its outstanding Common Shares payable in Common Shares
or securities exchangeable for or convertible into Common Shares; or |
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subdivides its outstanding Common Shares into a greater number of shares; or |
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consolidates its outstanding Common Shares into a lesser number of shares; |
(any of such events being called a Common Share Reorganization), then the Exercise Price will be
adjusted effective immediately after the effective date or record date, whichever is earlier, for
the happening of a Common Share Reorganization at which the holders of Common Shares are determined
for the purpose of the Common Share Reorganization by multiplying the Exercise Price in effect
immediately prior to such effective date or record date by a fraction, the numerator of which is
the number of Common Shares outstanding on such effective date or record date before giving effect
to such Common Share Reorganization and the denominator of which is the number of Common Shares
outstanding immediately after giving effect to such Common Share Reorganization (including, in the
case where securities exchangeable for or convertible into Common Shares are distributed, the
number of Common Shares that would have been outstanding had all such securities been exchanged for
or converted into Common Shares on such effective date or record date).
10.3 To the extent that any adjustment in the Exercise Price occurs pursuant to Section 10.2 as
a result of the fixing by the Company of a record date for the distribution of securities
exchangeable for or convertible into Common Shares, the Exercise Price shall be readjusted
immediately after the expiry of any relevant exchange or conversion right to the Exercise Price
which would then be in effect based upon the number of Common Shares actually issued and remaining
issuable after such expiry and shall be further readjusted in such manner upon the expiry of any
further such right. If the Holder has not exercised all of the Series A Warrants on or prior to
the record date of any stock dividend or distribution or the effective date of any subdivision or
consolidation, as the case may be, upon the exercise of such Series A Warrants thereafter, the
Holder shall be entitled to receive and shall accept in lieu of the number of Common Shares then
subscribed for and purchased by the Holder, at the Exercise Price determined in accordance with
Section 10.2, the aggregate number of Common Shares that the Holder would have been entitled to
receive as a result of such Common Share Reorganization, if, on such record date or effective date,
as the case may be, the Holder had been the holder of record of the number of Common Shares so
subscribed for and purchased.
10.4 If, and whenever at any time after the date hereof, the Company fixes a record date for
the issue of rights, options or warrants to the holders of all or substantially all of its
outstanding Common Shares under which such holders are entitled to subscribe for or purchase Common
Shares or securities exchangeable for or convertible into Common Shares, where:
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the right to subscribe for or purchase Common Shares, or the right to exchange
securities for or convert securities into Common Shares, expires not more than forty
five (45) days after the date of such issue (the period from the record date to the
date of expiry being referred to as the Rights Period); and |
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the cost per Common Share during the Rights Period (inclusive of any cost or
acquisition of securities exchangeable for or convertible into Common Shares in
addition to any direct cost of Common Shares) (such cost being referred to as the Per
Share Cost) is less than 95% of the Current Market Price of the Common Shares on the
record date; |
(any of such events being referred to as a Rights Offering), then the Exercise Price will be
adjusted to a price determined in accordance with Section 10.5.
10.5 In the event of a Rights Offering, the Exercise Price will be adjusted effective
immediately after the end of the Rights Period to a price determined by multiplying the Exercise
Price in effect immediately prior to the end of the Rights Period by a fraction:
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the numerator of which is the aggregate of: |
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the number of Common Shares outstanding as of the record date
for the Rights Offering; and |
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a number determined by dividing the product of the Per Share
Cost and: |
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where the event giving rise to the application
of this Section 10.5 was the issue of rights, options or warrants to
the holders of Common Shares under which such holders are entitled to
subscribe for or purchase additional Common Shares, the number of
Common Shares so subscribed for or purchased during the Rights Period,
or |
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where the event giving rise to the application
of this Section 10.5 was the issue of rights, options or warrants to
the holders of Common Shares under which such holders are entitled to
subscribe for or purchase securities exchangeable for or convertible
into Common Shares, the number of Common Shares for which those
securities so subscribed for or purchased during the Rights Period
could have been exchanged or into which they could have been converted, |
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by the Current Market Price of the Common Shares as of the record date for
the Rights Offering; and |
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the denominator of which is |
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in the case described in subsection 10.5(a)(ii)A., the number
of Common Shares outstanding, or |
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in the case described in subsection 10.5(a)(ii)B., the number
of Common Shares that would be outstanding if all the Common Shares described
in subsection 10.5(a)(ii)B. had been issued, |
as at the end of the Rights Period.
Any Common Shares owned by or held for the account of the Company or any Subsidiary of the Company
will be deemed not to be outstanding for the purpose of any such computation.
10.6 If, by the terms of any rights, options or warrants referred to in this Part 10, there is more
than one purchase, conversion or exchange price per Common Share, the Per Share Cost will be
calculated for purposes of the adjustment with reference to the aggregate price of the total number
of additional Common Shares offered for subscription or purchase, or the aggregate conversion or
exchange price of the convertible securities so offered, on the basis of the lowest purchase,
conversion or exchange price per Common Share, as the case may be.
10.7 To the extent that any adjustment in the Exercise Price occurs pursuant to Section 10.5 as
a result of the the issue or distribution of rights, options or warrants referred to in Section
10.5, the Exercise Price shall be readjusted immediately after the expiry of any relevant exchange,
conversion or exercise right to the Exercise Price which would then be in effect based upon the
number of Common Shares actually issued and remaining issuable after such expiry and shall be
further readjusted in such manner upon the expiry of any further such right.
10.8 If the Holder has exercised any Series A Warrants in accordance herewith during the period
beginning immediately after the record date for a Rights Offering and ending on the last day of the
Rights Period therefor, the Holder will, in addition to the Common Shares to which it is otherwise
entitled upon such exercise, be entitled to that number of additional Common Shares equal to the
result obtained when the difference, if any, between:
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the Exercise Price in effect immediately prior to the end of such Rights
Offering; and |
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the Exercise Price as adjusted hereunder for such Rights Offering; |
is multiplied by the number of Common Shares received upon the exercise of such Series A Warrants
during such period, and the resulting product is divided by the Exercise Price as adjusted
hereunder for such Rights Offering, provided that the provisions of Section 7.1 will be applicable
to any fractional
interest in a Common Share to which the Holder might otherwise be entitled. Such additional Common
Shares will be deemed to have been issued to the Holder immediately following the end of the Rights
Period and a certificate for such additional Common Shares will be delivered to the Holder within
ten (10) Business Days following the end of the Rights Period.
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10.9 If, and whenever at any time after the date hereof, the Company fixes a record date for the
issue or the distribution to the holders of all or substantially all of its Common Shares of:
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shares of the Company of any class other than Common Shares, |
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rights, options or warrants to acquire: |
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Common Shares or securities exchangeable for or convertible
into Common Shares (other than rights, options or warrants of the nature
described in Section 10.4), or |
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shares other than Common Shares or securities exchangeable for
or convertible into shares other than Common Shares or property or other assets
of the Company, |
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evidences of indebtedness, or |
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any property or other assets |
and if such issuance or distribution does not constitute a Common Share Reorganization or a Rights
Offering (any of such non-excluded events being referred to as a Special Distribution), the
Exercise Price will be adjusted in accordance with Section 10.10.
10.10 In the event of a Special Distribution, the Exercise Price will be adjusted effective
immediately after the record date for the Special Distribution to a price determined by multiplying
the Exercise Price in effect on such record date by a fraction:
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the numerator of which is: |
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the product of the number of Common Shares outstanding on such
record date and the Current Market Price of the Common Shares on such record
date; less |
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the aggregate fair market value (as determined by the board of
directors of the Company, acting reasonably and in good faith) to the holders
of the Common Shares of such securities or property or other assets so issued
or distributed in the Special Distribution; and |
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the denominator of which is the number of Common Shares outstanding on such
record date multiplied by the Current Market Price of the Common Shares on such
record date. |
Any Common Shares owned by or held for the account of the Company or any Subsidiary of the
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Company will be deemed not to be outstanding for the purpose of any such computation.
10.11 To the extent that any adjustment in the Exercise Price occurs pursuant to Section 10.10 as
a result of the the issue or distribution of rights, options or warrants referred to in Section
10.10, the Exercise Price shall be readjusted immediately after the expiry of any relevant
exchange, conversion or exercise right to the Exercise Price which would then be in effect based
upon the number of Common Shares actually issued and remaining issuable after such expiry and shall
be further readjusted in such manner upon the expiry of any further such right.
10.12 If, and whenever at any time after the date hereof, there is a reclassification or
redesignation of the Common Shares outstanding at any time or change of the Common Shares into
other shares or into other securities (other than a Common Share Reorganization), or a
consolidation, amalgamation or merger of the Company with or into any other corporation or other
entity (other than a consolidation, amalgamation or merger which does not result in any
reclassification or redesignation of the outstanding Common Shares or a change of the Common Shares
into other shares), or a transfer of the undertaking or assets of the Company as an entirety or
substantially as an entirety to another corporation or other entity (any of such events being
referred to as a Capital Reorganization), the Holder, upon exercising any Series A Warrants after
the effective date of such Capital Reorganization, will be entitled to receive in lieu of the
number of Common Shares to which such Holder was theretofore entitled upon such exercise, the
aggregate number of shares, other securities or other property which the Holder would have been
entitled to receive as a result of such Capital Reorganization if, on the effective date thereof,
the Holder had been the registered holder of the number of Common Shares to which such Holder was
theretofore entitled upon exercise of such Series A Warrants.
10.13 If, and whenever at any time after the date hereof, there is a Common Share Reorganization,
a Rights Offering or a Special Distribution, that results in an adjustment pursuant to Sections
10.2, 10.5 or 10.10, as the case may be, or a readjustment pursuant to Sections 10.3, 10.7 or
10.11, as the case may be, in the Exercise Price, then the number of Common Shares acquirable upon
the subsequent exercise of the Series A Warrants shall be simultaneously adjusted or readjusted, as
the case may be, by multiplying the number of Common Shares acquirable upon the exercise of the
Series A Warrants immediately prior to such adjustment or readjustment by a fraction which shall be
the reciprocal of the fraction used in the adjustment or readjustment of the Exercise Price.
11. Rules Regarding Calculation of Adjustment of Exercise Price
11.1 The adjustments provided for in Part 10 are cumulative and will, in the case of adjustments to
the Exercise Price, be computed to the nearest one-tenth of one cent and will be made successively
whenever an event referred to therein occurs, subject to the following provisions of this Part 11.
11.2 No adjustment in the Exercise Price is required to be made unless such adjustment would
result in a change of at least 1% in the prevailing Exercise Price; provided, however, that any
adjustments which, except for the provisions of this Section 11.2, would otherwise have been
required to be made, will be carried forward and taken into account in any subsequent adjustments.
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11.3 No adjustment in the Exercise Price (or in the number of Common Shares acquirable upon the
exercise of the Series A Warrants pursuant to Section 10.13) will be made in respect of any event
described in Part 10, other than the events referred to in subsections 10(2)(c) and (d), if the
Holder is entitled to participate in such event on the same terms, mutatis mutandis, as if
the Holder had exercised its Series A Warrants prior to or on the effective date or record date of
such event, or if the Company makes adequate provision for the Holder to participate in such event
on the same terms or with the same effect, mutatis mutandis, upon the subsequent exercise
of the Series A Warrants (the adequacy of such provisions to be determined by the Holder in its
sole discretion, acting reasonably).
11.4 No adjustment in the Exercise Price will be made under Part 10 in respect of the issue from
time to time of Common Shares as dividends paid in the ordinary course to holders of Common Shares
who exercise an option or election to receive substantially equivalent dividends in Common Shares
in lieu of receiving a cash dividend, and any such issue will be deemed not to be a Common Share
Reorganization.
11.5 If at any time a dispute arises with respect to adjustments provided for in Part 10, such
dispute will be conclusively determined by the auditors of the Company or if they are unable or
unwilling to act, by such other firm of independent chartered accountants as may be selected by the
board of directors of the Company, acting reasonably and in good faith, and any such determination
will be binding upon the Company, the Holder and the shareholders of the Company.
11.6 If, and whenever at any time after the date hereof, the Company takes any action affecting the
Common Shares, other than action described in Part 10, which in the opinion of the board of
directors of the Company, acting reasonably and in good faith, would materially affect the rights
of the Holder, the Exercise Price will be adjusted in such manner, if any, and at such time, by
action of the board of directors of the Company, acting reasonably and in good faith, but subject
in all cases to any necessary Exchange approval or other regulatory approval. Failure by the board
of directors of the Company to take action so as to provide for an adjustment on or prior to the
effective date of any action by the Company affecting the Common Shares will be conclusive evidence
that the board of directors of the Company has determined that it is equitable to make no
adjustment in the circumstances.
11.7 If the Company sets a record date to determine the holders of the Common Shares for the
purpose of entitling them to receive any dividend or distribution or sets a record date to take any
other action and, thereafter and before the distribution to such shareholders of any such dividend
or distribution or the taking of any other action, decides not to implement its plan to pay or
deliver such dividend or distribution or take such other action, then no adjustment in the Exercise
Price will be required by reason of the setting of such record date.
11.8 In the absence of a resolution of the board of directors of the Company fixing a record date
for a Special Distribution or Rights Offering, the Company will be deemed to have fixed as the
record date therefor the date on which the Special Distribution or Rights Offering is effected.
