-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SRPB2D7iYSwqrpJiJZR5usTUKvyuHniUl7b+qDlP6LMQWeJC50PxAnUiR6zDfpN+ ASRtHh4mExvo/VRyI+stuA== 0000950129-02-003030.txt : 20020612 0000950129-02-003030.hdr.sgml : 20020612 20020612164429 ACCESSION NUMBER: 0000950129-02-003030 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 20020612 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GULF INDONESIA RESOURCES LTD CENTRAL INDEX KEY: 0001045212 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: 1934 Act SEC FILE NUMBER: 005-50360 FILM NUMBER: 02677534 BUSINESS ADDRESS: STREET 1: 21ST FL WISMA 46 KOTA BNI STREET 2: JL JEND SUDIRMAN KAV 1 CITY: JAKARTA 10220 INDONE STATE: K8 BUSINESS PHONE: 3038133850 MAIL ADDRESS: STREET 1: ONE NORWEST CENTER STREET 2: 1700 LINCOLN SUITE 5000 CITY: DENVER STATE: CO ZIP: 80203-4525 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GULF INDONESIA RESOURCES LTD CENTRAL INDEX KEY: 0001045212 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 21ST FL WISMA 46 KOTA BNI STREET 2: JL JEND SUDIRMAN KAV 1 CITY: JAKARTA 10220 INDONE STATE: K8 BUSINESS PHONE: 3038133850 MAIL ADDRESS: STREET 1: ONE NORWEST CENTER STREET 2: 1700 LINCOLN SUITE 5000 CITY: DENVER STATE: CO ZIP: 80203-4525 SC 14D9 1 h97565asc14d9.txt GULF INDONESIA RESOURCES LIMITED DIRECTORS' CIRCULAR - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT UNDER SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 GULF INDONESIA RESOURCES LIMITED (Name of Subject Company) --------------------- GULF INDONESIA RESOURCES LIMITED (Names of Person Filing Statement) --------------------- COMMON SHARES (Title of Class of Securities) 402284103 (CUSIP Number of Class of Securities) --------------------- JASON DOUGHTY GULF INDONESIA RESOURCES LIMITED 21ST FLOOR, WISMA 46, KOTA BNI JALAN JENDERAL SUDIRMAN KAVLING 1 JAKARTA, 10220, INDONESIA PHONE (6221) 574-2120 FAX (6221) 575-4015 (Name, address and telephone number of person authorized to receive notices and communications on behalf of the persons filing statement) --------------------- WITH COPIES TO: George G. Young III Robert R. Rooney Haynes and Boone, LLP Bennett Jones LLP 1000 Louisiana Street 4500 Bankers Hall East Suite 4300 855 - 2nd Street S.W. Houston, Texas 77002-5012 Calgary, Alberta T2P 4K7 Phone (713) 547-2081 Canada Fax (713) 236-5699 Phone (403) 298-3420 Fax (403) 265-7219
[ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- June 12, 2002 ITEM 1. SUBJECT COMPANY INFORMATION. The name of the subject company is Gulf Indonesia Resources Limited, a corporation organized under the laws of the Province of New Brunswick, Canada ("Gulf Indonesia"). The principal executive offices of Gulf Indonesia are located at 21st Floor, Wisma 46, Kota BNI, Jalan Jenderal Sudirman Kavling 1, Jakarta, 10220, Indonesia and Gulf Indonesia's telephone number at this address is (6221) 574-2120. The class and title of equity securities to which this Solicitation/Recommendation Statement on Schedule 14D-9 (this "Statement") relates is Gulf Indonesia's common shares, with a nominal or par value of U.S.$0.01 per share (the "Shares" or the "Gulf Indonesia Common Shares"). As of June 4, 2002, there were 90,038,542 Shares outstanding on a fully diluted basis. For the purposes of this Statement and the Support Agreement (as defined below), the fully diluted number of Shares is calculated by aggregating the number of Shares issued and outstanding with the number of Shares issuable pursuant to options of Gulf Indonesia having an exercise price less than U.S.$13.25. NOTICE TO CANADIAN SHAREHOLDERS. This Statement, including the Annexes provided to shareholders, constitutes the Directors' Circular of Gulf Indonesia, as required by applicable securities laws in Canada. All dollar references in this Statement are expressed in United States dollars except where otherwise indicated. ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON. The person filing this statement is Gulf Indonesia, which is the subject company. The name, business address and business telephone number of Gulf Indonesia are set forth in Item 1 above. This Statement relates to the tender offer by Conoco Canada Resources Limited ("Conoco Canada"), a Nova Scotia corporation and wholly owned subsidiary of Conoco Inc. ("Conoco"), a Delaware corporation, described in the Tender Offer Statement on Schedule TO (which includes information required to be reported under Rule 13e-3 of the Securities Exchange Act of 1934) dated June 12, 2002 (the "Schedule TO"), which was filed by Conoco and Conoco Canada with the Securities and Exchange Commission on June 12, 2002. Conoco Canada is offering to purchase all the outstanding Shares not owned by Conoco Canada at a purchase price of $13.25 per Share in cash (the "Offer Price"), on the terms and upon the conditions set forth in the Offer to Purchase dated June 12, 2002 (the "Offer to Purchase"), and the related Letter of Transmittal (the "Letter of Transmittal") (which, together with any amendments or supplements thereto, collectively constitute "the Offer"), copies of which are filed as Exhibits (a)(1) and (a)(2) herewith, respectively, and are incorporated herein by reference in their entirety. As of June 4, 2002, Conoco Canada owned 63,650,000 of the outstanding Shares of Gulf Indonesia, or approximately 70.7% of the Shares on a fully diluted basis. The Offer is described in the Offer to Purchase. The Offer is being made pursuant to a Support Agreement, dated as of June 7, 2002, among Conoco, Conoco Canada and Gulf Indonesia (the "Support Agreement"). The Support Agreement provides that if the Offer is consummated and the Minimum Tender Condition (as defined in the Support Agreement) has been satisfied and the other conditions to the second-step transaction have been satisfied or waived, Conoco Canada will use its best efforts, as soon as practicable after completion of the Offer, to consummate a second-step transaction, pursuant to which Conoco Canada will acquire all outstanding Shares not tendered in the Offer or otherwise owned by Conoco Canada (the "Second-Step Acquisition"). The Second-Step Acquisition will be effected either through a compulsory acquisition or a statutory transaction under New Brunswick law, such as an amalgamation, arrangement or share consolidation. The Offer to Purchase states that the principal executive offices of Conoco Canada are located at 1600, 401 - 9th Avenue S.W., Calgary, Alberta, T2P 3C5, Canada and the principal executive offices of Conoco are located at 600 North Dairy Ashford Road, Houston, Texas 77079, United States. ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS. Except as described herein (including the Annexes hereto) or incorporated herein by reference, to the knowledge of Gulf Indonesia, there are no material agreements, arrangements or understandings or any actual or potential conflicts of interest between Gulf Indonesia or the affiliates it controls and (1) their respective executive officers, directors or affiliates or (2) Conoco, Conoco Canada and their respective executive officers, directors or affiliates. Certain Arrangements between Gulf Indonesia and its Executive Officers, Directors and Affiliates. The information regarding agreements, arrangements or understandings between Gulf Indonesia and its executive officers, directors or affiliates is described on pages 3-11 under "ELECTION OF DIRECTORS", "EXECUTIVE COMPENSATION", "SUMMARY COMPENSATION TABLE", "OPTIONS/SAR GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR" and "AGGREGATED OPTIONS/SAR EXERCISES DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR AND THE FINANCIAL YEAR END OPTIONS/SAR VALUES" in Gulf Indonesia's Management Proxy Circular relating to the Annual Meeting of Gulf Indonesia's shareholders on May 6, 2002 (the "Proxy Circular"). The Proxy Circular is filed herewith as Exhibit (e)(2) and incorporated herein by reference. In addition, the information set forth under "SPECIAL FACTORS -- Beneficial Ownership of Shares", "SPECIAL FACTORS -- Transactions and Arrangements Concerning the Shares", "SPECIAL FACTORS -- Interest of Certain Persons in the Offer" and "SPECIAL FACTORS -- Purpose and Certain Effects of the Offer and the Second-Step Acquisition" in the Offer to Purchase is incorporated herein by reference. Certain Arrangements between Gulf Indonesia, Conoco Canada and Conoco. The information set forth under "SPECIAL FACTORS -- Certain Related Party Transactions" in the Offer to Purchase is incorporated herein by reference. ITEM 4. THE SOLICITATION OR RECOMMENDATION. BACKGROUND TO THE OFFER In August 1988, Conoco Canada (formerly Gulf Canada Resources Limited ("Gulf Canada")), acquired Asamera Inc. In 1994, various assets and liabilities of Asamera Inc., including all those relating to the business in Indonesia, were restructured under a new Canadian corporation, Asamera Canada Limited. In 1997, Asamera Canada Limited acquired other assets relating to the Indonesian business from Gulf Canada and transferred to Gulf Canada its interests in various subsidiaries that were not carrying on business in Indonesia. Asamera Canada Limited was continued under the Business Corporations Act (New Brunswick) and changed its name to Gulf Indonesia Resources Limited. Gulf Indonesia operated as a wholly owned subsidiary of Gulf Canada until September 1997. On September 29, 1997, Gulf Indonesia completed a public offering of approximately 27.6% of its Shares, which are publicly traded on the New York Stock Exchange. Gulf Canada retained approximately a 72.4% equity ownership interest in Gulf Indonesia. On May 28, 2001, Conoco, Conoco Northern Inc., a wholly owned subsidiary of Conoco ("Conoco Northern"), and Gulf Canada entered into a Support Agreement, pursuant to which Conoco agreed to cause Conoco Northern to acquire all the outstanding ordinary shares of Gulf Canada through a cash tender offer to all the holders of ordinary shares of Gulf Canada. On June 7, 2001, Conoco Northern commenced a cash tender offer for all the outstanding ordinary shares of Gulf Canada. On July 16, 2001, Conoco Northern acquired all the outstanding shares of Gulf Canada (which was subsequently renamed Conoco Canada Resources Limited), and, as a result, Conoco acquired its indirect equity ownership interest in Gulf Indonesia. After Conoco obtained control of Gulf Indonesia, designees of Conoco were elected to the Board of Directors of Gulf Indonesia, including Robert W. Goldman, Malcolm D. Griffiths, Rick A. Harrington, Francis H. James, James D. McColgin, Paul C. Warwick and Dr. George E. Watkins. On July 26, 2001, Conoco and Conoco Canada filed with the SEC a Schedule 13D (the "Schedule 13D") indicating that they were considering various alternatives with respect to Conoco Canada's ownership interest in Gulf Indonesia. 2 On March 25, 2002, Mr. Robert E. McKee, III, Executive Vice President, Exploration Production of Conoco, called Mr. Robert H. Allen, the Chairman of the Board of Directors of Gulf Indonesia, to indicate that Conoco was considering various alternatives with respect to Gulf Indonesia, including the acquisition of all of the outstanding Gulf Indonesia Common Shares not already owned by Conoco Canada. In view of Conoco's ongoing internal evaluations regarding Gulf Indonesia and the possibility of future discussions with Gulf Indonesia, Mr. McKee suggested that an independent committee of the Board of Directors of Gulf Indonesia (the "Independent Committee") be formed to ensure that Gulf Indonesia would be in a position to review and respond to any proposal in the event Conoco or Conoco Canada decided to make a proposal. Subsequent to the conversation on March 25, 2002, Mr. Allen sought legal advice regarding the formation and the mandate of the Independent Committee. On April 1, 2002, the Board of Directors of Gulf Indonesia formed the Independent Committee to take such steps as it considered necessary to be in a position to receive, consider and make a recommendation regarding any proposal that may be made by Conoco or Conoco Canada. Mr. Allen, Mr. John R. Sanders and Dr. Ir. Kuntoro Mangkusubroto, each an independent director of Gulf Indonesia, were appointed to the Independent Committee. On April 1, 2002, the Independent Committee met to discuss potential advisors and determined, upon the recommendation of Mr. Allen, to retain Macleod Dixon LLP to act as its legal counsel. At this meeting, Mr. Allen was appointed Chairman of the Independent Committee. Subsequently, the Independent Committee, with the assistance of Macleod Dixon, selected Patterson Palmer and Vinson & Elkins, in New Brunswick and the United States, respectively, to act as counsel in respect to the laws of those jurisdictions and considered a number of investment banks to act as the Independent Committee's financial advisor. In addition, the Independent Committee, with the assistance of Macleod Dixon, selected Philip Kingstone, a legal consultant based in Indonesia, to assist its financial advisors with their due diligence efforts in Indonesia. On April 9, 2002, the Independent Committee retained RBC Dominion Securities Inc. ("RBC"), effective April 1, 2002, to serve as financial advisor to the Independent Committee and, if required, to prepare and deliver a valuation and fairness opinion. The Independent Committee satisfied itself that RBC was a qualified and independent advisor and competent to provide the financial services required by the Independent Committee. Also on April 9, 2002, the Independent Committee met with its legal and financial advisors. At this meeting, Macleod Dixon advised the Independent Committee of its legal duties and responsibilities in the discharge of its duties. Over the next several weeks, RBC conducted a review of the business, financial condition, results of operations, prospects, business strategy and competitive position of Gulf Indonesia, as well as a review of the industry in general. The purpose of RBC's review was to put it in a position to perform a valuation analysis of Gulf Indonesia. On May 5, 2002, the Independent Committee met with its legal and financial advisors and received an update on RBC's due diligence investigation of Gulf Indonesia. During May 2002, representatives from RBC held a number of meetings and conference calls with representatives of Conoco and Conoco's financial advisors, JPMorgan and Merrill Lynch, to discuss financial and other due diligence with respect to Gulf Indonesia. During the course of these meetings, Conoco stated that it continued to evaluate alternatives with respect to its interest in Gulf Indonesia and that it was not currently interested in disposing of its ownership interest in Gulf Indonesia. On May 14, 2002 and May 15, 2002, meetings of the Independent Committee were held in Indonesia, during which RBC presented to the Independent Committee the preliminary results of its valuation analysis of Gulf Indonesia and the management of Gulf Indonesia presented an update on Gulf Indonesia's business plan and operations. 3 On May 22, 2002, the Independent Committee met with RBC to discuss RBC's valuation analysis of Gulf Indonesia. At this meeting, RBC presented and explained its valuation analysis to the Independent Committee. Also on May 22, 2002, Mr. Allen advised the Board of Directors of Gulf Indonesia that the Independent Committee had completed its valuation analysis of Gulf Indonesia. On May 24, 2002, Mr. Wayne C. Byers, Senior Counsel of Conoco, called Mr. Allen and indicated that Conoco Canada proposed to acquire all the Gulf Indonesia Common Shares not owned by Conoco Canada. Mr. Byers then sent to Mr. Allen a term sheet setting forth a proposed price of $12.50 per Share in cash and certain other terms of the proposal. Conoco Canada also delivered to Macleod Dixon and Bennett Jones LLP, legal counsel to Gulf Indonesia, a draft support agreement that would give effect to the proposed transaction. The Independent Committee met later on May 24, 2002 with RBC and Macleod Dixon, and with their assistance, considered Conoco Canada's initial proposal in light of the work, including valuation analysis, it had previously conducted. At this meeting, the Independent Committee received and reviewed advice from Macleod Dixon regarding the duties and responsibilities of the members of the Independent Committee under applicable law. At this meeting, the Independent Committee determined that it was not prepared to recommend Conoco Canada's initial proposal to the Board of Directors of Gulf Indonesia. Mr. Allen called Mr. Byers and indicated that the Independent Committee had rejected Conoco Canada's proposal and would await any further proposal. On May 25, 2002, representatives of RBC held discussions with representatives of JPMorgan and Merrill Lynch and representatives of Macleod Dixon held discussions with representatives of Cravath, Swaine & Moore, U.S. counsel to Conoco and Conoco Canada, and Blake, Cassels & Graydon LLP, Canadian counsel to Conoco and Conoco Canada, regarding Conoco Canada's proposal. Later in the day on May 25, 2002, the Independent Committee met with its financial and legal advisors and received a report on the discussions such advisors had with the financial and legal advisors of Conoco and Conoco Canada during that day. On the morning of May 26, 2002, Mr. Byers called Mr. Allen to indicate that Conoco Canada would increase its proposed price to $12.90 per Share in cash. On May 26, 2002, the Independent Committee met with RBC and Macleod Dixon, and with their assistance, considered Conoco Canada's revised proposal, including the terms of the proposed support agreement. At this meeting, the Independent Committee determined to reject Conoco Canada's revised proposal and determined to provide a counter-proposal of $14.00 per Share. Mr. Allen communicated this decision to Mr. Byers and highlighted certain aspects of the proposed support agreement which were not agreeable to the Independent Committee. On the morning of May 27, 2002, Mr. McKee called Mr. Allen and discussed various aspects of Conoco Canada's proposal. Mr. Allen called Mr. McKee later in the day on May 27, 2002 for further discussions which resulted in the suggestion by Mr. McKee that Conoco, Conoco Canada and their representatives call the Independent Committee and its advisors to discuss certain aspects of Conoco Canada's valuation of Gulf Indonesia. Mr. Byers and representatives of JPMorgan and Merrill Lynch called the Independent Committee and its advisors and discussed these matters. After these discussions, representatives of the Independent Committee met with its legal and financial advisors to discuss the status of negotiations between Conoco Canada and the Independent Committee. After these discussions, Mr. McKee called Mr. Allen and indicated that Conoco Canada was willing to revise its proposal to $13.25 per Share in cash and that such revised proposal would be Conoco Canada's final and best offer. Mr. Allen of Gulf Indonesia indicated that he would seek the recommendation of the revised proposal by the Independent Committee, subject to satisfactory resolution of certain terms of the proposed support agreement. Later in the day on May 27, 2002, the Independent Committee met and, with the assistance and advice of its financial and legal advisors, considered Conoco Canada's revised proposal, including the material terms and 4 conditions of the proposed support agreement, in light of the work of the Independent Committee, including RBC's valuation analysis of Gulf Indonesia, and the extent, nature and status of negotiations. During this meeting, Macleod Dixon reviewed the duties and responsibilities of the members of the Independent Committee under applicable law. Also at this meeting, RBC delivered an oral opinion that, as of May 27, 2002, the $13.25 per Share in cash to be received by the shareholders of Gulf Indonesia (other than Conoco Canada) in the Offer was fair, from a financial point of view, to such shareholders. In addition, RBC advised the Independent Committee that it would provide the Independent Committee with a formal valuation of Gulf Indonesia indicating that the proposed $13.25 per Share price in cash to be received by shareholders of Gulf Indonesia (other than Conoco Canada) in the Offer was in the higher end of its valuation range for Gulf Indonesia Common Shares. After receipt of such financial and legal advice, the Independent Committee, subject to the negotiation of satisfactory terms to the support agreement, (1) unanimously approved the Offer, (2) unanimously determined that the Offer is fair to the shareholders of Gulf Indonesia (other than Conoco Canada) and in the best interests of Gulf Indonesia and the shareholders of Gulf Indonesia (other than Conoco Canada), (3) unanimously resolved to recommend that shareholders of Gulf Indonesia accept the Offer and tender their Shares in the Offer and (4) unanimously resolved to recommend that the Board of Directors of Gulf Indonesia make the foregoing conclusions. Later on May 27, 2002, Mr. Byers and representatives of Cravath, Swaine & Moore, Blake, Cassels & Graydon and Macleod Dixon negotiated certain aspects of the proposed support agreement. On May 28, 2002, Conoco Canada and Gulf Indonesia issued a press release announcing the proposal and the Independent Committee's recommendation thereof. On the same day, Conoco and Conoco Canada filed with the SEC an amendment to the Schedule 13D to indicate that a proposal had been made and accepted by the Independent Committee, subject to the execution of definitive documentation and approval by the full Board of Directors of Gulf Indonesia. Over the next several days, the respective legal advisors of Conoco, Conoco Canada, the Independent Committee and Gulf Indonesia negotiated the definitive Support Agreement. On June 7, 2002, at a meeting of the Independent Committee, RBC presented to the Independent Committee its written valuation and fairness opinion (the "Valuation and Fairness Opinion"), which has been attached as Annex A. The Valuation and Fairness Opinion indicated that, as of June 6, 2002, (1) the fair market value for Gulf Indonesia Common Shares was in the range of $11.50 to $14.00 per Share and (2) the $13.25 per Share in cash to be received by shareholders of Gulf Indonesia (other than Conoco Canada) in the Offer was fair, from a financial point of view, to such shareholders. Also at this meeting, Macleod Dixon presented to the Independent Committee the Support Agreement and described the material terms thereof. At this meeting, the Independent Committee unanimously (i) approved the Offer and the Support Agreement, (ii) determined that the Offer is fair to the shareholders of Gulf Indonesia (other than Conoco Canada) and in the best interests of Gulf Indonesia and the shareholders of Gulf Indonesia (other than Conoco Canada), (iii) resolved to recommend that shareholders of Gulf Indonesia accept the Offer and tender their shares in the Offer and (iv) resolved to recommend that the Board of Directors of Gulf Indonesia make the foregoing conclusions. On June 7, 2002, the Board of Directors of Gulf Indonesia met and received the report of the Independent Committee, the Valuation and Fairness Opinion and the advice of counsel as to their fiduciary duties. After considering the foregoing, the Board of Directors of Gulf Indonesia unanimously (1) approved the Offer and the Support Agreement, (2) determined that the Offer is fair to the shareholders of Gulf Indonesia (other than Conoco Canada) and in the best interests of Gulf Indonesia and the shareholders of Gulf Indonesia (other than Conoco Canada) and (3) resolved to recommend that shareholders of Gulf Indonesia accept the Offer and tender their shares in the Offer. Seven members of the Board of Directors of Gulf Indonesia indicated that they were either directors, officers or senior managers of Conoco or its affiliates (other than Gulf Indonesia) and abstained from voting on the Offer and the Support Agreement. A further member of the Board of Directors of Gulf Indonesia, Paul C. Warwick, indicated that he was a designee of Conoco and also abstained from voting on the Offer and the Support Agreement. Later on June 7, 2002, the Support Agreement was executed and on June 10, 2002, Conoco Canada and Gulf Indonesia issued a press release announcing the execution of the Support Agreement. 5 REPORT OF FINANCIAL ADVISOR TO THE INDEPENDENT COMMITTEE Under the provisions of certain Canadian provincial securities laws respecting take-over bids, where a take-over bid is an "insider bid", the offeror is required, unless otherwise exempted, to have a valuation of the target company prepared by a qualified and independent valuer, based on techniques that are appropriate in the circumstances, after considering all relevant assumptions, that arrives at an opinion as to a value or range of values for the target company's common shares. The Independent Committee retained RBC to prepare a written Valuation and Fairness Opinion as to the fair market value of the Shares and as to whether the consideration to be received under the Offer is fair, from a financial point of view, to the holders of the Shares other than Conoco Canada. On May 27, 2002, RBC delivered an oral opinion that, as of May 27, 2002, the $13.25 per Share in cash to be received by the shareholders of Gulf Indonesia (other than Conoco Canada) in the Offer was fair, from a financial point of view, to such shareholders. In addition, on May 27, 2002, RBC advised the Independent Committee that it would provide the Independent Committee with a formal valuation of Gulf Indonesia indicating that the $13.25 per Share in cash to be received by the shareholders of Gulf Indonesia (other than Conoco Canada) in the Offer was in the higher end of its valuation range for Gulf Indonesia Common Shares. On June 7, 2002, RBC delivered the written Valuation and Fairness Opinion to the Independent Committee which indicated that, as of June 6, 2002, (1) the fair market value for Gulf Indonesia Common Shares was in the range of $11.50 to $14.00 per Share and (2) the $13.25 per Share in cash to be received by shareholders of Gulf Indonesia (other than Conoco Canada) in the Offer was fair, from a financial point of view, to such shareholders. THE FULL TEXT OF THE VALUATION AND FAIRNESS OPINION OF RBC DATED JUNE 6, 2002, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH THE VALUATION AND FAIRNESS OPINION, HAS BEEN ATTACHED AS ANNEX A HERETO. SHAREHOLDERS OF GULF INDONESIA ARE URGED TO, AND SHOULD, READ THE VALUATION AND FAIRNESS OPINION IN ITS ENTIRETY. REASONS AND RECOMMENDATION OF THE INDEPENDENT COMMITTEE AND THE BOARD OF DIRECTORS The Independent Committee has unanimously (1) approved the Offer and the Support Agreement and (2) determined that the Offer is fair to the shareholders of Gulf Indonesia (other than Conoco Canada) and in the best interests of Gulf Indonesia and the shareholders of Gulf Indonesia (other than Conoco Canada). The Independent Committee recommends that shareholders of Gulf Indonesia accept the Offer and tender their Shares in the Offer. The Independent Committee. In reaching the conclusions described above, the Independent Committee considered a number of factors, including but not limited to the following: - The Offer provides the opportunity to the shareholders of Gulf Indonesia (other than Conoco Canada) to choose to realize the value of their investment in Gulf Indonesia for cash at a significant premium to market prices (a 23% premium to the closing price for a Share on May 24, 2002, the last trading day immediately prior to the announcement of the Offer, and a 21% premium to the 30-day average closing price for a Share prior to and including May 24, 2002; - The Offer Price is in the high end of the range of values of the Shares of $11.50 to $14.00 determined by RBC; - The fairness opinion provided by RBC that the $13.25 per Share in cash to be received by shareholders of Gulf Indonesia (other than Conoco Canada) in the Offer was fair, from a financial point of view, to shareholders of Gulf Indonesia (other than Conoco Canada); - The Offer Price resulted from active arm's length negotiations among the Independent Committee, Gulf Indonesia, Conoco and Conoco Canada with the assistance of independent financial and legal 6 advisors, which the Independent Committee believes resulted in the Offer Price being increased from $12.50 per Share to $13.25 per Share; - The determination by the Independent Committee that the terms and conditions of the Offer and the Support Agreement are reasonable and resulted from active arm's length negotiations between the advisors of the Independent Committee, Gulf Indonesia, Conoco and Conoco Canada, which the Independent Committee believes resulted in improvements to the terms and conditions of the Support Agreement; - The Offer is an all cash offer providing shareholders of Gulf Indonesia with liquidity without being affected by historical limited trading volumes; - To be completed, the Offer must be accepted by a majority of Gulf Indonesia shareholders not affiliated with Conoco Canada; - If the Second-Step Acquisition occurs, shareholders who choose not to tender in the Offer will have the ability to perfect appraisal and dissent rights in connection with such Second-Step Acquisition; and - In light of Conoco's position that it is not prepared to sell its interest in Gulf Indonesia, the Independent Committee satisfied itself that there are no viable alternative transactions to the Offer. The Board of Directors. The Board of Directors of Gulf Indonesia has unanimously (1) approved the Offer and the Support Agreement and (2) determined that the Offer is fair to the shareholders of Gulf Indonesia (other than Conoco Canada) and in the best interests of Gulf Indonesia and the shareholders of Gulf Indonesia (other than Conoco Canada). The Board of Directors of Gulf Indonesia recommends that shareholders of Gulf Indonesia accept the Offer and tender their Shares in the Offer. In reaching its determinations, the Board of Directors of Gulf Indonesia adopted the conclusions of the Independent Committee based upon analysis of the factors considered by the Independent Committee. The following members of the Board of Directors of Gulf Indonesia indicated that they were directors, officers or senior managers of Conoco or its affiliates (other than Gulf Indonesia) and abstained from voting on the Offer and the Support Agreement: Robert W. Goldman, Malcolm D. Griffiths, Rick A. Harrington, Francis H. James, Donald F. Mazankowski, James D. McColgin and George D. Watkins. A further member of the Board of Directors of Gulf Indonesia, Paul C. Warwick, indicated that he was a designee of Conoco and also abstained from voting on the Offer and the Support Agreement. The Board of Directors of Gulf Indonesia believes that the Offer and the Support Agreement are also procedurally fair because, among other things: (1) the Independent Committee consisted of solely independent directors appointed to represent the interests of shareholders (other than Conoco Canada); (2) the Independent Committee retained and was advised by its own independent legal counsel experienced in advising on similar transactions; (3) the Independent Committee retained and was advised by RBC, as its independent financial advisor, to assist it in evaluating a potential transaction with Conoco or Conoco Canada; (4) the nature of the deliberations pursuant to which the Independent Committee evaluated the Offer and the Support Agreement and alternatives thereto; (5) that the $13.25 per Share price in cash resulted from active arm's length negotiations between representatives of the Independent Committee, on the one hand, and representatives of Conoco and Conoco Canada, on the other; and (6) that the independent committee is a mechanism well established in transactions of this type. The Independent Committee and the Board of Directors of Gulf Indonesia also recognized that, while consummation of the Offer will result in all shareholders (other than Conoco Canada) being entitled to receive $13.25 in cash for each of their Shares, it will eliminate the opportunity for current shareholders (other than Conoco Canada) to participate in the longer term potential benefits of the business of Gulf Indonesia, including the opportunities arising out of Gulf Indonesia's initiatives in developing new markets for its gas reserves. The Independent Committee also recognized that the consummation of the Offer would result in the elimination of potential conflicts of interest of Conoco arising out of its existing operations in Indonesia and would also result in other operational synergies, cost savings and economic efficiencies for Conoco's operations in Indonesia. 7 During its deliberations, the Independent Committee also considered two circumstances that could arise in the event no agreement was reached with Conoco and Conoco Canada for the Independent Committee to provide its support of a proposal. If the parties were unable to come to agreement and Conoco Canada decided not to make an offer directly to shareholders, shareholders would not have the opportunity to consider a cash offer at a premium to market and which was above the mid-point of the range of values of the Shares determined by RBC. Conversely, if Conoco Canada were to make an offer directly to shareholders without the recommendation of the Independent Committee, which Conoco Canada had not expressed it intended to do, it could well be at a price less than the Independent Committee might be able to negotiate. Neither the Independent Committee nor the Board of Directors of Gulf Indonesia considered the liquidation of Gulf Indonesia's assets and neither considered liquidation to be a viable course of action based on Conoco's desire to retain its shareholding in Gulf Indonesia. Therefore, no appraisal of liquidation values was sought for purposes of evaluating the Offer. The foregoing discussion of the information and factors considered by the Independent Committee and the Board of Directors of Gulf Indonesia is not intended to be exhaustive but includes all the material factors considered. In view of the variety of factors considered in connection with the evaluation of the Offer, the Independent Committee and the Board of Directors of Gulf Indonesia did not find it practical to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching such determinations and recommendations. A letter to the shareholders of Gulf Indonesia from the Chairman of the Board of Directors of Gulf Indonesia; a letter to brokers, dealers, commercial banks, trust companies and other nominees; and a form letter to clients for use by brokers, dealers, commercial banks, trust companies and other nominees; are filed herewith as Exhibits (a)(5), (a)(3) and (a)(4), respectively, and are incorporated herein by reference. INTENT TO TENDER To Gulf Indonesia's knowledge, after reasonable inquiry, all its senior officers, directors, affiliates and subsidiaries of Gulf Indonesia (other than Conoco Canada) intend to tender in the Offer all Shares, and all Shares issued to them upon exercise of Gulf Indonesia options or acquired by them upon exercise of RSUs (as defined below), held of record or beneficially owned by them. ITEM 5. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED. The information contained in Annex A hereto and under "SPECIAL FACTORS -- Summary of Certain Analysis of JP Morgan and Merrill Lynch", and "THE OFFER -- Source and Amount of Funds; Fees and Expenses" in the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. No transactions in the Shares have been effected during the last six months by Gulf Indonesia or any subsidiary of Gulf Indonesia or, to the knowledge of Gulf Indonesia, by any executive officer, director, associate or affiliate of Gulf Indonesia or any director or executive officer of its subsidiaries except as set forth under "Annex B -- Information Pursuant to Canadian Securities Laws -- Trading by Directors and Senior Officers in Securities of Gulf Indonesia -- Issue of Securities of Gulf Indonesia" and in Schedule B of the Offer to Purchase. ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS. Except as set forth in this Statement, Gulf Indonesia is not undertaking or engaged in any negotiations in response to the Offer that relate to or would result in: (i) a tender offer or other acquisition of Gulf Indonesia's securities by Gulf Indonesia, any of its subsidiaries or any other person; (ii) any extraordinary transaction, such as a merger, reorganization or liquidation, involving Gulf Indonesia or any of its subsidiaries; (iii) any purchase, sale or transfer of a material amount of assets of Gulf Indonesia or any of its subsidiaries; or (iv) any material change in the present dividend rate or policy, indebtedness or capitalization of Gulf Indonesia. 8 Except as set forth in this Statement, there are no transactions, board resolutions, agreements in principle or signed contracts entered into in response to the Offer that relate to one or more of the matters referred to in the preceding paragraph. The information set forth under "SPECIAL FACTORS -- Reasons for the Offer and Plans for Gulf Indonesia" and "SPECIAL FACTORS -- Purpose and Certain Effects of the Offer and the Second-Step Acquisition" in the Offer to Purchase are incorporated herein by reference. ITEM 8. ADDITIONAL INFORMATION. The Information Pursuant to Canadian Securities Laws attached as Annex B to this Statement and the Offer to Purchase filed herewith as Exhibit (a)(1) are incorporated herein by reference. ITEM 9. EXHIBITS. EXHIBIT NO. (a)(1) Offer to Purchase dated June 12, 2002.+* (a)(2) Letter of Transmittal.+* (a)(3) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees.+ (a)(4) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.+ (a)(5) Letter to shareholders of Gulf Indonesia from the Chairman of the Board of Gulf Indonesia.+* (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.+* (a)(7) Valuation and Fairness Opinion of RBC Dominion Securities Inc. dated June 6, 2002 (included as Annex A hereto).* (a)(8) Summary Advertisement published on June 12, 2002.+ (a)(9) Press release issued by Conoco Canada, dated June 12, 2002, announcing the commencement of the Offer.+ (a)(10) Employee Notice issued by Gulf Indonesia on May 30, 2002. (a)(11) Notice of Guaranteed Delivery.+ (e)(1) Support Agreement dated as of June 7, 2002, by and among Conoco, Conoco Canada and Gulf Indonesia.+ (e)(2) Gulf Indonesia's Proxy Circular relating to the Annual Meeting of Shareholders held on May 6, 2002 (incorporated by reference from Gulf Indonesia's 6-K for the month ended March 2002 filed with the SEC on June 10, 2002). (e)(3) Information Services Agreement between Gulf Indonesia and Gulf Canada Resources Limited ("Gulf Canada"). (e)(4) Administrative Services Agreement between Gulf Indonesia and Gulf Canada. (e)(5) Administrative and Information Services Agreement between Gulf Indonesia and Conoco. (e)(6) Cross Indemnification Agreement between Gulf Indonesia and Gulf Canada. (e)(7) Corporate Opportunity Agreement between Gulf Indonesia and Gulf Canada. (e)(8) Technical Services Agreement between Gulf Indonesia and Gulf Canada. (e)(9) Trade-mark Sublicense and Name Use Agreement between Gulf Indonesia and Gulf Canada. (e)(10) Registration Rights Agreement between Gulf Indonesia and Gulf Canada. (e)(11) Technical Services Agreement between Gulf Indonesia and Conoco.