11.9 As a condition precedent to the taking of any action which would require any adjustment to the
Series A Warrants, including the Exercise Price, the Company must take any corporate action which
may be necessary in order that the Company have unissued and reserved in its authorized
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capital,
and may validly and legally issue as fully paid and non-assessable, all the shares or other
securities which the Holder is entitled to receive on the full exercise thereof in accordance with
the provisions hereof.
11.10 The Company will from time to time, immediately after the occurrence of any event which
requires an adjustment or readjustment as provided in Part 10, forthwith give notice to the Holder
specifying the event requiring such adjustment or readjustment and the results thereof, including
the resulting Exercise Price.
11.11 The Company covenants to and in favour of the Holder that so long as any Series A Warrants
remain outstanding, it will give notice to the Holder of its intention to fix a record date for any
Common Share Reorganization (other than the subdivision or consolidation of the Common Shares),
Rights Offering or Special Distribution which may give rise to an adjustment in the Exercise Price,
and, in each case, such notice must specify the particulars of such event and the record date and
the effective date for such event; provided that the Company is only required to specify in such
notice such particulars of such event as have been fixed and determined on the date on which such
notice is given. Such notice must be given not less than fourteen (14) days in each case prior to
such applicable record date or effective date.
12. Consolidation and Amalgamation
12.1 The Company shall not enter into any transaction whereby all or substantially all of its
undertaking, property and assets would become the property of any other corporation (herein called
a successor corporation) whether by way of reorganization, reconstruction, consolidation,
amalgamation, merger, transfer, sale, disposition or otherwise, unless prior to or
contemporaneously with the consummation of such transaction the Company and the successor
corporation shall have executed such instruments and done such things as, in the opinion of counsel
to the Holder, are necessary or advisable to establish that upon the consummation of such
transaction:
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the successor corporation will have assumed all the covenants and obligations
of the Company under this Series A Warrant certificate; and |
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this Series A Warrant certificate will be a valid and binding obligation of the
successor corporation entitling the Holder, as against the successor corporation, to
all the rights of the Holder under this Series A Warrant certificate. |
12.2 Whenever the conditions of Section 12.1 shall have been duly observed and performed the
successor corporation shall possess, and from time to time may exercise, each and every right and
power of the Company under this Series A Warrant certificate in the name of the Company or
otherwise
and any act or proceeding by any provision hereof required to be done or performed by any director
or officer of the Company may be done and performed with like force and effect by the like
directors or officers of the successor corporation.
13. Representation and Warranty
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13.1 The Company hereby represents and warrants with and to the Holder that the Company is duly
authorized and has the corporate and lawful power and authority to create and issue the Series A
Warrants represented hereby and the Common Shares issuable upon the exercise hereof and to perform
its obligations hereunder and that this Series A Warrant certificate represents a valid, legal and
binding obligation of the Company enforceable in accordance with its terms.
14. If Share Transfer Books Closed
14.1 The Company shall not be required to deliver certificates for Common Shares while the share
transfer books of the Company are properly closed, prior to any meeting of shareholders or for the
payment of dividends or for any other purpose and, in the event of the exercise of any Series A
Warrants in accordance with the provisions hereof and the making of any subscription and payment
for the Common Shares pursuant thereto during any such period, delivery of certificates for Common
Shares may be postponed for a period not exceeding three (3) Business Days after the date of the
re-opening of said share transfer books. Provided however that any such postponement of delivery
of certificates shall be without prejudice to the right of the Holder, if the Holder has exercised
any Series A Warrants and made payment during such period, to receive such certificates for the
Common Shares subscribed for after the share transfer books shall have been re-opened.
15. Protection of Shareholders, Officers and Directors
15.1 Subject as herein provided, all or any of the rights conferred upon the Holder may be enforced
by the Holder by appropriate legal proceedings. No recourse under or upon any obligation, covenant
or agreement herein contained or in any of the Series A Warrants represented hereby shall be taken
against any shareholder, officer or director of the Company, either directly or through the
Company, it being expressly agreed and declared that the obligations under the Series A Warrants
evidenced hereby, are solely corporate obligations of the Company and that no personal liability
whatever shall attach to or be incurred by the shareholders, officers, or directors of the Company
or any of them in respect thereof, any and all rights and claims against every such shareholder,
officer or director being hereby expressly waived as a condition of and as a consideration for the
issue of the Series A Warrants evidenced hereby.
16. Lost Certificate
16.1 If the Series A Warrant certificate evidencing the Series A Warrants represented hereby
becomes stolen, lost, mutilated or destroyed, the Company may, upon delivery to it by the Holder of
an appropriate indemnity, issue and countersign a new Series A Warrant certificate of like
denomination, tenor and date as the certificate so stolen, lost mutilated or destroyed.
17. Governing Law
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17.1 This Warrant shall be governed by, and construed in accordance with, the laws of the Province
of British Columbia and the laws of Canada applicable therein but the reference to such laws shall
not, by conflict of laws rules or otherwise, require the application of the law of any jurisdiction
other than the Province of British Columbia.
18. Severability
18.1 If any one or more of the provisions or parts thereof contained in this Series A Warrant
certificate should be or become invalid, illegal or unenforceable in any respect in any
jurisdiction, the remaining provisions or parts thereof contained herein shall be and shall be
conclusively deemed to be, as to such jurisdiction, severable therefrom and:
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the validity, legality or enforceability of such remaining provisions or parts
thereof shall not in any way be affected or impaired by the severance of the provisions
or parts thereof severed; and |
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the invalidity, illegality or unenforceability of any provision or part thereof
contained in this Series A Warrant certificate in any jurisdiction shall not affect or
impair such provision or part thereof or any other provisions of this Series A Warrant
certificate in any other jurisdiction. |
19. Headings
19.1 The headings of the Parts of this Series A Warrant certificate have been inserted for
convenience and reference only and do not define, limit, alter or enlarge the meaning of any
provision of this Series A Warrant certificate.
20. Gender
20.1 Whenever used in this Warrant, words importing the singular number only shall include the
plural, and vice versa, and words importing the masculine gender shall include the feminine gender.
21. Day not a Business Day
21.1 In the event that any day on or before 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 the requisite time
on the next succeeding day that is a Business Day. If the payment of any amount is deferred for
any period, then such period shall be included for purposes of the computation of any interest
payable hereunder.
22. Computation of Time Period
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22.1 Except to the extent otherwise provided herein, in the computation of a period of time from a
specified date to a later specified date, the word from means from and including and the words
to and until each mean to but excluding.
23. Binding Effect
23.1 This Warrant and all of its provisions shall enure to the benefit of the Holder, and their
respective heirs, executors, administrators, successors, legal representatives and assigns and
shall be binding upon the Company and its successors and permitted assigns. The expression the
Holder as used herein shall include the Holders assigns whether immediate or derivative.
24. Notice
24.1 Any notice, document, communication or delivery required or permitted by this Series A Warrant
certificate will be deemed to be duly given if it is made in accordance with the terms of the
Private Placement Agreement governing the giving of Notice thereunder.
25. Time of Essence
25.1 Time shall be of the essence hereof.
26. Limited Transferability of Warrants
26.1 The Series A Warrants represented by this Series A Warrant certificate are non-transferable
other than to any person who is a member of the Rio Tinto Group who covenants and agrees in writing
with the Company to assume all of the Holders obligations under the Private Placement Agreement in
respect of the Series A Warrants or any Common Shares acquired by it.
27. Legends
27.1 Any certificate representing Common Shares issued upon the exercise of the Series A Warrants
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prior to the date which is four months and one day after the date hereof will
bear the following legend: |
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UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE SHALL NOT TRADE THE SECURITIES BEFORE l,
200l. |
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provided that at any time subsequent to the date which is four months and one
day after the date hereof any certificate representing such Common Shares may be
exchanged for a certificate bearing no such legends; and |
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at any time during the Exercise Period will bear the the following legends: |
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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE U.S. SECURITIES
ACT) NOR THE SECURITIES ACT OF ANY STATE OF THE UNITED STATES. THESE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS
THEYHAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND THE SECURITIES LAWS OF
ALL APPLICABLE STATES OF THE UNITED STATES OR AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS IS AVAILABLE.; |
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK
EXCHANGE BUT CANNOT BE TRADED THROUGH THE FACILITIES OF THE EXCHANGE SINCE THEY ARE
NOT FREELY TRANSFERABLE AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH
SECURITIES IS NOT GOOD DELIVERY IN SETTLEMENT OF TRANSACTIONS ON THE TORONTO STOCK
EXCHANGE. ; |
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provided that, at any time and from time to time, the Holder may exchange a
certificate bearing the foregoing restrictive legends for a certificate bearing no
such legend upon having furnished evidence satisfactory to the Company, acting
reasonably, which may include an opinion of counsel, that the removal of such
restrictive legends would not be contrary to Applicable Law. |
IN WITNESS WHEREOF the Company has caused this Warrant certificate to be signed by its duly
authorized officer as of this day of 2006.
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IVANHOE MINES LTD. |
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Per: |
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Authorized Signatory
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APPENDIX 1
SUBSCRIPTION FORM
TO: IVANHOE MINES LTD.
The undersigned holder of the attached Series A Warrant certificate hereby irrevocably
subscribes for Common Shares of Ivanhoe Mines Ltd. (the Company) pursuant to the
attached Series A Warrant certificate at the Exercise Price per share specified in the said Series
A Warrant certificate and encloses herewith payment of the subscription price therefor in
accordance with the terms of the Series A Warrant certificate.
The undersigned acknowledges and understands that the Common Shares issuable upon exercise of the
Series A Warrant have not been under the U.S. Securities Act of 1933, as amended (the U.S.
Securities Act), and therefore, the Series A Warrant may not be exercised within the United
States or on behalf of any U. S. person (as defined in Regulation S under the U.S. Securities Act),
except upon registration or pursuant to an exemption from the registration requirements of the U.S.
Securities Act and applicable state securities laws.
The undersigned hereby represents for the benefit of the Company that it (i) at the time of
exercise of the Series A Warrants, is not in the United States; (ii) is not a U.S. person as
defined in Regulation S under the U.S. Securities Act and is not exercising any Series A Warrants
on behalf of a U.S. person; and (iii) did not execute or deliver this subscription form in the
United States;
If any Series A Warrants represented by the attached Series A Warrant certificate are not being
exercised, a new Series A Warrant certificate will be issued and delivered with the Common Share
certificates.
Please issue a certificate for the shares being purchased as follows in the name of the
undersigned:
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NAME: |
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(please print)
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ADDRESS: |
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DATED this day of , .
SCHEDULE B
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE SHALL NOT TRADE THE SECURITIES BEFORE l, 2007.
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE U.S. SECURITIES ACT), OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED
STATES OR BY OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON (AS DEFINED IN REGULATION S UNDER THE
U.S. SECURITIES ACT) OR A PERSON IN THE UNITED STATES UNLESS THIS WARRANT AND THE UNDERLYING
SECURITIES ISSUABLE UPON THE EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
AND THE SECURITIES LAWS OF ALL APPLICABLE STATES OF THE UNITED STATES OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
SERIES B WARRANTS TO PURCHASE COMMON SHARES
OF
IVANHOE MINES LTD.
(Incorporated under the laws of the Yukon Territory)
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CERTIFICATE
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46,026,522 |
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NUMBER B -1
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SERIES B
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WARRANTS
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THIS CERTIFIES THAT, for value received, RIO TINTO INTERNATIONAL HOLDINGS LIMITED
(the Holder) is entitled, at any time during the Exercise Period, to purchase, at the Exercise
Price, one Common Share in the capital of IVANHOE MINES LTD. (the Company), in respect of each
Series B Warrant evidenced by this Series B Warrant certificate, by surrendering to the Company at
its principal office located at Suite 654 999 Canada Place, Vancouver, British Columbia, Canada
V6C 3E1, Attention: Corporate Secretary, this Series B Warrant certificate, together with a
Subscription Form, duly completed and executed, and a bank draft, certified cheque or wire transfer
payable to the order of the Company, in lawful money of the United States of America an amount
equal to the product of the then prevailing Exercise Price multiplied by the number of Common
Shares stipulated in the Subscription Form as being subscribed for pursuant to the exercise of the
Series B Warrants evidenced by this Series B Warrant certificate.
These Series B Warrants and the Common Shares issuable upon the exercise of these Series
- 2 -
B Warrants have not been and will not be registered under the United States Securities Act of
1933, as amended (the U.S. Securities Act) or any state securities laws. These Series B Warrants
may not be exercised in the United States or by or on behalf of any U.S. Person (as defined in
Regulation S under the U.S. Securities Act) or person in the United States, unless these Warrants
and the Common Shares issuable upon exercise hereof have been registered under the U.S. Securities
Act and any applicable state securities laws or unless an exemption from such registration is
available.
1. Definitions
1.1 In this Warrant, including the preamble, unless there is something in the subject matter or
context inconsistent therewith, the following expressions shall have the following meanings namely:
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Applicable Law has the meaning assigned to it in the Private Placement
Agreement; |
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Business Day has the meaning assigned to it in the Private Placement
Agreement; |
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Common Shares means the common shares without par value in the capital of the
Company as such shares are constituted on the date of the Private Placement Agreement,
as the same may be reorganized, reclassified or redesignated pursuant to any of the
events set out in Part 10 hereof; |
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Company means Ivanhoe Mines Ltd., a corporation continued under the laws of
the Yukon Territory, and its successors; |
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Company Shareholder Approval means approval of the Holders right to exercise
the Series B Warrants to acquire the maximum number of Common Shares that may be
acquired by the Holder from time to time pursuant to this Series B Warrant certificate
given by a majority of the votes cast by holders of Common Shares present in person or
by proxy at a special meeting of holders of Common Shares convened pursuant to the
terms of the Private Placement Agreement; |
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Company Shareholder Approval Date means the date upon which Company
Shareholder Approval is obtained by the Company; |
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Current Market Price of the Common Shares at any date, means the weighted
average of the sale prices per Common Share at which the Common Shares have traded on
the Exchange, or, if the Common Shares in respect of which a determination of current
market price is being made are not listed thereon, on such stock exchange or securities
market on which such shares are listed or quoted as may be selected for such purpose by
the Companys board of directors, or, if the Common Shares are not listed on any stock
exchange, then on the over-the-counter market, for any twenty (20) consecutive trading
days selected by the Company commencing not more than forty five (45) trading days and
ending not fewer than five (5) trading days
before such date; provided, however, if such Common Shares are not traded during
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such forty (40) trading day period for at least twenty (20) consecutive trading
days, the simple average of the following prices established for each of twenty (20)
consecutive trading days selected by the Company commencing not more than forty five
(45) trading days before such date: |
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the average of the bid and ask prices for each day on which
there was no trading, and |
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the closing price of the Common Shares for each day on which
there was trading, |
or, in the event that, at any date, the Common Shares are not listed on any stock
exchange or securities market or on the over-the-counter market, the current market
price shall be as determined by the Companys board of directors or such firm of
independent chartered accountants as may be selected by the Companys board of
directors, acting reasonably and in good faith in their sole discretion; for these
purposes, the weighted average price for any period shall be determined by dividing
the aggregate sale prices during such period by the total number of Common Shares
sold during such period;
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Exchange means the Toronto Stock Exchange; |
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Exercise Clearance Date means the later of: |
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the Company Shareholder Approval Date; and |
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the Regulatory Approval Date; |
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Exercise Period means the period of time commencing on the Exercise Clearance
Date and ending on the the seven hundred and twenty-fifth (725th) day after
the Warrant Determination Date; |
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Exercise Price means an amount per Common Share in lawful money of the United
States of America equal to, |
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eight dollars and thirty eight cents ($8.38) during the period
of time commencing on the Company Shareholder Approval Date and ending on the
one hundred and eightieth (180th) day after the Warrant
Determination Date; and |
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eight dollars and fifty four cents ($8.54) during the period
commencing on the one hundred and eighty first (181st) day after the
Warrant Determination Date and ending on the three hundred and sixty-fifth
(365th) day after the Warrant
Determination Date; |
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eight dollars and eighty eight cents ($8.88) during the period
commencing on the three hundred and sixty-sixth (366th) day after
the Warrant Determination Date and ending on the five hundred and forty-fifth
(545th) day after the Warrant Determination Date; and |
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nine dollars and two cents ($9.02) during the period commencing
on the five hundred and forty-sixth (546th) day after the Warrant
Determination Date and ending on the seven hundred and twenty-fifth
(725th) day after the Warrant Determination Date. |
unless such price shall have been adjusted in accordance with the provisions of Part
10, in which case it shall mean the adjusted price in effect at such time;
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Expiry Time means (i) immediately upon termination of the Ivanhoe Meeting, if
the Company Shareholder Approval is not obtained at the Ivanhoe Meeting, or (ii) 5:00
oclock in the afternoon, Vancouver time, on the last day of the Exercise Period, if
the Company Shareholder Approval is obtained at the Ivanhoe Meeting; |
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Holder means Rio Tinto International Holdings Limited, a corporation
incorporated under the laws of England and Wales and its successors; |
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Ivanhoe Meeting has the meaning assigned to it in the Private Placement
Agreement; |
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(o) |
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Notice has the meaning assigned to it in the Private Placement Agreement; |
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person means an individual, corporation, partnership, unincorporated
syndicate, unincorporated organization, trust, trustee, executor, administrator, or
other legal representative, or any group or combination thereof; |
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Private Placement Agreement means the agreement made as of the
18th day of October 2006 between the Company and the Holder providing for,
among other things, the issuance of the Series B Warrants; |
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Regulatory Approval means approval under the Investment Canada Act (Canada)
of the Holders right to exercise the Series B Warrants, to the extent such approval is
required in the reasonable opinion of the Holder; |
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Regulatory Approval Date means the date upon which the Holder delivers to the
Company written evidence of Regulatory Approval; |
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Rio Tinto Group has the meaning assigned to it in the Private Placement
Agreement; |
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(u) |
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Series B Warrants means the share purchase warrants of the Company evidenced
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by, and governed by the terms of, this Series B Warrant certificate; |
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Subscription Form means the form of subscription annexed hereto as Appendix
1; and |
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Subsidiary has the meaning assigned to it in the Private Placement Agreement; |
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Warrant Determination Date has the meaning assigned to it in the Private
Placement Agreement; |
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(y) |
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this Series B Warrant certificate, Series B Warrant, herein, hereby,
hereof, hereto, hereunder and similar expressions mean or refer to this Series B
Warrant certificate and any deed or instrument supplemental or ancillary thereto and
any appendices or schedules hereto or thereto and not to any particular article,
section, subsection, clause, subclause or other portion hereof. |
2. Exercise Period
2.1 The Series B Warrants shall be exercisable during the Exercise Period.
3. Expiry Time
3.1 After the Expiry Time, all rights under any Series B Warrants evidenced hereby which remain
unexercised at the Expiry Time shall wholly cease and terminate and such Series B Warrants shall
be null and void and of no value or effect.
4. Exercise Procedure
4.1 The Holder may exercise its rights hereunder to purchase Common Shares during the Exercise
Period by delivering to the Company in accordance with Part 24 hereof:
|
(a) |
|
this Series B Warrant certificate, with the Subscription Form duly completed
and executed by the Holder or its legal representative or attorney, duly appointed by
an instrument in writing in form and manner satisfactory to the Company; and |
|
|
(b) |
|
a bank draft or certified cheque payable, or wire transfer confirmation in
writing evidencing payment, to the order of the Company, in lawful money of the United
States of America an amount equal to the product of the then prevailing Exercise Price
multiplied by the number of Common Shares stipulated in the Subscription Form as being
subscribed for pursuant to the exercise of the Series B Warrants evidenced by this
Series B Warrant certificate. |
5. Entitlement to Certificate
5.1 Upon delivery and payment as provided in Part 4, the Company shall cause to be issued to the
- 6 -
Holder the Common Shares subscribed for up to the maximum number that the Holder is entitled to
purchase pursuant to this Series B Warrant certificate and the Holder shall become a shareholder of
the Company in respect of such Common Shares with effect from the date of such delivery and payment
and shall be entitled to delivery of a certificate or certificates evidencing such Common Shares
and the Company shall cause such certificate or certificates to be delivered to the Holder in
accordance with Part 24 hereof within three (3) Business Days of such delivery and payment.
6. Partial Exercise
6.1 The Holder may subscribe for and purchase a number of Common Shares less than the number the
Holder is entitled to purchase pursuant to this Series B Warrant certificate. In the event of any
such partial subscription and purchase prior to the Expiry Time, the Holder shall be entitled to
receive, without charge, a new Series B Warrant certificate in respect of the balance of the Common
Shares of which the Holder was entitled to purchase pursuant to this Series B Warrant certificate
and which were then not purchased.
7. No Fractional Shares
7.1 Notwithstanding any adjustments provided for in Part 10 hereof or otherwise, the Company shall
not be required upon the exercise of any Series B Warrants, to issue fractional Common Shares in
satisfaction of its obligations hereunder. To the extent that the Holder would be entitled to
purchase a fraction of a Common Share, such right may be exercised in respect of such fraction only
in combination with other rights which, in the aggregate, entitle the Holder to purchase a whole
number of Common Shares.
8. Not a Shareholder
8.1 Nothing in this Series B Warrant certificate or in the holding of the Series B Warrants
evidenced hereby shall be construed as conferring upon the Holder any right or interest whatsoever
as a shareholder of the Company.
9. Covenants
9.1 The Company hereby covenants and agrees that:
|
(a) |
|
so long as any Series B Warrants evidenced hereby remain outstanding, it shall
reserve and there shall remain unissued out of its authorized capital a sufficient
number of Common Shares to satisfy the maximum right of purchase provided for herein; |
|
|
(b) |
|
all Common Shares which shall be issued upon the exercise of any Series B
Warrants
hereunder shall, upon payment therefor of the then prevailing Exercise Price, be
issued as fully paid and non-assessable Common Shares; and |
- 7 -
|
(c) |
|
it will at its expense expediously use its best efforts to obtain the listing
of such Common Shares (subject to issue and notice of issue) on each stock exchange,
securities market or over-the-counter market on which the Common Shares may be listed
from time to time. |
10. Adjustment to Exercise Price
10.1 The Exercise Price in effect at any time is subject to adjustment from time to time in the
events and in the manner provided in this Part 10.
10.2 If, and whenever at any time after the date hereof, the Company:
|
(a) |
|
issues Common Shares or securities exchangeable for or convertible into Common
Shares to all or substantially all the holders of the Common Shares as a stock
dividend; or |
|
|
(b) |
|
makes a distribution on its outstanding Common Shares payable in Common Shares
or securities exchangeable for or convertible into Common Shares; or |
|
|
(c) |
|
subdivides its outstanding Common Shares into a greater number of shares; or |
|
|
(d) |
|
consolidates its outstanding Common Shares into a lesser number of shares; |
(any of such events being called a Common Share Reorganization), then the Exercise Price will be
adjusted effective immediately after the effective date or record date, whichever is earlier, for
the happening of a Common Share Reorganization at which the holders of Common Shares are determined
for the purpose of the Common Share Reorganization by multiplying the Exercise Price in effect
immediately prior to such effective date or record date by a fraction, the numerator of which is
the number of Common Shares outstanding on such effective date or record date before giving effect
to such Common Share Reorganization and the denominator of which is the number of Common Shares
outstanding immediately after giving effect to such Common Share Reorganization (including, in the
case where securities exchangeable for or convertible into Common Shares are distributed, the
number of Common Shares that would have been outstanding had all such securities been exchanged for
or converted into Common Shares on such effective date or record date).
10.3 To the extent that any adjustment in the Exercise Price occurs pursuant to Section 10.2 as
a result of the fixing by the Company of a record date for the distribution of securities
exchangeable for or convertible into Common Shares, the Exercise Price shall be readjusted
immediately after the expiry of any relevant exchange or conversion right to the Exercise Price
which would then be in effect based upon the number of Common Shares actually issued and remaining
issuable after such expiry and shall be further readjusted in such manner upon the expiry of any
further such right. If the Holder has not
exercised all of the Series B Warrants on or prior to the record date of any stock dividend or
distribution or the effective date of any subdivision or consolidation, as the case may be, upon
the exercise of such Series B Warrants thereafter, the Holder shall be entitled to receive and
shall accept in lieu of the
- 8 -
number of Common Shares then subscribed for and purchased by the
Holder, at the Exercise Price determined in accordance with Section 10.2, the aggregate number of
Common Shares that the Holder would have been entitled to receive as a result of such Common Share
Reorganization, if, on such record date or effective date, as the case may be, the Holder had been
the holder of record of the number of Common Shares so subscribed for and purchased.
10.4 If, and whenever at any time after the date hereof, the Company fixes a record date for
the issue of rights, options or warrants to the holders of all or substantially all of its
outstanding Common Shares under which such holders are entitled to subscribe for or purchase Common
Shares or securities exchangeable for or convertible into Common Shares, where:
|
(a) |
|
the right to subscribe for or purchase Common Shares, or the right to exchange
securities for or convert securities into Common Shares, expires not more than forty
five (45) days after the date of such issue (the period from the record date to the
date of expiry being referred to as the Rights Period); and |
|
|
(b) |
|
the cost per Common Share during the Rights Period (inclusive of any cost or
acquisition of securities exchangeable for or convertible into Common Shares in
addition to any direct cost of Common Shares) (such cost being referred to as the Per
Share Cost) is less than 95% of the Current Market Price of the Common Shares on the
record date; |
(any of such events being referred to as a Rights Offering), then the Exercise Price will be
adjusted to a price determined in accordance with Section 10.5.