- --------------- + Incorporated by reference to the Schedule TO filed by Conoco and Conoco Canada on June 12, 2002. * Mailed to shareholders. 9 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. GULF INDONESIA RESOURCES LIMITED /s/ PAUL C. WARWICK PAUL C. WARWICK President and Chief Executive Officer CERTIFICATE The foregoing (including Annexes A and B) contains no untrue statement of a material fact and does not omit to state a material fact that is required to be stated or that is necessary to make a statement not misleading in the light of the circumstances in which it was made. The foregoing does not contain any misrepresentation likely to affect the value or the market price of the securities subject to the Offer within the meaning of the Securities Act (Quebec). On behalf of the Board of Directors /s/ ROBERT H. ALLEN /s/ PAUL C. WARWICK ROBERT H. ALLEN PAUL C. WARWICK Director Director
Date: June 12, 2002 10 ANNEX A CONSENT OF RBC DOMINION SECURITIES INC. To: The Board of Directors of Gulf Indonesia Resources Limited We hereby consent to the reference to our name, the contents of the summary of our valuation and fairness opinion (the "Valuation and Fairness Opinion") dated June 6, 2002 and the inclusion of the full text of such Valuation and Fairness Opinion in the Statement dated the date hereof regarding the offer dated June 12, 2002 made by Conoco Canada Resources Limited to purchase all of the issued and outstanding common shares of Gulf Indonesia Resources Limited. We also consent to the filing of the Valuation and Fairness Opinion with the applicable securities regulatory authorities in the United States and Canada and its distribution to shareholders and certain other persons as provided in this Statement. /s/ RBC DOMINION SECURITIES INC. RBC DOMINION SECURITIES INC. Calgary, Alberta, Canada June 12, 2002 VALUATION AND FAIRNESS OPINION (RBC LETTERHEAD) June 6, 2002 The Board of Directors and Independent Committee of the Board of Directors Gulf Indonesia Resources Limited Box 2858 Jalan Jenderal Sudirman, Kavling 1 Jakarta, Indonesia 10270 To the Board of Directors and Independent Committee of the Board of Directors: RBC Dominion Securities Inc. ("RBC"), a member company of RBC Capital Markets, understands that Conoco Canada Resources Limited (the "Controlling Shareholder"), an indirect wholly-owned subsidiary of Conoco Inc. ("Conoco"), is proposing to acquire all of the issued and outstanding common shares (the "Common Shares") of Gulf Indonesia Resources Limited (the "Company") that are not owned by the Controlling Shareholder or its affiliates for consideration of US$13.25 per Common Share in cash (the "Offer"). The terms of the Offer will be more fully described in a take-over bid circular (the "Circular"), which will be mailed to holders of the Common Shares in connection with the Offer. RBC also understands that a committee (the "Independent Committee") of the board of directors (the "Board of Directors") of the Company who are independent of the Controlling Shareholder has been constituted to consider the Offer and make recommendations thereon to the Board of Directors. RBC was instructed by the Independent Committee that the Offer is an "insider bid" within the meaning of Rule 61-501 of the Ontario Securities Commission and Quebec Securities Commission Policy Statement Q-27 (collectively, the "Policies"). The Independent Committee has retained RBC to provide advice and assistance to the Independent Committee in evaluating the Offer, including the preparation and delivery to the Independent Committee of a formal valuation of the Common Shares (the "Valuation") in accordance with the requirements of the Policies and its opinion (the "Fairness Opinion") as to the fairness, from a financial point of view, of the consideration under the Offer to the holders of Common Shares other than the Controlling Shareholder or its affiliates (the "Minority Shareholders"). The Valuation and Fairness Opinion have been prepared in accordance with the guidelines of the Investment Dealers Association of Canada. ENGAGEMENT The Independent Committee initially contacted RBC regarding a potential advisory assignment on April 1, 2002, and RBC was formally engaged by the Independent Committee through an agreement between the Company and RBC (the "Engagement Agreement") dated as of April 1, 2002. The terms of the Engagement Agreement provide that RBC is to be paid US$1,350,000 for the Valuation, Fairness Opinion and financial advisory services. In addition, RBC is to be reimbursed for its reasonable out-of-pocket expenses and to be indemnified by the Company in certain circumstances. RBC consents to the inclusion of the Valuation and Fairness Opinion in their entirety and a summary thereof in the Circular and to the filing thereof, as necessary, by the Controlling Shareholder with the securities commissions or similar regulatory authorities in Canada and the United States. A-2 RELATIONSHIP WITH INTERESTED PARTIES Neither RBC nor any of its affiliates is an insider, associate or affiliate (as those terms are defined in the Securities Act (Ontario)) of the Company, the Controlling Shareholder or any of their respective affiliates. RBC has not been engaged to provide any financial advisory services nor has it participated in any financing involving the Company, the Controlling Shareholder or any of their respective affiliates within the past two years. There are no understandings, agreements or commitments between RBC and the Company, the Controlling Shareholder or any of their respective affiliates with respect to any future business dealings. RBC may, in the future, in the ordinary course of its business, perform financial advisory or investment banking services for the Company, the Controlling Shareholder or any of their respective affiliates. The compensation of RBC under the Engagement Agreement does not depend in whole or in part on the conclusions reached in the Valuation or the Fairness Opinion or the successful outcome of the Offer. Royal Bank of Canada, of which RBC is a wholly-owned subsidiary, provides banking services to the Company, the Controlling Shareholder and their affiliates in the normal course of business. RBC acts as a trader and dealer, both as principal and agent, in major financial markets and, as such, may have had and may in the future have positions in the securities of the Company, the Controlling Shareholder or any of their respective affiliates and, from time to time, may have executed or may execute transactions on behalf of such companies or clients for which it received or may receive compensation. As an investment dealer, RBC conducts research on securities and may, in the ordinary course of its business, provide research reports and investment advice to its clients on investment matters, including with respect to the Company, the Controlling Shareholder or any of their respective affiliates or the Offer. CREDENTIALS OF RBC CAPITAL MARKETS RBC is one of Canada's largest investment banking firms, with operations in all facets of corporate and government finance, corporate banking, mergers and acquisitions, equity and fixed income sales and trading and investment research. RBC Capital Markets also has significant operations in the United States and internationally. The Valuation and the Fairness Opinion expressed herein represent the opinions of RBC and the form and content herein have been approved for release by a committee of its directors, each of whom is experienced in merger, acquisition, divestiture and valuation matters. SCOPE OF REVIEW In connection with our Valuation and Fairness Opinion, we have reviewed and relied upon or carried out, among other things, the following: 1. the most recent draft, dated June 6, 2002, of the Circular (the "Draft Circular"); 2. the most recent draft, dated June 6, 2002, of the Directors' Circular (the "Draft Directors' Circular"); 3. audited financial statements of the Company for each of the five years ended December 31, 2001; 4. the unaudited interim report of the Company for the quarter ended March 31, 2002; 5. annual reports of the Company for each of the two years ended December 31, 2001; 6. the Notice of Annual Meeting of Shareholders and Management Proxy Circular of the Company for each of the two years ended December 31, 2001; 7. Annual Information Form of the Company for each of the two years ended December 31, 2001; 8. historical segmented financial statements of the Company for each of five years ended December 31, 2001; (RBC RUNNING FOOT) A-3 9. the internal management budget of the Company prepared on a consolidated and segmented basis for the year ending December 31, 2002; 10. unaudited cash flow projections for the Company prepared by management on a consolidated and segmented basis for the years ending December 31, 2002 through 2023; 11. the Conoco take-over bid circular regarding the offer (the "Gulf Canada Offer") by an indirect wholly-owned subsidiary of Conoco, for all of the outstanding ordinary shares of Gulf Canada Resources Limited, dated June 7, 2001; 12. the Gulf Canada Resources Limited Directors' Circular, dated June 7, 2001, responding to the Gulf Canada Offer; 13. the Form 10-K of Conoco for the year ended December 31, 2001; 14. the Form 10-Q of Conoco for the quarter ended March 31, 2002; 15. discussions with and memoranda prepared by senior management of the Company; 16. discussions with senior management of Conoco; 17. discussions with the Company's auditors, legal counsel and independent reserve engineers; 18. discussions with the Controlling Shareholder's financial advisors; 19. public information relating to the business, operations, financial performance and stock trading history of the Company and other public companies considered by us to be relevant; 20. public information with respect to other transactions of a comparable nature considered by us to be relevant; 21. public information regarding Indonesia and the Indonesian oil and gas industry; 22. country risk rating reports for Indonesia prepared by independent rating agencies; 23. internal oil and gas reserve estimates prepared by the Company; 24. Certificates of Gas Reserves and Reserve Reports prepared by independent reserve engineer, DeGolyer and MacNaughton, including: -- Reserve Report as of March 31, 2002 estimating the proved and probable natural gas and condensate reserves of the Suban field located in the Corridor PSC; -- Certificates of Gas Reserves as of January 31, 2001 estimating the proved and probable natural gas reserves of the Ujung Pangkah field located in the Pangkah PSC, Java Sea, offshore Indonesia; -- Reserve Report as of June 30, 2000 estimating the proved and probable crude oil, condensate and natural gas reserves in the Corridor PSC, Kakap PSC and Corridor TAC; -- Certificates of Gas Reserves as of May 31, 1999 estimating the proved and probable natural gas reserves of the Bungin, Bungkal, Geger, Hari, Rayun and Teluk Rendah fields located in the South Jambi "B" Block contract area in Sumatra, Indonesia; -- Certificates of Gas Reserves as of December 31, 1998 estimating the probable natural gas reserves of the Alur Siwah field located in the Block "A" PSC in Aceh Province, North Sumatra, Indonesia; and -- Reserve Report as of June 30, 1997 estimating the probable natural gas reserves in the Block "A" PSC in Aceh Province, North Sumatra, Indonesia; (RBC RUNNING FOOT) A-4 25. representations contained in certificates addressed to us, dated as of the date hereof, from senior officers of the Company as to the completeness and accuracy of the information upon which the Valuation and Fairness Opinion are based; and 26. such other corporate, industry, country and financial market information, investigations and analyses as RBC considered necessary or appropriate in the circumstances. RBC has not, to the best of its knowledge, been denied access by the Company to any information requested by RBC. PRIOR VALUATIONS The Company has represented to RBC that to the best of its knowledge, information and belief after due inquiry, there are no independent appraisals or valuations or material non-independent appraisals or valuations relating to the Company or any of its subsidiaries or any of their respective material assets or liabilities which have been prepared as of a date within the two years preceding the date hereof and which have not been provided to RBC. RBC has been advised by the Company that none of the materials provided to RBC by the Company constitute a prior valuation (as defined in Ontario Securities Commission Rule 61-501) of the Company, its subsidiaries or their material assets or securities. ASSUMPTIONS AND LIMITATIONS With the Independent Committee's approval and as provided for in the Engagement Agreement, RBC has relied upon the completeness, accuracy and fair presentation of all of the financial and other information, data, advice, opinions or representations obtained by it from public sources, senior management of the Company, and their consultants and advisors (collectively, the "Information"). The Valuation and Fairness Opinion are conditional upon such completeness, accuracy and fair presentation of such Information. Subject to the exercise of professional judgment and except as expressly described herein, we have not attempted to verify independently the completeness, accuracy or fair presentation of any of the Information. Senior officers of the Company have represented to RBC in a certificate delivered as of the date hereof, among other things, that (i) the Information (as defined above) provided orally by, or in the presence of, an officer or employee of the Company or in writing by the Company or any of its subsidiaries or their respective agents to RBC relating to the Company, its subsidiaries or the Offer for the purpose of preparing the Valuation and Fairness Opinion was, at the date the Information was provided to RBC, and is complete, true and correct in all material respects, and did not and does not contain any untrue statement of a material fact in respect of the Company, its subsidiaries or the Offer and did not and does not omit to state a material fact in respect of the Company, its subsidiaries or the Offer necessary to make the Information or any statement contained therein not misleading in light of the circumstances under which the Information was made or provided or any statement was made; and that (ii) since the dates on which the Information was provided to RBC, except as disclosed in writing to RBC, there has been no material change, financial or otherwise, in the financial condition, assets, liabilities (contingent or otherwise), business, operations or prospects of the Company or any of its subsidiaries and no material change has occurred in the Information or any part thereof which would have or which would reasonably be expected to have a material effect on the Valuation or Fairness Opinion. In preparing the Valuation and Fairness Opinion, RBC has made several assumptions, including that all of the conditions required to implement the Offer will be met and that the disclosure provided or incorporated by reference in the Draft Circular and the Draft Directors' Circular with respect to the Company, its subsidiaries and affiliates and the Offer is accurate in all material respects. The Valuation and Fairness Opinion are rendered on the basis of securities markets, economic, political, financial and general business conditions prevailing as at the date hereof and the condition and prospects, financial and otherwise, of the Company and its subsidiaries and affiliates, as they were reflected in the Information and as they have been represented to RBC in discussions with management of the Company. In (RBC RUNNING FOOT) A-5 its analyses and in preparing the Valuation and Fairness Opinion, RBC made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of RBC or any party involved in the Offer. The Valuation and Fairness Opinion have been provided for the use of the Independent Committee and the Board of Directors and, except for inclusion in its entirety in the Circulars and related documents, may not be used by any other person or relied upon by any other person other than the Independent Committee and the Board of Directors without the express prior written consent of RBC. The Valuation and Fairness Opinion are given as of the date hereof and RBC disclaims any undertaking or obligation to advise any person of any change in any fact or matter affecting the Valuation or Fairness Opinion which may come or be brought to RBC's attention after the date hereof. Without limiting the foregoing, in the event that there is any material change in any fact or matter affecting the Valuation or Fairness Opinion after the date hereof, RBC reserves the right to change, modify or withdraw the Valuation or Fairness Opinion. RBC believes that its analyses must be considered as a whole and that selecting portions of the analyses or the factors considered by it, without considering all factors and analyses together, could create a misleading view of the process underlying the Valuation or Fairness Opinion. The preparation of a valuation or fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Any attempt to do so could lead to undue emphasis on any particular factor or analysis. Neither the Valuation nor the Fairness Opinion is to be construed as a recommendation to any holder of Common Shares as to whether to tender their Shares to the Offer. OVERVIEW OF THE COMPANY The Company is engaged in the exploration, development and production of crude oil and natural gas onshore and offshore Indonesia. As of December 31, 2001, the Company had gross and net proved reserves of 323 million barrels of oil equivalent ("mmboe") and 244 mmboe, respectively, of which approximately 90 percent are natural gas. The Indonesian government owns all of Indonesia's petroleum resources. The Indonesian state-owned oil and gas company, Perusahaan Pertambangan Minyak dan Gas Bumi Negara ("Pertamina"), manages all of Indonesia's petroleum resources on behalf of the Indonesian government and, in certain cases, enters into production sharing arrangements with private energy companies entitling such private energy companies to a portion of the production from the fields in the applicable production sharing area. The contractor is responsible to Pertamina for the execution of the operation and has an economic interest in the hydrocarbon reserves. All references to "reserves" relate to the economic interest that the Company is entitled to under Production Sharing Contracts ("PSC"), Technical Assistance Contracts and Enhanced Oil Recovery contracts (collectively, the "Production Contracts") with Pertamina. The Company currently has interests in 12 contract areas in Indonesia. DEFINITION OF FAIR MARKET VALUE For purposes of the Valuation, fair market value means the monetary consideration that, in an open and unrestricted market, a prudent and informed buyer would pay to a prudent and informed seller, each acting at arm's length with the other and under no compulsion to act. RBC has not made any downward adjustment to the value of the Common Shares to reflect the liquidity of the Common Shares, the effect of the Offer or the fact that the Common Shares held by Minority Shareholders do not form part of a controlling interest. VALUATION OF THE COMMON SHARES VALUATION METHODS RBC valued the Common Shares on a going concern basis using a net asset value ("NAV") analysis and a precedent transaction analysis. RBC also reviewed trading multiples of public companies involved in the oil (RBC RUNNING FOOT) A-6 and gas industry from the perspective of whether a public market analysis might exceed NAV or precedent transaction values for the Common Shares. However, RBC concluded that public company multiples implied values that were at or below our NAV and precedent transaction values. Given the foregoing, and that public company values generally reflect minority discount values rather than "en bloc" values, RBC did not rely on this methodology in determining the value of the Common Shares. NET ASSET VALUE ANALYSIS The NAV approach ascribes a separate value for each category of assets and liabilities, utilizing the methodology most appropriate in each case; the sum of total assets less total liabilities yields the NAV. This approach ascribes value to the proved and probable reserves existing at the time of valuation on the basis of discounted future after-tax cash flows, and takes into account the amount, timing and relative certainty of projected cash flows. This approach is known as a "depletion" or "blow-down" evaluation and is a common method of evaluation of petroleum interests (reserves and related production facilities) in the oil and gas industry. As in the case of a typical discounted cash flow analysis, capital expenditures required to develop existing reserves are deducted from cash flows. Provisions are made for costs associated with future well abandonment and reclamation as provided for in the Company's PSCs. The NAV approach requires that certain assumptions be made regarding, among other things, future cash flows and discount rates. The possibility that some of the assumptions will prove to be inaccurate is one factor involved in the determination of the discount rates to be used in establishing a range of values. Liquids (Oil and Condensate) and Contracted Natural Gas Reserves For the first quarter of 2002, the Company reported gross sales volumes of approximately 14,400 barrels per day ("bbls/d") of liquids (10,600 bbls/d net) and approximately 163 million cubic feet per day ("mmcf/d") of natural gas (156 mmcf/d net) from several fields in South Sumatra and the West Natuna Sea. The liquids are sold at market prices and have a readily available market. The natural gas is currently being sold under two long-term supply contracts. The prices established in these contracts are based on an energy equivalent basis with oil. The Company also expects to start delivery of additional natural gas later this year and in 2003 on two other signed contracts. Delivery is subject to capacity expansion on one pipeline and construction of a second pipeline. The Company has informed RBC that it expects both pipeline projects to be completed by the required delivery dates. In conducting our NAV analysis, RBC reviewed the Company's Production Contracts and management's unaudited cash flow projections for the years ending December 31, 2002 to 2023 for the Company's liquids and contracted natural gas reserves. RBC reviewed the assumptions in management's projections and determined that material adjustments were not necessary in preparing our base case cash flow forecasts other than as described below. RBC applied a 5% risk discount to the cash flows projected by management from the Sumatra Gas to Singapore agreement to reflect the availability of a natural gas transportation system, the potential risk of timing delays and the risk of not being able to deliver the contracted volumes. In addition, based on discussions with management of the Company, RBC identified approximately US$7 million of net cost saving initiatives that the Company intends to pursue, regardless of whether the Offer is completed. We have factored 100% of the US$7 million estimate into our NAV analysis beginning in 2003, and have reduced this figure on a declining balance basis until 2023 to reflect the reduced production levels in our NAV blow-down scenario. RBC projected commodity prices in its base case cash flow projection by using a composite price forecast from several independent professional reserve engineers and forward strip pricing (see Exhibit 1 for RBC's base case commodity price forecast). Due to the use of strip pricing in 2002 and 2003, RBC's base case commodity price forecast is higher than the Company's internal forecast by approximately US$2.00 to US$3.00 per barrel of oil for these years. Beginning in 2004, using the composite of selected independent professional reserve engineers' forecast, RBC's base case commodity price forecast averages approximately US$2.00 per barrel of oil less than the Company's internal forecast. RBC's base case risked free cash flows for contracted reserves are summarized in Exhibit 1. (RBC RUNNING FOOT) A-7 Uncontracted Reserves I) UNCONTRACTED NATURAL GAS RESERVES WITH IDENTIFIED POTENTIAL MARKETS Certain of the Company's probable natural gas reserves, as disclosed in its 2001 annual report, are currently not dedicated to long-term supply contracts. The Company has informed RBC that it has identified potential markets for this natural gas and has signed, or is negotiating, memorandums of understanding to produce and sell certain of this natural gas. In conducting our NAV analysis, RBC reviewed management's unaudited cash flow projections for the years ending December 31, 2002 to 2023 for the Company's uncontracted natural gas reserves that have identified potential markets. RBC reviewed the assumptions in management's projections and determined that material adjustments were not necessary in preparing our base case cash flow forecasts other than as described below. RBC applied a risk discount to the cash flows projected by management ranging from 20% to 40% of the unrisked cash flows to reflect the progress of contract negotiations, the proximity of commercially viable markets, the availability of natural gas transportation systems, counterparty risk, the potential risk of timing delays and the risk of not being able to recover booked and projected volumes. RBC projected commodity prices in its base case cash flow projections for uncontracted natural gas reserves with identified potential markets on the same basis as described above under the heading Liquids (Oil and Condensate) and Contracted Natural Gas Reserves. RBC's base case risked free cash flows for uncontracted natural gas reserves that have identified potential markets are summarized in Exhibit 1. II) ADDITIONAL RESERVES There exist certain differences in the assessed reserves of DeGolyer and MacNaughton, the independent reserve engineering firm, and the Company. The differences arise from the employed reserve assessment techniques of each reviewer. Additionally, the Company has identified other expected reserves associated with certain exploration initiatives. Taken together, there could exist certain other reserves not recorded in the Company's proved and probable reserves as disclosed in its 2001 annual report. RBC reviewed a number of precedent transactions in South East Asia in order to estimate a value for the additional reserves. RBC considered the areas in which the precedent transactions occurred, the availability of transportation systems and commercially viable markets, the nature of the hydrocarbon reserves, the level of current development and existence of a development plan and the risk associated with recovering the projected volumes, among other things. In selecting our ascribed net asset value range for the Company's additional reserves, RBC considered that the recovery of these reserves was less certain than the reserves related to precedent transactions and therefore assessed a lower value per mcf than what is implied by the precedent transactions. Based on this analysis, RBC ascribed values ranging from US$0.03 per thousand cubic feet ("mcf") to US$0.06/mcf to the Company's additional reserves. TGI Investment The Company is a 35% shareholder in a limited liability company ("PGST") established to purchase a 40% interest in PT Transportasi Gas Indonesia ("TGI") (net 14% interest in TGI). TGI has been established by the Indonesian state-owned enterprise PT Perusahaan Gas Negara ("PGN") and will own and operate pipeline assets transferred from PGN. PGST is in negotiations to complete this acquisition. RBC reviewed the Company's cash flow projections for PGST assuming that the acquisition will be completed and determined that material adjustments were not necessary, except for the application of a 50% risk discount to reflect the risks of not completing the acquisition of TGI, not achieving projected volumes, not achieving projected transportation tolls and the timing of incremental volumes. (RBC RUNNING FOOT) A-8 Sensitivity Analysis In completing our NAV analysis, RBC did not rely on any single series of cash flows but performed a variety of sensitivity analyses. Variables sensitized included commodity price assumptions, discount rates, timing and risk factors. The results of these sensitivity analyses are reflected in our judgment as to the appropriate values resulting from the NAV approach. Discount Rates RBC selected appropriate discount rates to apply to our projected unlevered free cash flows by utilizing the Capital Asset Pricing Model ("CAPM") approach to determine an appropriate weighted average cost of capital ("WACC"). This approach calculates WACC based on an assumed optimal capital structure for the Company. The Company's optimal capital structure was chosen based upon a review of the capital structures of comparable companies and the risks faced by the Company and the Indonesian oil and gas industry. The CAPM approach calculates the cost of equity capital as a function of the risk-free rate of return, the volatility of equity prices in relationship to a benchmark ("beta") and a premium for equity and country specific risk. The CAPM approach calculates the cost of debt as a function of the risk-free rate of return plus an appropriate borrowing spread to reflect credit risk, assuming an optimal capital structure. The assumptions used by RBC in estimating WACC for the Company are provided below: COST OF DEBT Risk-free rate (10 year US Treasury bonds).................. 4.98% Borrowing spread............................................ 1.50% Country risk premium........................................ 3.25% Pre-tax cost of debt........................................ 9.73% Tax rate (1)................................................ 41.00% After tax cost of debt...................................... 5.74% ------------------- COST OF EQUITY Risk-free rate (10 year US Treasury bonds).................. 4.98% Equity risk premium......................................... 5.00% Unlevered beta.............................................. 1.05 Levered beta (2)............................................ 1.26 Country Risk Premium........................................ 3.25% After tax cost of equity.................................... 14.51% ------------------- Optimal Capital Structure................................... 25% debt/75% equity ------------------- WACC Calculated From Above.................................. 12.32% -------------------
- --------------- (1) RBC estimate of expected Canadian tax rate. (2) Assuming 25% debt/75% equity. Based on the foregoing analysis, taking into account sensitivity analyses on the variables selected above, RBC utilized a discount rate of 11.0% to 13.5%. Results of NAV Analysis Based on the foregoing analysis, taking into account the various sensitivity analyses performed, RBC selected a value range of US$11.00 to US$13.00 per Common Share in our NAV analysis. This analysis is summarized in Exhibit 2. (RBC RUNNING FOOT) A-9 PRECEDENT TRANSACTION ANALYSIS RBC reviewed certain publicly available information regarding comparable company and asset transactions in the Indonesian oil and gas industry and other developing regions. In analyzing precedent transactions, RBC reviewed a number of parameters, including: i) price as a multiple of forecasted discretionary cash flow ("DCF") per share for the first year following the transaction; ii) price as a percentage of NAV per share; iii) enterprise value ("EV"), defined as equity value plus net debt, as a multiple of forecasted earnings before interest, taxes, depreciation, depletion and amortization ("EBITDA") for the first year following the transaction; iv) adjusted enterprise value ("AEV"), defined as enterprise value less any value for non-reserve assets, as a multiple of forecasted daily barrel of oil equivalent ("boe") production for the first year following the transaction; and v) AEV as a multiple of boe proved and proved plus probable reserves. RBC's selection of precedent transactions was based primarily on transactions in the Indonesian oil and gas industry and other developing regions which have occurred during the period 2000 to present. The following table summarizes selected precedent transactions and indicates the implied multiples under the Offer:
EV/ AEV/ P/DCF(1) EBITDA(1) NET -------- --------- PRODUCTION(1) ENTERPRISE 1 YR. 1 YR. ---------------- DATE ACQUIROR TARGET VALUE FWD P/NAV(1) FWD 1 YR. FWD - ---- ---------------------------- ------------------------- ---------- -------- -------- --------- ---------------- (US$ MM) (X) (%) (X) (US$/BOE/D) 15-Apr-02 PetroChina Devon $262.0 6.8 x n/a n/a $21,475 22-Mar-02 Medco Energi EEX Corporation $34.5 n/a n/a n/a n/a 18-Jan-02 CNOOC Ltd. Repsol-YPF $585.0 n/a n/a n/a n/a 8-Oct-01 PTT Exploration and Prod. Medco Energi (34.1%) $225.0 6.7 x 149.5% 3.5 x $11,091 10-Jul-01 Amerada Hess Corp. Triton Energy Ltd. $3,143.3 8.4 x 111.1% 7.8 x $36,967 21-Jun-01 Talisman Energy Inc. Lundin Oil AB (Malaysia) $243.9 n/a n/a n/a $46,422 29-May-01 Conoco Inc. Gulf Canada Resources $6,338.0 4.5 x 111.1% 6.0 x $21,951 21-Dec-00 ENI SpA (Agip plc) LASMO plc $5,641.1 5.4 x 110.6% 6.1 x n/a MEAN $2,059.1 6.3 X 120.6% 5.8 X $27,581 MEAN (EXCL. HIGH AND LOW) $1,683.4 6.3 X 111.1% 6.1 X $26,798 MEDIAN $423.5 6.7 X 111.1% 6.1 X $21,951 27-May-02 Conoco Canada Gulf Indonesia $1,072.8 8.8 x 103.5% 6.7 x $29,805 AEV/NET RESERVES(1) ------------------------- DATE PROVED PRV + PRB - ---- ----------- ----------- (US$/MMBOE) (US$/MMBOE) 15-Apr-02 $3.28 $2.06 22-Mar-02 $3.45 n/a 18-Jan-02 $3.18 $2.30 8-Oct-01 $3.26 $1.42 10-Jul-01 $10.46 $5.77 21-Jun-01 $5.29 $1.21 29-May-01 $5.14 $2.35 21-Dec-00 $5.54 n/a $4.95 $2.52 $4.33 $2.03 $4.30 $2.18 27-May-02 $4.40 $2.66
- --------------- Notes: (1) Based on street research estimates. RBC's review of the precedent transactions considered various factors, including the existence of contracted gas reserves, the location of the assets, the hydrocarbon mix and the transaction size. Based on the foregoing analysis, RBC selected a value range of US$11.00 to US$14.00 per Common Share in our precedent transaction analysis. (RBC RUNNING FOOT) A-10 BENEFITS TO THE CONTROLLING SHAREHOLDER OF ACQUIRING THE COMMON SHARES HELD BY MINORITY SHAREHOLDERS In arriving at our opinion of the value of the Common Shares, we reviewed and considered whether any distinctive material benefits will accrue to the Controlling Shareholder or its affiliates through the acquisition of all the Common Shares held by Minority Shareholders as contemplated in the Offer. We concluded that there were material specific operational and financial benefits that would accrue to the Controlling Shareholder or its affiliates. These consist primarily of the potential reduction of head office and other expenses. Based on discussions with management of the Company and Conoco, RBC has estimated that approximately US$3 to US$5 million of annual cost reductions would accrue to the Controlling Shareholder or its affiliates as a result of the Offer. This estimate is net of taxes and the Production Contracts' cost sharing provisions under which the Company operates. For purposes of the Valuation, RBC included that portion of the benefits in its NAV analysis that it estimated the Controlling Shareholder might pay for if an open auction of the Company were undertaken. RBC believes that several potential purchasers could emerge in a competitive auction process for the Company, primarily oil and gas companies with similar operations in or near Indonesia or a desire to enter the South East Asian market. RBC estimated that several of such potential purchasers would be able to achieve benefits comparable to, or possibly greater than, the benefits achievable by the Controlling Shareholder. As a result, we included 100% of the US$3 to US$5 million of annual benefits in our NAV analysis. We assumed that 100% of these benefits could be achieved starting in 2003 and reduced this figure on a declining balance basis until 2023 to reflect the reduced production levels in our NAV blow-down scenario. Based on discussions with Conoco, the Controlling Shareholder and tax counsel, RBC understands that there would be no material tax benefits to Conoco or the Controlling Shareholder if the Offer is completed. VALUATION CONCLUSION Based upon and subject to the foregoing, RBC is of the opinion that, as of the date hereof, the fair market value of the Common Shares is in the range of US$11.50 to US$14.00 per Common Share. FAIRNESS OPINION FACTORS CONSIDERED In considering the fairness of the Offer, from a financial point of view, to the Minority Shareholders, we principally considered and relied upon the following: i) a comparison of the price per Common Share under the Offer to the range of fair market values of the Common Shares under our Valuation; and ii) a comparison of the price per Common Share under the Offer to the trading price of the Common Shares prior to the announcement (the "Announcement") on May 28, 2002 of the Controlling Shareholder's intention to make the Offer. COMPARISON OF PRICE PER COMMON SHARE UNDER THE OFFER TO VALUATION The price per Common Share to be paid to Minority Shareholders under the Offer is within the fair market value range for the Common Shares under our Valuation. COMPARABLE TRANSACTION PREMIUMS Our review of other transactions in the Canadian equity market where controlling shareholders successfully acquired publicly traded minority interests identified 46 such transactions with a value over $10 million in the past five years. Success was defined as acquiring at least one-half of the minority shares outstanding at the time of the transaction. Defining the premium for this purpose as the amount by which the value per share offered under the relevant transaction exceeded the closing price of the shares on the principal (RBC RUNNING FOOT) A-11 trading exchange on the day immediately prior to announcement of the transaction resulted in premiums as follows: CANADIAN PRECEDENT GOING-PRIVATE PREMIUMS