10.5 In the event of a Rights Offering, the Exercise Price will be adjusted effective
immediately after the end of the Rights Period to a price determined by multiplying the Exercise
Price in effect immediately prior to the end of the Rights Period by a fraction:
|
(a) |
|
the numerator of which is the aggregate of: |
|
(i) |
|
the number of Common Shares outstanding as of the record date
for the Rights Offering; and |
|
|
(ii) |
|
a number determined by dividing the product of the Per Share
Cost and: |
|
A. |
|
where the event giving rise to the application
of this Section 10.5 was the issue of rights, options or warrants to
the holders of Common Shares under which such holders are entitled to
subscribe for or purchase additional Common Shares, the number of
Common Shares so subscribed for or purchased during the Rights Period,
or |
|
|
B. |
|
where the event giving rise to the application
of this Section 10.5 was the issue of rights, options or warrants to
the holders of Common |
- 9 -
|
|
|
Shares under which such holders are entitled to
subscribe for or purchase securities exchangeable for or convertible
into Common Shares, the number of Common Shares for which those
securities so subscribed for or purchased during the Rights Period
could have been exchanged or into which they could have been converted, |
by the Current Market Price of the Common Shares as of the record date for
the Rights Offering; and
|
(b) |
|
the denominator of which is |
|
(i) |
|
in the case described in subsection 10.5(a)(ii)A., the number
of Common Shares outstanding, or |
|
|
(ii) |
|
in the case described in subsection 10.5(a)(ii)B., the number
of Common Shares that would be outstanding if all the Common Shares described
in subsection 10.5(a)(ii)B. had been issued, |
as at the end of the Rights Period.
Any Common Shares owned by or held for the account of the Company or any Subsidiary of the Company
will be deemed not to be outstanding for the purpose of any such computation.
10.6 If, by the terms of any rights, options or warrants referred to in this Part 10, there is more
than one purchase, conversion or exchange price per Common Share, the Per Share Cost will be
calculated for purposes of the adjustment with reference to the aggregate price of the total number
of additional Common Shares offered for subscription or purchase, or the aggregate conversion or
exchange price of the convertible securities so offered, on the basis of the lowest purchase,
conversion or exchange price per Common Share, as the case may be.
10.7 To the extent that any adjustment in the Exercise Price occurs pursuant to Section 10.5 as
a result of the the issue or distribution of rights, options or warrants referred to in Section
10.5, the Exercise Price shall be readjusted immediately after the expiry of any relevant exchange,
conversion or exercise right to the Exercise Price which would then be in effect based upon the
number of Common Shares actually issued and remaining issuable after such expiry and shall be
further readjusted in such manner upon the expiry of any further such right.
10.8 If the Holder has exercised any Series B Warrants in accordance herewith during the period
beginning immediately after the record date for a Rights Offering and ending on the last day of the
Rights Period therefor, the Holder will, in addition to the Common Shares to which it is otherwise
entitled upon such exercise, be entitled to that number of additional Common Shares equal to the
result obtained when the difference, if any, between:
|
(a) |
|
the Exercise Price in effect immediately prior to the end of such Rights
Offering; and |
- 10 -
|
(b) |
|
the Exercise Price as adjusted hereunder for such Rights Offering; |
is multiplied by the number of Common Shares received upon the exercise of such Series B Warrants
during such period, and the resulting product is divided by the Exercise Price as adjusted
hereunder for such Rights Offering, provided that the provisions of Section 7.1 will be applicable
to any fractional interest in a Common Share to which the Holder might otherwise be entitled. Such
additional Common Shares will be deemed to have been issued to the Holder immediately following the
end of the Rights Period and a certificate for such additional Common Shares will be delivered to
the Holder within ten (10) Business Days following the end of the Rights Period.
10.9 If, and whenever at any time after the date hereof, the Company fixes a record date for the
issue or the distribution to the holders of all or substantially all of its Common Shares of:
|
(a) |
|
shares of the Company of any class other than Common Shares, |
|
|
(b) |
|
rights, options or warrants to acquire: |
|
(i) |
|
Common Shares or securities exchangeable for or convertible
into Common Shares (other than rights, options or warrants of the nature
described in Section 10.4), or |
|
|
(ii) |
|
shares other than Common Shares or securities exchangeable for
or convertible into shares other than Common Shares or property or other assets
of the Company, |
|
(c) |
|
evidences of indebtedness, or |
|
|
(d) |
|
any property or other assets |
and if such issuance or distribution does not constitute a Common Share Reorganization or a Rights
Offering (any of such non-excluded events being referred to as a Special Distribution), the
Exercise Price will be adjusted in accordance with Section 10.10.
10.10 In the event of a Special Distribution, the Exercise Price will be adjusted effective
immediately after the record date for the Special Distribution to a price determined by multiplying
the Exercise Price in effect on such record date by a fraction:
|
(a) |
|
the numerator of which is: |
|
(i) |
|
the product of the number of Common Shares outstanding on such
record
date and the Current Market Price of the Common Shares on such record date;
less
|
- 11 -
|
(ii) |
|
the aggregate fair market value (as determined by the board of
directors of the Company, acting reasonably and in good faith) to the holders
of the Common Shares of such securities or property or other assets so issued
or distributed in the Special Distribution; and |
|
(b) |
|
the denominator of which is the number of Common Shares outstanding on such
record date multiplied by the Current Market Price of the Common Shares on such record
date. |
Any Common Shares owned by or held for the account of the Company or any Subsidiary of the Company
will be deemed not to be outstanding for the purpose of any such computation.
10.11 To the extent that any adjustment in the Exercise Price occurs pursuant to Section 10.10 as
a result of the the issue or distribution of rights, options or warrants referred to in Section
10.10, the Exercise Price shall be readjusted immediately after the expiry of any relevant
exchange, conversion or exercise right to the Exercise Price which would then be in effect based
upon the number of Common Shares actually issued and remaining issuable after such expiry and shall
be further readjusted in such manner upon the expiry of any further such right.
10.12 If, and whenever at any time after the date hereof, there is a reclassification or
redesignation of the Common Shares outstanding at any time or change of the Common Shares into
other shares or into other securities (other than a Common Share Reorganization), or a
consolidation, amalgamation or merger of the Company with or into any other corporation or other
entity (other than a consolidation, amalgamation or merger which does not result in any
reclassification or redesignation of the outstanding Common Shares or a change of the Common Shares
into other shares), or a transfer of the undertaking or assets of the Company as an entirety or
substantially as an entirety to another corporation or other entity (any of such events being
referred to as a Capital Reorganization), the Holder, upon exercising any Series B Warrants after
the effective date of such Capital Reorganization, will be entitled to receive in lieu of the
number of Common Shares to which such Holder was theretofore entitled upon such exercise, the
aggregate number of shares, other securities or other property which the Holder would have been
entitled to receive as a result of such Capital Reorganization if, on the effective date thereof,
the Holder had been the registered holder of the number of Common Shares to which such Holder was
theretofore entitled upon exercise of such Series B Warrants.
10.13 If, and whenever at any time after the date hereof, there is a Common Share Reorganization,
a Rights Offering or a Special Distribution, that results in an adjustment pursuant to Sections
10.2, 10.5 or 10.10, as the case may be, or a readjustment pursuant to Sections 10.3, 10.7 or
10.11, as the case may be, in the Exercise Price, then the number of Common Shares acquirable upon
the subsequent exercise of the Series B Warrants shall be simultaneously adjusted or readjusted, as
the case may be, by multiplying the number of Common Shares acquirable upon the exercise of the
Series B Warrants immediately prior to such adjustment or readjustment by a fraction which shall be
the reciprocal of the
fraction used in the adjustment or readjustment of the Exercise Price.
11. Rules Regarding Calculation of Adjustment of Exercise Price
- 12 -
11.1 The adjustments provided for in Part 10 are cumulative and will, in the case of adjustments to
the Exercise Price, be computed to the nearest one-tenth of one cent and will be made successively
whenever an event referred to therein occurs, subject to the following provisions of this Part 11.
11.2 No adjustment in the Exercise Price is required to be made unless such adjustment would result
in a change of at least 1% in the prevailing Exercise Price; provided, however, that any
adjustments which, except for the provisions of this Section 11.2, would otherwise have been
required to be made, will be carried forward and taken into account in any subsequent adjustments.
11.3 No adjustment in the Exercise Price (or in the number of Common Shares acquirable upon the
exercise of the Series B Warrants pursuant to Section 10.13) will be made in respect of any event
described in Part 10, other than the events referred to in subsections 10(2)(c) and (d), if the
Holder is entitled to participate in such event on the same terms, mutatis mutandis, as if
the Holder had exercised its Series B Warrants prior to or on the effective date or record date of
such event, or if the Company makes adequate provision for the Holder to participate in such event
on the same terms or with the same effect, mutatis mutandis, upon the subsequent exercise
of the Series B Warrants (the adequacy of such provisions to be determined by the Holder in its
sole discretion, acting reasonably).
11.4 No adjustment in the Exercise Price will be made under Part 10 in respect of the issue from
time to time of Common Shares as dividends paid in the ordinary course to holders of Common Shares
who exercise an option or election to receive substantially equivalent dividends in Common Shares
in lieu of receiving a cash dividend, and any such issue will be deemed not to be a Common Share
Reorganization.
11.5 If at any time a dispute arises with respect to adjustments provided for in Part 10, such
dispute will be conclusively determined by the auditors of the Company or if they are unable or
unwilling to act, by such other firm of independent chartered accountants as may be selected by the
board of directors of the Company, acting reasonably and in good faith, and any such determination
will be binding upon the Company, the Holder and the shareholders of the Company.
11.6 If, and whenever at any time after the date hereof, the Company takes any action affecting the
Common Shares, other than action described in Part 10, which in the opinion of the board of
directors of the Company, acting reasonably and in good faith, would materially affect the rights
of the Holder, the Exercise Price will be adjusted in such manner, if any, and at such time, by
action of the board of directors of the Company, acting reasonably and in good faith, but subject
in all cases to any necessary Exchange approval or other regulatory approval. Failure by the board
of directors of the Company to take action so as to provide for an adjustment on or prior to the
effective date of any action by the Company affecting the Common Shares will be conclusive evidence
that the board of directors of the Company has determined that it is equitable to make no
adjustment in the circumstances.
11.7 If the Company sets a record date to determine the holders of the Common Shares for the
purpose of entitling them to receive any dividend or distribution or sets a record date to take any
other action and, thereafter and before the distribution to such shareholders of any such dividend
or distribution or the taking of any other action, decides not to implement its plan to pay or
deliver such
- 13 -
dividend or distribution or take such other action, then no adjustment in the Exercise
Price will be required by reason of the setting of such record date.
11.8 In the absence of a resolution of the board of directors of the Company fixing a record date
for a Special Distribution or Rights Offering, the Company will be deemed to have fixed as the
record date therefor the date on which the Special Distribution or Rights Offering is effected.
11.9 As a condition precedent to the taking of any action which would require any adjustment to the
Series B Warrants, including the Exercise Price, the Company must take any corporate action which
may be necessary in order that the Company have unissued and reserved in its authorized capital,
and may validly and legally issue as fully paid and non-assessable, all the shares or other
securities which the Holder is entitled to receive on the full exercise thereof in accordance with
the provisions hereof.
11.10 The Company will from time to time, immediately after the occurrence of any event which
requires an adjustment or readjustment as provided in Part 10, forthwith give notice to the Holder
specifying the event requiring such adjustment or readjustment and the results thereof, including
the resulting Exercise Price.
11.11 The Company covenants to and in favour of the Holder that so long as any Series B Warrants
remain outstanding, it will give notice to the Holder of its intention to fix a record date for any
Common Share Reorganization (other than the subdivision or consolidation of the Common Shares),
Rights Offering or Special Distribution which may give rise to an adjustment in the Exercise Price,
and, in each case, such notice must specify the particulars of such event and the record date and
the effective date for such event; provided that the Company is only required to specify in such
notice such particulars of such event as have been fixed and determined on the date on which such
notice is given. Such notice must be given not less than fourteen (14) days in each case prior to
such applicable record date or effective date.
12. Consolidation and Amalgamation
12.1 The Company shall not enter into any transaction whereby all or substantially all of its
undertaking, property and assets would become the property of any other corporation (herein called
a successor corporation) whether by way of reorganization, reconstruction, consolidation,
amalgamation, merger, transfer, sale, disposition or otherwise, unless prior to or
contemporaneously with the consummation of such transaction the Company and the successor
corporation shall have executed such instruments and done such things as, in the opinion of counsel
to the Holder, are necessary or advisable to establish that upon the consummation of such
transaction:
|
(a) |
|
the successor corporation will have assumed all the covenants and obligations
of the
Company under this Series B Warrant certificate; and |
|
|
(b) |
|
this Series B Warrant certificate will be a valid and binding obligation of the
successor corporation entitling the Holder, as against the successor corporation, to
all |
- 14 -
|
|
|
the rights of the Holder under this Series B Warrant certificate. |
12.2 Whenever the conditions of Section 12.1 shall have been duly observed and performed the
successor corporation shall possess, and from time to time may exercise, each and every right and
power of the Company under this Series B Warrant certificate in the name of the Company or
otherwise and any act or proceeding by any provision hereof required to be done or performed by any
director or officer of the Company may be done and performed with like force and effect by the like
directors or officers of the successor corporation.
13. Representation and Warranty
13.1 The Company hereby represents and warrants with and to the Holder that the Company is duly
authorized and has the corporate and lawful power and authority to create and issue the Series B
Warrants represented hereby and the Common Shares issuable upon the exercise hereof and to perform
its obligations hereunder and that this Series B Warrant certificate represents a valid, legal and
binding obligation of the Company enforceable in accordance with its terms.
14. If Share Transfer Books Closed
14.1 The Company shall not be required to deliver certificates for Common Shares while the share
transfer books of the Company are properly closed, prior to any meeting of shareholders or for the
payment of dividends or for any other purpose and, in the event of the exercise of any Series B
Warrants in accordance with the provisions hereof and the making of any subscription and payment
for the Common Shares pursuant thereto during any such period, delivery of certificates for Common
Shares may be postponed for a period not exceeding three (3) Business Days after the date of the
re-opening of said share transfer books. Provided however that any such postponement of delivery
of certificates shall be without prejudice to the right of the Holder, if the Holder has exercised
any Series B Warrants and made payment during such period, to receive such certificates for the
Common Shares subscribed for after the share transfer books shall have been re-opened.
15. Protection of Shareholders, Officers and Directors
15.1 Subject as herein provided, all or any of the rights conferred upon the Holder may be enforced
by the Holder by appropriate legal proceedings. No recourse under or upon any obligation, covenant
or agreement herein contained or in any of the Series B Warrants represented hereby shall be taken
against any shareholder, officer or director of the Company, either directly or through the
Company, it being expressly agreed and declared that the obligations under the Series B Warrants
evidenced hereby, are solely corporate obligations of the Company and that no personal liability
whatever shall attach to or be incurred by the shareholders, officers, or directors of the Company
or any of them in respect thereof, any and all rights and claims against every such shareholder,
officer
or director being hereby expressly waived as a condition of and as a consideration for the issue of
the Series B Warrants evidenced hereby.
16. Lost Certificate
- 15 -
16.1 If the Series B Warrant certificate evidencing the Series B Warrants represented hereby
becomes stolen, lost, mutilated or destroyed, the Company may, upon delivery to it by the Holder of
an appropriate indemnity, issue and countersign a new Series B Warrant certificate of like
denomination, tenor and date as the certificate so stolen, lost mutilated or destroyed.
17. Governing Law
17.1 This Warrant shall be governed by, and construed in accordance with, the laws of the Province
of British Columbia and the laws of Canada applicable therein but the reference to such laws shall
not, by conflict of laws rules or otherwise, require the application of the law of any jurisdiction
other than the Province of British Columbia.
18. Severability
18.1 If any one or more of the provisions or parts thereof contained in this Series B Warrant
certificate should be or become invalid, illegal or unenforceable in any respect in any
jurisdiction, the remaining provisions or parts thereof contained herein shall be and shall be
conclusively deemed to be, as to such jurisdiction, severable therefrom and:
|
(a) |
|
the validity, legality or enforceability of such remaining provisions or parts
thereof shall not in any way be affected or impaired by the severance of the provisions
or parts thereof severed; and |
|
|
(b) |
|
the invalidity, illegality or unenforceability of any provision or part thereof
contained in this Series B Warrant certificate in any jurisdiction shall not affect or
impair such provision or part thereof or any other provisions of this Series B Warrant
certificate in any other jurisdiction. |
19. Headings
19.1 The headings of the Parts of this Series B Warrant certificate have been inserted for
convenience and reference only and do not define, limit, alter or enlarge the meaning of any
provision of this Series B Warrant certificate.
20. Gender
20.1 Whenever used in this Warrant, words importing the singular number only shall include the
plural, and vice versa, and words importing the masculine gender shall include the feminine gender.
21. Day not a Business Day
- 16 -
21.1 In the event that any day on or before 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 the requisite time
on the next succeeding day that is a Business Day. If the payment of any amount is deferred for
any period, then such period shall be included for purposes of the computation of any interest
payable hereunder.
22. Computation of Time Period
22.1 Except to the extent otherwise provided herein, in the computation of a period of time from a
specified date to a later specified date, the word from means from and including and the words
to and until each mean to but excluding.
23. Binding Effect
23.1 This Warrant and all of its provisions shall enure to the benefit of the Holder, and their
respective heirs, executors, administrators, successors, legal representatives and assigns and
shall be binding upon the Company and its successors and permitted assigns. The expression the
Holder as used herein shall include the Holders assigns whether immediate or derivative.
24. Notice
24.1 Any notice, document, communication or delivery required or permitted by this Series B Warrant
certificate will be deemed to be duly given if it is made in accordance with the terms of the
Private Placement Agreement governing the giving of Notice thereunder.
25. Time of Essence
25.1 Time shall be of the essence hereof.
26. Limited Transferability of Warrants
26.1 The Series B Warrants represented by this Series B Warrant certificate are non-transferable
other than to any person who is a member of the Rio Tinto Group who covenants and agrees in writing
with the Company to assume all of the Holders obligations under the Private Placement Agreement in
respect of the Series B Warrants or any Common Shares acquired by it.
27. Legends
27.1 Any certificate representing Common Shares issued upon the exercise of the Series B Warrants
|
(a) |
|
prior to the date which is four months and one day after the date hereof will
bear the following legend: |
|
|
|
|
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE |
- 17 -
|
|
|
SECURITIES
REPRESENTED BY THIS CERTIFICATE SHALL NOT TRADE THE SECURITIES BEFORE l,
200l. |
provided that at any time subsequent to the date which is four months and one
day after the date hereof any certificate representing such Common Shares may be
exchanged for a certificate bearing no such legends; and
|
(b) |
|
at any time during the Exercise Period will bear the the following legends: |
|
|
|
|
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE U.S. SECURITIES
ACT) NOR THE SECURITIES ACT OF ANY STATE OF THE UNITED STATES. THESE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS
THEYHAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND THE SECURITIES LAWS OF
ALL APPLICABLE STATES OF THE UNITED STATES OR AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS IS AVAILABLE.; |
|
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK
EXCHANGE BUT CANNOT BE TRADED THROUGH THE FACILITIES OF THE EXCHANGE SINCE THEY ARE
NOT FREELY TRANSFERABLE AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH
SECURITIES IS NOT GOOD DELIVERY IN SETTLEMENT OF TRANSACTIONS ON THE TORONTO STOCK
EXCHANGE. ; |
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provided that, at any time and from time to time, the Holder may exchange a
certificate bearing the foregoing restrictive legends for a certificate bearing no
such legend upon having furnished evidence satisfactory to the Company, acting
reasonably, which may include an opinion of counsel, that the removal of such
restrictive legends would not be contrary to Applicable Law. |
IN WITNESS WHEREOF the Company has caused this Warrant certificate to be signed by its duly
authorized officer as of this day of 2006.
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IVANHOE MINES LTD. |
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Per: |
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Authorized Signatory
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APPENDIX 1
SUBSCRIPTION FORM
TO: IVANHOE MINES LTD.
The undersigned holder of the attached Series B Warrant certificate hereby irrevocably
subscribes for Common Shares of Ivanhoe Mines Ltd. (the Company) pursuant to the
attached Series B Warrant certificate at the Exercise Price per share specified in the said Series
B Warrant certificate and encloses herewith payment of the subscription price therefor in
accordance with the terms of the Series B Warrant certificate.
The undersigned acknowledges and understands that the Common Shares issuable upon exercise of the
Series B Warrant have not been under the U.S. Securities Act of 1933, as amended (the U.S.
Securities Act), and therefore, the Series B Warrant may not be exercised within the United
States or on behalf of any U. S. person (as defined in Regulation S under the U.S. Securities Act),
except upon registration or pursuant to an exemption from the registration requirements of the U.S.
Securities Act and applicable state securities laws.
The undersigned hereby represents for the benefit of the Company that it (i) at the time of
exercise of the Series B Warrants, is not in the United States; (ii) is not a U.S. person as
defined in Regulation S under the U.S. Securities Act and is not exercising any Series B Warrants
on behalf of a U.S. person; and (iii) did not execute or deliver this subscription form in the
United States;
If any Series B Warrants represented by the attached Series B Warrant certificate are not being
exercised, a new Series B Warrant certificate will be issued and delivered with the Common Share
certificates.
Please issue a certificate for the shares being purchased as follows in the name of the
undersigned:
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NAME: |
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(please print)
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ADDRESS: |
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DATED this day of , .
SCHEDULE C
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of [______] [___], 2006, by and between Rio Tinto
International Holdings Limited, a corporation incorporated under the laws of England and Wales
(Rio Tinto, and together with its permitted assignees, Selling Shareholder),
and Ivanhoe Mines Ltd., a corporation continued under the laws of the Yukon Territory
(Ivanhoe).
WHEREAS, pursuant to that certain Private Placement Agreement, dated as of October 18, 2006
(the Private Placement Agreement), by and between Ivanhoe and Rio Tinto, Rio Tinto shall
subscribe for and purchase common shares without par value in the capital of Ivanhoe (Ivanhoe
Shares) pursuant to Sections 2.1 and 2.3 of the Private Placement Agreement;
WHEREAS, pursuant to the Private Placement Agreement, Rio Tinto shall subscribe for and
purchase share purchase warrants (the Warrants) exercisable to purchase Ivanhoe Shares
pursuant to Section 2.1 of the Private Placement Agreement; and
WHEREAS, as a condition to the obligations of Rio Tinto to complete the First Tranche Private
Placement (as defined in the Private Placement Agreement), Ivanhoe has agreed to provide Rio Tinto
certain registration rights with respect to its Ivanhoe Shares.
NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, it is agreed as follows:
1. Definitions. (a) Unless otherwise defined herein, the terms below shall have the
following meanings (such meanings being equally applicable to both the singular and plural form of
the terms defined):
Affiliate shall mean, with respect to any specified Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under
common control with, such specified Person.
Agreement shall mean this Registration Rights Agreement, including all amendments,
modifications and supplements and any exhibits or schedules to any of the foregoing.
Business Day shall mean any day that is not a Saturday, a Sunday or a day on which
commercial banks are required or permitted by law to be closed in the City of New York in the State
of New York, the City of Vancouver in the Province of British Columbia or the City of London in
England.
control (including the terms controlled by and under common control
with) means the possession, directly or indirectly, of the power to direct or cause the
direction of the
management and policies of a Person, whether through the ownership of voting
securities, as trustee or executor, by contract or otherwise, including, without limitation, the
ownership, directly or indirectly, of securities having the power to elect a majority of the board
of directors or similar body governing the affairs of such Person.
Exchange Act shall mean the United States Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated thereunder.
NASD shall mean the National Association of Securities Dealers, Inc., or any
successor entity thereof.
Person shall mean any individual, corporation, partnership, joint venture, firm,
trust, unincorporated organization, government or any agency or political subdivision thereof or
other entity.
Registrable Securities shall mean all and any Ivanhoe Shares held by Selling
Shareholder (including any Securities issuable or issued or distributed in respect of any such
Ivanhoe Shares by way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, reorganization, merger, amalgamation, consolidation or otherwise). For
purposes of this Agreement, Registrable Securities shall cease to be Registrable Securities when
(i) a Registration Statement (other than a Form F-6 or successor thereto) covering such Registrable
Securities has been declared effective under the Securities Act by the SEC and such Registrable
Securities have been disposed of pursuant to such effective Registration Statement, (ii) the entire
amount of the Registrable Securities proposed to be sold by Selling Shareholder in a single sale,
in the opinion of counsel satisfactory to Ivanhoe and Selling Shareholder, each in their reasonable
judgment, may be distributed to the public in the United States pursuant to Rule 144 (or any
successor provision then in effect) under the Securities Act in any three-month period, (iii) any
such Registrable Securities have been sold in a sale made pursuant to Rule 144 (or any successor
provision then in effect) under the Securities Act or (iv) the Registrable Securities are saleable
pursuant to Rule 144(k) under the Securities Act.
Registration Expenses shall mean all expenses in connection with or incident to the
registration of Registrable Securities hereunder, including, without limitation, (a) all SEC and
any NASD registration and filing fees and expenses, (b) all fees and expenses in connection with
the registration or qualification of Registrable Securities for offering and sale under the
securities or blue sky laws of any state or other jurisdiction of the United States of America
and, in the case of an underwritten offering, determination of their eligibility for investment
under the laws of such jurisdictions as the managing underwriter or underwriters may reasonably
designate, including, without limitation, reasonable fees and disbursements, if any, of counsel for
the underwriters in connection with such registrations or qualifications and determination, (c) all
expenses relating to the preparation, printing, distribution and reproduction of any Registration
Statement required to be filed hereunder, each prospectus included therein or prepared for
distribution pursuant hereto, each amendment or supplement to the foregoing, the expenses of
preparing Registrable Securities in a form for delivery for purchase pursuant to such registration
or qualification and the expense of printing or producing any underwriting agreement(s) and
agreement(s) among underwriters and any blue sky or legal investment memoranda, any selling
agreements and all other documents approved for use in writing by Ivanhoe to be used in
2
connection
with the offering, sale or delivery of Registrable Securities, (d) messenger, telephone and
delivery expenses of Ivanhoe and out-of-pocket travel expenses incurred by or for Ivanhoes
personnel for travel undertaken for any road show made in connection with the offering of
securities registered thereby, (e) fees and expenses of any transfer agent and registrar with
respect to the delivery of any Registrable Securities and any escrow agent or custodian involved in
the offering, (f) fees, disbursements and expenses of counsel of Ivanhoe and independent certified
public accountants of Ivanhoe incurred in connection with the registration, qualification and
offering of the Registrable Securities (including, without limitation, the expenses of any opinions
or comfort letters required by or incident to such performance and compliance), (g) fees,
expenses and disbursements of counsel and any other persons retained by Ivanhoe, including, without
limitation, special experts retained by Ivanhoe in connection with such registration, (h)
Securities Act liability insurance, if Ivanhoe desires such insurance and (i) the fees and expenses
incurred by Ivanhoe and its advisers in connection with the quotation or listing of Registrable
Securities on any securities exchange or automated securities quotation system. Any brokerage
commissions attributable to the sale of any of the Registrable Securities, and any commissions,
fees, discounts or, except as specified in the immediately preceding sentence, expenses of any
underwriter or placement agent incurred in connection with an offering of securities registered in
accordance with this Agreement and any fees and expenses of any counsel or other advisors to
Selling Shareholder and any other out-of-pocket expenses of Selling Shareholder shall not be
Registration Expenses.