1 DAY PRIOR TO ANNOUNCEMENT - ----------------------------------- HIGHEST LOWEST MEAN MEDIAN - ------- ------ ---- ------ 97% (5)% 31% 27%
The range of premiums paid in the above transactions is very wide. Although every transaction has its own particular circumstances and direct comparison of any single transaction to the Offer is difficult, we believe that the transactions reviewed, in the aggregate, provide a useful comparison benchmark. The price per Common Share under the Offer of US$13.25 represents a premium of approximately 23% to the US$10.75 closing price of the Common Shares on the New York Stock Exchange on May 24, 2002, the last trading day immediately prior to the Announcement, and a premium of approximately 21% to the 20-day weighted average trading price prior to announcement of US$10.99. This premium is within the range of premiums for similar transactions over the past five years. FAIRNESS CONCLUSION Based upon and subject to the foregoing, RBC is of the opinion that, as of the date hereof, the consideration under the Offer is fair from a financial point of view to the Minority Shareholders. Yours very truly, (RBC SIGNATURE) RBC DOMINION SECURITIES INC. (RBC RUNNING FOOT) A-12 EXHIBIT 1 RBC BASE CASE COMMODITY PRICE FORECAST AND BASE CASE FREE CASH FLOWS
YEAR ENDING DECEMBER 31, --------------------------------------------------------------------------------------- 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ RBC BASE CASE WTI FORECAST (US$)... $25.08 $25.07 $21.42 $21.55 $21.79 $22.14 $22.59 $22.95 $23.31 $23.68 RISKED CONTRACTED RESERVES (US$ MM) EBITDA............................ $ 185 $ 210 $ 181 $ 156 $ 155 $ 161 $ 176 $ 178 $ 146 $ 132 Capital expenditures............ (71) (28) (13) (48) (26) (9) (24) (43) (12) (0) Tax............................. (73) (51) (53) (48) (51) (56) (59) (58) (47) (45) ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ UNLEVERED AFTER-TAX FREE CASH FLOW.............................. $ 41 $ 131 $ 115 $ 59 $ 79 $ 96 $ 93 $ 76 $ 87 $ 87 ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== RISKED UNCONTRACTED RESERVES (US$ MM) EBITDA............................ $ (0) $ 10 $ 24 $ 36 $ 84 $ 69 $ 69 $ 70 $ 71 $ 68 Capital expenditures............ (6) (26) (24) (40) (13) (4) (0) (1) (3) 0 Tax............................. 0 (6) (6) (14) (16) (25) (26) (27) (28) (28) ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ UNLEVERED AFTER-TAX FREE CASH FLOW.............................. $ (6) $ (21) $ (5) $ (17) $ 55 $ 40 $ 43 $ 41 $ 39 $ 41 ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== YEAR ENDING DECEMBER 31, --------------------------------------------------------------------------------------- 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ RBC BASE CASE WTI FORECAST (US$)... $24.13 $24.50 $24.90 $25.31 $25.72 $26.14 $26.56 $26.99 $27.43 $27.88 RISKED CONTRACTED RESERVES (US$ MM) EBITDA............................ $ 119 $ 129 $ 112 $ 114 $ 94 $ 83 $ 84 $ 83 $ 75 $ 64 Capital expenditures............ (1) (29) 0 0 0 0 0 0 0 0 Tax............................. (41) (54) (41) (43) (38) (35) (35) (36) (33) (27) ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ UNLEVERED AFTER-TAX FREE CASH FLOW.............................. $ 78 $ 46 $ 71 $ 71 $ 56 $ 48 $ 49 $ 47 $ 42 $ 37 ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== RISKED UNCONTRACTED RESERVES (US$ MM) EBITDA............................ $ 68 $ 63 $ 60 $ 59 $ 59 $ 60 $ 61 $ 62 $ 64 $ 65 Capital expenditures............ 0 0 0 0 0 0 0 0 0 0 Tax............................. (28) (27) (25) (25) (26) (26) (27) (27) (28) (28) ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ UNLEVERED AFTER-TAX FREE CASH FLOW.............................. $ 40 $ 37 $ 34 $ 34 $ 34 $ 34 $ 35 $ 35 $ 36 $ 37 ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== YEAR ENDING DECEMBER 31, --------------- 2022 2023 ------ ------ RBC BASE CASE WTI FORECAST (US$)... $28.33 $27.88 RISKED CONTRACTED RESERVES (US$ MM) EBITDA............................ $ 49 $ 43 Capital expenditures............ 0 0 Tax............................. (21) (18) ------ ------ UNLEVERED AFTER-TAX FREE CASH FLOW.............................. $ 28 $ 25 ====== ====== RISKED UNCONTRACTED RESERVES (US$ MM) EBITDA............................ $ 66 $ 65 Capital expenditures............ 0 0 Tax............................. (29) (29) ------ ------ UNLEVERED AFTER-TAX FREE CASH FLOW.............................. $ 37 $ 37 ====== ======
(RBC RUNNING FOOT) A-13 EXHIBIT 2 RBC BASE CASE NET ASSET VALUATION
GROSS VALUE ---------------- LOW HIGH ------ ------ (US$ MILLIONS) Liquids and Contracted Gas Reserves......................... 585 680 Uncontracted Gas Reserves with Identified Potential Markets................................................... 135 175 Additional Reserves and TGI Investment...................... 130 180 ------ ------ TOTAL ASSETS................................................ 850 1,035 Net Working Capital (Including Cash)........................ 100 100 ------ ------ NET ASSETS.................................................. 950 1,135 Capitalized Cost Synergies.................................. 15 25 Option Proceeds............................................. 11 19 ------ ------ DILUTED SHAREHOLDERS' EQUITY................................ 976 1,179 Diluted Shares Outstanding (mm)............................. 89.3 90.0 NET ASSET VALUE (PER DILUTED COMMON SHARE).................. $10.93 $13.11
(RBC RUNNING FOOT) A-14 ANNEX B INFORMATION PURSUANT TO CANADIAN SECURITIES LAWS The information contained in this Annex is stated as of June 12, 2002, unless otherwise indicated. All capitalized terms used and not otherwise defined herein shall have their defined meanings ascribed to them in the Statement to which this Annex B is attached. EXCHANGE RATE INFORMATION ALL DOLLAR REFERENCES IN THIS STATEMENT ARE EXPRESSED IN U.S. DOLLARS. The following table sets forth, for the dates indicated, certain exchange rates (the "Noon Buy Rates"), presented as Canadian dollars per U.S.$1.00, based on the rate quoted by the Federal Reserve Bank of New York for Canadian dollars per U.S.$1.00. March 29, 2002.............................................. 1.5958 December 31, 2001........................................... 1.5925 September 28, 2001.......................................... 1.5797 June 29, 2001............................................... 1.5175 March 30, 2001.............................................. 1.5784
The Noon Buy Rate on June 11, 2002 was U.S.$1.00 = Cdn.$1.5383. SUPPORT AGREEMENT The following is a summary of material provisions of the Support Agreement, which has been filed as Exhibit (d) to Conoco's and Conoco Canada's Tender Offer Statement on Schedule TO filed with the SEC on the date hereof. Such summary is not a complete description and is qualified in its entirety by reference to the Support Agreement. Capitalized terms not otherwise defined in the following summary shall have the meanings set forth in the Support Agreement. We urge you to read carefully the Support Agreement. The Offer. The Support Agreement provides that, following the satisfaction or waiver of the conditions to the Offer, Conoco Canada shall accept for payment and pay for, in accordance with the terms of the Offer and the Support Agreement, all Gulf Indonesia Common Shares which have been validly tendered and not properly withdrawn pursuant to the Offer promptly after the Expiration Date. The obligations of Conoco Canada to accept for payment and to pay for any Gulf Indonesia Common Shares tendered pursuant to the Offer is subject to the conditions specified in "THE OFFER -- Certain Conditions to the Offer" in the Offer to Purchase. The Second-Step Acquisition. The Support Agreement provides that if the Minimum Tender Condition has been satisfied and the other conditions to the Second-Step Acquisition have been satisfied or waived, Conoco Canada will use its best efforts to, as soon as practicable after completion of the Offer, complete the Second-Step Acquisition, pursuant to which Conoco Canada will acquire all outstanding Gulf Indonesia Common Shares not tendered in the Offer or otherwise owned by Conoco Canada or its affiliates at a price in cash equal to the Offer Price. Gulf Indonesia has agreed that if Conoco Canada is required under the Support Agreement to use its best efforts to effect a Second-Step Acquisition, Gulf Indonesia will use its best efforts to assist Conoco Canada in connection therewith, including (1) taking all action necessary in accordance with the securities laws, other applicable laws, Gulf Indonesia's constating documents, the requirements of the New York Stock Exchange or the requirements of any governmental entity to duly call, give notice of, convene and hold a meeting of shareholders of Gulf Indonesia as promptly as practicable to consider and vote upon the Second-Step Acquisition, if necessary, and (2) filing with the applicable securities commissions and mailing to shareholders of Gulf Indonesia a management proxy circular, or if requested by Conoco Canada, an information statement relating to the meeting of shareholders. Certain Conditions to the Second-Step Acquisition. The Support Agreement provides that the obligation of Conoco Canada to commence and complete the Second-Step Acquisition is subject to the satisfaction (or waiver by Conoco Canada), immediately prior to the time the Second-Step Acquisition is commenced and immediately prior to the time the Second-Step Acquisition is completed, of each of the following conditions: (1) all sanctions, rulings, exceptions, waivers, permits, orders, consents or approvals of any governmental entity (whether in Canada, the United States, Indonesia or elsewhere) which, in Conoco Canada's reasonable judgment, are necessary in connection with the Second-Step Acquisition shall have been obtained on terms and conditions reasonably satisfactory to Conoco Canada; (2) (i) no act, action, suit, proceeding, obligation or opposition shall have been threatened or taken before or by any governmental entity or by any other person (in the case of such other person, which has a reasonable likelihood of success), and (ii) no law, regulation, rule, statute, judgment, order, injunction or policy shall have been enacted, promulgated, amended or applied, in either case in the reasonable judgment of Conoco Canada: (a) to (A) cease trade, enjoin, prohibit or impose limitations, damages or conditions on (x) the purchase by, or sale to, Conoco Canada of the Shares or any of them or the consummation of the transactions contemplated by the Support Agreement, (y) the right of Conoco Canada to own or exercise full rights of ownership of the Shares or any of them, or (z) the ability of Conoco Canada or Conoco to exercise full ownership rights over or operate the businesses or assets of Gulf Indonesia and its subsidiaries, or (B) compel Conoco Canada or Conoco (or any of their respective affiliates) to dispose of or to hold separate any portion of their business or assets or to dispose or to hold separate any portion of the business or assets of or any of Gulf Indonesia or its subsidiaries; (b) which has materially adversely affected or, if the Second-Step Acquisition were consummated, could materially adversely affect Gulf Indonesia and its subsidiaries considered as a whole; or (c) which challenges or would prevent completion of the Second-Step Acquisition or which would have a material adverse effect on the ability of Conoco Canada to complete a Second-Step Acquisition; (3) there shall not exist any prohibition at law or legal restraint against Conoco Canada making or completing a Second-Step Acquisition; (4) Conoco Canada shall have determined in its reasonable judgment that there does not exist and has not occurred (or, if there does exist or shall have previously occurred, there shall not have been disclosed prior to the date of the Support Agreement, generally or to Conoco or Conoco Canada) any material adverse change to Gulf Indonesia and its subsidiaries considered as a whole; (5) all representations and warranties of Gulf Indonesia in the Support Agreement qualified as to materiality shall be true and correct and those not so qualified shall be true and correct in all material respects as of the date of the Support Agreement and as of the effective date of the Second-Step Acquisition as if made on and as of such date (except to the extent that such representations and warranties speak as of an earlier date) and Gulf Indonesia shall have performed in all material respects all covenants to be performed by it under the Support Agreement; (6) there shall not be in force and non-appealable any injunction, order or decree issued by a court or other governmental entity of competent jurisdiction in Canada, the United States or elsewhere restraining or enjoining the consummation of the Second-Step Acquisition or any other transaction contemplated by the Support Agreement; (7) the Support Agreement shall not have been terminated; and (8) the Minimum Tender Condition shall have been satisfied. B-2 Subject to the terms of the Support Agreement, the foregoing conditions are for the sole benefit of Conoco Canada and Conoco and may be asserted by Conoco Canada or Conoco regardless of the circumstances (including any action or inaction by Conoco Canada or Conoco) giving rise to any such conditions or may be waived by Conoco Canada or Conoco in whole or in part at any time and from time to time prior to the effective time of the Second-Step Acquisition (subject, in the case of any waiver, to the requirements of the Exchange Act and Canadian provincial securities legislation). The failure by Conoco Canada or Conoco at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time prior to the effective time of the Second-Step Acquisition. For purposes of the Support Agreement the terms "material adverse change" and "material adverse effect" mean, when used in connection with a person, any change, effect, event, occurrence or state of facts (or any effect, development, occurrence or state of facts involving a prospective change) that is, or could reasonably be expected to be, material and adverse to the business, assets, rights, liabilities, capitalization, operations, prospects or financial condition of that person and its subsidiaries taken as a whole, other than any change, effect, event, occurrence or state of facts (or any effect, development, occurrence or state of fact involving a prospective change); (i) resulting from changes affecting the worldwide oil and gas industry, including without limitation changes in crude oil, natural gas, gas liquids or other commodity prices on a current or forward basis; (ii) resulting from changes in general economic, political, civil, financial, banking, regulatory, currency exchange, securities market or commodity market conditions in Canada or the United States; (iii) which prior to the date of the Support Agreement has been publicly disclosed by Gulf Indonesia or otherwise disclosed in writing by Gulf Indonesia to Conoco or Conoco Canada; (iv) resulting from the negotiation, announcement, execution, delivery, consummation or anticipation of the transactions contemplated by, or compliance with, the Support Agreement; or (v) resulting from any change in law of any Canadian or U.S. governmental entity. Termination. The Support Agreement may be terminated: (1) by Conoco, Conoco Canada or Gulf Indonesia (in the case of Gulf Indonesia, as determined by the Independent Committee) if there shall be in force and non-appealable any injunction, order or decree issued by a court or other governmental entity of competent jurisdiction in Canada, the United States or elsewhere restraining or enjoining the consummation of the Offer, the Second-Step Acquisition or any other transaction contemplated by the Support Agreement; provided that the party so terminating is not then in material breach of the Support Agreement (or in the case of Conoco or Conoco Canada, neither is so in breach); (2) by Conoco or Conoco Canada if the conditions to Conoco Canada consummating the Offer have not been satisfied (or waived by Conoco or Conoco Canada) by the date specified in the condition or the Expiration Date, as applicable; provided that neither Conoco nor Conoco Canada is then in material breach of the Support Agreement; (3) by Conoco or Conoco Canada if the conditions to Conoco Canada consummating the Second-Step Acquisition have not been satisfied (or waived by Conoco or Conoco Canada) both immediately prior to the time the Second-Step Acquisition is commenced and immediately prior to the time the Second-Step Acquisition is completed; provided that neither Conoco nor Conoco Canada is then in material breach of the Support Agreement; (4) by the mutual agreement of Conoco, Conoco Canada and Gulf Indonesia (as determined by the Independent Committee); (5) by Conoco and Conoco Canada if the Board of Directors of Gulf Indonesia or the Independent Committee shall have (i) withdrawn or modified, or proposed to withdraw or modify in a manner adverse to Conoco or Conoco Canada, the approval or recommendation of the Board of Directors of Gulf Indonesia or the Independent Committee of the Support Agreement or the Offer or (ii) approved or recommended, or proposed publicly to approve or recommend, any proposal by any person to acquire, directly or indirectly, more than 10% of the Shares (other than the Offer) (an "Acquisition Proposal"); B-3 (6) by Gulf Indonesia (as determined by the Independent Committee) if (i) any representation or warranty of Conoco Canada or Conoco in the Support Agreement which is qualified as to materiality is not true and correct and any representation and warranty in the Support Agreement not so qualified is not true and correct in all material respects (except to the extent that such representations and warranties speak to an earlier date) or (ii) Conoco Canada or Conoco is in breach in a material respect of any of their respective covenants under the Support Agreement; provided, in each case that (A) Conoco or Conoco Canada, as applicable, has not cured such breach within 20 business days of Gulf Indonesia notifying Conoco or Conoco Canada of such breach and (B) Gulf Indonesia is not then in material breach of the Support Agreement; (7) by Gulf Indonesia in order for it to concurrently enter into a bona fide written unsolicited Acquisition Proposal that in the good faith determination of the Independent Committee (i) is reasonably capable of being completed, taking into account all legal, financial, regulatory and other aspects of such proposal and the person making such proposal and (ii) would, if consummated, result in a more favorable transaction from a financial point of view to shareholders of Gulf Indonesia (other than Conoco Canada) than the transactions contemplated by the Support Agreement; and (8) by Conoco, Conoco Canada or Gulf Indonesia (as determined by the Independent Committee) in the event that Conoco Canada does not complete the Second-Step Acquisition on or prior to January 1, 2003; provided that a party may not terminate the Support Agreement pursuant to this clause if such party's breach (or in the case of Conoco or Conoco Canada, the breach by either of Conoco or Conoco Canada) of the Support Agreement resulted in the Second-Step Acquisition not being completed on or prior to such date. In the event of such termination, except as provided in the Support Agreement, the Support Agreement will become void and have no effect, and there will be no liability on the part of Conoco, Conoco Canada or Gulf Indonesia. However, the Support Agreement provides that the termination of the Support Agreement will not relieve any party from liability for any wilful and knowing breach of a representation or warranty in the Support Agreement or a material breach of a covenant contained therein. Change in Recommendation. Both the Board of Directors of Gulf Indonesia and the Independent Committee have agreed not to withdraw or modify, or propose to withdraw or modify, in a manner adverse to Conoco or Conoco Canada, its approval or recommendation of the Offer or the Support Agreement, or approve or recommend or propose publicly to approve or recommend any Acquisition Proposal, unless the Board of Directors of Gulf Indonesia, or the Independent Committee, determines in good faith, after consultation with outside counsel, that it is necessary to do so in order to comply with its fiduciary duties to the shareholders of Gulf Indonesia (other than Conoco Canada) under applicable law. Interim Operations. Gulf Indonesia has agreed that, prior to consummation of the Second-Step Acquisition, except as otherwise expressly contemplated by the Support Agreement or unless Conoco otherwise agrees in writing: (1) Gulf Indonesia and its subsidiaries will conduct their businesses only in, and not take any action except in, the usual and ordinary course of business and consistent with past practice, and Gulf Indonesia shall use all commercially reasonable efforts to maintain and preserve its and their business organization, assets, employees, advantageous business relationships and the attendant goodwill of Gulf Indonesia and its subsidiaries and to contribute to retention of that goodwill to and after the date of the consummation of the Second-Step Acquisition; (2) Gulf Indonesia will not, and will not permit any of its subsidiaries to, directly or indirectly: (i) issue, grant, sell or pledge or agree to issue, grant, sell or pledge any shares of Gulf Indonesia or its subsidiaries or other equity interests of Gulf Indonesia or its subsidiaries, or options, warrants, rights or units to acquire any such shares or interests, securities convertible into or exchangeable or exercisable for, or otherwise evidencing a right to acquire, shares of Gulf Indonesia or its subsidiaries or other equity interests of Gulf Indonesia or its subsidiaries, other than (A) the issuance of Gulf Indonesia Common Shares issuable pursuant to the terms of certain options, (B) the granting of options in the ordinary B-4 course consistent with past practice, (C) in transactions between two or more Gulf Indonesia wholly owned subsidiaries or between Gulf Indonesia and a Gulf Indonesia wholly owned subsidiary, (D) pursuant to certain pledge commitments and (E) as required under law or existing contracts; (ii) redeem, purchase or otherwise acquire any of its outstanding securities unless otherwise required by the terms of such securities and other than in transactions between two or more Gulf Indonesia wholly owned subsidiaries or between Gulf Indonesia and a Gulf Indonesia wholly owned subsidiary; (iii) adopt a plan of liquidation, or resolution providing for the liquidation, dissolution, merger, consolidation, spin-off, demerger or reorganization of Gulf Indonesia or any of its subsidiaries; or (iv) enter into, modify or terminate any contract or agreement with respect to any of the foregoing; (3) Gulf Indonesia will conduct itself so as to keep Conoco informed as to the material decisions or actions required to be made or taken by Gulf Indonesia's Board of Directors with respect to the operation of its business, except in respect of disclosure prohibited by reason of a confidentiality obligation owed to any person or otherwise prevented by applicable law; (4) Gulf Indonesia will not, and will not permit its subsidiaries, directly or indirectly, to: (i) sell, pledge, lease, dispose of or encumber any assets of Gulf Indonesia or its subsidiaries, except in the ordinary course of business consistent with past practice; (ii) subject to certain exceptions, acquire any corporation, partnership or other person or other business organization or division thereof, make any investment either by the purchase of securities, contributions of capital, property transfer or purchase of any property or assets of any other person, if any of the foregoing would be material to the business or financial condition of Gulf Indonesia and its subsidiaries taken as a whole; (iii) commence or undertake a substantial expansion of its business facilities or operations or an expansion that is out of the ordinary and regular course of business consistent with past practice in light of current market and economic conditions; (iv) incur any indebtedness for borrowed money or any other liability or obligation or issue any debt securities or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other person, or make any loans or advances, except (A) in the ordinary course of business consistent with past practice, (B) for refinancing of existing debt on substantially the same or more favorable terms and (C) for daylight employee assistance loans in connection with the exercise of options; (v) pay, discharge or satisfy any claims, liabilities or obligations other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice, of liabilities reflected or reserved against in certain Gulf Indonesia financial statements or incurred in the ordinary course of business consistent with past practice; (vi) authorize, recommend or propose any release or relinquishment of any contractual right, other than in the ordinary course of business consistent with past practice; (vii) waive, release, grant or transfer any rights of material value or modify or change any existing material licence, lease, contract or other document, other than in the ordinary course of business consistent with past practice; (viii) except in the ordinary course of business consistent with past practice or as required by applicable law, enter into or modify in any material respect any contract, agreement, commitment or arrangement which new contract or series of related existing contracts could reasonably be expected to have a material adverse effect on Gulf Indonesia and its subsidiaries taken as a whole; or (ix) authorize or propose any of the foregoing or enter into or modify any contract, agreement, commitment or arrangement to do any of the foregoing; provided, however, that the foregoing does not apply to any action, expenditure, transaction or agreement (including a series of transactions) included in the Gulf Indonesia 2002 budget approved by the Board of Directors of Gulf Indonesia prior to December 10, 2001 (including amendments thereto made prior to June 1, 2002) or with a value of less than $5 million individually or $10 million in the aggregate; (5) Gulf Indonesia will not, and will not permit any of its subsidiaries to, (i) grant or promise to grant to any officer or director an increase or improvement in compensation or benefits in any form; (ii) other than in the ordinary course of business consistent with past practice, grant or promise to grant to any other employee any increase in compensation or benefits in any form other than to the extent required under any existing collective bargaining agreements or union contracts; (iii) make any loan to any officer or director except for daylight employee assistance loans in connection with the exercise of options; (iv) except as provided in the Support Agreement, take any action with respect to the grant or B-5 increase of any severance or termination pay to, or the entering into or amendment of any employment or consulting agreement with, any employee of Gulf Indonesia or any of its subsidiaries, or with respect to any increase of benefits payable under its current severance or termination pay policies; (v) except as otherwise set forth in the Support Agreement, take any action to accelerate any rights or benefits, or make any material determinations not in the ordinary course of business consistent with past practice under any certain Gulf Indonesia benefit plans, collective bargaining agreements or union contracts; or (vi) except as required by law, establish, adopt, enter into or amend any collective bargaining agreement; (6) Gulf Indonesia shall not take, and shall not permit any of its subsidiaries to take, any action, if such action could reasonably be expected to prevent, materially impede or make more difficult or burdensome in any material respect, the obtainment of regulatory approvals that are necessary or desirable in connection with the Offer, the Second Step Acquisition or any of the other transactions contemplated by the Support Agreement; (7) Gulf Indonesia will not, and will not permit its subsidiaries to (i) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, other than dividends and distributions by a direct or indirect wholly owned subsidiary of Gulf Indonesia to Gulf Indonesia or (ii) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock; (8) Gulf Indonesia will not, and will not permit its subsidiaries to, make or revoke any material tax election, other than consistent with past practice, unless required by applicable law, or resolve any tax audit or other similar proceeding in respect of material taxes payable by Gulf Indonesia or its subsidiaries; and (9) Gulf Indonesia will not, and will not permit its subsidiaries to, make any change in any method of accounting or accounting practice or policies or financial accounting policies other than those required by generally accepted accounting principles or required by applicable law or applicable securities commissions. Fees and Expenses. All fees and expenses incurred in connection with the Support Agreement and the Offer and the transactions contemplated by the Support Agreement will be paid by the party incurring such fees or expenses, whether or not the Offer is consummated, except that Conoco Canada will pay all the costs incurred by Gulf Indonesia in obtaining the Valuation and Fairness Option. Indemnification. Conoco has agreed that it will, or will cause Gulf Indonesia to, maintain in effect without any reduction in scope or coverage for ten years from the later of the Expiration Date (as defined in the Offer to Purchase) and the date a Second-Step Acquisition is completed, customary policies of directors' and officers' liability insurance providing protection comparable to the protection provided by the policies maintained by Gulf Indonesia in effect immediately prior to the Expiration Date. In addition, Conoco has agreed that all rights to indemnification or exculpation existing as of the date of the Support Agreement or authorized prior to the date of the Support Agreement in favor of present and former officers and directors of Gulf Indonesia shall survive the completion of the Offer and Conoco has agreed to cause Gulf Indonesia to fulfill its obligations under such rights or, failing that, to fulfill such obligations itself. Efforts. Conoco, Conoco Canada and Gulf Indonesia have each agreed in the Support Agreement, subject to the terms and conditions thereof, to use their commercially reasonable efforts to take and cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by the Offer, the Second-Step Acquisition and the Support Agreement, and to cooperate with each other in connection with the foregoing, including using commercially reasonable efforts to (1) obtain all necessary waivers, consents, permits, orders and approvals required under applicable law or otherwise and (2) obtain all necessary or desirable regulatory approvals. In addition, Conoco, Conoco Canada and Gulf Indonesia have agreed to challenge all lawsuits or proceedings challenging or affecting the Support Agreement or the making or completion of the Offer. Representations and Warranties. The Support Agreement contains various customary representations and warranties of the parties thereto including among others, representations as to due organization and B-6 qualification; in the case of Gulf Indonesia, capitalization; corporate authority; no violation of charter or by-laws, debt instruments or material agreements or applicable law; and, in the case of Gulf Indonesia, accuracy of Gulf Indonesia's public filings, including financial statements. Amendments; Waivers. The Support Agreement may be amended at any time prior to consummation of the Second-Step Acquisition by mutual agreement of Conoco, Conoco Canada and Gulf Indonesia, except that the Support Agreement may not be amended in a way that adversely affects the shareholders of Gulf Indonesia (other than Conoco Canada) without the approval of the Independent Committee. Conoco Canada and Conoco and Gulf Indonesia may (1) extend the time for the performance of any of the obligations or other acts of the other contained in the Support Agreement, (2) waive any inaccuracies in the representations and warranties of the other contained in the Support Agreement or in any document delivered pursuant to the Support Agreement or (3) subject to the restrictions described under "THE OFFER -- Terms of the Offer; Expiration Date" in the Offer to Purchase, waive compliance with any of the agreements of any other party or with any conditions to its own obligations, except that any extension or waiver that adversely affects the rights of shareholders of Gulf Indonesia (other than Conoco Canada) requires the approval of the Independent Committee. Any agreement on the part of a party to the Support Agreement to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party by a duly authorized officer. INTENTIONS OF DIRECTORS, SENIOR OFFICERS AND SHAREHOLDERS OF GULF INDONESIA WITH RESPECT TO THE OFFER Each of the directors and senior officers of Gulf Indonesia has indicated that at the date hereof he intends to accept the Offer, both with respect to Shares currently owned by him, directly or indirectly, and Shares issuable upon the exercise of options held by such persons as indicated in "Ownership of Securities of Gulf Indonesia". The Support Agreement provides that Gulf Indonesia may make arrangements to permit holders of options to exercise such options on a conditional basis (conditional on Conoco Canada accepting and paying for the Shares). Alternatively, Gulf Indonesia may make arrangements to cancel options in exchange for a cash payment equal to the difference, if any, between the Offer Price and the applicable exercise price of the options. The directors and senior officers of Gulf Indonesia have also indicated that, to their knowledge, after reasonable inquiry, at the date hereof, the Shares held by their associates or under their control or direction will also be tendered pursuant to the Offer. Gulf Indonesia has no knowledge as to the intentions of any other shareholder to accept or reject the Offer. OWNERSHIP OF SECURITIES OF GULF INDONESIA The names of the directors and senior officers of Gulf Indonesia and the respective numbers of securities of Gulf Indonesia owned or over which control or direction is exercised, as at the date hereof, by each director and senior officer of Gulf Indonesia and, to the knowledge of the directors and senior officers of Gulf Indonesia, after reasonable inquiry, each associate of a director or senior officer of Gulf Indonesia, and any person or company acting jointly or in concert with Gulf Indonesia, are as follows:
PERCENTAGE OF NUMBER OF PERCENTAGE OF NAME AND POSITION HELD NUMBER OF SHARES(1)(2) SHARES OPTIONS(1) OPTIONS - ---------------------- ---------------------- ------------- ---------- ------------- Robert H. Allen...................... 7,431 * 202,500 3.9% Chairman of the Board of Directors Paul C. Warwick...................... 3,950 * 50,000 * President, Chief Executive Officer and Director Taufik Ahmad......................... 1,850 * 20,000 * Vice President, Administration Andrew D.R. Hastings................. 0 * 0 * Vice President, Gas Marketing and Business Development
B-7
PERCENTAGE OF NUMBER OF PERCENTAGE OF NAME AND POSITION HELD NUMBER OF SHARES(1)(2) SHARES OPTIONS(1) OPTIONS - ---------------------- ---------------------- ------------- ---------- ------------- Donald D. McKechnie.................. 2,200 * 41,000 * Vice President, Finance Supramu Santosa...................... 4,550 * 210,250 4.0% Vice President, Corporate Strategy and Government Relations John K. Wearing...................... 2,350 * 41,700 * Vice President, Operations Cliff W. Zeliff...................... 15,200 * 220,850 4.2% Vice President, Exploration Alan P. Scott........................ 0 * 0 * Corporate Secretary Robert W. Goldman.................... 0 * 0 * Director Malcolm D. Griffiths................. 0 * 0 * Director Rick A. Harrington................... 0 * 0 * Director Francis H. (Mim) James............... 0 * 0 * Director Dr. Ir. Kuntoro Mangkusubroto........ 900 * 7,500 * Director Donald F. Mazankowski................ 2,050 * 52,500 1.0% Director James D. McColgin.................... 0 * 0 * Director John R. Sanders...................... 6,429 * 30,000 * Director Dr. George E. Watkins................ 0 * 0 * Director
- --------------- Notes: * means less than one percent (1) The information as to Shares and Gulf Indonesia options beneficially owned, directly or indirectly, or over which control or direction is exercised by each director and senior officer of Gulf Indonesia and by their respective associates, not being within the knowledge of Gulf Indonesia, has been furnished by the respective directors and senior officers individually. (2) Includes Shares which directors and senior officers are entitled to under the Restricted Share Unit/Deferred Share Unit Plan if they elect to take all units under such plan in Shares. Under the Restricted Share Unit/Deferred Share Unit Plan, holders of RSU's or DSU's may elect to take such units in cash. See "Agreements Between Gulf Indonesia and its Directors and Senior Officers -- Options and Stock Based Plans". As at the date hereof, the directors and senior officers of Gulf Indonesia and, to the knowledge of the directors and senior officers of Gulf Indonesia, after reasonable inquiry, their respective associates, as a group, beneficially own, directly or indirectly, or exercise control or direction over 46,910 Shares (including Shares which directors and senior officers are entitled to under the Restricted Share Unit/Deferred Share Unit Plan) and 876,300 Gulf Indonesia options. As of June 4, 2002, Conoco Canada owned 63,650,000 Shares representing approximately 72.3% of the outstanding Shares or approximately 70.7% of the Shares on a fully diluted basis. To the knowledge of the directors and senior officers of Gulf Indonesia, after reasonable inquiry, other than Conoco Canada, no person or company, at the date hereof, beneficially owns, directly or indirectly, or exercises control or direction over, more than 10% of the outstanding Shares. B-8 TRADING BY DIRECTORS AND SENIOR OFFICERS IN SECURITIES OF GULF INDONESIA Except as disclosed in the following sentences and under "Issue of Securities of Gulf Indonesia" below, neither Gulf Indonesia nor any of the directors or senior officers of Gulf Indonesia nor, to the knowledge of the directors and senior officers of Gulf Indonesia, after reasonable inquiry, any associate of a director or senior officer of Gulf Indonesia, any person or company who owns more than 10% of any class of equity securities of Gulf Indonesia, or any person or company acting jointly or in concert with Gulf Indonesia has traded in securities of Gulf Indonesia during the six-month period preceding the date hereof. On January 10, 2002, Gulf Indonesia purchased 1,067 Shares for John R. Sanders, at a price of $8.85 per Share, in lieu of director's fees. In addition, on April 9, 2002, Gulf Indonesia purchased 803 Shares for John R. Sanders and 584 Shares for Robert H. Allen, all at a price of $10.70 per Share, in lieu of director's fees. ISSUE OF SECURITIES OF GULF INDONESIA No Shares or securities convertible into Shares have been issued to any director or senior officer of Gulf Indonesia during the two-year period preceding the date hereof, other than as follows:
PRICE PER NAME DATE OF ISSUANCE SECURITIES ISSUED NUMBER SECURITY(1) - ---- ----------------- ----------------- ------- ----------- Robert H. Allen........................ December 18, 2000 Options 5,000 $ 9.06 May 7, 2001 Options 10,000 $ 8.18 May 7, 2001 RSUs 2,300 $ 8.18 May 6, 2002 Options 7,500 $11.25 May 6, 2002 RSUs 1,800 $11.25 Paul C. Warwick........................ July 24, 2001 Options 30,000 $11.40 May 6, 2002 Options 20,000 $11.25 May 6, 2002 RSUs 3,950 $11.25 Taufik Ahmad........................... February 15, 2001 Options 5,000 $ 9.05 February 15, 2001 RSUs 900 $ 9.05 May 7, 2001 Options 10,000 $ 8.18 May 6, 2002 Options 5,000 $11.25 May 6, 2002 RSUs 950 $11.25 Donald D. McKechnie.................... June 18, 2001 Options 30,000 $10.70 May 6, 2002 Options 11,000 $11.25 May 6, 2002 RSUs 2,200 $11.25 Supramu Santosa........................ August 10, 2000 Options 12,000 $ 8.25 February 15, 2001 RSUs 2,300 $ 9.05 May 7, 2001 Options 25,000 $ 8.18 May 6, 2002 Options 11,250 $11.25 May 6, 2002 RSUs 2,250 $11.25 John K. Wearing........................ June 1, 2001 Options 30,000 $10.80 May 6, 2002 Options 11,700 $11.25 May 6, 2002 RSUs 2,350 $11.25 Cliff W. Zeliff........................ August 10, 2000 Options 16,000 $ 8.25 February 15, 2001 RSUs 2,600 $ 9.05 May 7, 2001 Options 30,000 $ 8.18 May 6, 2002 Options 12,850 $11.25 May 6, 2002 RSUs 2,600 $11.25
B-9
PRICE PER NAME DATE OF ISSUANCE SECURITIES ISSUED NUMBER SECURITY(1) - ---- ----------------- ----------------- ------- ----------- Dr. Ir. Kuntoro Mangkusubroto.......... May 6, 2002 Options 7,500 $11.25 May 6, 2002 RSUs 900 $11.25 Donald F Mazankowski................... December 18, 2000 Options 5,000 $ 9.06 May 7, 2001 Options 10,000 $ 8.18 May 7, 2001 RSUs 1,150 $ 8.18 May 6, 2002 Options 7,500 $11.25 May 6, 2002 RSUs 900 $11.25 John R. Sanders........................ December 18, 2000 Options 5,000 $ 9.06 May 7, 2001 Options 10,000 $ 8.18 May 7, 2001 RSUs 1,150 $ 8.18 May 6, 2002 Options 7,500 $11.25 May 6, 2002 RSUs 900 $11.25
- --------------- Notes: (1) Represents the exercise price per Share in the case of a grant of Gulf Indonesia options. OWNERSHIP OF SECURITIES OF CONOCO OR CONOCO CANADA Neither Gulf Indonesia nor any director or senior officer of Gulf Indonesia nor, to the knowledge of the directors and senior officers of Gulf Indonesia after reasonable inquiry, any associate of a director or senior officer of Gulf Indonesia, any person or company holding more than 10% of any class of equity securities of Gulf Indonesia or any person or company acting jointly or in concert with Gulf Indonesia, at the date hereof, owns, directly or indirectly, or exercises control or direction over, any securities of any class of Conoco or Conoco Canada other than as follows:
NUMBER OF SHARES OF PERCENTAGE OF COMMON STOCK OF SHARES OF COMMON NUMBER OF PERCENTAGE OF NAME CONOCO (1) STOCK OF CONOCO CONOCO OPTIONS (1) CONOCO OPTIONS - ---- ------------------- ---------------- ------------------ -------------- Paul C. Warwick............. 2,469(2) * 0 nil Andrew D.R. Hastings........ 2,077 * 6,600 * Alan P. Scott............... 0 * 2,242 * Robert W. Goldman........... 43,538(3) * 632,153 * Malcolm D. Griffiths........ 4,000 * 51,000 * Rick A. Harrington.......... 51,762 * 549,191 * Francis H. (Mim) James...... 4,728 * 57,470 * James D. McColgin........... 22,815 * 297,143 * Dr. George E. Watkins....... 11,867 * 342,691 *
- --------------- Notes: * means less than one percent (1) The information as to the number of shares of common stock of Conoco and Conoco options beneficially owned, directly or indirectly, or over which control or direction is exercised by each director and senior officer of Gulf Indonesia and by their respective associates, not being within the knowledge of Gulf Indonesia, has been furnished by the respective directors and senior officers individually. (2) Includes 930 shares of common stock of Conoco held by an associate. (3) Includes 1,716 shares of common stock of Conoco held by two associates. B-10 RELATIONSHIP BETWEEN CONOCO, CONOCO CANADA AND THE DIRECTORS AND SENIOR OFFICERS OF GULF INDONESIA To the knowledge of the directors and senior officers of Gulf Indonesia, there are no arrangements or agreements made or proposed to be made between Conoco or Conoco Canada and any of the directors or senior officers of Gulf Indonesia, including arrangements or agreements pursuant to which a payment or other benefit is to be made or given by way of compensation for loss of office or as to their remaining in or retiring from office if the Offer is successful. The following directors or senior officers of Gulf Indonesia are also directors or senior officers of Conoco, Conoco Canada or a subsidiary of Conoco or Conoco Canada (other than Gulf Indonesia and its subsidiaries): Robert W. Goldman, Malcolm D. Griffiths, Rick A. Harrington, Francis H. (Mim) James, Donald F. Mazankowski, James D. McColgin, Alan P. Scott and Dr. George E. Watkins. A further member of the Board of Directors of Gulf Indonesia, Paul C. Warwick, has indicated that he is a designee of Conoco. CERTAIN AGREEMENTS BETWEEN GULF INDONESIA AND CONOCO OR CONOCO CANADA Gulf Indonesia has entered into a number of material transactions with Conoco Canada and Conoco regarding services, financial matters and corporate opportunities. Set forth below are summaries of these agreements. Each of these agreements will terminate if the transactions contemplated in this Offer to Purchase are consummated. 1997 Agreements. With respect to services, Gulf Indonesia and Gulf Canada (now Conoco Canada) entered into a series of agreements in 1997 relating to certain ongoing intercompany arrangements, including a technical services agreement, an information services agreement, a registration rights agreement, a cross-indemnification agreement and a corporate opportunity agreement. The technical services agreement and the information services agreement provided that, if Gulf Indonesia was unable to provide certain technical and information services itself, it would be required to obtain such technical and information services from Gulf Canada as long as Gulf Canada was able to provide such services in a timely fashion. In addition, an administrative services agreement provided that Gulf Indonesia was required to obtain from Gulf Canada substantially all of its required administrative services, including financial, treasury, accounting, tax, audit, legal and other related services, human resources services and other administrative services. All these agreements were originally for 10-year terms beginning in 1997. Gulf Indonesia paid a fee to Gulf Canada for such services in an amount equal to the cost of providing such services based on industry averages for the services provided, but in any event not greater than those fees which an unaffiliated third party would charge Gulf Indonesia. The registration rights agreement provides for, among other things, the future registration, under the United States Securities Act of 1933, as amended, of Gulf Indonesia Common Shares owned by Gulf Canada. The registration rights agreement provides that Gulf Canada can require Gulf Indonesia to register not more than two public offerings and two private placements of Gulf Indonesia Common Stock in any 12-month period, so long as each offering or placement has a value of at least $50 million. The cross-indemnification agreement provides that each of Gulf Indonesia and Gulf Canada will indemnify the other for certain claims made in connection with the reorganization of Gulf Indonesia undertaken prior to Gulf Indonesia's initial public offering in 1997. The corporate opportunity agreement provides that if Gulf Canada acquires Indonesian oil and gas assets with a fair market value in excess of $100 million or a majority equity or voting interest in an entity with Indonesian oil and gas assets with a fair market value in excess of $100 million, Gulf Canada will, subject to certain exceptions, within one year either (1) offer to Gulf Indonesia the right to purchase such Indonesian assets at Gulf Canada's purchase price plus the amount of any costs, including taxes, that would be incurred by Gulf Canada in connection with such sale to Gulf Indonesia or (2) cause some or all of its representatives to resign from Gulf Indonesia's Board of Directors so that a majority of Gulf Indonesia's directors will have no affiliation with Gulf Canada. In addition, if Gulf Canada elects to cause such resignations, Gulf Indonesia will B-11 have the right to terminate the corporate opportunity agreement. The corporate opportunity agreement also provides that Gulf Indonesia will not, without Gulf Canada's consent, directly acquire non-Indonesian oil and gas assets or acquire a majority equity or voting interest in any entity with non-Indonesian oil and gas assets unless a majority of the fair market value of such assets are located in Indonesia. 2001 Agreement. In November 2001, Gulf Indonesia and Conoco entered into a technical services agreement superceding the 1997 technical services agreement with Gulf Canada. While similar in many ways to the previous agreement, the new technical services agreement provides for a more detailed work scope and cost estimate, enables reciprocal assistance, and provides for the possible use of experts on an "on call" basis. The new technical services agreement also provides for the long-term secondment of personnel and, pursuant thereto, Gulf Indonesia's Vice President, Gas Marketing and Business Development, is provided by secondment arrangement with Conoco. 2002 Agreement. In March 2002, Gulf Indonesia and Conoco entered into a new administrative and information services agreement superceding the previous information services agreement and administrative services agreement with Gulf Canada. The new agreement with Conoco is similar to the new technical services agreement and includes provision for the payment for services on a cost recovery basis, potential for reciprocal services and the use of a project sheet to describe the scope of work and estimated costs. In connection with financial matters, Gulf Indonesia has arranged to obtain from Conoco Canada a $65 million credit facility for a term of up to three years from August 2001 for a fee of 1.5% per annum of the amount undrawn and, in the case of amounts borrowed, at a cost equal to the cost to Conoco Canada plus a fee of 1.5% per annum. In addition, Gulf Indonesia on two occasions in 2001 has invested surplus amounts of cash in short-term notes of Conoco on market terms. These amounts were repaid. AGREEMENTS BETWEEN GULF INDONESIA AND ITS DIRECTORS AND SENIOR OFFICERS There are no arrangements or agreements made or proposed to be made between Gulf Indonesia and any of the directors or senior officers of Gulf Indonesia pursuant to which a payment or other benefit is to be made or given by way of compensation for loss of office or as to their remaining in or retiring from office if the Offer is successful, except as described below. Gulf Indonesia has entered into employment agreements with certain of its senior officers. In 1998 (in respect of Supramu Santosa and Cliff W. Zeliff, collectively the "1998 Contracts") and in 2001 (in respect of Taufik Ahmad, Paul C. Warwick, John K. Wearing and Donald D. McKechnie, collectively the "2001 Contracts") Gulf Indonesia entered into a series of employment agreements. The employment contracts provide for continuing employment unless voluntarily terminated by the employee. The employment contracts provide that the senior officers are entitled to severance upon being terminated without cause or upon certain other specified events of constructive dismissal and upon certain stated events. Thus, in certain circumstances, if such senior officers of Gulf Indonesia are terminated following the Offer or the Second-Step Acquisition, they will be entitled to certain benefits. If a senior officer is entitled to receive severance under his respective employment agreement, then he is entitled to receive, and Gulf Indonesia is obligated to pay or provide, the following: 1. an undiscounted cash amount equal to one month's base salary (including, in the 1998 Contracts, any foreign service supplement), multiplied by the number of years of service of such senior officer with Gulf Indonesia, subject to a minimum entitlement and payment equal to 24 months' base salary and a maximum entitlement and payment equal to 30 months' base salary; 2. an undiscounted cash amount equal, in the case of the 1998 Contracts and the employment agreement with Mr. Ahmad, to the value of certain benefit plans and programs provided to regular Canadian resident employees of Gulf Canada (now Conoco Canada) and equal to one month for every year of service with Gulf Indonesia, with a minimum entitlement and payment equal to 24 months of benefits value and a maximum entitlement and payment equal to 30 months of benefits value; in the 2001 B-12 Contracts and excluding the employment agreement with Mr. Ahmad, this is an undiscounted cash amount equal to fifteen percent (15%) of the base salary (excluding pension) to reflect the hypothetical value of certain benefit plans and programs provided to regular Canadian residents; 3. an undiscounted amount equal to two times the target bonus under the cash bonus plan of Gulf Indonesia; and 4. pension benefits under the pension plan of Gulf Indonesia treating such senior officer's pension rights as fully vested. In addition, Mr. Wearing's employment agreement provides that if after three years employment with Gulf Indonesia, Mr. Wearing decides to voluntarily resign and return to Canada, Gulf Canada (now Conoco Canada) will make reasonable efforts to identify, at a minimum, a Director level position within Conoco Canada to offer to Mr. Wearing. If Conoco Canada is unable to offer Mr. Wearing a Director level position, then Mr. Wearing will be entitled to receive from Conoco Canada termination benefits equal to two times his then current base salary. Mr. Wearing has been employed by Gulf Indonesia since June 2001. OPTIONS AND STOCK BASED PLANS Gulf Indonesia is required by the terms of the Support Agreement to accelerate the vesting of any currently unvested Gulf Indonesia options and accelerate the release of any Shares held in a Gulf Indonesia employee share purchase plan so that any entitlement pursuant thereto to Shares becomes exercisable or fully vested prior to the expiration of the Offer. In addition, Gulf Indonesia is permitted by the terms of the Support Agreement to cancel Gulf Indonesia options in exchange for a cash payment equal to the difference, if any, between the Offer Price and the applicable option exercise price. All options not exercised or cashed out prior to the expiration of the Offer shall cease to be exercisable thereafter. Gulf Indonesia has an incentive stock option plan (the "Option Plan") pursuant to which options to purchase Shares have been granted to directors, officers and other employees of Gulf Indonesia. As of June 4, 2002, Gulf Indonesia had outstanding options entitling the holders thereof to purchase approximately 5,199,227 Shares, at exercise prices ranging from $8.06 to $20.06 per Share. The Option Plan provides that, if an offer is made to purchase all of the Shares, the compensation committee of the Board of Directors of Gulf Indonesia may require that all or some of the options be exercised on or before the effective date of such purchase. In connection with the Offer, Gulf Indonesia may make arrangements to permit holders of options to exercise such options on a conditional basis (conditional on Conoco Canada accepting and paying for the Shares). Alternatively, Gulf Indonesia may make arrangements to cancel options in exchange for a cash payment equal to the difference, if any, between the Offer Price and the applicable exercise price of the options. Gulf Indonesia also has a Restricted Share Unit/Deferred Share Unit Plan pursuant to which restricted share units ("RSUs") have been issued to directors and executive officers of Gulf Indonesia. Each RSU vests after four years, and entitles the holder to one Share or a cash payment equal to the market price of one Share on the date of exercise. Each RSU will vest as a result of the Offer, and each holder of a RSU will be entitled to a cash payment equal to the Offer Price for each RSU. Holders of RSUs will be entitled to an aggregate payment of $399,780 with respect to their RSUs in connection with the Offer, of which officers will receive $266,325, directors will receive $120,575 and a former director will receive $12,880. Any RSU not exercised prior to the expiration of the Offer will terminate. The Restricted Share Unit/Deferred Share Unit Plan will terminate on the expiration of the Offer. Between February 2001 and May 2002, each director of Gulf Indonesia had the option of taking all or part of the cash component of his or her annual retainer in Shares. If the director elected to take Shares, the Shares were eligible for participation in Gulf Indonesia's Leveraged Purchase Plan ("LPP"). The LPP provided that for each Share acquired by the participant and held for two years, the participant would be granted three stock appreciation rights ("SARs"). Each SAR entitles the holder to receive the difference between the market price of the Shares on the date the SAR is exercised and the market price on the date the SAR was granted. The SARs acquired under the LPP will immediately vest and be exercisable upon B-13 consummation of the Offer. Upon consummation of the Offer, holders of SARs will receive an aggregate cash payment of $286,476 in connection with the Offer, of which officers will receive $109,770, directors will receive $72,861 and former officers and directors will receive $103,845. The Board of Directors of Gulf Indonesia has authorized and directed the compensation committee to cause the acceleration and vesting of all options, RSUs and SARs prior to or concurrent with the consummation of the Offer. INTERESTS OF DIRECTORS AND SENIOR OFFICERS OF GULF INDONESIA IN MATERIAL CONTRACTS WITH CONOCO CANADA None of the directors or senior officers of Gulf Indonesia nor any of their associates nor, to the knowledge of the directors or senior officers after reasonable inquiry, any person or company who owns more than 10% of any class of equity securities of Gulf Indonesia, has any interest in any material contract to which Conoco Canada is a party. RECENT DEVELOPMENTS In October 1998, Gulf Indonesia commenced deliveries of natural gas under a long-term agreement to the Duri Steamflood operated by PT Caltex Pacific Indonesia ("Caltex"). During the first two years of this agreement, gas takes by Caltex were above the take-or-pay levels specified in the agreement. In 2001, gas takes by Caltex fell below the contracted take-or-pay quantities, with Gulf Indonesia's share of gas sales averaging 137 mmcf/day (million cubic feet per day) for the first three quarters of 2001 (approximately seven per cent below the take-or-pay quantity). When sales fall below take-or-pay quantities, Gulf Indonesia receives, as payment, oil volumes equivalent to the take-or-pay quantities of gas, and is to deliver the make-up gas when the requirements of Caltex increase to above take-or-pay levels. In September 2001, Caltex increased its gas takes significantly and sales averaged 149 mmcf/day for the fourth quarter of 2001. This trend continued into the first quarter of 2002 with sales averaging 153 mmcf/day. However, for the second quarter of 2002 to date, gas takes by Caltex have declined substantially, with Gulf Indonesia's share of gas sales averaging 134 mmcf/day for the first two months of the quarter (approximately ten per cent below the take-or-pay quantity). Caltex has recently nominated gas volumes at levels below the contracted take-or-pay quantities for the remainder of the second quarter of 2002. In December 2000, Gulf Indonesia and Pertamina signed agreements for additional gas deliveries to the Duri Steamflood. Gas for this contract is to be supplied primarily from the Suban field where construction of the field facilities is scheduled to be completed in late 2002. Gulf Indonesia is unable to predict, at this time, with certainty the level of future takes by Caltex under these long term agreements. VALUATION AND FAIRNESS OPINION The Valuation and Fairness Opinion of RBC is set out in full at Annex A hereto and is summarized in the Schedule TO filed by Conoco and Conoco Canada under the heading "Valuation and Fairness Opinion". Gulf Indonesia believes there are no "prior valuations", as defined under Ontario Securities Commission Rule 61-501 or Commission des valeurs mobilieres du Quebec Policy Q-27, required to be disclosed. B-14 OTHER INFORMATION There is no other information not disclosed herein but known to the Board of Directors of Gulf Indonesia which would reasonably be expected to affect the decision of the holders of Shares to accept or reject the Offer. MATERIAL CHANGES The directors and senior officers of Gulf Indonesia are not aware of any information that indicates any material change in the affairs of Gulf Indonesia since March 31, 2002, the date of the last published interim financial statements of Gulf Indonesia. STATUTORY RIGHTS Securities legislation in certain of the provinces and territories of Canada provides security holders of Gulf Indonesia with, in addition to any other rights they may have at law, rights of rescission or to damages, or both, if there is a misrepresentation in a circular or notice that is required to be delivered to such security holders. However, such rights must be exercised within prescribed time limits. Security holders should refer to the applicable provisions of the securities legislation of their province or territory for particulars of those rights or consult with a lawyer. APPROVAL The contents of the Statement have been approved and the delivery thereof authorized by the Board of Directors of Gulf Indonesia. B-15 [This page intentionally left blank.] EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS - ------- ---------------------------------------------------------- (a)(1) Offer to Purchase dated June 12, 2002.+* (a)(2) Letter of Transmittal.+* (a)(3) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees.+ (a)(4) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.+ (a)(5) Letter to shareholders of Gulf Indonesia from the Chairman of the Board of Gulf Indonesia.+* (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.+* (a)(7) Valuation and Fairness Opinion of RBC Dominion Securities Inc. dated June 6, 2002 (included as Annex A hereto).* (a)(8) Summary Advertisement published on June 12, 2002.+ (a)(9) Press release issued by Conoco Canada, dated June 12, 2002, announcing the commencement of the Offer.+ (a)(10) Employee Notice issued by Gulf Indonesia on May 30, 2002. (a)(11) Notice of Guaranteed Delivery. (e)(1) Support Agreement dated as of June 7, 2002, by and among Conoco, Conoco Canada and Gulf Indonesia.+ (e)(2) Gulf Indonesia's Proxy Circular relating to the Annual Meeting of Shareholders held on May 6, 2002 (incorporated by reference from Gulf Indonesia's 6-K for the month ended March 2002 filed with the SEC on June 10, 2002). (e)(3) Information Services Agreement between Gulf Indonesia and Gulf Canada Resources Limited ("Gulf Canada"). (e)(4) Administrative Services Agreement between Gulf Indonesia and Gulf Canada. (e)(5) Administrative and Information Services Agreement between Gulf Indonesia and Conoco. (e)(6) Cross Indemnification Agreement between Gulf Indonesia and Gulf Canada. (e)(7) Corporate Opportunity Agreement between Gulf Indonesia and Gulf Canada. (e)(8) Technical Services Agreement between Gulf Indonesia and Gulf Canada. (e)(9) Trade-mark Sublicense and Name Use Agreement between Gulf Indonesia and Gulf Canada. (e)(10) Registration Rights Agreement between Gulf Indonesia and Gulf Canada. (e)(11) Technical Services Agreement between Gulf Indonesia and Conoco.
- --------------- + Incorporated by reference to the Schedule TO filed by Conoco and Conoco Canada on June 12, 2002. * Mailed to shareholders. EX-99.A.10 3 h97565aexv99waw10.txt EMPLOYEE NOTICE Exhibit (A)(10) Communication to All Gulf Indonesia Employees As covered in the press release which I sent Monday evening to all employees, Conoco Canada, the wholly owned subsidiary of Conoco Inc. has made an offer to purchase the remaining 28% of outstanding shares of Gulf Indonesia Resources for U.S. $ 13.25 per common share in cash. The acquisition of the minority shares of Gulf Indonesia will allow Conoco to optimize its operations in Southeast Asia. With this consolidation, Indonesia emerges as a significant area of growth and opportunity for Conoco Inc., its shareholders and employees. Conoco Canada's proposal is subject to, among other things, approval by the Board of Directors of Gulf Indonesia and a tender of a majority of the minority shares of Gulf Indonesia. Subject to all approvals and execution of definitive documentation, this transaction is expected to close in 30 to 90 days. When the transaction closes, Conoco Inc. will have two wholly owned subsidiaries in Indonesia. I know that foremost in everyone's mind is how this acquisition will impact Gulf Indonesia employees. Although we do not know any details at present, it seems likely that these two organizations will be combined in some manner. These details will be worked in the upcoming weeks for implementation after appropriate approvals are obtained. This acquisition would represent a great opportunity for Gulf Indonesia and Conoco Indonesia. I am excited about the combined potential in joining the organizations. We are fortunate to have the opportunity to build and sustain one organization that is founded upon a strong financial platform, shared core values and the best in skills, capabilities, and technologies. Your management will be providing more information to you regarding this process as it develops. I appreciate that this will be a time of some uncertainty for you. During the period of this transaction and related activities, we must remain focused on our goals and deliver the results needed to keep up the momentum that you've worked so hard to establish. Frequently Asked Questions o Will the Gulf Indonesia and Conoco Indonesia organizations and offices be merged into one? To remain competitive and achieve our business objectives, consolidation will likely be required. What that consolidation will look like will be determined over the next few months as we assess the synergies and similarities between the two organizations and reach agreement on those areas where there are differences. During this period we will be focusing on those priorities that will have the greatest influence on achieving our combined business potential for growth and value creation. We will want to focus on doing our respective jobs, our core values, maintaining high standards of safety performance and doing all things respectfully and in accordance with business ethics, local laws and industry standards and practice. o Will there be a change in compensation and benefits programs under Conoco? Until we fully assess the benefit differences that exist between Gulf Indonesia and Conoco Indonesia, we are unable to address this question. Additionally, we will need to take into account any compensation and benefit changes that could result from the ConocoPhillips merger that could impact us in Indonesia. o As a result of this transaction, will there be any asset sales? We continually review our portfolio as a part of our ongoing business. With the larger portfolio, it will be important to the future performance of the company to continue this practice. As decisions are made, we will communicate them to employees. o When and where can employees get answers to their questions? We will be communicating with employees as frequently as necessary to ensure that appropriate information is received on a timely basis as it becomes available. In the meantime, please direct your questions to your supervisors so they can be forwarded through the right channels for response. You are strongly advised to read the tender offer documents that are expected to be filed with the U.S. Securities and Exchange Commission (SEC), if and when they become available, because they will contain important information. You may obtain a free copy of these documents (when available) and other documents filed by Conoco, Conoco Canada and Gulf Indonesia at the SEC's web site at http://www.sec.gov. Documents filed by Conoco and Conoco Canada may be obtained for free by directing such requests to Conoco Investor Relations at 600 N. Dairy Ashford, Houston, Texas, 77079. Documents filed by Gulf Indonesia may be obtained for free by directing such requests to Gulf Indonesia Investor Relations at 21st Floor, Wisma 46 - Kota BNI, Jalan Jendral Sudirman Kavling 1, Jakarta 10220, Indonesia. EX-99.E.2 4 h97565aexv99wew2.txt GULF INDONESIA'S PROXY CIRCULAR Exhibit (E)(2) GULF INDONESIA RESOURCES LIMITED 21ST FLOOR, WISMA 46, KOTA BNI JL. JEND. SUDIRMAN KAVLING 1 JAKARTA INDONESIA 10220 MANAGEMENT PROXY CIRCULAR SOLICITATION OF PROXIES THIS MANAGEMENT PROXY CIRCULAR ("PROXY CIRCULAR") IS FURNISHED IN CONNECTION WITH THE SOLICITATION BY THE MANAGEMENT OF GULF INDONESIA RESOURCES LIMITED ("GULF INDONESIA" OR THE "COMPANY") OF PROXIES FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS OF THE COMPANY (THE "MEETING") TO BE HELD AT 2:00 P.M. (MST) ON MAY 6, 2002 IN THE GULF AUDITORIUM LOCATED ON THE THIRD FLOOR OF GULF CANADA SQUARE, 401 - 9TH AVENUE S.W., CALGARY, ALBERTA. The solicitation will be primarily by mail, but regular employees of the Company without special compensation may also solicit proxies personally or by telephone. In accordance with regulatory requirements, arrangements are in effect with clearing agencies or other intermediaries such as financial institutions, who hold Common Shares of the Company on behalf of another person, to forward this Management Proxy Circular to the beneficial owners of such Common Shares of the Company and the cost of any such solicitation or forwarding will be borne by the Company. Information contained in this Proxy Circular is given as of March 18, 2002, unless otherwise specifically stated. APPOINTMENT OF PROXIES Shareholders desiring to be represented at the Meeting by a proxyholder must deposit their proxies with The Bank of New York at the address shown on the self-addressed return envelope contained in the proxy materials, no later than 5:00 p.m. (New York time) on May 3, 2002 or with the Chairman of the Meeting prior to the commencement of the Meeting. A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A SHAREHOLDER OF GULF INDONESIA), OTHER THAN PERSONS DESIGNATED IN THE FORM OF PROXY ACCOMPANYING THIS PROXY CIRCULAR, AS NOMINEE TO ATTEND AND ACT FOR AND ON BEHALF OF SUCH SHAREHOLDER AT THE MEETING AND MAY EXERCISE SUCH RIGHT BY INSERTING THE NAME OF SUCH PERSON IN THE BLANK SPACE PROVIDED ON THE FORM OF PROXY. REVOCATION OF PROXIES Proxies given by Shareholders for use at the Meeting may be revoked at any time prior to their use. A Shareholder giving a proxy may revoke the proxy by depositing an instrument in writing executed by the Shareholder, or by his attorney authorized in writing, either at the registered office of Gulf Indonesia in New Brunswick or at the office of Conoco Canada Resources Limited at 1600, 401 - 9th Avenue S.W., Calgary, Alberta T2P 3C5, to the attention of the Corporate Secretary, at any time up to and including 4:30 p.m. (Calgary time) on the last business day preceding the day of the Meeting, or any adjournment thereof, at which the proxy is to be used, or with the Chairman of the Meeting on the day of the Meeting or any adjournment thereof, or in any other manner permitted by law. - 2 - VOTING RIGHTS As at March 18, 2002, there were 87,927,853 Common Shares in the capital of the Company outstanding, each of which carries the right to one vote in respect of each matter to come before the Meeting, other than the election of directors. All of the holders of record of Common Shares of the Company at the close of business on March 22, 2002 will be entitled to vote at the Meeting except that if a shareholder transfers Common Shares after such date, the person who acquires the Common Shares may vote those Common Shares at the Meeting if, not later than 10 days before the Meeting, that person requests the Company to add his or her name to the list of Shareholders entitled to vote at the Meeting and establishes that that person owns such Common Shares. The Business Corporations Act (New Brunswick) (the "Act") provides by section 65(1) for cumulative voting for election of directors so that each shareholder entitled to vote at an election of directors has the right to cast a number of votes equal to the number of votes attached to the shares held by such shareholder multiplied by the number of directors to be elected and may cast all such votes in favour of one candidate or distribute them among the candidates in any manner. The Act further provides, in section 65(2), that a separate vote of shareholders shall be taken with respect to each candidate nominated for director unless a resolution is passed unanimously permitting two or more persons to be elected by a single resolution. To the knowledge of the management of Gulf Indonesia, the only persons or companies which beneficially own, directly or indirectly, or exercise direction or control over more than 10% of the voting rights attached to the issued and outstanding Common Shares of Gulf Indonesia are Conoco Canada Resources Limited ("Conoco Canada"), formerly known as Gulf Canada Resources Limited ("Gulf Canada") and, through Conoco Canada, Conoco Inc. and its subsidiaries. Conoco Inc., a major integrated energy company active in more than 40 countries, acquired indirect ownership of all of the ordinary, voting shares of Gulf Canada in July 2001. As of March 18, 2002, Conoco Canada held 63,650,000 Common Shares of Gulf Indonesia, which shares represented approximately 72% of the issued and outstanding Common Shares. VOTING OF PROXIES AND DISCRETIONARY AUTHORITY The Common Shares represented by proxies at the Meeting will be voted or withheld from voting on any ballot that may be called for and, where the person whose proxy is solicited specifies a choice with respect to any matter to be voted upon, the Common Shares shall be voted in accordance with the specification so made. IN THE ABSENCE OF SUCH DIRECTION, COMMON SHARES WILL BE VOTED "FOR" THE ELECTION OF THE DIRECTORS NOMINATED BY MANAGEMENT AND NAMED IN THE ENCLOSED FORM OF PROXY AND "FOR" THE APPOINTMENT OF ERNST & YOUNG LLP AS AUDITORS OF GULF INDONESIA. The enclosed form of proxy confers discretionary authority upon the persons named therein with respect to amendments of matters identified in the Notice of Annual Meeting of Shareholders and with respect to other matters not specifically mentioned in the Notice of Annual Meeting of Shareholders which may properly come before the Meeting or any adjournment thereof. The form of proxy also authorizes the replacement of any nominee identified herein for election to the Board of Directors if such nominee is unable to serve or will not serve. If any amendments or other matters should properly come before the Meeting, the shares represented by proxies appointing management nominees as proxyholders will be voted on such matters in accordance with the best judgment of the nominees. Management knows of no such amendments or other matters as of the date hereof. - 3 - ELECTION OF DIRECTORS The following persons are nominees proposed by management for election as directors of the Company to serve until the next annual meeting of the Shareholders of the Company or until their successors are duly elected or appointed. If any vacancies occur in the slate of such nominees because any nominee is unable to serve or will not serve, the discretionary authority conferred by the proxies appointing management nominees will be exercised to vote such proxies for the election of any other person or persons nominated by management. The Company, however, does not anticipate any such occurrence as at the date hereof. The nominees for election as directors, their municipalities of residence, principal occupations, the year in which each became a director of the Company and the numbers of Common Shares of the Company beneficially owned, directly or indirectly, subject to stock options exercisable within 60 days, or over which control or direction is exercised by such persons, as at March 18, 2002, is set forth below.