Registration Statement shall mean a Demand Registration Statement, a Shelf
Registration Statement or a Piggy-Back Registration Statement, as the case may be.
SEC shall mean the United States Securities and Exchange Commission, or any
successor thereto.
Securities Act shall mean the United States Securities Act of 1933, as amended, and
all rules and regulations promulgated thereunder.
(b) The following terms have the meanings set forth it the Section set forth opposite such
term:
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Term |
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Section |
Blackout Period |
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Demand Registration |
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2(a) |
Demand Registration Statement |
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2(a) |
Indemnified Party |
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8(c) |
Indemnifying Party |
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8(c) |
Ivanhoe |
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Preamble |
Ivanhoe Shares |
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Recitals |
Maximum Number of Securities |
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3(c) |
Piggy-Back Registration |
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3(a) |
Piggy-Back Registration Statement |
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3(a) |
Private Placement Agreement |
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Recitals |
Rio Tinto |
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Preamble |
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Term |
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Selling Shareholder |
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Preamble |
Shelf Registration |
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2(c) |
Shelf Registration Statement |
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2(c) |
Warrants |
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Recitals |
2. Demand Registration.
(a) At any time after the first (1st) anniversary of the First Closing Date (as
defined in the Private Placement Agreement), after receipt of a written request from Selling
Shareholder requesting that Ivanhoe effect a registration (a Demand Registration) under
the Securities Act covering all or part of the Registrable Securities, and which notice shall
specify the number of Registrable Securities for which registration is requested and the intended
method or methods of distribution thereof, Ivanhoe shall, as soon as practicable, but in any event
no later than thirty (30) days (excluding any days which occur during a permitted Blackout Period
under Section 4 below) after receipt of such written request, file with the SEC and use its
reasonable best efforts to cause to be declared effective, a registration statement (a Demand
Registration Statement) relating to all of the Registrable Securities that Ivanhoe has been so
requested to register for sale, to the extent required to permit the disposition (in accordance
with the intended method or methods of distribution thereof) of the Registrable Securities so
registered.
(b) If the Demand Registration relates to an underwritten public offering and the managing
underwriter of such proposed public offering advises Ivanhoe and Selling Shareholder that, in its
opinion, the number of securities requested to be included in the Demand Registration (including
securities to be sold by Ivanhoe or any other security holder) exceeds the number which can be sold
in such offering within an acceptable price range, then Ivanhoe shall include in such Demand
Registration first, the Registrable Securities Selling Shareholder proposes to register,
and second, any securities Ivanhoe proposed to register. Ivanhoe shall not hereafter enter
into any agreement which is inconsistent with the rights of priority provided in this Section 2(b).
(c) Any Demand Registration Statement may be required by Selling Shareholder to be on Form
F-10 (or any successor form) under the Securities Act (a Shelf Registration Statement)
relating to the offer and sale by Selling Shareholder of any or all of the Registrable Securities
at any time and from time to time on a delayed or continuous basis in accordance with Canadian
shelf prospectus offering procedures, through such method or methods of distribution as Selling
Shareholder shall select (the Shelf Registration), provided, that Selling
Shareholder shall be entitled to request no more than two (2) underwritten public offerings
pursuant to a Shelf Registration Statement in any twelve-month period.
(d) Selling Shareholder shall be entitled to an aggregate of five (5) registrations of
Registrable Securities pursuant to this Section 2; provided, that (i) no more than one (1)
such registration shall be a Shelf Registration pursuant to Section 2(c), (ii) a registration
requested pursuant to this Section 2 shall not be deemed to have been effected for purposes of
this Section 2(d) unless (x) it has been declared effective by the SEC, (y) it has remained
effective for the period set forth in Section 5(a), and (z) the offering of Registrable Securities
pursuant to such registration is not subject to any stop order, injunction or other order or
4
requirement of the SEC and (iii) the aggregate sales price of the Registrable Securities proposed
to be included in any such registration shall equal or exceed US$35,000,000.
(e) Notwithstanding anything to the contrary contained herein, Ivanhoe shall not be required
to prepare and file (i) more than two (2) Demand Registration Statements in any twelve-month
period, or (ii) any Demand Registration Statement within ninety (90) days following the date of
effectiveness of any other Registration Statement.
3. Piggy-Back Registration.
(a) If Ivanhoe proposes to file on its behalf and/or on behalf of any holder of its securities
(other than a holder of Registrable Securities) a registration statement under the Securities Act
on any form (other than a registration statement on Form F-4 or S-8 (or any successor form) for
securities to be offered in a transaction of the type referred to in Rule 145 under the Securities
Act or to employees of Ivanhoe pursuant to any employee benefit plan, respectively) for the
registration of Ivanhoe Shares (a Piggy-Back Registration), it shall give written notice
to Selling Shareholder at least twenty (20) days before the initial filing with the SEC of such
piggy-back registration statement (a Piggy-Back Registration Statement), which notice
shall set forth the number of Ivanhoe Shares Ivanhoe and other holders, if any, then contemplate
including in such registration and the intended method of disposition of such Ivanhoe Shares. The
notice shall offer to include in such filing the aggregate number of Registrable Securities as
Selling Shareholder may request.
(b) If Selling Shareholder desires to have Registrable Securities registered under this
Section 3, it shall advise Ivanhoe in writing within ten (10) days after the date of receipt of
such offer from Ivanhoe of its desire to have Registrable Securities registered under this Section
3, and shall set forth the number of Registrable Securities for which registration is requested.
Ivanhoe shall thereupon include, or in the case of a proposed underwritten public offering, use its
reasonable best efforts to cause the managing underwriter or underwriters to permit such Selling
Shareholder to include, in such filing the number of Registrable Securities for which registration
is so requested by Selling Shareholder, subject to paragraph (c) below, and shall use its
reasonable best efforts to effect registration of such Registrable Securities under the Securities
Act. Any withdrawal of the registration statement by Ivanhoe for any reason shall constitute and
effect an automatic withdrawal of any Piggy-Back Registration related thereto.
(c) If the Piggy-Back Registration relates to an underwritten public offering and the managing
underwriter of such proposed public offering advises Ivanhoe and Selling Shareholder in writing
that, in its opinion, the number of Registrable Securities requested to be included in the
Piggy-Back Registration in addition to the securities being registered by Ivanhoe or any other
security holder would be greater than the total number of securities which can be sold in the
offering without having a material adverse effect on the distribution of such securities
or otherwise having a material adverse effect on the marketability thereof (the Maximum
Number of Securities), then:
(i) in the event Ivanhoe initiated the Piggy-Back Registration, Ivanhoe shall include
in such Piggy-Back Registration first, the securities Ivanhoe proposes to register
and second, the securities of all other selling
security holders, including Selling
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Shareholder, to be included in such Piggy-Back Registration in an amount that together with
the securities Ivanhoe proposes to register, shall not exceed the Maximum Number of
Securities, such amount to be allocated among such selling security holders on a pro rata
basis (based on the number of securities of Ivanhoe held by each such selling security
holder); and
(ii) in the event any holder of securities of Ivanhoe initiated the Piggy-Back
Registration, Ivanhoe shall include in such Piggy-Back Registration first, the
securities such initiating security holder proposes to register, second, the
securities of any other selling security holders (including Selling Shareholder), in an
amount that together with the securities the initiating security holder proposes to
register, shall not exceed the Maximum Number of Securities, such amount to be allocated
among such other selling security holders on a pro rata basis (based on the number of
securities of Ivanhoe held by each such selling security holder) and third, any
securities Ivanhoe proposes to register, in an amount that together with the securities the
initiating security holder and the other selling security holders propose to register, shall
not exceed the Maximum Number of Securities.
(d) Ivanhoe shall not hereafter enter into any agreement that is inconsistent with the rights
of priority provided in Section 3(c).
4. Blackout Periods. Ivanhoe shall have the right to delay the filing or
effectiveness of a Registration Statement required pursuant to Sections 2 or 3 hereof during no
more than three (3) periods aggregating to not more than ninety (90) days in any twelve-month
period (each, a Blackout Period), in the event that (i) Ivanhoe would, in accordance with
the advice of its counsel, be required to disclose in the prospectus material non-public
information that Ivanhoe has a bona fide business purpose for preserving as confidential and that
is not otherwise then required by law to be publicly disclosed, (ii) Ivanhoe determines that the
prospectus requires amendment or supplement due to the happening of any event that comes to the
attention of Ivanhoe and as a result of which the prospectus would contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made, not misleading or
(iii) in the good faith judgment of Ivanhoe, there is a reasonable likelihood that disclosure of
material non-public information, or any other action to be taken in connection with the prospectus,
would materially and adversely affect or interfere with any financing, acquisition, merger,
disposition of assets (not in the ordinary course of business), corporate reorganization or other
material transaction or negotiations involving Ivanhoe; provided, however, that (A)
Selling Shareholder shall be entitled, at any time after receiving notice of such delay and before
such Demand Registration Statement becomes effective, to withdraw such request and, if such request
if withdrawn, such
Demand Registration shall not count as one of the permitted Demand Registrations and (B)
Ivanhoe shall delay during such Blackout Period the filing or effectiveness of any Registration
Statement required pursuant to the registration rights of other holders of any securities of
Ivanhoe. Ivanhoe shall promptly give Selling Shareholder written notice of such determination
containing a general statement of the reasons for such postponement and an approximation of the
anticipated delay. After the expiration of any Blackout Period (including, without limitation,
upon public disclosure of the material non-public information that was the reason for such Blackout
Period) and without any further request from Selling Shareholder,
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Ivanhoe shall promptly notify
Selling Shareholder and shall use its reasonable best efforts to prepare and file with the SEC the
requisite Registration Statement or such amendments or supplements to such Registration Statement
or prospectus used in connection therewith as may be necessary to cause such Registration Statement
to become effective as promptly as practicable thereafter.