NAME AND MUNICIPALITY OF PRESENT OCCUPATION OF EMPLOYMENT(1) DIRECTOR COMMON RESIDENCE SINCE SHARES HELD(2) Robert H. Allen Chairman of the Board of Directors of Gulf Indonesia; 1997 186,079 Houston, Texas Managing Partner, Challenge Investment Partners (mining related investments). Robert W. Goldman Senior Vice President, Finance and Chief Financial 2001 0 Sugarland, Texas Officer, Conoco Inc. (oil and gas exploration, development, refining and marketing), Director of Conoco Canada. Malcolm D. Griffiths Managing Director, Conoco European Gas Ltd. (gas 2001 0 Buckinghamshire, England marketing). Rick A. Harrington Senior Vice President, Legal and General Counsel, 2001 0 Houston, Texas Conoco Inc. Francis H. (Mim) James General Manager, Upstream Finance, Conoco Inc. 2001 0 Cypress, Texas Dr. Ir. Kuntoro Mangkusubroto Professor, Institut Teknologi, Bandung, Indonesia. 2001 0 Jakarta, Indonesia
- 4 -
NAME AND MUNICIPALITY OF PRESENT OCCUPATION OF EMPLOYMENT(1) DIRECTOR COMMON RESIDENCE SINCE SHARES HELD(2) Rt. Hon. Donald F. Mazankowski Corporate Director and Business Consultant; Director 1997 33,332 Vegreville, Alberta of Conoco Canada; Power Group of Companies (diversified holding companies); Atco Ltd. (manufacturing & utilities); Shaw Communications Incorporated (communications); Weyerhaeuser Company (forestry products); IMC Global Inc. (fertilizers); and Great West Life Assurance and Investors Group (financial services). James D. McColgin President - Exploration Production - Africa, Asia 2001 0 Houston, Texas Pacific, Middle East, Conoco Inc. John R. Sanders Corporate Director and Business Consultant; Director 1999 14,408 Hertfordshire, UK and Deputy Chairman of Austin Reed Group Plc (clothing retailer); Director of Amlin Plc (insurance); BOE Limited (financial services); Sabanci Bank Plc (bank); Sanwa International Plc. (financial services) and Non-Executive Director of Melli Bank PLC (banking). Paul C. Warwick President and Chief Executive Officer, Gulf Indonesia. 2001 0 South Jakarta, Indonesia Dr. George E. Watkins Chairman and Managing Director, Conoco (U.K.) Limited 2001 0 Aberdeen, Scotland (oil and gas exploration, refining and marketing).
NOTES: (1) Each of the proposed nominees for election as a director has held his principal occupation for the past five years except for the following: Mr. Goldman was Vice President, Finance for Conoco Inc. before his appointment in 1998 to his current position. Mr. Harrington was Vice President and General Counsel for Conoco Inc. before his appointment in 1998 to his current position. Mr. James was Business Development Manager for Conoco Inc.'s Mid-Continent Exploration and Production Region prior to assuming his current position in August 1998. Dr. Kuntoro Mangkusubroto was President and Chief Executive Officer of PLN, the state electricity company in Indonesia, in 2000 and 2001, was Minister of Mines and Energy, Republic of Indonesia in 1998 and 1999 and, prior thereto, was a member of the National Investment Board, Republic of Indonesia. Mr. James McColgin was President and General Manager of Conoco Indonesia Inc. from 1997 to 2000 and, immediately prior thereto, was General Manager of Strategy and Portfolio Management, Exploration Production, Conoco Inc. Mr. John R. Sanders was a Managing Director and Advisor to the Chief Executive Officer of Natwest Markets from 1993 - 1998 and the Deputy Chairman of BOE Natwest from 1995-1998. - 5 - Paul Warwick was President and Managing Director, Conoco Energy Nigeria Limited from 1999 until his appointment with the Corporation in July 2001, was President and Chief Executive Officer of Gulfstream Resources (Canada) Limited earlier in 1999 and, from 1997 to 1999 was Managing Director, Phoenix Park Gas Processors Limited in Trinidad. (2) Common Shares beneficially owned, directly or indirectly, including stock options that are exercisable within the next 60 days. Mr. Allen and Mr. Sanders hold 2,747 and 3,576 Common Shares respectively of the Company. On June 27, 2001, Dr. Jack Birks, a former director of the Company, passed away. On July 24, 2002, a meeting of the board of directors was held at which Richard H. Auchinleck, Marcel R. Coutu, William T. Fanagan, T. Michael Long, Walter B. O'Donoghue, Dr. Subroto and Henry W. Sykes resigned as directors of the Corporation and Messrs. Goldman, Griffiths, Harrington, James, McColgin, Warwick and Dr. Watkins were appointed as replacement directors at the request of Conoco Inc. which had acquired control of Conoco Canada earlier in July 2001. Dr. Kuntoro Mangkusubroto was appointed as a director of the Company to fill the remaining vacancy on July 31, 2001. The board of directors has established an Audit Committee and a Compensation and Pension Committee. The Audit Committee reviews and evaluates the scope of the audit of the Company's financial statements, the Company's accounting policies and reporting practices, internal auditing, internal controls, certain security procedures and other matters deemed appropriate and in so doing, confers with the Company's auditors and the Vice President, Finance. The Audit Committee held five meetings in 2001 and is presently composed of Messrs. Mazankowski (Chairman), Sanders and Goldman. The Audit Committee and the board of directors specifically determined that it is advantageous that Mr. Goldman, the Chief Financial Officer of Conoco Inc., be a member of the Audit Committee. The Compensation and Pension Committee is further described in the Executive Compensation section of this Proxy Circular. No executive committee has been established. EXECUTIVE COMPENSATION COMPENSATION OF NAMED EXECUTIVE OFFICERS The following tables set forth annual and long term compensation for services in all capacities to the Company and its subsidiaries for the period January 1, 2001 to December 31, 2001 (to the extent required by the applicable securities legislation) in respect of William T. Fanagan, Gulf Indonesia's Chief Executive Officer until July 24, 2001, Paul C. Warwick, his successor to that position, and each of the other four most highly compensated executive officers measured by salary and bonus at the end of the fiscal year ended December 31, 2001. The Chief Executive Officer and other executive officers included as part of this disclosure may be collectively referred to as the Named Executive Officers. Unless otherwise indicated, all dollar amounts contained in this Management Proxy Circular are in United States Dollars ($US). - 6 - SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------------------------------- ANNUAL COMPENSATION LONG TERM COMPENSATION ------------------------------------------------ -------------------------------------- AWARDS PAYOUT - ----------------------------------------------------------------------- ---------------------------- -------- RESTRICTED SECURITIES SHARES OR OTHER ANNUAL UNDER OPTIONS/ RESTRICTED LTIP ALL OTHER NAME AND PRINCIPAL SALARY BONUS(2) COMPENSATION(3) SARS GRANTED SHARE UNITS PAYOUTS COMPENSATION(4) POSITION YEAR ($) ($) ($) (#) ($) ($) ($) - --------------------------------------------------------------------------------------------------------------------------------- WILLIAM T. FANAGAN 2001 159,475 220,000 545,605 100,000/22,500 62,445 79,971 676,044(5) PRESIDENT & CHIEF 2000 250,000 100,000 224,707 86,000 -- -- 150,330(6) EXECUTIVE OFFICER (1) 1999 235,415 100,000 220,872 40,000 -- -- 90,970 - --------------------------------------------------------------------------------------------------------------------------------- PAUL C. WARWICK, 2001 63,258 22,000 32,921 30,000 -- -- 35,872 PRESIDENT & CHIEF EXECUTIVE OFFICER(7) - --------------------------------------------------------------------------------------------------------------------------------- SUPRAMU SANTOSA 2001 145,200 21,663 135,340 25,000 20,815 -- 67,005 VICE PRESIDENT, 2000 130,000 26,400 116,998 34,000 -- -- 66,265 ADMINISTRATION 1999 120,000 24,000 98,884 20,000 -- -- 38,810 - --------------------------------------------------------------------------------------------------------------------------------- CLIFF W. ZELIFF 2001 165,000 16,500 153,732 30,000/16,500 23,530 -- 132,725 VICE PRESIDENT, 2000 165,000 46,500 188,986 38,000 -- -- 115,805 EXPLORATION 1999 144,996 58,000 142,011 20,000 -- -- 83,041 - --------------------------------------------------------------------------------------------------------------------------------- JOHN K. WEARING 2001(8) 87,500 8,750 32,405 30,000 46,101 VICE PRESIDENT, 2000 -- -- -- -- -- -- -- OPERATIONS 1999 -- -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- DONALD D. MCKECHNIE 2001(9) 75,056 7,506 40,374 30,000 -- -- 57,101 VICE PRESIDENT, 2000 -- -- -- -- -- -- -- FINANCE 1999 -- -- -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------
NOTES: (1) Mr. Fanagan resigned as President and Chief Executive Officer on July 24, 2001 and was replaced by Mr. Warwick. (2) Includes discretionary payment awarded in 2002 for 2001 performance. (3) Includes taxes, medical and dental plans and insurance. In the case of Mr. Fanagan's 2001 compensation, this amount includes $89,663 of perquisites, including vehicle allowance of $37,998 and a perquisite allowance at resignation of $32,808. (4) Includes foreign service supplements, school fees, housing, home leave and short leave benefits and a retirement trust fund. With respect to the retirement trust fund, the Company contributes 8.33% of the employees' base salary to the fund, which together with accrued interest, vests at rates ranging from 50% to 150% over a period of eight years. The accumulated benefit is payable upon departure from Indonesia or retirement, and is not subject to tax. The following table sets out the retirement trust fund benefits earned by the Named Executive Officers for the year ended December 31, 2001:
---------------------------------------------------------------------------------- ACCRUED BENEFIT ($) ---------------------------------------------------------------------------------- COMPANY NET NAME JANUARY 1, 2001 DECEMBER 31, 2001 CONTRIBUTION IN 2001 ---------------------------------------=------------------------------------------ WILLIAM T. FANAGAN 81,220 (109,559) (10) 25,180 ---------------------------------------------------------------------------------- PAUL C. WARWICK -- 7,550 6,129 ---------------------------------------------------------------------------------- SUPRAMU SANTOSA 156,888 194,902 18,660 ---------------------------------------------------------------------------------- CLIFF W. ZELIFF 281,745 348,649 22,493 ---------------------------------------------------------------------------------- JOHN K. WEARING -- 10,996 9,514 ---------------------------------------------------------------------------------- DONALD D. MCKECHNIE -- -- -- ----------------------------------------------------------------------------------
(5) Includes payment for resignation of employment, net of adjustments from the items described in note (3) above. (6) Includes a payout from a terminated U.S. 401K plan in the amount of $10,912. (7) Includes compensation arising after appointment as an officer and does not include compensation received as President and Managing Director of Conoco Energy Nigeria Limited prior to such appointment. (8) Includes compensation arising after his appointment as an officer and does not include compensation received as an employee or contractor of Conoco Canada prior to such appointment. - 7 - (9) Includes compensation arising after his appointment as an officer and does not include compensation prior to his engagement by the Company. (10) Represents payment received with respect to the pension plan as a result of Mr. Fanagan's resignation from the Company. STOCK OPTIONS GRANTED AND EXERCISED The following table sets forth certain information with respect to stock options granted under the Gulf Indonesia Resources Limited 1997 Stock Option and Incentive Plan (the "Stock Option Plan") during the fiscal year ended December 31, 2001 to each of the Named Executive Officers. Under the terms of the Stock Option Plan, the Company may grant options to acquire Common Shares of the Company to its employees at any time prior to December 31, 2007. The maximum number of Common Shares that may be issuable pursuant to the Stock Option Plan at any particular time is 10% of the outstanding Common Shares. Options outstanding are granted at prices determined at the time the option is granted, provided that the exercise price is not less than the fair market value of the Common Shares on the date of the grant, and have a maximum term of 10 years. Under the Stock Option Plan, 3,421,584 Common Shares were reserved but unallocated as at December 31, 2001. OPTIONS/SAR GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
- ---------------------------------------------------------------------------------------------------------------------- MARKET VALUE OF SECURITIES SECURITIES % OF TOTAL UNDERLYING UNDER OPTIONS/SARS OPTIONS/SARS OPTIONS/SARS GRANTED TO EXERCISE OR ON THE GRANTED EMPLOYEES IN BASE PRICE DATE OF GRANT NAME (#) FINANCIAL YEAR ($/SECURITY) ($/SECURITY) EXPIRATION DATE - ---------------------------------------------------------------------------------------------------------------------- WILLIAM T. FANAGAN 100,000 12.9 10.75 10.75 JUNE 6, 2011 22,500 49.4 8.88 8.88 MARCH 31, 2011 - ---------------------------------------------------------------------------------------------------------------------- PAUL C. WARWICK 30,000 3.9 11.40 11.40 JULY 23, 2011 -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------- SUPRAMU SANTOSA 25,000 3.2 8.18 8.18 MAY 6, 2011 -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------- CLIFF W. ZELIFF 30,000 3.9 8.18 8.18 MAY 6, 2011 16,500 36.2 8.88 8.88 MARCH 31, 2011 - ---------------------------------------------------------------------------------------------------------------------- JOHN K. WEARING 30,000 3.9 10.80 10.80 MAY 31, 2011 -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------- DONALD D. MCKECHNIE 30,000 3.9 10.70 10.70 JUNE 17, 2011 -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------
NOTES: (1) The options granted to Mr. Fanagan were originally scheduled to vest on December 31, 2002 but, under the terms of his resignation, were immediately vested and may be exercised within two years of his resignation . (2) All other options vest as to one-third on each successive anniversary of the grant and are therefore all vested on the third anniversary. - 8 - AGGREGATED OPTIONS/SAR EXERCISES DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR AND THE FINANCIAL YEAR END OPTIONS/SAR VALUES The following table sets forth certain information with respect to stock options held by the Named Officers during the fiscal year ended December 31, 2001 and, based upon a closing Common Share price on the New York Stock Exchange on December 31, 2001 of $9.00, the value of unexercised options at such year end.
VALUE OF UNEXERCISED UNEXERCISED OPTIONS/SAR IN-THE-MONEY OPTIONS/SARS SECURITIES AGGREGATE AT FISCAL YEAR END AT FISCAL YEAR END ACQUIRED ON VALUE NAME EXERCISE REALIZED (#) ($) - ----------------------------------------------------------------------------------------------------------------------- (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ----------------------------------------------------------------------------------------------------------------------- WILLIAM T. FANAGAN -- -- 441,000/22,500 -- 72,750/2,700 -- - ----------------------------------------------------------------------------------------------------------------------- PAUL C. WARWICK -- -- -- 30,000 -- -- - ----------------------------------------------------------------------------------------------------------------------- SUPRAMU SANTOSA -- -- 131,333 67,667 9,875 40,250 - ----------------------------------------------------------------------------------------------------------------------- CLIFF W. ZELIFF -- -- 132,666 75,334/16,500 10,874 46,351/1,980 - ----------------------------------------------------------------------------------------------------------------------- JOHN K. WEARING -- 30,000 -- -- - ----------------------------------------------------------------------------------------------------------------------- DONALD D. MCKECHNIE -- -- -- 30,000 -- -- - -----------------------------------------------------------------------------------------------------------------------
EMPLOYMENT AGREEMENTS AND TERMINATION PROVISIONS In 1998 (in respect of Messrs. Fanagan, Santosa and Zeliff, collectively the "1998 Contracts") and in 2001 (in respect of Messrs. Warwick, Wearing and McKechnie, collectively the "2001 Contracts") the Company entered into employment agreements with the Named Executive Officers. The employment contracts provide for continuing employment unless voluntarily terminated by the employee. The employment contracts provide that the Named Executive Officers are entitled to severance upon being terminated without cause or upon certain other specified events of constructive dismissal and upon certain stated events. In addition, Mr. Fanagan was entitled to payment of severance upon a change of control in the ownership of Gulf Indonesia. If the Named Executive Officers are entitled to receive severance under their employment agreement, then they are entitled to receive and the Company is obligated to pay or provide the following: 1. an undiscounted cash amount equal to one month's base salary (including, in the 1998 Contracts, any foreign service supplement), multiplied by the number of years of service of the Named Executive Officer with the Company, subject to a minimum entitlement and payment equal to 24 months' base salary and a maximum entitlement and payment equal to 30 months' base salary; 2. an undiscounted cash amount equal, in the case of the 1998 Contracts, to the value of certain benefits plans and programs provided to regular Canadian resident employees of Gulf Canada and equal to one month for every year of service with the Company, with a minimum entitlement and payment equal to 24 months of benefits value and a maximum entitlement and payment equal to 30 months of benefits value; in the 2001 Contracts, this is an undiscounted cash amount equal to fifteen percent (15%) of the base salary (excluding pension) to reflect the hypothetical value of certain benefit plans and programs provided to regular Canadian residents; - 9 - 3. an undiscounted amount equal to the product obtained by multiplying the target bonus under the Company's cash bonus plan by two; and 4. the normal and any pension benefits according to the Company's registered pension plan on the basis that the Named Executive Officer's rights are treated as fully vested. In addition, all options for the purchase of shares of the Company which have been granted by the Company under the Incentive Stock Option Plan (1997) or otherwise to the date of termination, but which have not yet vested, shall immediately vest on the date of termination and the Named Executive Officer shall be entitled to exercise all such options for the purchase of shares of the Company for a period of two years from the date of termination. Executives will have access to already vested restricted stock units and deferred stock units awarded under the Long Term Incentive Program (described below). In addition, vesting is accelerated under the Leveraged Purchase Plan. DIRECTORS' FEES The annual fee paid to each eligible director for his services as director in 2001 was $15,000. Directors who are employees of Conoco Inc. or its affiliates ("Conoco directors") are not eligible for director fees and the eligible directors are the four directors who are not Conoco directors. The Chairman of the Board was paid a $50,000 annual fee. Eligible directors were also entitled, in 2001, to an annual fee of $3,000 for their services as a member of any committee of the board and $1,500 for acting as the Chairman of any committee of the board. Such directors also received $900 for each board and committee meeting respectively attended in person except that, if inter-continental travel was required for attendance, the fee for the first meeting was $2,000. Eligible directors received $600 for each board and committee meeting attended by conference call. The previous directors who were employees of Conoco Canada (Messrs. Auchinleck, Coutu and Sykes), did not receive compensation for service on the board or committees thereof with the exception of stock options. Mr. Fanagan received no compensation for service on the board or committees thereof. Each director was compensated for all reasonable out-of-pocket expenses incurred incidental to attending a board or committee meeting. On May 7, 2001, each director, except Mr. Fanagan, was granted options to purchase 10,000 Common Shares of the Company at an exercise price of $8.18 ($U.S.) and an expiry date of May 6, 2011. In each case, these options vest as to one-third on each successive anniversary of the grant, and are therefore all vested on the third anniversary. Particulars of the options and restricted share units granted to Mr. Fanagan and options granted to Mr. Warwick are previously described herein. In addition, each director who was not an employee of Conoco Canada received a grant of 1,150 restricted share units valued at a unit price of $8.18, and Mr. Allen as Chairman of the Board received 2,300 of such restricted share units, as of May 7, 2001. The restricted share units will become vested on May 7, 2005 and expire on May 6, 2011. COMPOSITION OF THE COMPENSATION AND PENSION COMMITTEE The members of the Compensation and Pension Committee at December 31, 2001 were Messrs. McColgin (Chairman), Allen and Harrington. No current member of the Compensation and Pension Committee was an officer or employee of the Company or any of its subsidiaries during 2001, or formerly an officer of the Company or any of its subsidiaries, except Mr. Allen who is Chairman of the Board of Directors. The other two members of the Committee are officers of Conoco Inc. - 10 - REPORT ON EXECUTIVE COMPENSATION The Compensation and Pension Committee administers the Company's compensation program. The total compensation package of the Named Executive Officers consists of three components: base salary, annual incentive (cash bonus), and long term incentives. Details of these three components are as follows: 1. Base Salary Program: The program provides employees and officers with a base salary targeted at the industry average, with the ability to earn more on an individual basis, based on sustainable results. Yearly industry comparisons determine the industry average and provide support for any recommendations to increase salaries. Although individual circumstances may vary, overall there is reduced emphasis on base salary in favor of the cash bonus and long term incentive programs. 2. Cash Bonus Program: The program compensates employees for achieving or exceeding corporate and individual targets. Corporate targets are recommended annually by senior management and approved by the Compensation and Pension Committee of the Board of Directors. Targets encompass key criteria regarding production levels, costs, reserve additions and safety. Individual performance targets will be determined for each employee and approved by his or her group leader. Cash bonus increases can occur when corporate and/or individual targets are exceeded. For the 2001 performance bonus, the Committee did not award a payment under the plan because the Company did not achieve all of the performance targets but the Committee did recommend and the Board approved a discretionary award in recognition of accomplishments in 2001. 3. Long Term Incentives: The Executive Long Term Incentive Program was adopted in 2001 in order to align employee and shareholder goals in a long term compensation strategy. Each Named Executive Officer will receive annual grants of stock options and restricted or deferred share units, and in addition may participate in the Leveraged Purchase Plan (LPP). Stock options have a term of ten years and vest at the rate of one-third per year, so that they are 100% vested after three years. Restricted stock units vest after four years and attract notional dividends during the restriction period. The value of deferred share units, which also have a four year vesting period, may only be realized upon termination. The Leveraged Purchase Plan was created to encourage stock ownership by Named Executive Officers. Under the terms of the Plan, executives may voluntarily "contribute" shares of common stock equivalent to 30% of their annual base salary to the program. For each eligible share that is owned outright, the executive will receive three stock appreciation rights (SARs). The SARs will vest in two years provided that the executive still owns the underlying shares of stock. On August 27, 1997, the Board of Directors established a reserve equal to ten (10%) percent of the aggregate issued and outstanding Common Shares of Gulf Indonesia as may exist from time to time. Particulars of awards in 2001 of options, restricted share units and stock appreciation rights to the Named Executive Officers are set out previously in this Circular. The Company adopted stock ownership guidelines for Company executives in 2001. The Chief Executive Officer's ownership target is an amount of common stock with a value equivalent to 150% of base salary. A Vice President's target is 70% of base salary. Executives - 11 - are expected to reach this level of ownership within five years. Restricted and deferred share units as well as direct holdings of shares of stock may be considered in meeting the ownership guidelines. CHIEF EXECUTIVE OFFICER The Compensation of the Chief Executive Officer is recommended by the Compensation and Pension Committee under the same plans and in the same manner as the other Named Executive Officers. Upon his appointment in 2001, the Committee targeted the base salary and cash bonus and long term incentive targets of Mr. Warwick to position him competitively within the industry. James D. McColgin, Committee Chairman Robert H. Allen Rick A. Harrington PERFORMANCE GRAPH During the period December 31, 2000 to December 31, 2001, Gulf Indonesia's Common Shares traded between a high of $11.89 and a low of $7.48, closing on December 31, 2001 at $9.00 (all amounts in $U.S.). During the same period, the New York Stock Exchange composite index fell approximately 8.5% (with dividend reinvestment). COMPARISON OF CUMULATIVE TOTAL RETURN ASSUMING REINVESTMENT OF DIVIDENDS 1997= $100
DEC. 31/97 DEC. 31/98 DEC. 31/99 DEC. 31/00 DEC. 31/01 ---------- ---------- ---------- ---------- ---------- GULF INDONESIA 100 29.55 36.93 42.33 40.91 NYSE COMPOSITE INDEX 100 118.37 131.01 134.28 123.34
- 12 - LIABILITY INSURANCE OF DIRECTORS AND OFFICERS Gulf Indonesia provides directors' and officers' liability insurance covering losses to Gulf Indonesia for reimbursement of directors and officers, where permitted, and direct indemnity of directors and officers where corporate reimbursement is not permitted by law. The insurance protects Gulf Indonesia against liability, including costs that may be incurred by directors and/or officers acting in their capacity as such for Gulf Indonesia and its subsidiaries, subject to standard policy exclusions. Following the take-over of Gulf Canada by Conoco Inc. in July 2001, the directors' and officers' liability insurance was integrated with the corporate insurance program of Conoco Inc. INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS The Company had previously entered into material transactions with its major shareholder, Conoco Canada (formerly known as Gulf Canada Resources Limited) and has more recently entered into new agreements with its indirect major shareholder, Conoco Inc., regarding services and financial matters. With respect to services, the Company and Gulf Canada entered into a series of agreements in 1997 relating to certain ongoing intercompany arrangements. These included a Technical Services Agreement and an Information Services Agreement, which provided that, if the Company were unable to provide certain technical and information services itself, it would be required to obtain such technical and information services from Gulf Canada as long as Gulf Canada was able to provide such services in a timely fashion. In addition, an Administrative Services Agreement provided that the Company must obtain from Gulf Canada substantially all of its required administrative services, including financial, treasury, accounting, tax, audit, legal and other related services, human resources services and other administrative services. All were originally for 10 year terms beginning in 1997. The Company paid a fee to Gulf Canada for such services provided by Gulf Canada in an amount equal to Gulf Canada's cost of providing such services based on industry averages for the services provided, but in any event not greater than those fees which an unaffiliated third party would charge the Company. The Company and Gulf Canada also entered into a series of other agreements relating to, among other things, the future registration, under the United States Securities Act of 1993, as amended, of Common Shares owned by Gulf Canada and cross-indemnities relating to certain asset transfers between the Company and Gulf Canada. In November 2001, the Company entered into a Technical Services Agreement with Conoco Inc., superceding the 1997 Technical Services Agreement with Gulf Canada. While similar in many ways to the previous agreement with Gulf Canada, the new Agreement provides for a more detailed work scope and cost estimate, enables reciprocal assistance, and provides for the possible use of experts on an "on call" basis. The new Agreement also provides for the longer term secondment of personnel and, pursuant thereto, the Company's new Vice President, Gas Marketing and Business Development, is provided by secondment arrangement with Conoco Inc. In March 2002, the Company also entered into a new Administrative & Information Services Agreement with Conoco Inc., superceding the previous Information Services Agreement and Administrative Services Agreement with Gulf Canada. The new agreement with Conoco Inc. is similar to the new Technical Services Agreement and includes provision for the payment for services on a cost recovery basis, potential for reciprocal services and the use of a project sheet to describe the scope of work and estimated costs. This - 13 - agreement specifically does not provide for services to Conoco Inc.'s principal Indonesian subsidiary. In connection with financial matters, the Company arranged, prior to completing the repayment of its Corridor Project loan, to obtain from Conoco Canada a U.S. $65 million credit facility for a term of up to three years from August 2001 for a fee of 1.5 percent per annum of the amount undrawn and, in the case of amounts borrowed, at a cost equal to the cost to Conoco Canada plus a fee of 1.5 percent per annum. It was and remains the Company's belief that the cost to the Company would be considerably lower than that available in the marketplace. In addition, the Company on two occasions in 2001 invested surplus amounts of cash in short term notes of Conoco Inc., on market terms; such amounts were repaid as anticipated. APPOINTMENT OF AUDITORS Unless it is specified in a proxy that the Common Shares represented therein be withheld from voting on the appointment of auditors, the persons named in the enclosed form of proxy intend to vote the Common Shares represented therein for the appointment of Ernst & Young LLP as auditors of Gulf Indonesia to hold office until the next annual meeting of Shareholders following the Meeting, at a remuneration to be fixed by the board of directors. Ernst & Young LLP have been auditors of Gulf Indonesia and its predecessor companies since April, 1988. Fees paid to Ernst & Young LLP during 2001 for audit and audit-related services were $182,150 and fees of an additional $6,328 were paid for advisory, recruitment and other services. Representatives of Ernst & Young LLP will be present at the Meeting and will have the opportunity to make a statement and to respond to appropriate questions. DIRECTORS' APPROVAL The Directors of the Company have approved the contents and sending of this Proxy Circular. GULF INDONESIA RESOURCES LIMITED /s/ Alan Scott Alan Scott Corporate Secretary Calgary, Alberta March 18, 2002 EX-99.E.3 5 h97565aexv99wew3.txt INFORMATION SERVICES AGREEMENT EXHIBIT (e)(3) INFORMATION SERVICES AGREEMENT THIS INFORMATION SERVICES AGREEMENT made this 1st day of October, 1997, A M O N G: GULF CANADA RESOURCES LIMITED, a corporation governed by the laws of Canada (hereinafter referred to as "Gulf") - and - GULF INDONESIA RESOURCES LIMITED, a corporation governed by the laws of New Brunswick (hereinafter referred to as the "Company") - and - EACH OF THOSE SUBSIDIARIES OF THE COMPANY WHICH HAS EXECUTED THIS AGREEMENT OR HAS OTHERWISE BECOME A PARTY HERETO WHEREAS the Company is a wholly-owned subsidiary of Gulf; and WHEREAS each of the signatories hereto other than Gulf and the Company (collectively, the "Subsidiaries") are currently wholly-owned subsidiaries of the Company and each Subsidiary is a party hereto in its capacity as either operator and/or working interest owner of a PSC (as defined herein); and WHEREAS it is anticipated that a portion of the Shares held by Gulf will be sold to the public in the Offering; and WHEREAS GIRL is primarily engaged in the oil and gas business, including the acquisition, development and exploration and production of oil and gas properties in Indonesia; and WHEREAS Gulf has provided certain information processing and information technology services to the Company in the past in connection with the business of the Company, and the Company wishes to ensure that such services, and others, as set forth herein, are available to it after the Offering, in order to maximize shareholder value and in an effort to manage its affairs in a cost effective and efficient manner, and Gulf desires to render such services to the Company, all upon the terms and conditions hereinafter set forth. - 2 - NOW, THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual covenants and promises contained herein and other good and valuable consideration (the receipt and adequacy whereof is hereby acknowledged), the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 DEFINED TERMS For the purpose of this Agreement, the following terms shall have the meaning ascribed thereto below unless otherwise specified: "ADMINISTRATIVE SERVICES AGREEMENT" means the administrative services agreement among the Company, certain of its Subsidiaries and Gulf dated the date hereof. "AFFILIATE" means, with respect to a Person, any person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with such Person, and the term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management, activities or policies of any Person or entity, whether through the ownership of voting securities, by contract, employment or otherwise but, for greater certainty, does not include any Person deriving such rights through a PSC. "AGREEMENT" means this Information Services Agreement, as amended from time to time pursuant to the terms hereof. "BUSINESS" means all business activities of the Company as such Business is now conducted or, subject to Section 2.2, may hereafter be conducted in the future. "CHANGE OF CONTROL" means the acquisition by any Person or group of Persons of beneficial ownership (as such term is defined under Section 13(d) of the Securities Exchange Act of 1934) of more than 50% of the outstanding ordinary shares of Gulf on a non-diluted basis, or all or substantially all of the assets or business of Gulf. "COMPANY", when used herein, means the Company and each of the Subsidiaries, unless the context otherwise requires. "COMPANY SYSTEM" means the information processing systems, hardware, communications equipment, computer programs and data of the Company including such updates and enhancements thereto as are contemplated by this Agreement. - 3 - "CORPORATE OPPORTUNITY AGREEMENT" means the corporate opportunity agreement between the Company and Gulf dated the date hereof. "EFFECTIVE DATE" means October 1, 1997. "FEES" has the meaning set forth in Section 4.3. "GULF SYSTEM" means the information processing systems, hardware, communications equipment, computer programs and data of Gulf, portions of which are used by Gulf to provide Information Technology Services to the Company as contemplated by this Agreement. "IT SERVICES" or "INFORMATION TECHNOLOGY SERVICES" or "INFORMATION SERVICES" means the services set forth in Section 4.1. "OFFERING" means a public offering of Shares following which Gulf will own less than all of the Shares. "PERSON" includes an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a stock exchange, trustee in bankruptcy, receiver or any government, any political subdivision, any agency and any entity or person exercising executive, legislative, judicial, regulatory or administrative functions of government. "PERTAMINA" means Perusahaan Pertambangan Minyak dan Gas Bumi Negara, a state enterprise of the Republic of Indonesia, established on the basis of law no. 8/1971. "PSC" means a production sharing contract between the Company or any of its Subsidiaries and Pertamina, and includes any technical assistance contract, enhanced oil recovery contract, and any similar contractual arrangement to which the Company or any of its Subsidiaries may be a party or which it may enter into in the normal course of Business. "SHARES" means common shares in the capital of the Company and includes any shares, however called, having attributes similar to those of common shares. "SUBSIDIARY", with respect to a corporation (the "first corporation"), means a corporation that is controlled (i) by the first corporation, (ii) by the first corporation and another corporation which is itself controlled by the first corporation, (iii) by two or more corporations, each of which is controlled by the first corporation, or that is a subsidiary of such a corporation. "TECHNICAL SERVICES AGREEMENT" means the Technical Services Agreement among Gulf, the Company and its subsidiaries dated the date hereof. - 4 - "TERM OF AGREEMENT" means the period from the Effective Date until this Agreement is terminated or otherwise expires pursuant to Article IX hereof. 1.2 CONSTRUCTION Whenever the context requires, the gender of all words used herein shall include the masculine, feminine and neuter, and the number of all words shall include the singular and plural. 1.3 REFERENCES Unless otherwise specified, the references herein to "Sections", "Subsections" or "Articles" refer to the sections, subsections or articles in this Agreement. ARTICLE II APPOINTMENT OF GULF 2.1 APPOINTMENT The Company hereby agrees that if it is unable to provide the IT Services for itself, it will request that Gulf provide the IT Services to the Company pursuant to and as set forth in this Agreement, and Gulf hereby agrees to provide such services as are requested by the Company on the terms set forth herein. 2.2 FUTURE ACTIVITIES The IT Services to be provided shall be provided with respect to the Business, which shall include all of the assets and activities of the Company, as now owned or conducted or as may be owned or conducted in the future. Notwithstanding the foregoing, in the event the Company acquires an asset or begins performing an activity outside the oil and gas business or scope of Gulf's normal course of business, the Company may request that provision of IT Services in respect of such new assets or activity be excluded from the Business. If, in Gulf's reasonable opinion, such asset or activity is in the normal course of Gulf's and the Company business, Gulf may submit the question of whether or not the asset or activity should be part of the Business to the Resolution Committee as contemplated by Section 3.4, the decision of which shall be final and binding. If the asset or activity is agreed or determined not to be within the oil and gas business or the normal course of Gulf's business, Gulf shall provide no IT Services in respect of such asset or activity. - 5 - 2.3 STATUS OF PERTAMINA Gulf acknowledges that Pertamina is the manager of oil and gas assets in Indonesia, and that Pertamina has subcontracted through the PSCs the management of such assets to Affiliates of the Company and that, as a result, the actions of Gulf hereunder are subject to the same control by Pertamina as would the actions of the Company in connection with such assets. ARTICLE III AUTHORITY AND RESPONSIBILITY OF GULF 3.1 GENERAL Gulf shall have the authority and the responsibility to render the IT Services in support of the Business herein described. Gulf agrees to render services hereunder in a timely and prudent manner, consistent with generally accepted standards for a business similar to the Business. Gulf shall have no obligation to advance funds to any third party (other than any employee of Gulf) for the account of the Company or to pay any sums of its own to any third party (other than any employee of Gulf) in connection with the performance of the actions which it is authorized to take hereunder. Gulf's activities under this Agreement shall be specifically subject to the terms hereof and the general control, direction and supervision of the Company. 3.2 COMPLIANCE WITH LAWS Gulf shall use all reasonable efforts to insure full compliance by itself and its agents with all laws, ordinances, regulations and orders relative to the provision of IT Services in each country which may have jurisdiction over the Company, the Business, the provision of such IT Services or the assets of the Company. Gulf shall, on the Company's behalf and for the Company's account, use all reasonable efforts to remedy any violation of any such law, ordinance, rule, regulation or order which comes to its attention. If the violation is one for which the Company might be subject to penalty, Gulf shall promptly notify the Company of such violation to allow actions to be made to remedy the violation, and Gulf shall transmit promptly to the Company a copy of any citation or other communication received by Gulf setting forth any such violation. 3.3 COMPLIANCE WITH OBLIGATIONS Gulf, to the extent such matters are reasonably within its control, shall use all reasonable efforts to cause compliance with all terms and conditions contained in any contract, agreement, judicial, administrative or governmental order, lease, license agreement or other contractual or security instrument affecting the Company System. Gulf shall promptly notify the Company of any violation of any covenant in such instruments or agreements. - 6 - 3.4 RESOLUTION COMMITTEE Either the Company or Gulf under Section 2.2 may request the formation of a committee ("Resolution Committee") to determine any of the matters provided for in such section. The Resolution Committee shall have three members, one person selected by Gulf, one member of the Company's Board of Directors selected by the Company (which member may be an officer or employee of the Company but shall not be an officer, director or employee of Gulf) and one member of the Company's Audit Committee selected by such Audit Committee. Each of Gulf and the Company agree to select the members of the Committee to be selected by them within ten (10) business days of the request to form the Resolution Committee, and shall advise the other party of their respective selections. Any determination made by the Resolution Committee shall be made by a majority of the members thereof,and shall be given to the Company in writing. The Company and Gulf shall provide the members of the Resolution Committee with such information as they may reasonably request. ARTICLE IV PROVISION OF SERVICES 4.1 PROVISION OF IT SERVICES At the request of the Company from time to time, Gulf shall provide IT Services to the Company, subject to the general direction and supervision of the Company. IT Services shall mean the following: (a) periodic processing of the data and information of the Company on the Company System and on the Gulf System, as applicable, and provision of information and reports to the Company arising from such data and information processing tasks; (b) periodic maintenance and support of the Company System including all liaison with vendors of components thereof and provision of updates and new versions or releases (as approved by the Company); (c) periodic maintenance and support of the portions of the Gulf System used to provide data or information processing support for the Company provided that all decisions regarding the provision of updates and new versions or releases shall be solely made by Gulf after consultation with the Company; (d) periodic reporting and recommendations on enhancements to and remedial action in respect of the Company System; - 7 - (e) implementation of updates, revisions, enhancements and new versions of components of the Company System and provision of applicable training of the Company staff in that respect; and (f) such other information technology or related services as the Company may request of Gulf from time to time and that Gulf agrees to provide. Any request for IT Services shall specify in reasonable detail the service or work Gulf is to supply, the date or dates on which the Company desires such service to be supplied or such work to be completed and such other information as the Company deems relevant. Gulf may request clarification as to any matter contained in such request, provided that Gulf does so in a prompt and timely manner. The Company and Gulf contemplate the preparation of an information services plan which will set out the specific services to be provided on a periodic basis and the applicable target time frames for provision of such services. If Gulf is unable to provide the Company with the requested IT Services in a timely fashion, within the Fees set forth in Section 4.3 or at all, then the Company shall be free to obtain such services from third parties. The Company may, in any event, perform IT Services in-house. Notwithstanding anything to the contrary set forth herein, the Company may use third-party IT Service providers to the extent required by Indonesian law, regulations or custom, or to effect cost recovery, free of any restriction contained herein. 4.2 CONSULTANTS The Company acknowledges that Gulf may use third party consultants to perform certain of the activities outlined in this Agreement. If Gulf wishes to use third party consultants, Gulf shall obtain the consent of the Company thereto, which shall not be unreasonably withheld. 4.3 FEES Fees in connection with IT Services provided pursuant hereto ("Fees") shall be billed by Gulf monthly, with an invoice representing all actual and allocated costs for the previous month to be delivered to the Company no later than the 20th day of each month. The Company shall pay invoices within 30 days from the receipt thereof. The Fees of Gulf for the provision of services hereunder shall be determined by a detailed study and the method so determined shall be applied consistently from period to period. The method selected shall be approved by Gulf and the Company and shall be reviewed not less than every two years. The parties hereto intend that the Fees of Gulf for the provision of services hereunder shall be limited to the actual and total costs, direct and indirect (including, but not limited to, overhead and administrative costs, out-of-pocket expenses of Gulf and its employees, agents and consultants incurred in connection with the provision of services hereunder and Indonesian levies and taxes) to Gulf of providing such services, provided that such Fees shall not exceed those which the Company would pay to an arm's length third party for services of comparable quality and quantity; and - 8 - provided further, that if this Agreement is assigned by Gulf pursuant to Section 10.5 hereof, the Fees of such assignee for the provision of services hereunder may be more than such actual and total costs if they are in any event no more than those which the Company would pay at arm's length to a third party for services of comparable quality and quantity. 4.4 COST RECOVERY Gulf shall use all reasonable efforts to ensure that all services provided hereunder in respect of which the Company or any of its Subsidiaries are or could be entitled to cost recovery from any third party shall be provided for in such a manner as to ensure that such cost recovery is available. In particular and without limitation, Gulf shall ensure that all Fees which may be charged as "technical services from abroad", and all other amounts in respect of which the Company or any of its Subsidiaries may be entitled to cost recovery are invoiced in such a manner as to be readily identifiable as such. In the event that cost recovery is not available in respect of particular Fees paid by the Company hereunder principally as a result of an assignment by Gulf pursuant to section 10.5 hereof, Gulf shall reimburse those particular Fees to the Company. 4.5 AUDIT REPORT The Company shall have the right at any time to cause its independent auditors to prepare a report to it confirming that the computation of the Fee by Gulf was accurate, and Gulf shall provide all reasonable cooperation and access to such auditors in the preparation of such report. At the request of the Company, Gulf shall also provide all reasonable cooperation and access to Pertamina or any government official in the event that Pertamina or such government official shall request or undertake an audit of any Fees paid by the Company to Gulf hereunder. In the event that such audit determines that the Fees were not properly calculated, the party against which such determination is made shall have the right to cause another independent audit to be prepared. In the event of disagreement between any two such audits, the matter shall be determined pursuant to arbitration in accordance with the provisions hereof. Upon any ultimate determination, Gulf or the Company, as the case may be, shall refund or pay any Fees improperly paid, or not charged, by Gulf. ARTICLE V FINANCIAL ADMINISTRATION 5.1 BUDGETS Gulf will provide the Company with all data necessary to prepare its operating budgets in a timely manner and in any event no later than six months prior to the beginning of a fiscal year of the Company. Prior to the end of each fiscal year of the Company during the Term of Agreement, the Company shall, to the extent possible, prepare and submit to Gulf, a budget (a "Budget") for Information Services for the ensuing year. Gulf shall employ reasonable efforts to ensure that the - 9 - actual costs of providing Information Services shall not exceed the approved Budget either in total or in any one accounting category, in connection with any matters set forth in such Budget. ARTICLE VI INDEMNITIES 6.1 INDEMNIFICATION BY GULF Gulf shall protect, indemnify, defend and hold harmless the Company and its officers, directors, employees, agents, other representatives and Subsidiaries from any and all threatened or actual claims, demands, causes of action, suits, proceedings (formal or informal), losses, damages, fines, penalties, liabilities, costs and expenses of any nature, including attorneys' fees and court costs, sustained or incurred by or asserted against the Company or its controlled Affiliates by any Person by reason of or arising out of: (i) any breach or alleged breach of this Agreement by Gulf, its Affiliates (other than the Company or its Subsidiaries), agents, or employees; or (ii) any act or alleged act of fraud, willful misconduct or gross negligence of Gulf and its Affiliates (other than the Company or its Subsidiaries) or any of its respective employees, officers, directors or agents, or (iii) acts outside, or omissions in, the scope of Gulf's authorized duties and responsibilities contained herein. In case any action or proceeding shall be brought against the Company or any of its controlled Affiliates in respect of which the indemnification contemplated by this Section 6.1 may be sought against Gulf, Gulf, upon the receipt of notice from the Company, shall defend such action or proceeding by counsel reasonably satisfactory to the Company and Gulf, and Gulf shall pay for all expenses therefor unless such action or proceeding is resisted and defended by counsel for any carrier of public liability insurance that benefits the Company or Gulf. The Company shall promptly give written notice to Gulf when a claim is made against the Company for which indemnity is owed to the Company by Gulf pursuant to this Section 6.1. Gulf shall participate at its own expense in defense of such claims, but the Company shall have the right to employ its own separate counsel. The Company shall assist Gulf in the defense of any claim for which Gulf owes indemnification hereunder and is undertaking to provide a defense, by making available to Gulf such records and personnel as may be reasonably requested in the defense of such claim. 6.2 INDEMNIFICATION BY THE COMPANY The Company hereby agrees to indemnify, defend, and hold harmless Gulf and its officers, directors, employees, agents, other representatives, shareholders, employees, agents and Subsidiaries (other than the Company) from any and all threatened or actual claims, demands, causes of action, suits, proceedings (formal or informal), losses, damages, fines, penalties, liabilities, costs and expenses of any nature, including attorneys' fees and court costs, sustained or incurred by or asserted against Gulf or its Affiliates, officers, directors, employees and agents by any Person by reason of or arising out of the conduct of the Company, other than the provision of services by Gulf or any of its Affiliates pursuant to this Agreement, except to the extent Gulf indemnifies the Company under the foregoing Section 6.1. In case any action or proceeding shall be brought against Gulf in - 10 - respect to which the indemnity contemplated by this Section 6.2 may be sought against the Company, Gulf shall give notice of such action to the Company, and the Company shall defend such action or proceeding by counsel reasonably satisfactory to the Company and Gulf, and the Company shall pay for all expenses therefor unless such action or proceeding is resisted and defended by counsel for any carrier of public liability insurance that benefits the Company or Gulf. Gulf shall promptly give written notice to the Company when a claim is made against Gulf for which indemnity is owed to Gulf by the Company pursuant to this Section 6.2. The Company shall participate in defense of such claims, but Gulf shall have the right to employ its own separate counsel, and Gulf shall assist the Company in the defense of any claim for which the Company owes indemnification hereunder and is undertaking to provide a defense, by making available to the Company such records and personnel of Gulf as may be reasonably requested in the defense of such claim. 6.3 NON-ASSUMPTION OF LIABILITIES Gulf shall not, by entering into this Agreement, assume or become liable for any of the obligations, debts or other liabilities of the Company in existence or arising on or after the date hereof. Other than with respect to any damages caused by the fraud, willful misconduct or gross negligence of Gulf in rendering services hereunder, and except as provided in Section 6.1, Gulf shall not, by providing services to the Company, assume or become liable for any of the obligations, debts or other liabilities of the Company. ARTICLE VII ACCESS TO INFORMATION, BOOKS AND RECORDS; CONFIDENTIALITY; POWER OF ATTORNEY 7.1 ACCESS TO BOOKS AND RECORDS Gulf and its duly authorized representatives shall have complete access to the Company's offices, facilities and records wherever located, in order to discharge Gulf's responsibilities hereunder. All records and materials furnished to Gulf by the Company in performance of this Agreement shall at all times during the Term of Agreement remain the property of the Company. The Company and its duly authorized representatives shall have complete access to records and other information concerning the Company used by Gulf in performance of its duties hereunder. 7.2 CONFIDENTIALITY For the Term of Agreement and for at least two years after the Term of Agreement, Gulf agrees to keep confidential all non-public information concerning the Company acquired by Gulf or its Affiliates during the Term of Agreement. For the purpose of this Section 7.2, confidential information shall not include any information available to or otherwise disclosed by the Company to third parties generally without any obligation of confidentiality. Nothing in this Section 7.2 shall prohibit any announcement or disclosure by a Party that such Party determines upon the written - 11 - advice of counsel is required to be disclosed by applicable law or court order or is necessary to be disclosed in connection with litigation, provided that in any such event the Party proposing to make disclosure shall use reasonable efforts to advise the other Party as far in advance of such disclosure as possible and shall consult with the other Party on the means of complying with such obligation, and shall assist such Party in any attempt it may make to seek confidential treatment of such information. ARTICLE VIII REPRESENTATIONS AND WARRANTIES 8.1 REPRESENTATIONS AND WARRANTIES OF GULF Gulf represents and warrants to the Company as follows: (a) Gulf has the full power and authority to conduct its business and perform its obligations and consummate the transactions contemplated hereunder. (b) This Agreement has been duly authorized, executed and delivered by Gulf. (c) This Agreement is a valid and legally binding obligation of Gulf enforceable against Gulf in accordance with its terms, and the Company is entitled to the benefits thereof. (d) Gulf is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority, or in the payment of any indebtedness for borrowed money or under the terms or provisions of any agreement or instrument evidencing or securing any such indebtedness. (e) No representation or warranty of Gulf contained in this Agreement and no statement of Gulf contained in any certificate, schedule, list, financial statement or other instrument furnished to the Company pursuant to this Agreement contains, or will contain, any untrue statement of material facts, or omits, or will omit, to state a material fact necessary to make the statements contained herein or therein not misleading. (f) There are no actions, suits, proceedings or governmental investigations or inquiries pending or threatened against Gulf or investigations or inquiries pending or threatened against Gulf or to which Gulf is a party or to which any property of Gulf is subject, which, if determined adversely to Gulf, would materially affect the operations or financial position of Gulf or its ability to perform its obligations hereunder. - 12 - (g) Gulf is validly existing and in good standing under the laws of Canada and Gulf possesses all licenses, consents, approvals, authorizations and qualifications the absence of which would, individually or in the aggregate, materially adversely affect the business or properties of Gulf. (h) Neither the execution and delivery of this Agreement, nor the performance or compliance with the terms and conditions hereof, conflict with, or will result in a breach by Gulf of, or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any asset of Gulf pursuant to any of the terms, conditions or provisions of (i) the Articles of Incorporation or Bylaws of Gulf, (ii) any mortgage, deed of trust, lease, contract, agreement or other instrument to which Gulf is a party or by which Gulf may be bound or affected, or (iii) any writ, order, judgment, decree, statute, ordinance, regulation or any other restriction of any kind or character, to which Gulf is subject, or by which Gulf may be bound or affected. All representations and warranties made by Gulf in this Agreement shall survive for a period of two years from the date of this Agreement. 8.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Gulf as follows: (a) The Company has full power and authority to conduct its business and perform all its obligations and consummate the transactions contemplated hereunder. (b) This Agreement has been duly authorized, executed and delivered by the Company. (c) This Agreement is valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, and Gulf is entitled to the benefits thereof. (d) The Company is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority, or in the payment of any indebtedness for borrowed money or under the terms or provisions of any agreement or instrument evidencing or securing any such indebtedness except for those which the Company has to date disclosed to Gulf in writing. (e) No representation or warranty of the Company contained in this Agreement or other instrument furnished by the Company to Gulf pursuant to this Agreement contains, or will contain, any untrue statement of material fact, or omits, or will omit, to state a material fact necessary to make the statements contained herein or therein not misleading. - 13 - (f) There are no actions, suits, proceedings or governmental investigations or inquiries pending or threatened against the Company or to which the Company is a party or to which any property of the Company is subject, which if determined adversely to the Company, would materially affect the operations or financial position of the Company, except for those which the Company has to date disclosed to Gulf in writing. (g) The Company is duly incorporated and validly existing and in good standing under the laws of New Brunswick and the Company possesses all licenses, consents, approvals, authorizations and qualifications (including qualifications to do business as a foreign corporation) the absence of which would individually or in the aggregate, materially adversely affect the business or properties of the Company. (h) Neither the execution and delivery of this Agreement, nor the performance or compliance with the terms and conditions hereof, conflict with, or will result in a breach by the Company of, or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any asset of the Company pursuant to any of the terms, conditions or provisions of (i) the Articles of Incorporation or Bylaws of the Company, (ii) any mortgage, deed of trust, lease, contract, agreement or other instrument to which the Company is a party or by which the Company is subject, or by which the Company may be bound or affected. All representations and warranties made by the Company in this Agreement shall survive for a period of two years from the date of this Agreement. ARTICLE IX TERM AND TERMINATION OF AGREEMENT 9.1 INITIAL TERM The initial term of this Agreement shall be for a 10 (ten) year period beginning on the Effective Date ("Initial Term"). Thereafter, this Agreement shall automatically renew for successive five-year periods ("Renewal Terms") until terminated by either party in accordance with the provisions of this Article IX. 9.2 TERMINATION This Agreement shall be terminated on the first to occur of the following: (a) In the event the parties shall mutually agree in writing, this Agreement may be terminated on the terms and dates stipulated in such writing. - 14 - (b) Subject to Section 9.3, prior to the expiration of the Initial Term, if Gulf ceases to hold more than a majority of the Shares of the Company (calculated on a non-diluted basis) or ceases to hold shares of the Company entitled to a majority of the votes entitled to be cast under ordinary circumstances in the election of directors, the Company may, with or without cause, terminate this Agreement on the first day of any month thereafter by providing written advance notice to Gulf, and Gulf may terminate this Agreement on the first day of any month by giving the Company at least 12 months' advance written notice of such termination. (c) Subject to Section 9.3, Gulf or the Company may, with or without cause, terminate this Agreement on the expiration of the Initial Term or any Renewal Term by giving the other party at least 12 months' advance written notice of its intent to terminate, whereupon this Agreement shall terminate on the expiry of the Initial Term or the Renewal Term, as the case may be. (d) Subject to events of force majeure (as provided in Section 10.9 hereof), in the event either party shall fail to discharge any of its material obligations hereunder or under the Corporate Opportunity Agreement, the Administrative Services Agreement or the Technical Services Agreement (collectively, the "Other Agreements"), including without limitation, the obligation to render services in connection with the Business in a timely and prudent manner, or shall commit a material breach of this Agreement or any of the Other Agreements and such failure, default or breach shall continue for a period of thirty (30) days after the other party has served written notice of such default, this Agreement and any or all of the Other Agreements may then be terminated at the option of the non-breaching party by written notice thereof to the breaching party specifying a proposed date of termination no more than 12 months nor less than 30 days after the date of such notice, in which case this Agreement shall terminate on the date specified in such notice, it being understood that such termination right is in addition to any other remedies that may be available to the aggrieved party. (e) Upon the dissolution or termination of the corporate existence of Gulf or cessation on Gulf's part to continue to conduct the E&P Business (as defined in the Corporate Opportunity Agreement). (f) The Company shall have the right to terminate this Agreement if there is instituted by or against Gulf any proceeding under any applicable bankruptcy law, or under any other law for the relief of debtors now or hereafter existing, or a receiver is appointed for all or substantially all of the assets of Gulf and such proceeding is not dismissed or such receiver is not discharged, as the case may be, within thirty (30) days thereafter. - 15 - (g) The Company shall have the right to terminate this Agreement if Gulf shall (i) become insolvent, (ii) generally fail to, or admit in writing its inability to, pay debts as they become due, (iii) make a general assignment for the benefit of creditors, (iv) apply for, consent to or acquiesce in the appointment of a trustee, receiver or other custodian. (h) The Company shall have the right to terminate this Agreement if a substantial portion of the assets or properties of Gulf shall be seized or taken by order of a governmental agency or body, or any other writ shall be issued against Gulf or any of its assets, or if any other lawful creditor's remedy shall be asserted or exercised with respect thereof, provided that in any such case Gulf has not contested such action in good faith within 30 days' thereof. (i) The Company and Gulf shall have the right to terminate this Agreement during the 12 months following the occurrence of a Change of Control. (j) In the event that the Company shall have elected to take the actions specified in section 4 of the Corporate Opportunity Agreement. Unless otherwise provided in this section 9.2, the Company may exercise its right to terminate this Agreement under paragraphs (f) through (i) of this Section 9.2 by giving Gulf written notice specifying a proposed date of termination no more than 12 months nor less than thirty (30) days after the date of such notice, in which case this Agreement shall terminate on the date specified in such notice. Gulf may exercise the rights of termination provided to it hereunder by giving the Company written notice specifying a proposed date of termination not less than 12 months after the date of such notice, in which case this Agreement shall terminate on the date specified in such notice. 9.3 EFFECTS OF TERMINATION The termination of this Agreement in accordance with the provisions of this Article IX shall have the following effects: (a) Except for the mutual indemnities set forth in Article VI and the covenants and the other provisions herein that by their terms expressly extend beyond the Term of Agreement, the Parties' obligations hereunder are limited to the Term of Agreement. (b) In the event this Agreement is terminated for any reason, Gulf shall immediately deliver possession to the Company of all assets, books and records of the Company in Gulf's possession and shall provide the Company with copies of all assets, books and records (including electronic copies in the format requested by the Company and reasonably within Gulf's capability) relating to the Business that are in Gulf's possession, at the cost of the Company. - 16 - (c) Upon termination of this Agreement (for whatever cause, other than a material breach by Gulf of this Agreement or any of the Other Agreements), the Company shall pay to Gulf the amount of any and all costs and expenses accrued to the date of such termination which are payable by the Company to Gulf in accordance with the provisions hereof. (d) In addition to any other requirements in this Article IX, if the Company terminates this Agreement pursuant to (i) Section 9.2(a) or 9.2(b), then the Company shall pay to Gulf a fee equal to twelve months' Fees under this Agreement, and (ii) Section 9.2(c), then the Company shall pay to Gulf a Fee equal to eight months' Fees under this Agreement. In the case of clauses (i) and (ii) above, such termination fee shall be calculated based on the average of the total fees paid for the three years immediately preceding the date this Agreement terminates (or such shorter period as this Agreement has been in effect) and shall be payable on the termination date. ARTICLE X MISCELLANEOUS 10.1 RELATIONSHIP OF PARTIES This Agreement does not create a partnership, joint venture or association or agency relationship; nor does this Agreement, or the operations hereunder, create the relationship of lessor and lessee or bailor and bailee. Nothing contained in this Agreement or in any agreement made pursuant hereto shall ever be construed to create a partnership, joint venture or association, or the relationship of lessor and lessee or bailor and bailee, or to impose any duty, obligation or liability that would arise therefrom with respect to either or both of the Parties except as otherwise expressly provided in this Agreement or any agreement made pursuant hereto. Specifically, but not by way of limitation, except as otherwise expressly provided for herein, nothing contained herein shall be construed as imposing any responsibility on Gulf for the debts or obligation of the Company or any of its Subsidiaries. Subject to the terms of this Agreement, Gulf and its Affiliates shall have the right to render similar services for other business entities and persons, including its own, whether or not engaged in the same business as the Company. 10.2 NO THIRD PARTY BENEFICIARIES Except to the extent a third party is expressly given rights herein, any agreement to pay an amount and any assumption of liability herein contained, expressed or implied, shall be only for the benefit of the parties and their respective legal representatives, successors and assigns, and such agreement or assumption shall not inure to the benefit of the holders of any indebtedness or any party whomsoever, it being the intention of the parties hereto that no person or entity shall be deemed a - 17 - third party beneficiary of this Agreement except to the extent a third party is expressly given rights herein. 10.3 NOTICES Any notice, demand, or communication required, permitted, or desired to be given hereunder shall be deemed effectively given when personally delivered or mailed by prepaid certified mail, return receipt requested, addressed as follows: (i) if to the Company to: Gulf Indonesia Resources Limited 21st Floor, Wisma 46, Kota, BNI JI. Jend. Sudirman, Kav 1 Jakarta, Indonesia Attn: Chief Operating Officer (ii) if to Gulf, to: Gulf Canada Resources Limited One Norwest Center 1700 Lincoln, Suite 5000 Denver CO 80203-4524 Attn: President or to such other address and to the attention of such other person or officer as either Party may designate by written notice pursuant to this Section 10.3. 10.4 GOVERNING LAW This agreement has been executed and delivered in and shall be interpreted, construed and enforced pursuant to and in accordance with the laws of Alberta. 10.5 ASSIGNMENT No assignment of this Agreement or any of the rights or obligations set forth herein by either party shall be valid without the specific written consent of the other party, provided that Gulf and any permitted assignees of Gulf shall have the right to assign this agreement to an Affiliate of Gulf without the consent of the Company, provided that (i) such Affiliate is controlled by Gulf, (ii) the ability of the Company to obtain cost recovery under a relevant PSC is not thereby lost, and (iii), Gulf shall remain liable for such assignee's obligations under this Agreement. - 18 - 10.6 WAIVER OF BREACH The waiver by either party of a breach or violation of any provision of this Agreement shall not operate as, or be construed to be, a waiver of any subsequent breach of the same or any other provisions hereof. 10.7 ENFORCEMENT In the event either party shall resort to legal action to enforce the terms and provisions of this Agreement, the prevailing party may recover from the other party the costs of such action including, without limitation, reasonable attorneys' fees. 10.8 ADDITIONAL ASSURANCES Upon the request of either party, the other party shall execute such additional instruments and take such additional actions as shall be necessary to effectuate this Agreement. 10.9 FORCE MAJEURE Neither party shall be liable nor deemed to be in default for any delay or failure of performance under this Agreement resulting directly or indirectly from acts of God, civil or military authority, acts of public enemy, war, accidents, fires, explosions, earthquakes, floods, failure of transportation, strikes, interruptions by either party's employees or any similar or dissimilar cause beyond the reasonable control of the party claiming the force majeure. 10.10 SEVERABILITY If any provision of this Agreement or any application thereof shall be declared or held to be invalid, illegal or unenforceable in whole or in part whether generally or in any particular jurisdiction, such provision shall be deemed to be amended to the extent necessary to cure such invalidity, illegality or unenforceability, and the validity, legality or enforceability of the remaining provisions of this Agreement, both generally and in every other jurisdiction, shall not in any way be affected or impaired thereby. 10.11 ARTICLE AND SECTION HEADINGS The articles and section headings contained in this Agreement are for reference purposes only and shall not effect in any way the meaning of interpretation of this Agreement. - 19 - 10.12 ENTIRE AGREEMENT This Agreement represents the entire agreement of the Company and Gulf with respect to the subject matter hereof, and there are no promises, agreements, undertakings, representations or warranties of the Company or Gulf relative to the subject matter hereof not expressly set forth or referred to herein. 10.13 ARBITRATION The parties hereto agree to the following: (a) Any controversy or claim arising out of or relating to this Agreement, or the breach hereof, shall be settled by arbitration in accordance with such rules as may be agreed upon by the parties hereto, or failing agreement, in accordance with the provisions of the Arbitration Act (Alberta) as such rules may be modified herein. (b) An award rendered in connection with an arbitration pursuant to this section shall be final and binding, and judgment upon such an award may be entered and enforced in any court of competent jurisdiction. (c) The forum for arbitration under this section shall be Calgary, Alberta, and the governing law for such arbitration shall be laws of Alberta. (d) Either of the parties hereto shall have the right to commence an arbitration by sending a notice to the other which shall state inter alia: (i) the amount of the controversy, if applicable, (ii) the nature of the controversy and (iii) that party's nominee, if any, for arbitrator. (e) Arbitration under this section shall be conducted by a single arbitrator selected by negotiations between an authorized attorney for each party. If after a period of 30 days from the demand for arbitration no single arbitrator is selected, then such single arbitrator shall be selected in accordance with the provisions of the Arbitration Act (Alberta). In connection with the selection of such single arbitrator, consideration shall be given to familiarity with the oil and gas business and experience in dispute resolution, as a judge or otherwise. (f) If the arbitrator cannot continue to serve, a successor shall be selected by the procedures set forth in Section 10.13(e) hereof. (g) The arbitrator shall be guided, but not bound, by the rules of evidence and by the procedural rules, including discovery provisions, of the Rules of Civil Procedure of - 20 - the Province of Alberta. Any discovery shall be limited to information directly relevant to the controversy or claim in arbitration. The arbitrator's ruling on discovery and procedural matters shall be binding on the parties. (h) The parties shall each be responsible for their own costs and expenses, except for the fees and expenses of the arbitrator, which shall be shared equally by the parties hereto. 10.14 ADDITIONAL PARTIES The parties hereto acknowledge and agree that additional Subsidiaries of the Company may come into existence and/or may become parties to a PSC at any time and from time to time, and in such event, the Company shall ensure that each Subsidiary which is the operator of or party to a PSC becomes party hereto. A Subsidiary shall become party hereto by executing a counterpart hereof, at which time such Subsidiary shall be deemed to be a party hereto without further formality. - 21 - IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly authorized representatives as of the day and year first above written. GULF CANADA RESOURCES LIMITED By: /s/ C.S. Glick ------------------------------- Name: C.S. Glick Title: Senior Vice President /s/ James Alexander ----------------------------------- Assistant Secretary Gulf INDONESIA RESOURCES LIMITED By: /s/ R. Auchinleck ------------------------------- Name: R. Auchinleck Title: President & CEO /s/ ----------------------------------- Corporate Secretary EX-99.E.4 6 h97565aexv99wew4.txt ADMINISTRATIVE SERVICES AGREEMENT EXHIBIT (e)(4) ADMINISTRATIVE SERVICES AGREEMENT THIS ADMINISTRATIVE SERVICES AGREEMENT made this 1st day of October, 1997, B E T W E E N: GULF CANADA RESOURCES LIMITED, a corporation governed by the laws of Canada (hereinafter referred to as "Gulf") OF THE FIRST PART - and - GULF INDONESIA RESOURCES LIMITED, a corporation governed by the laws of New Brunswick (hereinafter referred to as the "Company") OF THE SECOND PART - and - EACH OF THOSE SUBSIDIARIES OF THE COMPANY WHICH HAS EXECUTED THIS AGREEMENT OR HAS OTHERWISE BECOME A PARTY HERETO OF THE THIRD PART WHEREAS the Company is a wholly-owned subsidiary of Gulf; and WHEREAS each of the signatories hereto other than Gulf and the Company (collectively, the "Subsidiaries") are currently wholly-owned subsidiaries of the Company and each Subsidiary is a party hereto in its capacity as either operator and/or working interest owner of a PSC (as defined herein); and WHEREAS it is anticipated that a portion of the Shares held by Gulf will be sold to the public in the Offering; and WHEREAS the Company is primarily engaged in the oil and gas business, including the acquisition, development and exploration and production of oil and gas properties in Indonesia; and -2- WHEREAS Gulf has provided certain services to the Company in the past in connection with the business of the Company, and the Company wishes to ensure that such services, and others, as set forth herein, are available to it after the Offering, in order to maximize shareholder value and in an effort to manage its affairs in a cost effective and efficient manner, and Gulf desires to render such services to the Company, all upon the terms and conditions hereinafter set forth. NOW, THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual covenants and promises contained herein and other good and valuable consideration (the receipt and adequacy whereof is hereby acknowledged), the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 DEFINED TERMS For the purpose of this Agreement, the following terms shall have the meaning ascribed thereto below unless otherwise specified: "Administrative Services" means the services set forth in Section 4.1 "Affiliate" means, with respect to a Person, any person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, such Person, and the term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management, activities or policies of any Person or entity, whether through the ownership of voting securities, by contract, employment or otherwise but, for greater certainty, does not include any Person deriving such rights through a PSC. "Agreement" means this Administrative Services Agreement, as amended from time to time pursuant to the terms hereof. "Business" means all business activities of the Company as such Business is now conducted or, subject to Section 2.2, may hereafter be conducted in the future. "Change of Control" means the acquisition by any Person or group of Persons of beneficial ownership (as such term is defined under Section 13(d) of the Securities Exchange Act of 1934) of more than 50% of the outstanding ordinary shares of Gulf on a non-diluted basis, or all or substantially all of the assets or business of Gulf. "Company", when used herein, means the Company and each of the subsidiaries unless the context otherwise requires. -3- "Corporate Opportunity Agreement" means the corporate opportunity agreement between the Company and Gulf dated the date hereof. "Effective Date" means October 1, 1997. "Fees" has the meaning set forth in Section 4.3. "Information Services Agreement" means the information services agreement among the Company, certain of the subsidiaries of the Company and Gulf dated the date hereof. "Offering" means a public offering of Shares following which Gulf will own less than all of the Shares. "Person" includes an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a stock exchange, trustee in bankruptcy, receiver or any government, any political subdivision, any agency and any entity or person exercising executive, legislative, judicial, regulatory or administrative functions of government. "Pertamina" means Perusahaan Pertambangan Minyak dan Gas Bumi Negara, a state enterprise of the Republic of Indonesia, established on the basis of law no. 8/1971. "PSC" means a production sharing contract between the Company or any of its Subsidiaries and Pertamina, and includes any technical assistance contract, enhanced oil recovery contract and any similar contractual arrangement to which the Company or any of its Subsidiaries may be a party or which it may enter into in the normal course of Business. "Shares" means common shares in the capital of the Company and includes any shares, however called, having attributes similar to those of common shares. "subsidiary", with respect to a corporation (the "first corporation"), means a corporation that is controlled (i) by the first corporation, (ii) by the first corporation and another corporation which is itself controlled by the first corporation, (iii) by two or more corporations, each of which is controlled by the first corporation, or that is a subsidiary of such a corporation. "Technical Services Agreement" means the Technical Services Agreement dated the date hereof among Gulf, the Company and certain of its subsidiaries; "Term of Agreement" means the period from the Effective Date until this Agreement is terminated or otherwise expires pursuant to Article IX hereof. -4- 1.2 CONSTRUCTION Whenever the context requires, the gender of all words used herein shall include the masculine, feminine and neuter, and the number of all words shall include the singular and plural. 