5. Registration Procedures. If Ivanhoe is required by the provisions of Section 2 or
3 to use its reasonable best efforts to effect the registration of any of its securities under the
Securities Act, Ivanhoe shall, as soon as practicable, and in the case of a Demand Registration no
later than sixty (60) days (excluding any days that fall during a permitted Blackout Period under
Section 4) after receipt of a written request for a Demand Registration:
(a) prepare and file with the SEC a Registration Statement with respect to such
securities and use its reasonable best efforts to cause such Registration Statement to
become effective as promptly as practicable and to remain effective for a period of time
required for the disposition of such Registrable Securities by Selling Shareholder but not
to exceed sixty (60) days excluding any days that fall during a permitted Blackout Period
under Section 4 (except with respect to a Shelf Registration Statement which shall remain
effective for a period not to exceed twenty-five months (25) months); provided,
however, that before filing such Registration Statement or any amendments or
supplements thereto, Ivanhoe shall furnish to counsel selected by Selling Shareholder copies
of all documents proposed to be filed, which documents shall be subject to the review of and
comment by such counsel;
(b) prepare and file with the SEC such amendments and supplements to such Registration
Statement and the prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all securities covered by such Registration
Statement until the earlier of such time as all Ivanhoe Shares held by Selling Shareholder
cease to be Registered Securities and the expiration of sixty (60) days in the case of a
Demand Registration Statement (excluding any days that fall during a permitted Blackout
Period under Section 4), or twenty-five months (25) months in the case of a Shelf
Registration Statement;
(c) furnish to Selling Shareholder and each underwriter, if any, of the Registrable
Securities being sold by Selling Shareholder such number of conformed copies of the
applicable Registration Statement and each such amendment and supplement thereto (including
in each case all exhibits), such number of copies of the
prospectus contained in such Registration Statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as Selling Shareholder and
such underwriter, if any, may reasonably request;
(d) use its reasonable best efforts to register or qualify the Registrable Securities
or other securities covered by such Registration Statement under such other securities or
blue sky laws of such jurisdictions within the United States and its territories and
possessions as Selling Shareholder and any underwriter of the Registrable Securities
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being
sold by Selling Shareholder shall reasonably request, to keep such registration or
qualification in effect for so long as such Registration Statement remains in effect or
until all of the Registrable Securities are sold, whichever is shorter, and to take any
other action which may be reasonably necessary or advisable to enable Selling Shareholder
and such underwriter to consummate the disposition in such jurisdictions of the securities
owned by Selling Shareholder (provided, however, that Ivanhoe shall not be
required in connection therewith or as a condition thereto to qualify to do business as a
foreign corporation, subject itself to taxation in or to file a general consent to service
of process in any jurisdiction where it would not, but for the requirements of this
paragraph (d), be obligated to do so) and do such other reasonable acts and things as may be
required of it to enable Selling Shareholder and such underwriter to consummate the
disposition in such jurisdiction of the securities covered by such Registration Statement;
(e) (i) furnish, at the request of Selling Shareholder a signed counterpart, addressed
to Selling Shareholder and the underwriters, if any, of an opinion of independent counsel
representing Ivanhoe in connection with such registration, dated the effective date of such
Registration Statement (or, if such registration includes an underwritten public offering,
opinions (which term shall include disclosure letters) dated the date of the closing(s)
under the underwriting agreement) covering such matters as are customary in connection with
such registered offering of securities by Ivanhoe, reasonably satisfactory in form and
substance to Selling Shareholder, and (ii) use its reasonable best efforts to furnish, at
the request of Selling Shareholder, a signed counterpart, addressed to Selling Shareholder
and the underwriters, if any, of a comfort letter, dated the effective date of such
Registration Statement (and, if such registration includes an underwritten public offering,
letters of like kind dated the date the offering is priced and the date of the closing under
the underwriting agreement), signed by the independent public accountants who have certified
Ivanhoes financial statements included in such Registration Statement covering
substantially the same matters with respect to such Registration Statement (and the
prospects included therein) and, with respect to events subsequent to the date of such
financial statements, as are customarily covered in accountants letters delivered to the
underwriters in underwritten public offerings of securities, including, without limitation,
that in the opinion of such accountants, the financial statements and other financial data
of Ivanhoe included in such Registration Statement, prospectus or any amendment or
supplement thereto, comply as to form in all material respects with the applicable
requirements of the Securities Act;
(f) enter, only with respect to Demand Registrations relating to an underwritten public
offering, into customary agreements (including an underwriting
agreement containing representations, warranties and indemnities in customary form) and
take such other actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities;
(g) otherwise use its reasonable best efforts to comply with all applicable rules and
regulations promulgated by the SEC;
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(h) use its reasonable best efforts to cause all such Registrable Securities to be
listed on each securities exchange or quotation system on which Ivanhoe Shares are listed or
traded;
(i) give written notice to Selling Shareholder:
(i) when such Registration Statement, the prospectus or any amendment or
supplement thereto has been filed with the SEC and when such Registration Statement
or any post-effective amendment thereto has become effective;
(ii) of any request by the SEC for amendments or supplements to such
Registration Statement or the prospectus included therein or for additional
information;
(iii) of the issuance by the SEC of any stop order suspending the effectiveness
of such Registration Statement or the initiation of any proceedings for that
purpose;
(iv) of the receipt by Ivanhoe or its legal counsel of any notification with
respect to the suspension of the qualification of Ivanhoe Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such purpose;
and
(v) of the happening of any event that requires Ivanhoe to make changes in such
Registration Statement or such prospectus in order to make the statements therein,
in light of the circumstances in which they were made, not misleading (which notice
shall be accompanied by an instruction to suspend the use of such prospectus until
the requisite changes have been made);
(j) use its reasonable best efforts to prevent the issuance or obtain the withdrawal of
any order suspending the effectiveness of such Registration Statement at the earliest
possible time;
(k) upon the occurrence of any event contemplated by Section 5(i)(v) above, promptly
prepare a post-effective amendment to such Registration Statement or a supplement to the
related prospectus or file any other required document so that, as thereafter delivered to
Selling Shareholder, the prospectus shall not contain an untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. If Ivanhoe notifies Selling
Shareholder in accordance with Section 5(i)(v)
above to suspend the use of the prospectus until the requisite changes to the
prospectus have been made, then Selling Shareholder shall suspend use of such prospectus and
use its reasonable best efforts to return to Ivanhoe all copies of such prospectus other
than permanent file copies then in Selling Shareholders possession, and the period of
effectiveness of such Registration Statement provided for above shall be extended by the
number of days from and including the date of the giving of such notice to the date
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Selling
Shareholder shall have received such amended or supplemented prospectus pursuant to this
Section 5(k);
(l) make reasonably available for inspection by representatives of Selling Shareholder,
any underwriter participating in any disposition pursuant to such Registration Statement,
and any attorney, accountant or other agent retained by such representative or any such
underwriter all relevant financial and other records, pertinent corporate documents and
properties of Ivanhoe and cause Ivanhoes officers, directors and employees to supply all
relevant information reasonably requested by such representative or any such underwriter,
attorney, accountant or agent in connection with the registration;
(m) in connection with any underwritten offering, make appropriate officers and senior
executives of Ivanhoe available to the selling security holders for meetings with
prospective purchasers of Registrable Securities and prepare and present to potential
investors customary road show material in each case in accordance with the recommendations
of the underwriters and in all respects in a manner reasonably requested and consistent with
other new issuances of securities in an offering of a similar size to such offering of the
Registrable Securities; and
(n) use reasonable best efforts to procure the cooperation of Ivanhoes transfer agent
in settling any offering or sale of Registrable Securities, including with respect to the
transfer of physical stock certificates into book-entry form in accordance with any
procedures reasonably requested by Selling Shareholder or the underwriters, if any.
It shall be a condition precedent to the obligation of Ivanhoe to take any action pursuant to
this Agreement in respect of the Registrable Securities which are to be registered at the request
of Selling Shareholder that Selling Shareholder shall furnish to Ivanhoe such information regarding
the Registrable Securities held by Selling Shareholder and the intended method of distribution
thereof as Ivanhoe shall reasonably request and as shall be required in connection with the action
taken by Ivanhoe.
6. Expenses. All Registration Expenses shall be paid by Ivanhoe, except that Selling
Shareholder shall bear and pay any (a) brokerage commissions attributable to the sale of any of the
Registrable Securities, (b) underwriting commissions and discounts applicable to securities offered
for its account in connection with any registrations, filings and qualifications made pursuant to
this Agreement, (c) fees and expenses incurred in respect of counsel or other advisors to Selling
Shareholder and (d) any other out-of-pocket expenses of Selling Shareholder.
7. Rule 144 Information. With a view to making available the benefits of certain
rules and regulations of the SEC which may at any time permit the sale of the Registrable
Securities to the public without registration, Ivanhoe agrees to:
(a) make and keep public information available, as those terms are understood and
defined in Rule 144 under the Securities Act;
10
(b) use its best efforts to file with or furnish to the SEC in a timely manner all
reports and other documents required of Ivanhoe under the Securities Act and the Exchange
Act; and
(c) furnish to Selling Shareholder forthwith upon request a written statement by
Ivanhoe as to its compliance with the reporting requirements of Rule 144 under the Exchange
Act and of the Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of Ivanhoe, and such other reports and documents so filed or furnished by
Ivanhoe as Selling Shareholder may reasonably request in availing itself of any rule or
regulation of the SEC allowing Selling Shareholder to sell any Registrable Securities
without registration.
8. Indemnification and Contribution.
(a) Ivanhoe shall indemnify and hold harmless Selling Shareholder, Selling Shareholders
directors and officers, each agent and any underwriter for Ivanhoe (within the meaning of the
Securities Act), and each Person, if any, who controls Selling Shareholder or such agent or
underwriter within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which they may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or proceedings in respect
thereof) arise out of or are based on any untrue or alleged untrue statement of any material fact
contained in a Registration Statement on the effective date thereof (including any prospectus filed
under Rule 424 under the Securities Act or any amendments or supplements thereto), or any document
incorporated by reference therein, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse each of Selling Shareholder, Selling
Shareholders directors and officers, such agent or underwriter or such controlling Person for any
legal or other expenses reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage, liability, proceeding or action; provided, however,
that the indemnity agreement contained in this Section 8(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, proceeding or action if such settlement is
effected without the consent of Ivanhoe (which consent shall not be unreasonably withheld or
delayed); provided further that Ivanhoe shall not be liable to Selling Shareholder,
such Selling Shareholders directors and officers, such agent or underwriter or such controlling
Person in any such case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission
made in connection with a Registration Statement, preliminary prospectus, final prospectus or
amendments or supplements thereto, in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by Selling Shareholder, such
Selling Shareholders directors or officers, such agent or underwriter or such controlling Person
or by such Selling Shareholders failure to furnish Ivanhoe, upon request, with the information
with respect to Selling Shareholder or any participating person that is the subject of the untrue
statement or omission. Ivanhoe shall not, without the consent of Selling Shareholder (which
consent shall not be unreasonably withheld or delayed), effect any settlement of any pending or
threatened proceeding or action in respect of which Selling Shareholder is a party and indemnity
has been sought hereunder by Selling Shareholder, unless such settlement includes an unconditional
release of Selling Shareholder from all liability for claims that are the subject
11
matter of such
proceeding or action. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of Selling Shareholder, Selling Shareholders directors and
officers, such agent or underwriter or such controlling Person, and shall survive the transfer of
such securities by Selling Shareholder.
(b) Selling Shareholder shall indemnify and hold harmless Ivanhoe, each of its directors and
officers, each Person, if any, who controls Ivanhoe within the meaning of the Securities Act, and
each agent and any underwriter for Ivanhoe (within the meaning of the Securities Act) against any
losses, claims, damages or liabilities, joint or several, to which Ivanhoe or any such director,
officer, controlling Person, agent or underwriter may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or proceedings in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in a Registration Statement on the effective date thereof (including any
prospectus filed under Rule 424 under the Securities Act or any amendments or supplements thereto)
or arise out of or are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in such Registration Statement, preliminary or final
prospectus, or amendments or supplements thereto, in reliance upon and in conformity with written
information furnished by or on behalf of Selling Shareholder expressly for use in connection with
such registration, preliminary prospectus, final prospectus or amendments or supplements thereto;
and Selling Shareholder shall reimburse any legal or other expenses reasonably incurred by Ivanhoe
or any such director, officer, controlling Person, agent or underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this Section 8(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement
is effected without the consent of Selling Shareholder (which consent shall not be unreasonably
withheld or delayed), and provided further that the liability of Selling
Shareholder hereunder shall be limited to the aggregate net proceeds received by Selling
Shareholder in connection with any offering to which such registration under the Securities Act
relates. Selling Shareholder shall not, without the consent of Ivanhoe (which consent shall not be
unreasonably withheld or delayed), effect any settlement of any pending or threatened proceeding or
action in respect of which Ivanhoe is a party and indemnity has been sought hereunder by Ivanhoe,
unless such settlement includes an unconditional release of Ivanhoe from all liability for claims
that are the subject matter of such proceeding or action.
(c) If the indemnification provided for in this Section 8 from the indemnifying party (the
Indemnifying Party) is unavailable to any Person entitled to indemnification hereunder
(the Indemnified Party) in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then the Indemnifying Party, in lieu of indemnifying the Indemnified
Party, shall contribute to the amount paid or payable by the Indemnified Party as a result of such
losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party and the Indemnified Party in connection with the
actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any
other relevant equitable considerations. The relative fault of the Indemnifying Party and the
Indemnified Party shall be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact or omission or
12
alleged omission to state a material fact, has been made by, or relates to information supplied by,
the Indemnifying Party or the Indemnified Party, and the parties relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably incurred by such
party in connection with any investigation or proceeding. If the allocation provided in this
paragraph (c) is not permitted by applicable law, the parties shall contribute based upon the
relevant benefits received by Ivanhoe from the offering of securities on the one hand and the net
proceeds received by Selling Shareholder from the sale of securities on the other.
The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Section 8(c) were determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(d) The Indemnified Party agrees to give prompt written notice to the Indemnifying Party after
the receipt by the Indemnified Party of any written notice of the commencement of any action, suit,
proceeding or investigation or threat thereof made in writing for which the Indemnified Party
intends to claim indemnification or contribution pursuant to this Agreement; provided, that
the failure so to notify the Indemnifying Party shall not relieve the Indemnifying Party of any
liability that it may have to the Indemnified Party hereunder unless such failure is materially
prejudicial to the Indemnifying Party. If notice of commencement of any such action is given to
the Indemnifying Party as above provided, the Indemnifying Party shall be entitled to participate
in and, to the extent it may wish, to assume the defense of such action at its own expense, with
counsel chosen by it and reasonably satisfactory to such Indemnified Party. The Indemnified Party
shall have the right to employ separate counsel in any such action and participate in the defense
thereof, but the reasonable fees and expenses of not more than one of such counsel in any one
jurisdiction shall be paid by the Indemnified Party unless (i) the Indemnifying Party agrees to pay
the same, (ii) the Indemnifying Party fails to assume the defense of such action, or (iii) the
named parties to any such action (including any impleaded parties) have been advised by such
counsel that either (A) representation of such Indemnified Party and the Indemnifying Party by the
same counsel would be inappropriate under applicable standards of professional conduct or (B) there
are one or more legal defenses available to it which are substantially different from or additional
to those available to the Indemnifying
Party. No Indemnifying Party shall be liable for any settlement entered into without its
written consent, which consent shall not be unreasonably withheld or delayed.
(e) The agreements contained in this Section 8 shall survive the transfer of the Registrable
Securities by Selling Shareholder and sale of all the Registrable Securities pursuant to any
Registration Statement and shall remain in full force and effect, regardless of any investigation
made by or on behalf of Selling Shareholder, any of Selling Shareholders directors and officers,
any Person who participates in the offering of Registrable Securities, including underwriters (as
defined in the Securities Act), and any Person, if any, who controls Selling Shareholder or such
participating Person within the meaning of the Securities Act.
13
9. Limitations on Registration of Other Securities; Representation. From and after
the date of this Agreement, Ivanhoe shall not, without the prior written consent of Rio Tinto,
enter into any agreement with any holder or prospective holder of any securities of Ivanhoe giving
such holder or prospective holder any registration rights the terms of which are more favorable
taken as a whole than the registration rights granted to Selling Shareholder hereunder unless
Ivanhoe shall also give such rights to Selling Shareholder.