1.3 REFERENCES Unless otherwise specified, the references herein to "Sections", "Subsections" or "Articles" refer to the sections, subsections or articles in this Agreement ARTICLE II APPOINTMENT OF GULF 2.1 APPOINTMENT The Company hereby engages Gulf to render the Administrative Services to the Company, pursuant to and as set forth in this Agreement. 2.2 FUTURE ACTIVITIES The Administrative Services to be provided shall be provided with respect to the Business, which shall include all of the assets and activities of the Company, as now owned or conducted or as may be owned or conducted in the future. Notwithstanding the foregoing, in the event the Company acquires an asset or begins performing an activity outside the oil and gas business or scope of Gulf's normal course of business, the Company may request that such new assets or activity be excluded from the Business. If, in Gulf's reasonable opinion, such asset or activity is in the normal course of Gulf's and the Company's business, Gulf may submit the question of whether or not the asset or activity should be part of the Business to the Resolution Committee as contemplated by Section 3.3, the decision of which shall be final and binding. If the asset or activity is agreed or determined not to be within the oil and gas business or the normal course of Gulf's business, Gulf shall provide no Administrative Services in respect of such asset or activity. 2.3 STATUS OF PERTAMINA Gulf acknowledges that Pertamina is the manager of oil and gas assets in Indonesia, and that Pertamina has subcontracted through the PSCs the management of such assets to Affiliates of the Company and that, as a result, the actions of Gulf hereunder are subject to the same control by Pertamina as would the actions of the Company in connection with such assets. -5- ARTICLE III AUTHORITY AND RESPONSIBILITY OF GULF 3.1 GENERAL Gulf shall have the authority and the responsibility to render the services in connection with the Business herein described. Gulf agrees to render services hereunder in a timely and prudent manner, consistent with generally accepted standards for a business similar to the Business. Gulf shall have no obligation to advance funds to any third party (other than any employee of Gulf) for the account of the Company or to pay any sums of its own to any third party (other than any employee of Gulf) in connection with the performance of the actions which it is authorized to take hereunder. Gulf's activities under this Agreement shall be specifically subject to the terms hereof and the general control, direction and supervision of the Company. 3.2 COMPLIANCE WITH LAWS Gulf shall use all reasonable efforts to insure full compliance by itself and its agents with all laws, ordinances, regulations and orders relative to the use, operation, development and maintenance of the Business and of each country which may have jurisdiction over the Company, the Business or any of the assets of the Company. Gulf shall, on the Company's behalf and for the Company's account, use reasonable efforts to remedy any violation of any such law, ordinance, rule, regulation or order which comes to its attention. If the violation is one for which the Company might be subject to penalty, Gulf shall promptly notify the Company of such violation to allow actions to be made to remedy the violation, and Gulf shall transmit promptly to the Company a copy of any citation or other communication received by Gulf setting forth any such violation. 3.3 RESOLUTION COMMITTEE Either the Company or Gulf under Section 2.2 may request the formation of a committee ("Resolution Committee") to determine any of the matters provided for in such section. The Resolution Committee shall have three members, one person selected by Gulf, one member of the Company's Board of Directors selected by the Company (which member may be an officer or employee of the Company but shall not be an officer, director or employee of Gulf) and one member of the Company's Audit Committee selected by such Audit Committee. Each of Gulf and the Company agree to select the members of the Committee to be selected by them within ten (10) business days of the request to form the Resolution Committee, and shall advise the other party of their respective selections. Any determination made by the Resolution Committee shall be made by a majority of the members thereof and shall be given to the Company in writing. The Company and Gulf shall provide the members of the Resolution Committee with such information relating to the subject matter before them as they may reasonably request. -6- 3.4 COMPLIANCE WITH OBLIGATIONS Gulf, to the extent such matters are reasonably within its control, shall use all reasonable efforts to cause compliance with all terms and conditions contained in any contract, agreement, judicial, administrative or governmental order, lease, license agreement or other contractual or security instrument affecting the Company. Gulf shall promptly notify the Company of any violation of any provision or such contracts, agreements or orders. ARTICLE IV PROVISION OF SERVICES 4.1 PROVISION OF ADMINISTRATIVE SERVICES Gulf shall provide administrative services ("Administrative Services") to the Company, subject to the general approval and direction of the Company. Administrative Services shall mean the following: (a) financial and management consulting services pertaining to (i) accounting and maintenance of records, (ii) to the extent permitted by law, preparing and assisting with obtaining and maintaining applicable governmental approvals as and when necessary under applicable law, and (iii) complying with other applicable laws and regulations of the Republic of Indonesia or any political subdivision thereof; (b) any or all of the administrative services as may be required for the reasonable conduct of the Business, including, without limitation, human resources, audit, accounting, tax, land, communications, investor relations, insurance, payroll, legal and financial services, public company reporting obligations and stock exchange requirements; (c) performing and/or managing evaluation services as may be reasonably required in connection with prospective acquisitions of properties and assets by the Company, including, without limitation, acquisition screening and due diligence; (d) assisting the Company with the selection and supervision of such accountants, attorneys, banks, transfer agents, custodians, underwriters, insurance companies and other persons as may from time to time be requested by the Company or may reasonably be necessary to render services hereunder; (e) at the request of the Company, analyzing reports, economic data and other information relating to the Business and periodically reporting to the executive officers or the Board of Directors of the Company all such information obtained and analyzed, including making recommendations with respect thereto; -7- (f) maintenance activities, including overseeing and managing the interests of the Company in the various partnerships, joint ventures, companies and other entities in which the Company has an interest, and reporting to the executive officers of the Company any significant fact or matter which relates to such interests; (g) providing the Company, at its request, with relevant information for assessing the value of, or making decisions with respect to the acquisition, funding, management or disposition of, existing or future assets or investments of the Company; and (h) all other services and assistance as may be requested by the Company and agreed to be provided by Gulf from time to time which are necessary or desirable for the operation of the Business, including any other services performed by Gulf which are not directly billable under the Technical Services Agreement to a PSC. Subject to Indonesian law, regulation, custom, practice and requirements and Section 4.3, the Company shall obtain from Gulf on an exclusive basis all Administrative Services other than those which it is permitted to provide itself hereunder. The Company shall not provide any Administrative Services itself without the prior consent of Gulf, except for such Administrative Services which are required to be performed by the Company or such other designated party in accordance with Indonesian and other applicable law, regulation, custom, practice and requirements. Notwithstanding the foregoing, to the extent any Administrative Services have been performed by the Company during the 12 months preceding the Effective Date, the Company may continue to perform such Administrative Services to the extent and degree consistent with past practice. In the event that the Company requests other Administrative Services from Gulf, the Company shall specify in reasonable detail the service or work Gulf is to supply, the date or dates on which the Company desires such service to be supplied or such work to be completed and such other information as the Company deems relevant. Gulf may request clarification as to any matter contained in such request, provided that Gulf does so in a prompt and timely manner. Gulf and the Company shall consult with respect to any employees of Gulf which Gulf proposes to assign or second to the Company. 4.2 CONSULTANTS The Company acknowledges that Gulf may use third party consultants to perform certain of the activities outlined in this Agreement. If Gulf wishes to use third party consultants, Gulf shall obtain the consent of the Company thereto, which shall not be unreasonably withheld. 4.3 FEES Fees in connection with services provided pursuant hereto ("Fees") shall be billed by Gulf monthly, with an invoice representing all actual and allocated costs for the previous month to be delivered to the Company no later than the 20th day of each month. The Company shall pay invoices within 30 days from the receipt thereof. -8- The Fees of Gulf for the provision of services hereunder shall be determined by a detailed study and the method so determined shall be applied consistently from period to period. The method selected shall be approved by Gulf and the Company and shall be reviewed not less than every two years. The parties hereto intend that the Fees of Gulf for the provision of services hereunder shall be limited to the actual and total costs, direct and indirect (including, but not limited to, overhead and administrative costs, out-of-pocket expenses of Gulf and its employees, agents and consultants incurred in connection with the provision of services hereunder, a portion of the cost to Gulf, allocated reasonably, of providing senior executive officers to act as senior executive officers of the Company, amounts paid by Gulf to third parties calculated by reference to the Fees, Indonesian levies and taxes, and the salaries, benefits and expenses of any employee of Gulf or any of its Affiliates seconded to the Company in connection with this Agreement, regardless of where such person may be located) to Gulf of providing such services, provided that such Fees shall not exceed those which the Company would pay to an arm's length third party for services of comparable quality and quantity; and provided further, the aggregate Fees under this Agreement with respect to any given year may not exceed 2% of the Company's total operating and capital expenditures for such year. No amount shall be charged to the Company as Fees hereunder if such amount is properly payable pursuant to the Information Services Agreement or the Technical Services Agreement. 4.4 COST RECOVERY Gulf shall use all reasonable efforts to ensure that all services provided hereunder in respect of which the Company or any of its Subsidiaries are or could be entitled to cost recovery from any third party shall be provided for in such a manner as to ensure that such cost recovery is available. In particular and without limitation, Gulf shall ensure that all Fees which may be charged as "home office overhead", and all other amounts in respect of which the Company or any of its Subsidiaries may be entitled to cost recovery are invoiced in such a manner as to be readily identifiable as such. In the event that cost recovery is not available in respect of particular Fees paid by the Company hereunder principally as a result of an assignment by Gulf pursuant to section 10.5 hereof, Gulf shall reimburse those particular Fees to the Company. 4.5 AUDIT REPORT The Company shall have the right at any time to cause its independent auditors to prepare a report to it confirming that the computation of the Fee by Gulf was accurate, and Gulf shall provide all reasonable cooperation and access to such auditors in the preparation of such report. At the request of the Company, Gulf shall also provide all reasonable cooperation and access to Pertamina or any government official in the event that Pertamina or such government official shall request or undertake an audit of any Fees paid by the Company to Gulf hereunder. In the event that such audit determines that the Fees were not properly calculated, the party against which such determination is made shall have the right to cause another independent audit to be prepared. In the event of disagreement between any two such audits, the matter shall be determined pursuant to arbitration in -9- accordance with the provisions hereof. Upon any ultimate determination, Gulf or the Company, as the case may be, shall refund or pay any Fees improperly paid, or not charged, by Gulf. ARTICLE V FINANCIAL ADMINISTRATION 5.1 BUDGETS Gulf will provide the Company with all data necessary to prepare its operating budgets in a timely manner and in any event no later than six months prior to the beginning of a fiscal year of the Company. Prior to the end of each fiscal year of the Company during the Term of Agreement, the Company shall, to the extent possible, prepare and submit to Gulf, a budget (a "Budget") for Administrative Services for the ensuing year. Gulf shall employ reasonable efforts to ensure that the actual costs of providing Administrative Services shall not exceed the approved Budget either in total or in any one accounting category, in connection with any matters set forth in such Budget. ARTICLE VI INDEMNITIES 6.1 INDEMNIFICATION BY GULF Gulf shall protect, indemnify, defend and hold harmless the Company and its officers, directors, employees, agents, other representatives and Subsidiaries from any and all threatened or actual claims, demands, causes of action, suits, proceedings (formal or informal), losses, damages, fines, penalties, liabilities, costs and expenses of any nature, including attorneys' fees and court costs, sustained or incurred by or asserted against the Company or its controlled Affiliates by any Person by reason of or arising out of: (i) any breach or alleged breach of this Agreement by Gulf, its Affiliates (other than the Company or its Subsidiaries), agents, or employees; or (ii) any act or alleged act of fraud, willful misconduct or gross negligence of Gulf and its Affiliates (other than the Company or its Subsidiaries) or any of its respective employees, officers, directors or agents or (iii) acts outside, or omissions in, the scope of Gulf's authorized duties and responsibilities contained herein. In case any action or proceeding shall be brought against the Company or any of its controlled Affiliates in respect of which the indemnification contemplated by this Section 6.1 may be sought against Gulf, Gulf, upon the receipt of notice from the Company, shall defend such action or proceeding by counsel reasonably satisfactory to the Company and Gulf, and Gulf shall pay for all expenses therefor unless such action or proceeding is resisted and defended by counsel for any carrier of public liability insurance that benefits the Company or Gulf. The Company shall promptly give written notice to Gulf when a claim is made against the Company for which indemnity is owed to the Company by Gulf pursuant to this Section 6.1. Gulf shall participate at its own expense in defense of such claims, but the Company shall have the right to employ its own separate counsel. - 10 - The Company shall assist Gulf in the defense of any claim for which Gulf owes indemnification hereunder and is undertaking to provide a defense, by making available to Gulf such records and personnel as may be reasonably requested in the defense of such claim. 6.2 INDEMNIFICATION BY THE COMPANY The Company hereby agrees to indemnify, defend, and hold harmless Gulf and its officers, directors, employees, agents, other representatives, shareholders, employees, agents and Subsidiaries (other than the Company) from any and all threatened or actual claims, demands, causes of action, suits, proceedings (formal or informal), losses, damages, fines, penalties, liabilities, costs and expenses of any nature, including attorneys' fees and court costs, sustained or incurred by or asserted against Gulf or its Affiliates, officers, directors, employees and agents by any Person by reason of or arising out of the conduct of the Company, other than the provision of services by Gulf or any of its Affiliates pursuant to this Agreement, except to the extent Gulf indemnifies the Company under the foregoing Section 6.1. In case any action or proceeding shall be brought against Gulf in respect to which the indemnity contemplated by this Section 6.2 may be sought against the Company, Gulf shall give notice of such action to the Company, and the Company shall defend such action or proceeding by counsel reasonably satisfactory to the Company and Gulf, and the Company shall pay for all expenses therefor unless such action or proceeding is resisted and defended by counsel for any carrier of public liability insurance that benefits the Company or Gulf. Gulf shall promptly give written notice to the Company when a claim is made against Gulf for which indemnity is owed to Gulf by the Company pursuant to this Section 6.2. The Company shall participate in defense of such claims, but Gulf shall have the right to employ its own separate counsel, and Gulf shall assist the Company in the defense of any claim for which the Company owes indemnification hereunder and is undertaking to provide a defense, by making available to the Company such records and personnel of Gulf as may be reasonably requested in the defense of such claim. 6.3 NON-ASSUMPTION OF LIABILITIES Gulf shall not, by entering into this Agreement, assume or become liable for any of the obligations, debts or other liabilities of the Company in existence or arising on or after the date hereof. Other than with respect to any damages caused by the fraud, willful misconduct or gross negligence of Gulf in rendering services hereunder, and except as provided in Section 6.1, Gulf shall not, by providing services to the Company, assume or become liable for any of the obligations, debts or other liabilities of the Company. - 11 - ARTICLE VII ACCESS TO INFORMATION, BOOKS AND RECORDS; CONFIDENTIALITY; POWER OF ATTORNEY 7.1 ACCESS TO BOOKS AND RECORDS Gulf and its duly authorized representatives shall have complete access to the Company's offices, facilities and records wherever located, in order to discharge Gulf's responsibilities hereunder. All records and materials furnished to Gulf by the Company in performance of this Agreement shall at all times during the Term of Agreement remain the property of the Company. The Company and its duly authorized representatives shall have complete access to records and other information concerning the Company used by Gulf in performance of its duties hereunder. 7.2 CONFIDENTIALITY For the Term of Agreement and for at least two years after the Term of Agreement, Gulf agrees to keep confidential all non-public information concerning the Company acquired by Gulf or its Affiliates during the Term of Agreement. For the purpose of this Section 7.2, confidential information shall not include any information available to or otherwise disclosed by the Company to third parties generally without any obligation of confidentiality. Nothing in this Section 7.2 shall prohibit any announcement or disclosure by a Party that such Party determines upon the written advice of counsel is required to be disclosed by applicable law or court order or is necessary to be disclosed in connection with litigation, provided that in any such event the Party proposing to make disclosure shall use reasonable efforts to advise the other Party as far in advance of such disclosure as possible and shall consult with the other Party on the means of complying with such obligation, and shall assist such Party in any attempt it may make to seek confidential treatment of such information. ARTICLE VIII REPRESENTATIONS AND WARRANTIES 8.1 REPRESENTATIONS AND WARRANTIES OF GULF Gulf represents and warrants to the Company as follows: (a) Gulf has the full power and authority to conduct its business and perform its obligations and consummate the transactions contemplated hereunder. (b) This Agreement has been duly authorized, executed and delivered by Gulf. (c) This Agreement is a valid and legally binding obligation of Gulf enforceable against Gulf in accordance with its terms, and the Company is entitled to the benefits thereof. - 12 - (d) Gulf is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority, or in the payment of any indebtedness for borrowed money or under the terms or provisions of any agreement or instrument evidencing or securing any such indebtedness. (e) No representation or warranty of Gulf contained in this Agreement and no statement of Gulf contained in any certificate, schedule, list, financial statement or other instrument furnished to the Company pursuant to this Agreement contains, or will contain, any untrue statement of material facts, or omits, or will omit, to state a material fact necessary to make the statements contained herein or therein not misleading. (f) There are no actions, suits, proceedings or governmental investigations or inquiries pending or threatened against Gulf or investigations or inquiries pending or threatened against Gulf or to which Gulf is a party or to which any property of Gulf is subject, which, if determined adversely to Gulf, would materially affect the operations or financial position of Gulf or its ability to perform its obligations hereunder. (g) Gulf is validly existing and in good standing under the laws of Canada and Gulf possesses all licenses, consents, approvals, authorizations and qualifications the absence of which would, individually or in the aggregate, materially adversely affect the business or properties of Gulf. (h) Neither the execution and delivery of this Agreement, nor the performance or compliance with the terms and conditions hereof, conflict with, or will result in a breach by Gulf of, or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any asset of Gulf pursuant to any of the terms, conditions or provisions of(i) the Articles of Incorporation or Bylaws of Gulf, (ii) any mortgage, deed of trust, lease, contract, agreement or other instrument to which Gulf is a party or by which Gulf may be bound or affected, or (iii) any writ, order, judgment, decree, statute, ordinance, regulation or any other restriction of any kind or character, to which Gulf is subject, or by which Gulf may be bound or affected. All representations and warranties made by Gulf in this Agreement shall survive for a period of two years from the date of this Agreement. 8.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Gulf as follows: (a) The Company has full power and authority to conduct its business and perform all its obligations and consummate the transactions contemplated hereunder. (b) This Agreement has been duly authorized, executed and delivered by the Company. - 13 - (c) This Agreement is valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, and Gulf is entitled to the benefits thereof. (d) The Company is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority, or in the payment of any indebtedness for borrowed money or under the terms or provisions of any agreement or instrument evidencing or securing any such indebtedness, except for those which the Company has to date disclosed to Gulf in writing. (e) No representation or warranty of the Company contained in this Agreement or other instrument furnished by the Company to Gulf pursuant to this Agreement contains, or will contain, any untrue statement of material fact, or omits, or will omit, to state a material fact necessary to make the statements contained herein or therein not misleading. (f) There are no actions, suits, proceedings or governmental investigations or inquiries pending or threatened against the Company or to which the Company is a party or to which any property of the Company is subject, which if determined adversely to the Company, would materially affect the operations or financial position of the Company, except for those which the Company has to date disclosed to Gulf in writing. (g) The Company is duly incorporated and validly existing and in good standing under the laws of New Brunswick and the Company possesses all licenses, consents, approvals, authorizations and qualifications (including qualifications to do business as a foreign corporation) the absence of which would individually or in the aggregate, materially adversely affect the business or properties of the Company. (h) Neither the execution and delivery of this Agreement, nor the performance or compliance with the terms and conditions hereof, conflict with, or will result in a breach by the Company of, or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any asset of the Company pursuant to any of the terms, conditions or provisions of (i) the Articles of Incorporation or Bylaws of the Company, (ii) any mortgage, deed of trust, lease, contract, agreement or other instrument to which the Company is a party or by which the Company is subject, or by which the Company may be bound or affected. All representations and warranties made by the Company in this Agreement shall survive for a period of two years from the date of this Agreement. - 14 - ARTICLE IX TERM AND TERMINATION OF AGREEMENT 9.1 INITIAL TERM The initial term of this Agreement shall be for a 10 (ten) year period beginning on the Effective Date ("Initial Term"). Thereafter, this Agreement shall automatically renew for successive five-year periods ("Renewal Terms") until terminated by either party in accordance with the provisions of this Article IX. 9.2 TERMINATION This Agreement shall be terminated on the first to occur of the following: (a) In the event the parties shall mutually agree in writing, this Agreement may be terminated on the terms and dates stipulated in such writing. (b) Subject to Section 9.3, prior to the expiration of the Initial Term, if Gulf ceases to hold more than a majority of the Shares of the Company (calculated on a non-diluted basis) or ceases to hold shares of the Company entitled to a majority of the votes entitled to be cast under ordinary circumstances in the election of directors, the Company may, with or without cause, terminate this Agreement on the first day of any month thereafter by providing written advance notice to Gulf, and Gulf may terminate this Agreement on the first day of any month by giving the Company at least 12 months' advance written notice of such termination. (c) Subject to Section 9.3, Gulf or the Company may, with or without cause, terminate this Agreement on the expiration of the Initial Term or any Renewal Term by giving the other party at least 12 months' advance written notice of its intent to terminate, whereupon this Agreement shall terminate on the expiry of the Initial Term or the Renewal Term, as the case may be. (d) Subject to events of force majeure (as provided in Section 10.9 hereof), in the event either party shall fail to discharge any of its material obligations hereunder or under the Corporate Opportunity Agreement, the Information Services Agreement or the Technical Services Agreement (collectively, the "Other Agreements"), including, without limitation, the obligation to render services in connection with the Business in a timely and prudent manner, or shall commit a material breach of this Agreement or any of the Other Agreements and such failure, default or breach shall continue for a period of thirty (30) days after the other party has served written notice of such default, this Agreement and any or all of the Other Agreements may then be terminated at the option of the non-breaching party by written notice thereof to the breaching party specifying a proposed date of termination no more than 12 months nor less than 30 days after the date of such notice, in which case this Agreement shall terminate on the date specified in such notice, it being understood that such termination right is in addition to any other remedies that may be available to the aggrieved party. - 15 - (e) Upon the dissolution or termination of the corporate existence of Gulf or cessation on Gulf's part to continue to conduct the E&P Business (as defined in the Corporate Opportunity Agreement). (f) The Company shall have the right to terminate this Agreement if there is instituted by or against Gulf any proceeding under any applicable bankruptcy law, or under any other law for the relief of debtors now or hereafter existing, or a receiver is appointed for all or substantially all of the assets of Gulf and such proceeding is not dismissed or such receiver is not discharged, as the case may be, within thirty (30) days thereafter. (g) The Company shall have the right to terminate this Agreement if Gulf shall (i) become insolvent, (ii) generally fail to, or admit in writing its inability to, pay debts as they become due, (iii) make a general assignment for the benefit of creditors, (iv) apply for, consent to or acquiesce in the appointment of a trustee, receiver or other custodian. (h) The Company shall have the right to terminate this Agreement if a substantial portion of the assets or properties of Gulf shall be seized or taken by order of a governmental agency or body, or any other writ shall be issued against Gulf or any of its assets, or if any other lawful creditor's remedy shall be asserted or exercised with respect thereof, provided that in any such case Gulf has not contested such action in good faith within 30 days' thereof. (i) The Company and Gulf shall have the right to terminate this Agreement during the 12 months following the occurrence of a Change of Control. (j) In the event that the Company shall have elected to take the actions specified in section 4 of the Corporate Opportunity Agreement. Unless otherwise provided in this section 9.2, the Company may exercise its right to terminate this Agreement under paragraphs (f) through (i) of this Section 9.2 by giving Gulf written notice specifying a proposed date of termination no more than 12 months nor less than thirty (30) days after the date of such notice, in which case this Agreement shall terminate on the date specified in such notice. Gulf may exercise the rights of termination provided to it hereunder by giving the Company written notice specifying a proposed date of termination not less than 12 months after the date of such notice, in which case this Agreement shall terminate on the date specified in such notice. 9.3 EFFECTS OF TERMINATION The termination of this Agreement in accordance with the provisions of this Article IX shall have the following effects: (a) Except for the mutual indemnities set forth in Article VI and the covenants and the other provisions herein that by their terms expressly extend beyond the Term of Agreement, the Parties' obligations hereunder are limited to the Term of Agreement. - 16 - (b) In the event this Agreement is terminated for any reason, Gulf shall immediately deliver possession to the Company of all assets, books and records of the Company in Gulf's possession and shall provide the Company with copies of all assets, books and records (including electronic copies in the format requested by the Company and reasonably within Gulf's capability) relating to the Business that are in Gulf's possession, at the cost of the Company. (c) Upon termination of this Agreement (for whatever cause, other than a material breach by Gulf of this Agreement or any of the Other Agreements), the Company shall pay to Gulf the amount of any and all costs and expenses accrued to the date of such termination which are payable by the Company to Gulf in accordance with the provisions hereof. (d) In addition to any other requirement in this Article IX, if the Company terminates this Agreement pursuant to (i) Section 9.2(a) or 9.2(b), then the Company shall pay to Gulf a fee equal to twelve months' Fees under this Agreement, and (ii) Section 9.2(c), then the Company shall pay to Gulf a Fee equal to eight months' Fees under this Agreement. In the case of clauses (i) and (ii) above, such termination fee shall be calculated based on the avenge of the total fees paid for the three years immediately preceding the date this Agreement terminates (or such shorter period as this Agreement has been in effect) and shall be payable on the termination date. ARTICLE X MISCELLANEOUS 10.1 RELATIONSHIP OF PARTIES This Agreement does not create a partnership, joint venture or association or agency relationship; nor does this Agreement, or the operations hereunder, create the relationship of lessor and lessee or bailor and bailee. Nothing contained in this Agreement or in any agreement made pursuant hereto shall ever be construed to create a partnership, joint venture or association, or the relationship of lessor and lessee or bailor and bailee, or to impose any duty, obligation or liability that would arise therefrom with respect to either or both of the Parties except as otherwise expressly provided in this Agreement or any agreement made pursuant hereto. Specifically, but not by way of limitation, except as otherwise expressly provided for herein, nothing contained herein shall be construed as imposing any responsibility on Gulf for the debts or obligation of the Company or any of its Subsidiaries. Subject to the terms of this Agreement, Gulf and its Affiliates shall have the right to render similar services for other business entities and persons, including its own, whether or not engaged in the same business as the Company. - 17 - 10.2 NO THIRD PARTY BENEFICIARIES Except to the extent a third party is expressly given rights herein, any agreement to pay an amount and any assumption of liability herein contained, expressed or implied, shall be only for the benefit of the parties and their respective legal representatives, successors and assigns, and such agreement or assumption shall not inure to the benefit of the holders of any indebtedness or any party whomsoever, it being the intention of the parties hereto that no person or entity shall be deemed a third party beneficiary of this Agreement except to the extent a third party is expressly given rights herein. 10.3 NOTICES Any notice, demand, or communication required, permitted, or desired to be given hereunder shall be deemed effectively given when personally delivered or mailed by prepaid certified mail, return receipt requested, addressed as follows: (i) if to the Company to: Gulf Indonesia Resources Limited 21st Floor, Wisma 46, Kota BNI JI. Jend. Sudirman, Kav 1 Jakarta, Indonesia Attn: Chief Operating Officer (ii) if to Gulf, to: Gulf Canada Resources Limited One Norwest Center 1700 Lincoln, Suite 5000 Denver CO 80203-4524 Attn: President or to such other address and to the attention of such other person or officer as either Party may designate by written notice pursuant to this Section 10.3. 10.4 GOVERNING LAW This agreement has been executed and delivered in and shall be interpreted, construed and enforced pursuant to and in accordance with the laws of Alberta. - 18 - 10.5 ASSIGNMENT No assignment of this Agreement or any of the rights or obligations set forth herein by either party shall be valid without the specific written consent of the other party, provided that Gulf and any permitted assignees of Gulf shall have the right to assign this agreement to an Affiliate of Gulf without the consent of the Company, provided that (i) such Affiliate is controlled by Gulf, (ii) the ability of the Company to obtain cost recovery under a relevant PSC is not thereby lost, and (iii) Gulf shall remain liable for such assignee's obligations under this Agreement. 10.6 WAIVER OF BREACH The waiver by either party of a breach or violation of any provision of this Agreement shall not operate as, or be construed to be, a waiver of any subsequent breach of the same or any other provisions hereof. 10.7 ENFORCEMENT In the event either party shall resort to legal action to enforce the terms and provisions of this Agreement, the prevailing party may recover from the other party the costs of such action including, without limitation, reasonable attorneys' fees. 10.8 ADDITIONAL ASSURANCES Upon the request of either party, the other party shall execute such additional instruments and take such additional actions as shall be necessary to effectuate this Agreement. 10.9 FORCE MAJEURE Neither party shall be liable nor deemed to be in default for any delay or failure of performance under this Agreement resulting directly or indirectly from acts of God, civil or military authority, acts of public enemy, war, accidents, fires, explosions, earthquakes, floods, failure of transportation, strikes, interruptions by either party's employees or any similar or dissimilar cause beyond the reasonable control of the party claiming the force majeure. 10.10 SEVERABILITY If any provision of this Agreement or any application thereof shall be declared or held to be invalid, illegal or unenforceable in whole or in part whether generally or in any particular jurisdiction, such provision shall be deemed to be amended to the extent necessary to cure such invalidity, illegality or unenforceability, and the validity, legality or enforceability of the remaining provisions of this Agreement, both generally and in every other jurisdiction, shall not in any way be affected or impaired thereby. - 19 - 10.11 ARTICLE AND SECTION HEADINGS The articles and section headings contained in this Agreement are for reference purposes only and shall not effect in any way the meaning of interpretation of this Agreement. 10.12 ENTIRE AGREEMENT This Agreement represents the entire agreement of the Company and Gulf with respect to the subject matter hereof, and there are no promises, agreements, undertakings, representations or warranties of the Company or Gulf relative to the subject matter hereof not expressly set forth or referred to herein. 10.13 ARBITRATION The parties hereto agree to the following: (a) Any controversy or claim arising out of or relating to this Agreement, or the breach hereof, shall be settled by arbitration in accordance with such rules as may be agreed upon by the parties hereto, or failing agreement, in accordance with the provisions of the Arbitration Act (Alberta) as such rules may be modified herein. (b) An award rendered in connection with an arbitration pursuant to this section shall be final and binding, and judgment upon such an award may be entered and enforced in any court of competent jurisdiction. (c) The forum for arbitration under this section shall be Calgary, Alberta, and the governing law for such arbitration shall be laws of Alberta. (d) Either of the parties hereto shall have the right to commence an arbitration by sending a notice to the other which shall state inter alia: (i) the amount of the controversy, if applicable, (ii) the nature of the controversy and (iii) that party's nominee, if any, for arbitrator. (e) Arbitration under this section shall be conducted by a single arbitrator selected by negotiations between an authorized attorney for each party. If after a period of 30 days from the demand for arbitration no single arbitrator is selected, then such single arbitrator shall be selected in accordance with the provisions of the Arbitration Act (Alberta). In connection with the selection of such single arbitrator, consideration shall be given to familiarity with the oil and gas business and experience in dispute resolution, as a judge or otherwise. (f) If the arbitrator cannot continue to serve, a successor shall be selected by the procedures set forth in Section 10.13(e) hereof. - 20 - (g) The arbitrator shall be guided, but not bound, by the rules of evidence and by the procedural rules, including discovery provisions, of the Rules of Civil Procedure of the Province of Alberta. Any discovery shall be limited to information directly relevant to the controversy or claim in arbitration. The arbitrator's ruling on discovery and procedural matters shall be binding on the parties. (h) The parties shall each be responsible for their own costs and expenses, except for the fees and expenses of the arbitrator, which shall be shared equally by the parties hereto. 