10. No Inconsistent Agreements. Ivanhoe shall not hereafter enter into any agreement
with respect to its securities that is inconsistent in any material respects with the rights
granted to Selling Shareholder in this Agreement.
11. Selection of Managing Underwriters. In the event Selling Shareholder has
requested an underwritten offering, the underwriter or underwriters shall be selected by Selling
Shareholder and shall be approved by Ivanhoe, which approval shall not be unreasonably withheld or
delayed, Ivanhoe and Selling Shareholder shall enter into an underwriting agreement with such
underwriter or underwriters containing representations, warranties and indemnities in customary
form, provided, (i) that all of the representations and warranties by, and the other
agreements on the part of, Ivanhoe to and for the benefit of such underwriters shall also be made
to and for the benefit of Selling Shareholder, (ii) that any or all of the conditions precedent to
the obligations of such underwriters under such underwriting agreement shall be conditions
precedent to the obligations of Selling Shareholder, and (iii) that Selling Shareholder shall not
be required to make any representations or warranties to or agreements with Ivanhoe or the
underwriters other than representations, warranties or agreements regarding Selling Shareholder and
the Registrable Securities held by Selling Shareholder and any other representations required by
law.
12. Miscellaneous.
(a) Specific Performance. The parties hereto agree that irreparable damage would
occur in the event any provision of this Agreement was not performed in accordance with
the terms hereof and that the parties hereto shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or in equity.
(b) Amendments and Waivers.
(i) Any provision of this Agreement may be amended or waived only if such amendment or
waiver is in writing and signed, in the case of an amendment, by Ivanhoe and Selling
Shareholder or, in the case of a waiver, by the party or parties against whom the waiver is
to be effective.
(ii) No failure or delay by any party hereto in exercising any right, power or
privilege hereunder (other than a failure or delay beyond a period of time specified herein)
shall operate as a waiver thereof and no single or partial exercise thereof shall preclude
any other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
14
(c) Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly
given or made upon receipt) by delivery in person, by courier service, by fax or by registered or
certified mail (postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified by notice given in
accordance with this Section 12(c)):
(i) if to Ivanhoe:
999 Canada Place
Suite 654
Vancouver, BC V6C 3E1
Canada
Facsimile: 604-682-2060
Attention: Corporate Secretary
with a copy to (which shall not constitute notice):
Goodmans LLP
355 Burrard Street, Suite 1900
Vancouver, BC V6C 2G8
Canada
Facsimile: 604-682-7131
Attention: Paul L. Goldman
with a copy to (which shall not constitute notice):
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019-6064
Facsimile: 212-757-3990
Attention: Edwin S. Maynard
(ii) if to Rio Tinto or Selling Shareholder:
Rio Tinto plc
6 St. Jamess Square
London
SW1Y 4LD
United Kingdom
Facsimile: +44 (0)20 7930 3249
Attention: Company Secretary
with a copy to (which shall not constitute notice):
Shearman & Sterling LLP
Broadgate West
9 Appold Street
15
London EC2A 2AP
Facsimile: +44 (0)20 7655 5265
Attention: George Karafotias
(d) Successors and Assigns; Third Party Beneficiaries. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their successors and permitted assigns.
This Agreement may not be assigned by any party hereto without the prior written consent of the
other party hereto, except that the registration rights of Selling Shareholder with respect to any
Registrable Securities shall be transferred to any Affiliate of Selling Shareholder to which
Registrable Securities have been transferred. All of the obligations of Ivanhoe hereunder shall
survive any such transfer. Except as provided in Section 8, no Person other than the parties
hereto and their successors and permitted assigns is intended to be a beneficiary of this
Agreement.
(e) Headings. The headings and subheadings in this Agreement are included for
convenience and identification only and are in no way intended to describe, interpret, define or
limit the scope, extent or intent of this Agreement or any provision hereof.
(f) Governing Law; Jurisdiction. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.
(i) Any claim, action, suit or proceeding seeking to enforce any provision of, or based
on any matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby may be heard and determined in any New York state or federal court
sitting in The City of New York, County of Manhattan, and each of the parties hereto hereby
consents to the non-exclusive jurisdiction of such courts (and of the appropriate appellate
courts therefrom in any such claim, action, suit or proceeding) and irrevocably waives, to
the fullest extent permitted by law, any objection that it may now or hereafter have to the
laying of venue of any such claim, action, suit or proceeding in
any such court or that any such claim, action, suit or proceeding that is brought in
any such court has been brought in an inconvenient forum.
(ii) Subject to applicable law, process in any such claim, action, suit or proceeding
may be served on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing and subject to applicable law, each party
agrees that service of process on such party as provided in Section 12(c) shall be deemed
effective service of process on such party. Nothing herein shall affect the right of any
party to serve legal process in any other manner permitted by law or at equity.
(iii) Each of the parties hereto hereby waives to the fullest extent permitted by
applicable law any right it may have to a trial by jury with respect to any litigation
directly or indirectly arising out of, under or in connection with this Agreement or the
transactions contemplated by this Agreement. Each of the parties hereto hereby (A)
certifies that no representative, agent or attorney of the other party has represented,
expressly or otherwise, that such other party would not, in the event of litigation, seek to
enforce the foregoing waiver and (B) acknowledges that it has been induced to enter into
16
this Agreement and the transactions contemplated by this Agreement, as applicable, by, among
other things, the mutual waivers and certifications in this Section 12(f).
(g) Severability. If any term or other provision of this Agreement is held to be
invalid, illegal or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. Upon a determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.
(h) Entire Agreement. This Agreement constitutes the entire agreement between the
parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.
(i) Cumulative Remedies. The rights and remedies provided by this Agreement are
cumulative and the use of any one right or remedy by any party hereto shall not preclude or waive
its right to use any or all other remedies. Such rights and remedies are given in addition to any
other rights the parties may have by law, statute, ordinance or otherwise.
(j) Construction. Each party hereto acknowledges and agrees it has had the
opportunity to draft, review and edit the language of this Agreement and that no presumption for or
against any party arising out of drafting all or any part of this Agreement will be applied in any
dispute relating to, in connection with or involving this Agreement. Accordingly, the parties
hereto hereby waive the benefit of any rule of law or any legal decision that would require, in
cases of uncertainty, that the language of a contract should be interpreted most strongly against
the party who drafted such language.
(k) Counterparts. This Agreement may be executed and delivered (including, without
limitation, by facsimile transmission) in one or more counterparts, and by the different parties
hereto in separate counterparts, each of which when executed shall be deemed to be an original, but
all of which taken together shall constitute one and the same Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the
date first written above by their respective officers thereunto duly authorized.
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IVANHOE MINES LTD.
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RIO TINTO INTERNATIONAL HOLDINGS LIMITED
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18
SCHEDULE D
AGREED TERMS FOR
DISPOSITION OF MYANMAR ASSETS
By no later than 1 February 2007, Ivanhoe shall have completed a divestiture or sale of all of the
Myanmar Assets to a third party that is not an Affiliate of Ivanhoe, failing which Rio Tinto shall
have the option, at any time after 1 February 2007 pursuant to the Put Agreement, to cause Ivanhoe
to put all of the Shares to the Trust in consideration for the Agreed Amount. The purchase price
for the Shares will be satisfied by the delivery of the Note by the Trust to Ivanhoe. Under the
Put Agreement, Ivanhoe will be entitled to additional compensation from the Trust equal to a
percentage (to be negotiated but not less than 50%) of the proceeds from any future sale of the
Shares by the Trust that exceed the then outstanding amount of the Note.
Except in connection with a divestiture or sale of all of the Myanmar Assets to a third party that
is not an Affiliate of Ivanhoe or a sale of all of the Myanmar Assets to the Trust pursuant to the
Put Agreement, Ivanhoe may not transfer all or part of the Myanmar Assets or the shares of any
Subsidiary of Ivanhoe that directly or indirectly beneficially owns the Myanmar Assets to any
person, including Ivanhoe or another Subsidiary of Ivanhoe.
Ivanhoe will in good faith endeavour to arrange for the Trust to be created and the Put Agreement
to be entered into within sixty (60) days of the date of this Agreement, failing which, Ivanhoe
hereby irrevocably makes, constitutes and appoints Rio Tinto as its true and lawful attorney and
agent, with full power of substitution and authority in its name, place and stead to arrange for
the Trust to be created and the Put Agreement to be entered into on terms and conditions
satisfactory to Rio Tinto in Rio Tintos sole discretion. Ivanhoe hereby undertakes to ratify
everything which Rio Tinto shall do by virtue of this appointment and will fully indemnify and hold
harmless Rio Tinto against all losses, liabilities, costs, claims, actions, demands or expenses
which Rio Tinto or its Affiliates, or their respective directors, officers, employees or agents,
may incur or which may be made against any of them as a result of or in connection with anything
done by Rio Tinto pursuant to such appointment. All of the costs associated with establishing the
Trust and preparing the related documentation including the Put Agreement and the Note shall be
borne by Ivanhoe.
For purposes of this Schedule D:
Agreed Amount means an amount to be negotiated but not less than $40,000,000 plus 50% of the cash
receivable from the Myanmar Assets at the time of the sale pursuant to the Put Agreement;
Excluded Persons means Ivanhoe, Rio Tinto, Robert M. Friedland, their respective Affiliates, any
person related to any of them and any person that is a resident of Myanmar or Controlled by a
resident of Myanmar;
Note means an unsecured promissory note to be issued by the Trust to Ivanhoe in the aggregate
principal amount of the Agreed Amount and bearing interest at LIBOR calculated quarterly. Interest
on the Note shall accrue from the date of its issue. Interest on and principal of the Note shall
be payable (i) if and to the extent of any cash distributions received from the
Myanmar Assets and (ii) in full upon any future sale of the Shares by the Trust. For so long as
any amount is outstanding
under the Note, all cash distributions received from the Myanmar Assets
will be distributed to the Trust and used to repay the Note;
Put Agreement means a put agreement to be entered into between Ivanhoe, Rio Tinto and the Trust
pursuant to which Rio Tinto shall have the option, at any time after 1 February 2007, to cause
Ivanhoe to put the Shares to the Trust in consideration for the Agreed Amount;
Shares means all of the shares of a wholly-owned Subsidiary of Ivanhoe that owns, directly or
indirectly, all of the Myanmar Assets;
Trust means a trust to be established whose trustee and beneficiaries are not Excluded Persons
and whose powers will be limited to (i) entering into and performing its obligations under the Put
Agreement, (ii) if the Put Agreement is exercised, purchasing the Shares in accordance with the
terms of the Put Agreement and issuing the Note to Ivanhoe in consideration therefor, (iii) if it
purchases the Shares, running an auction for the Shares and selling the Shares to the highest
bidder (who may not be an Excluded Person, any trustee or beneficiary of the Trust or any person
related to or Controlled by any trustee or beneficiary of the Trust) for all cash consideration (in
US dollars) equal to or greater than the then outstanding amount of the Note, (iv) if it purchases
the Shares, receiving cash distributions from the Myanmar Assets and (v) repaying the Note. The
trustee of the Trust will be independent of the beneficiaries of the Trust. The principal
beneficiary of the Trust will be selected by the lead independent director of Ivanhoe and appointed
by the trustee of the Trust as the investment manager of the Trust. The principal beneficiary
shall be required to use its commercially reasonable efforts to run an auction for the Shares and
sell the Shares to the highest bidder (who may not be an Excluded Person, any trustee or
beneficiary of the Trust or any person related to or Controlled by any trustee or beneficiary of
the Trust). The principal beneficiary will be entitled to a percentage (to be negotiated but not
more than 50%) of the proceeds from any sale of the Shares by the Trust that exceed the then
outstanding amount of the Note. The principal beneficiary will be responsible for paying the fees
and expenses of the trust, including the trustees fees and disbursements, and funding the auction
process. If the Shares have not been sold within two (2) years of the principal beneficiarys
appointment as the investment manager of the Trust, the trustee of the Trust will replace the
principal beneficiary with a new principal beneficiary selected by independent lead director of
Ivanhoe, who is also not an Excluded Person.
SCHEDULE E
EXISTING LICENSES AND
OT PROJECT MAP AND CO-ORDINATES
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1 |
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Oyu Tolgoi: |
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106°4730 |
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42°5830 |
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8496 |
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6709A |
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106°4730 |
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43°0300 |
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hectares |
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106°5500 |
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43°0300 |
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106°5500 |
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42°5830 |
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2 |
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Huh Had: |
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106°5130 |
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42°5530 |
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1764 |
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6710A |
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106°5130 |
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42°5730 |
|
hectares |
|
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|
106°5500 |
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42°5730 |
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106°5500 |
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42°5530 |
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3 |
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Manaht: |
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106°3800 |
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42°5400 |
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4537 |
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6708A |
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106°3800 |
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42°5700 |
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hectares |
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106°4400 |
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42°5700 |
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106°4400 |
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42°5400 |
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4 |
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Oyu Tolgoi |
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106°3000 |
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42°5400 |
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9070 |
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106°3000 |
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43°0000 |
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hectares |
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|
6711A |
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106°3600 |
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43°0000 |
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106°3600 |
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42°5430 |
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(see map attached)