10.14 ADDITIONAL PARTIES The parties hereto acknowledge and agree that additional Subsidiaries of the Company may come into existence and/or may become parties to a PSC at any time and from time to time, and in such event, the Company shall ensure that each Subsidiary which is the operator or party to a PSC becomes party hereto. A Subsidiary shall become party hereto by executing a counterpart hereof, at which time such Subsidiary shall be deemed to be a party hereto without further formality. -21 - IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly authorized representatives as of the day and year first above written. GULF CANADA RESOURCES LIMITED By: /s/ ---------------------------------- Name: Title: Senior Vice President /s/ JOANNE ALEXANDER ASSISTANT SECRETARY GULF INDONESIA RESOURCES LIMITED By: /s/ R. AUCHINLECK ---------------------------------- Name: R. Auchinleck Title: President & CEO /s/ CORPORATE SECRETARY EX-99.E.5 7 h97565aexv99wew5.txt ADMINISTRATIVE AND INFORMATION SERVICES AGREEMENT EXHIBIT (e)(5) [Execution Copy] ADMINISTRATIVE & INFORMATION SERVICES AGREEMENT between GULF INDONESIA RESOURCES LIMITED AND CONOCO INC. THIS ADMINISTRATIVE & INFORMATION SERVICES AGREEMENT (this "Agreement") is made and entered into this 5th day of March 2002 (the "Effective Date") By and between: 1) GULF INDONESIA RESOURCES LIMITED, a corporation continued and existing under the laws of New Brunswick, Canada and having its registered office at Wisma 46-Kota BNI JL. Jenderal Sudirman Kav. 1, Jakarta, 10220 Indonesia ("Gulf"); and 2) CONOCO INC., a corporation organized and existing under the laws of Delaware U.S.A. and having its office at 600 North Dairy Ashford Rd. Houston Texas, 77079 ("Conoco"); Gulf and Conoco are referred to either individually as "Party" or collectively as "Parties" and shall include their respective successors. Either Gulf or Conoco may, as directed by the circumstances, be either a Party who requests services (a "Requesting Party") or a Party who provides services (a "Providing Party") pursuant to the terms of this Agreement. WHEREAS: A) Gulf and Conoco are both primarily engaged in the oil and gas business, including the acquisition, development, exploration and production of oil and gas properties; and B) Seventy-two percent (72%) of the shares of Gulf are indirectly owned or controlled by Conoco Inc.; and C) In order to maximize shareholder value and in an effort to better manage the affairs of each Party in a more cost effective and efficient manner the Parties wish to co-operate as to certain Administrative Services or Information Services as contemplated herein, provided that said co-operation is not in conflict with other existing arrangements that either Gulf or Conoco or any of their Subsidiaries (as defined below) may as of the Effective Date have with third parties. NOW THEREFORE, the Parties hereby agree as follows: 1. PURPOSE This Agreement shall provide a framework under which Gulf and Conoco and their respective Subsidiaries shall co-operate with each other concerning the Administrative Services or Information Services contemplated herein for the mutual benefit of the Parties. For purposes of this Agreement, "Subsidiary", with respect to a corporation (the "first corporation"), means a corporation that is controlled (i) by the first corporation, (ii) by the first corporation and another corporation which is itself controlled by the first corporation, (iii) by two or more corporations, each of which is controlled by the first corporation, or that is a subsidiary of such a corporation. Gulf and Conoco shall each appoint a representative who will act as the main point of communication between each of them and their respective Subsidiaries in order to facilitate the activities related to this Agreement and the provision of Administrative Services or Information Services contemplated herein. 1 Each Party acknowledges that Perusahaan Pertambangan Minyak dan Gas Bumi Negara ("PERTAMINA") is currently the manager of oil and gas assets in Indonesia, and that PERTAMINA has subcontracted through production sharing contracts the management of such assets to Subsidiaries of Gulf and to Subsidiaries of Conoco and that, as a result, the actions of Gulf and Conoco (or their respective Subsidiaries or other Affiliates) hereunder are subject to the same control by PERTAMINA as would the actions of Gulf or Conoco in connection with such assets. For purposes of this Agreement, (i) "PSC" means a production sharing contract between either Gulf or Conoco, as the case may be, or any of its Subsidiaries and PERTAMINA, and includes any technical assistance contract, enhanced oil recovery contract, and any similar contractual arrangement to which Gulf, Conoco or any of its Subsidiaries may be a party or which it may enter into in the normal course of its business; and (ii) "Affiliate" means, with respect to a person, any person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, such person, and the term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management, activities or policies of any person or entity, whether through the ownership of voting securities, by contract, employment or otherwise but, for greater certainty, does not include any person deriving such rights through a PSC. 2. AUTHORITY & RESPONSIBILITY OF THE PROVIDING PARTY 2.1 The Providing Party shall have the responsibility to render the Administrative Services or Information Services as contemplated herein in support of the business of the Requesting Party (and its Subsidiaries) as set forth herein. The Providing Party agrees to endeavor to ensure timely delivery of deliverables in respect of any activities to be carried out hereunder. The Providing Party shall perform all activities contemplated hereunder in a prudent manner consistent with generally accepted standards for the oil and gas business. The Providing Party's activities under this Agreement shall be specifically subject to the terms hereof and the general control, direction and supervision of the Requesting Party. 2.2 Both Parties shall use all reasonable efforts to ensure full compliance by itself and its agents with all applicable laws, ordinances, regulations and orders relative to the provision of the Administrative Services or Information Services contemplated herein in each country which may have jurisdiction over the provision of such Administrative Services or Information Services. 3. PROVISION OF ADMINISTRATIVE SERVICES 3.1 At the request of the Requesting Party from time to time, the Providing Party shall provide Administrative Services to the Requesting Party (or one of its Subsidiaries), subject to the general direction and supervision of the Requesting Party. For purposes of this Agreement, "Administrative Services" shall mean the following: (a) financial and management consulting services pertaining (i) to accounting and maintenance of records, (ii) to the extent permitted by applicable law, preparing and assisting with obtaining and maintaining governmental approvals as and when necessary 2 under applicable law, and (iii) complying with other applicable laws and regulations of the Republic of Indonesia or any political subdivision thereof; (b) any or all of the administrative services as may be required for the reasonable conduct of the business of the Requesting Party (and its Subsidiaries except that for purposes of this Agreement with respect to Conoco as a Requesting Party the Subsidiaries of Conoco shall not include Conoco Indonesia or its subsidiaries), including, without limitation, human resources, audit, accounting, tax, land, communications, investor relations, insurance, payroll, legal and financial services, public company reporting obligations and stock exchange requirements; (c) performing and/or managing evaluation services as may be reasonably required in connection with prospective acquisitions of properties and assets by the Requesting Party, including, without limitation, acquisition screening and due diligence; (d) assisting the Requesting Party with the selection and supervision of the such accountants, attorneys, banks, financial advisors, transfer agents, custodians, underwriters, insurance companies and other persons as may from time to time be requested by the Requesting Party or may reasonably be necessary to render services hereunder; (e) at the request of the Requesting Party, analyzing reports, economic data and other information relating to the business of the Requesting Party and its Subsidiaries and periodically reporting to the executive officers or the Board of Directors of the Requesting Party all such information obtained and analyzed, including making recommendation with respect thereto; (f) maintenance activities, including overseeing and managing the interests of the Requesting Party in the various partnerships, joint ventures, companies and other entities in which the Requesting Party has an interest, and reporting to the executive officers of the Requesting Party any significant fact or matter which relates to such interests; (g) providing Conoco, at its request, with relevant information for assessing the value of, or making decisions with respect to the acquisition, funding, management or disposition of, existing or future assets or investments of Gulf; and (h) all other services and assistance as may be requested by the Requesting Party and agreed to be provided by the Providing Party from time to time which are necessary or desirable for the operation of the business of the Requesting Party and its Subsidiaries, including any other services performed by Gulf which are not directly billable under this Agreement or the Technical Services Agreement to a PSC, 3.2 The Parties shall consult with respect to any employees of the Providing Party (or its other Affiliates) for Administrative Services which the Providing Party proposes to assign or second to the Requesting Party. 3.3 Subject to Indonesian law, regulation, custom, practice and requirements, Gulf shall obtain from Conoco (or its other Affiliates) on a non-exclusive basis all Administrative Services other than those which it is permitted to provide itself hereunder. Gulf shall not provide any Administrative Services itself without the prior consent of Conoco, except for such Administrative Services which are required to be performed by Gulf or such other 3 designated party in accordance with Indonesian and other applicable law, regulation, custom, practice and requirements. 4. PROVISION OF INFORMATION SERVICES 4.1 At the request of Gulf from time to time, Conoco shall provide or cause to be provided Information Services to Gulf (or one of its Subsidiaries), subject to the general direction and supervision of Gulf. For purposes of this Agreement, "Information Services" shall mean the following: (a) periodic processing of the data and information of Gulf on the Gulf System and/or on the Conoco System, as applicable, and provision of information and reports to Gulf arising from such data and information processing tasks. For purposes of this Agreement, "Conoco System" means the information processing systems, hardware, communications equipment, computer programs and/or data of Conoco, portions of which are used by Conoco to provide Information Services to Gulf as contemplated by this Agreement; and (ii) "Gulf System" means the information processing systems, hardware, communications equipment, computer programs and data of Gulf including such updates and enhancements thereto as contemplated by this Agreement. (b) periodic maintenance and support of the Gulf System including all liaison with vendors of components thereof and provision of updates and new versions or releases (as approved by Gulf); (c) periodic maintenance and support of the portions of the Conoco System used to provide data and support for Gulf provided that all decisions regarding the provision of updates and new versions or releases shall be solely made by Conoco after consultation with Gulf; (d) periodic reporting and recommendations on enhancements to and remedial action in respect of the Gulf System; (e) implementation of updates, revisions, enhancements and new versions of components of the Gulf System and provision of applicable training to the Gulf staff in that respect; (f) such other information technology or related services as Gulf may request from time to time and that Conoco agrees to provide. 4.2 The Parties shall consult with respect to any employees of Conoco (or its other Affiliates) for Information Services which Conoco proposes to assign or second to Gulf to provide the Information Services. 4 5. REQUESTS FOR ADMINISTRATIVE SERVICES & INFORMATION SERVICES Any request for Administrative Services or Information Services shall specify in reasonable written detail the Administrative Services or Information Services being requested the date or dates on which the Requesting Party desires such Administrative Services or Information Services to be supplied or completed and such other information as may be reasonably necessary or relevant. The Providing Party may request clarification as to any matter contained in such request, in a timely manner. Upon receiving a request for Administrative Services or Information Services, the Providing Party shall reply by submitting a project sheet that describes the work to be performed, timing, and estimated costs associated with the performance of the Administrative Services or Information Services. If the Providing Party is unable to provide the Requesting Party with the requested Administrative Services or Information Services in a timely fashion within a mutually agreed fee structure, then the Requesting Party shall be free to obtain such services from third parties. If the project sheet is agreed between the Parties, then it shall be signed by authorized representatives of both Parties, and be administered pursuant to the terms of this Agreement. The Parties intend that the Fees for the provision of Administrative Services or Information Services hereunder shall be limited to the actual total costs, direct and indirect (including, but not limited to, overhead and administrative costs, out-of-pocket expenses of the Providing Party for its Administrative Services or Information Services and its employees, agents and consultants incurred in connection with the provision of Administrative Services or Information Services hereunder, amounts paid by a Party to third parties calculated by reference to the Fees and Indonesian levies and taxes) to the Providing Party of such Administrative Services or Information Services, provided that such Fees shall not exceed those which the Requesting Party would pay to an arms' length third party for services of comparable quality, quantity and location. It is the intent of the Parties that a Providing Party and its Subsidiaries, should neither gain a profit nor suffer a loss as a result of performing the Administrative Services or Information Services pursuant to this Agreement. The Requesting Party may at all times and in any event in its discretion conduct Administrative Services or Information Services separately and/or in-house. Notwithstanding anything to the contrary set forth herein, the Requesting Party may use third party service providers to the extent required by Indonesia law, regulations or custom, or to effect cost recovery, free of any restriction contained herein. 6. FINANCIAL ADMINISTRATION When requested to do so in writing by the Requesting Party, and supplied with all necessary information including a scope of work upon which to base its budget projection, the Providing Party will provide the Requesting Party with necessary information to prepare its operating budgets in a timely manner and in any event no later than six (6) months prior to the beginning of a fiscal year of the Requesting Party. Prior to the end of each fiscal year of the Requesting Party during the term of this Agreement, the Requesting Party shall, to the extent possible, prepare and submit to the providing Party, a budget (the "Budget") for Administrative Services or Information Services for the ensuing year. Both Parties shall jointly employ reasonable efforts to ensure that the annual costs of providing Administrative Services or Information Services hereunder shall not exceed the approved Budget either in total or in any one accounting category in connection with any matters set forth in such Budget. 5 7. CONSULTANTS The provisions of this Agreement are not exclusive in favor of either Party, and each Party acknowledges and agrees that they may use third party consultants to perform certain of the activities outlined in this Agreement, and they may provide comparable administrative services or information services to itself or other subsidiaries as requested. The Parties may mutually agree upon retaining a specific third party consultant not currently retained by either Party for certain Administrative Services or Information Services in order to avoid needless cost or duplication. 8. FEES Fees in connection with Administrative Services or Information Services provided pursuant to this Agreement ("Fees") shall be billed monthly by the Providing Party performing such Administrative Services or Information Services to the Requesting Party, with an Invoice representing all actual and allocated costs for the previous month to be delivered to the Requesting Party no later than the 20th of each month. The Requesting Party shall pay invoices within thirty (30) days from the receipt thereof. 9. AUDIT REPORT Either Party shall have the right at any time to cause its auditors to prepare a report to it confirming that the computation of the Fee by a Party was accurate, and the other Party(s) shall provide all reasonable cooperation and access to such auditors in the preparation of such report. At the request of a Party, the other Party(s) shall also provide all reasonable cooperation and access to PERTAMINA or any government official in the event that PERTAMINA or such government official shall request or undertake an audit of any Fees paid hereunder. In the event that any audit conducted by a Party hereto determines that the Fees were not properly calculated, the Party against which such determination is made shall have the right to cause another independent audit to be prepared. In the event of disagreement between any two such audits, the matter shall be determined between the Parties hereto pursuant to arbitration in accordance with the provisions hereof. Upon any ultimate determination, either Party, as the case may be, shall refund or pay any Fees improperly paid, or not charged, to the other. 10. TERM AND TERMINATION OF AGREEMENT 10.1 The initial term of this Agreement shall be for a ten (10) year period beginning on the Effective Date. Thereafter, this Agreement shall automatically renew for successive five (5) year periods until terminated in accordance with the terms of this Article 10. 10.2 This Agreement shall be terminated at the earliest of the following occurrences: (a) at such time as the Parties shall mutually agree in writing, this Agreement may be terminated on the terms and dates stipulated in such writing. (b) at the expiration of the Initial Term or any Renewal Term, should either Party elect, with or without cause, to terminate this Agreement by giving the other party 6 at least twelve (12) months' advance written notice of its intent to terminate. In such event, after proper notice, this Agreement shall terminate on the expiry of the Initial Term or the Renewal Term, as the case may be. Subject to events of FORCE MAJEURE (as provided in Section 15.8 hereof), in the event either Party shall fail to discharge any of its material obligations hereunder, including, without limitation, the obligation to render Administrative Services or Information Services under the terms of this Agreement or the "Technical Services" under the Technical Services Agreement between the parties in a timely and prudent manner, or shall commit a material breach of this Agreement or the Technical Services Agreement and such failure, default or breach shall continue for period of thirty (30) days after the other Party has served written notice of such default, this Agreement and the Technical Services Agreement may then be terminated at the option of the non-breaching Party by written notice therefore to the breaching Party specifying a proposed date of termination at least thirty (30) days after the date of such notice, it being understood that such termination right is in addition to any other remedies that may be available to the aggrieved Party. Unless otherwise provided in this Section 10.2, either Party may exercise its right to terminate this Agreement by giving the other Party written notice specifying a proposed date of termination no more than twelve (12) months nor less than thirty (30) days after the date of such notice, in which case this Agreement shall terminate on the date specified in such notice. 10.3 The termination of this Agreement in accordance with the provisions of this Article 10 shall have the following effects: (a) Except for the mutual indemnities set forth in Article 13 and the covenants and the other provisions herein that by their terms expressly extend beyond the Term of Agreement, the Parties' obligations hereunder are limited to the Term of Agreement. (b) In the event this Agreement is terminated for any reason, the Providing Party for such Administrative Services or Information Services shall immediately deliver possession to the Requesting Party of all assets, books and records of the Requesting Party in the other Party's possession and shall provide the Requesting Party with copies of all assets, books and records (including electronic copies in the format requested by the Requesting Party and reasonably within the other Party's capability) relating to the Administrative Services or Information Services that are in the other Party's possession, at the cost of the Requesting Party. (c) Upon termination of this Agreement (for whatever cause, other than a material breach by a Party of this Agreement), the Requesting Party shall pay to the Providing Party the amount of any and all costs and expenses accrued to the date of such termination which are payable in accordance with the provisions hereof, together with any costs actually incurred which result from the termination of this Agreement. 10.4 Notwithstanding termination of this Agreement, each Party shall remain bound by the provisions of Article 11.2. 7 11. ACCESS TO BOOKS AND RECORDS; CONFIDENTIALITY; CONFLICTS OF INTEREST 11.1 Except as otherwise provided under the Confidentiality Agreement between the parties dated 15 October 2001, each Party and its duly authorized representatives shall have complete access to the other Party's offices, facilities and records wherever located, as necessary in order to discharge its responsibilities hereunder. All records and materials furnished pursuant to this Agreement shall at all times during the term of this Agreement remain the property of the Party providing such records and materials. The Requesting Party and its duly authorized representatives shall have complete access to records and other information concerning the Requesting Party (and its Subsidiaries) used by the Providing Party in the performance of its duties hereunder 11.2 During the term of this Agreement and for a period of three (3) years thereafter, any information and data acquired, interpreted, developed or disclosed in connection with the Administrative Services or Information Services provided under this Agreement shall be treated by the receiving Party as confidential and shall not be disclosed by the receiving Party except to its directors, officers, employees and to the directors, officers, employees of its Affiliates, and to its consultants, without the prior written consent of the disclosing Party. Both Parties shall ensure that the person to whom confidential information is provided is aware of the confidentiality obligations under this Agreement and shall ensure that such persons comply with the confidentiality provisions of this Agreement. 11.3 Conoco undertakes that it shall avoid any conflict of interest between the interests of its other Subsidiaries and other Affiliates and the interests of Gulf and its Subsidiaries in dealing with suppliers, customers and all other persons doing or seeking to do business with Gulf in connection with the Administrative Services or Information Services contemplated under this Agreement. 11.4 The provisions contained in Section 11.2 shall survive the termination of this Agreement. 12. GOVERNING LAW AND DISPUTE RESOLUTION 12.1 This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York. 12.2 Any dispute, controversy, or claim arising under this Agreement, including any disputes as to the construction, performance, interpretation, breach, termination, enforceability or invalidity of this Agreement, that cannot be settled amicably by the Parties within thirty (30) days of receipt by the Parties of a notice of such dispute, shall be finally settled by a three (3) person arbitration panel under the UNCITRAL arbitration rules as in force on the date of this Agreement and in accordance with the following provisions: (a) The Parties by mutual agreement shall select the three (3) person panel within thirty (30) days of the notice of the dispute described above. If the Parties have not selected the three person panel within such thirty (30) day period, then the entire panel shall be selected by the Secretary-General of the Permanent Court of Arbitration at the Hague (provided that the requirements set forth in clause (b) below are satisfied); 8 (b) Each arbitrator shall be fluent in English and shall be experienced in the oil and gas industry; (c) The site of the arbitration shall be in London. The language of the arbitration shall be English; (d) The Parties agree that the award made by the panel shall be final and conclusive and binding upon the Parties; (e) Any expenses incurred in connection with the appointment of the arbitrator(s) and the performance of the arbitration shall be shared equally by the Parties. Each Party shall pay its own expenses incurred in connection with the arbitration; (f) The Parties agree that no Party shall have any right to commence or maintain any suit or legal proceeding until the dispute has been determined in accordance with these arbitration procedures and then only for enforcement of the award made in such arbitration. In the case of a lawsuit or any other legal proceeding being commenced against any Party to enforce any arbitration award or for any other purpose related to this Agreement, the Parties agree that they are subject to the non-exclusive jurisdiction of, and hereby irrevocably elect permanent domicile at, the District Court of Central Jakarta, Indonesia. The Parties expressly agree to waive any provisions of any applicable law or regulation of Indonesia or any competent authority that provide the possibility to appeal the decision of the arbitrators so that there shall be no appeal to any court from the decision of the arbitrators; and (g) Each of the Parties hereby expressly waives any Indonesian laws and regulations, decrees or policies having the force of law that would otherwise give a right to appeal the decision of the panel and the Parties agree that, in accordance with Article 60 of the Indonesian Arbitration Law, neither Party shall appeal to any court from the award or decision contained therein, so that on the decision taken by the panel there shall be no other Indonesian authority or panel. Each of the Parties waive the applicability of Articles 48.1 and 73(B) of the Indonesian Arbitration Law; however, the Parties do acknowledge among themselves that it is their intent that an arbitration under this Agreement be completed within one hundred eighty (180) days from the selection of she three person panel. 13. INDEMNITIES 13.1 Indemnification by Conoco Conoco shall protect, indemnify, defend and hold harmless Gulf and its officers, directors, employees, agents, other representatives and Subsidiaries (together the "Gulf Indemnitees") from any and all threatened or actual claims, demands, causes of action, suits, proceedings (formal or informal), losses, damages, fines, penalties, liabilities, costs and expenses of any nature, including attorney's fees and court costs, sustained or incurred by or asserted against a Gulf Indemnitee by any person by reason of or arising out of: (i) any breach or alleged breach of this Agreement by Conoco, its Affiliates (other than a Gulf 9 Indemnitee), agents, or employees; or (ii) any act or alleged act of fraud, willful misconduct or gross negligence of Conoco or its Affiliates (other than a Gulf Indemnitee) or any of their respective employees, officers, directors or agents, or (iii) acts outside, or omissions in, the scope of Conoco's or its Subsidiary's authorized duties and responsibilities contained herein. In case any action or proceeding shall be brought against a Gulf Indemnitee in respect of which indemnification may be sought against Conoco pursuant to this Section 13.1, then Conoco, upon receipt of notice from Gulf, shall defend such action or proceeding by counsel reasonably satisfactory to Gulf and Conoco, and Conoco shall pay for all expenses therefore unless such action or proceeding is resisted and defended by counsel for any carrier of public liability insurance that benefits Gulf or Conoco. Gulf shall promptly give written notice to Conoco when a claim is made against a Gulf Indemnitee for which indemnity is owed pursuant to this Section 13.1. Conoco shall participate at its own expense on defense of such claims, but Gulf shall have the right to employ its own separate counsel. Gulf shall assist Conoco in the defense of any claim for which Conoco owes indemnification hereunder and is undertaking to provide a defense, by making available to Conoco such records and personnel as may be reasonably required in the defense of such claim. 13.2 Indemnification by Gulf Gulf shall protect, indemnify, defend and hold harmless Conoco and its officers, directors, employees, agents, other representatives and Subsidiaries (together the "Conoco Indemnitees") from any and all threatened or actual claims, demands, causes of action, suits, proceedings (formal or informal), losses, damages, fines, penalties, liabilities, costs and expenses of any nature, including attorney's fees and court costs, sustained or incurred by or asserted against a Conoco Indemnitee by any person by reason of or arising out of: (i) any breach or alleged breach of this Agreement by Gulf, its Affiliates (other than a Conoco Indemnitee), agents, or employees; or (ii) any act or alleged act of fraud, willful misconduct or gross negligence of Gulf or its Affiliates (other than a Conoco Indemnitee) or any of their respective employees, officers, directors or agents, or (iii) acts outside, or omissions in, the scope of Gulf's or its Subsidiary's authorized duties and responsibilities contained herein. In case any action or proceeding shall be brought against a Conoco Indemnitee in respect of which indemnification may be sought against Gulf pursuant to this Section 13.2, then Gulf, upon receipt of notice from Conoco, shall defend such action or proceeding by counsel reasonably satisfactory to Conoco and Gulf, and Gulf shall pay for all expenses therefore unless such action or proceeding is resisted and defended by counsel for any carrier of public liability insurance that benefits Conoco or Gulf. Conoco shall promptly give written notice to Gulf when a claim is made against a Conoco Indemnitee for which indemnity is owed pursuant to this Section 13.2. Gulf shall participate at its own expense on defense of such claims, but Conoco shall have the right to employ its own separate counsel. Conoco shall assist Gulf in the defense of any claim for which Gulf owes indemnification hereunder and is undertaking to provide a defense, by making available to Gulf such records and personnel as may be reasonably required in the defense of such claim. 14. NOTICES 14.1 Except as otherwise specifically provided herein, all notices and communications under this Agreement shall be deemed to have been properly given when received if sent to 10 Parties by email transmission to the appointed representative for each Party from time to time pursuant to Section 1 hereof, by telex, by telefax, or by acknowledged hand delivery: if to Gulf or one of its Subsidiaries that is a Party hereto as follows: GULF INDONESIA RESOURCES LIMITED Wisma 46, Kota BNI, Level 21 Jl. Jend. Sudirman Kav. 1 Jakarta. 10220 Indonesia. Attention: Vice President, Finance Telefax: 62 - 21 5730737 if to Conoco or one of its Subsidiaries that is a Party hereto as follows: CONOCO INC. 600 North Dairy Ashford Rd. Houston Texas, 77079 Administrative: Attention: Assistant to the President--Exploration Production AAME Telefax: 1-281-293-2270 Information Management: Attention: Upstream IM Manager Telefax: 1-281-293-6898 14.2 Gulf and Conoco may by giving notice thereof to the other change of its address for notice at any time. 15. MISCELLANEOUS 15.1 It is not the intention of the Parties to create, nor shall this Agreement be deemed or construed to create a partnership, joint venture, association, trust or fiduciary relationship, or to authorize any Party to act as an agent, servant, or employee for any other Party. 15.2 This Agreement is not intended to and shall not be deemed to impose any obligations upon the Parties to enter into any further transactions or impose any other obligation on either Party hereto with respect to areas of Administrative Services or Information Services hereunder. Without limiting the foregoing, this Agreement shall not be interpreted as creating any form of exclusive arrangement between the Parties, nor shall it place any restrictions on either Party in the conduct of their normal business. 15.3 Any modification, variation or alteration to the terms of this Agreement shall be effective and valid if confirmed in writing by the Parties. 15.4 No assignment of this Agreement or any of the rights or obligations set forth herein by a Party shall be valid without the specific written consent of both Gulf and Conoco, which 11 will not be unreasonably withheld. Notwithstanding the foregoing, Gulf and Conoco and any of their permitted assignees shall have the right to assign this Agreement to an Affiliate without the consent of the other Parties hereto, provided that (i) such Affiliate is controlled by Gulf, or by Conoco, (ii) the ability of Gulf (or its Subsidiaries) or Conoco (or its other Affiliates) to obtain cost recovery under a relevant PSC is not thereby lost, and (iii) Gulf or Conoco, as the case may be, shall remain liable for such assignee's obligations and liabilities under this Agreement. 15.5 The waiver by a Party of a breach or violation of any provision of this Agreement shall not operate as, or be construed to be, a waiver of any subsequent breach of the same or any other provisions hereof. 15.6 In the event either Party shall resort to legal action to enforce the terms and provisions of this Agreement, the prevailing Party may recover from the other Party the costs of such action including, without limitation, reasonable attorneys' fees. 15.7 Upon the request of a Party, the other Parties shall execute such additional instruments and take such additional actions as shall be necessary to effectuate this Agreement. 15.8 No Party shall be liable nor deemed to be in default for any delay or failure of performance under this Agreement resulting directly or indirectly from acts of God, civil or military authority, acts of public enemy, war accidents, fires, explosions, earthquakes, floods, failure of transportation, strikes, interruptions by a Party's employees or any similar or dissimilar cause beyond the reasonable control of the Party claiming the force majeure. 15.9 If any provision of this Agreement or any application thereof shall be declared or held to be invalid, illegal or unenforceable in whole or in part whether generally or in any particular jurisdiction, such provision shall be deemed to be amended to the extent necessary to cure such invalidity, illegality or unenforceability, and the validity, legality or enforceability of the remaining provision of this Agreement, both generally and in every other jurisdiction, shall not in any way be affected or impaired thereby. 15.10 No Party shall be liable to the other under this Agreement for direct, indirect or consequential damages including but not limited to economic losses, loss of profit or business interruption, loss of contract or business opportunity. 15.11 The Parties hereto agree that as of the Effective Date hereof, it is in the best interest of the Parties that this Agreement shall supercede all terms and conditions of the Administrative Services Agreement dated as of 1 October 1997 and the Information Services Agreement dated as of 1 October 1997 each between Gulf and Gulf Canada Resources Limited (presently known as Conoco Canada Inc. and presently an indirectly wholly-owned subsidiary of Conoco Inc.) as well as all other previous oral or written discussions, offers, proposals, or positions between the Parties. 15.12 The Parties hereto acknowledge and agree that additional Subsidiaries of Gulf may come into existence and/or may become parties to a PSC at any time and from time to time, and in such event, Gulf shall ensure that each Subsidiary which is the operator of or party to a PSC becomes a party hereto. A Subsidiary shall become a party hereto by executing a counterpart hereof and delivering a copy thereof to each of Gulf and Conoco, at which 12 time of delivery such Subsidiary shall be deemed to be a Party hereunder without further formality. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives on the day and year first above written. For and on behalf of: For and on behalf of: GULF INDONESIA RESOURCES CONOCO INC. LIMITED /s/ PAUL C. WARWICK /s/ JAMES D. McCOLGIN - ------------------------------- ------------------------------------------ Name: Paul C. Warwick Name: James D. McColgin Title: President and CEO Title: President-Exploration Production AAME 13 EX-99.E.6 8 h97565aexv99wew6.txt CROSS INDEMNIFICATION AGREEMENT EXHIBIT (e)(6) CROSS INDEMNIFICATION AGREEMENT THIS CROSS INDEMNITY AGREEMENT made this 1st day of October, 1997. BETWEEN: GULF CANADA RESOURCES LIMITED, a corporation governed by the laws of Canada (hereinafter referred to as "Gulf") OF THE FIRST PART -and- GULF INDONESIA RESOURCES LIMITED, a corporation governed by the laws of New Brunswick (hereinafter referred to as the Company") OF THE SECOND PART WHEREAS the Company is a wholly-owned subsidiary of Gulf; and WHEREAS it is anticipated that a portion of the shares of the Company held by Gulf will be sold to the public in the Offering; and WHEREAS in anticipation of the Offering, Gulf transferred to the Company the shares of certain subsidiaries of Gulf; and the Company transferred to Gulf the shares of certain subsidiaries of the Company which have heretofore carried on business outside of Indonesia; and WHEREAS it is the intention of the parties hereto that they not assume any liabilities which may be associated with the subsidiaries transferred by each to the other; and WHEREAS the parties desire to provide certain other assurances relating to the Offering; NOW, THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual covenants and promises contained herein and other good and valuable consideration (the receipt and adequacy whereof is hereby acknowledged), the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 DEFINED TERMS. For the purpose of this Agreement, the following terms shall have the meaning ascribed thereto below unless otherwise specified: "AFFILIATES" means, with respect to a Person, any person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with such Person, and the term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management, activities or policies of any Person or entity, whether through the ownership of voting securities, by contract, employment or otherwise. "AGREEMENT" means this Cross Indemnification Agreement, as amended from time to time pursuant to the terms hereof. "COMPANY REORGANIZATION" means, collectively, (i) the transaction pursuant to which Gulf Canada transferred all of the issued and outstanding shares of Gulf Resources (Tungkal) Ltd., Gulf Resources (Merangin) Ltd., Gulf Resources (Calik) Ltd., Gulf Resources (Pangkah) Ltd., Gulf Resources (Sakala Timur) Ltd. and Gulf Resources (South Jambi) Ltd. to the Company in exchange for six fully paid and non-assessable Shares pursuant to the Share Exchange Agreement listed as Item 2 of Schedule A hereto; (ii) the transaction pursuant to which the Company purchased from Gulf all of the issued and outstanding shares of Clyde Petroleum Indonesia Ltd. pursuant to the Sale and Purchase of Shares Agreement listed as Item 1 of Schedule A hereto; and (iii) the transaction pursuant to which a subsidiary of the Company purchased from a subsidiary of Gulf an interest in a production sharing contract relating to the Halmahera Block, Indonesia pursuant to the Share Sale Agreement listed as Item 3 of Schedule A hereto. "CORRIDOR FINANCING" means the financing and related agreements relating to the Corridor Block Gas Project, as described under "Business and Properties--Description of Properties--Corridor Block Gas Project" in the Prospectus. "GULF REORGANIZATION" means the transaction pursuant to which Gulf Resources (NA.) Ltd. purchased all of the issued and outstanding shares of Asamera Resources Inc. from Asamera Minerals, pursuant to the Purchase and Sale of Shares Agreement listed as Item 1 of Schedule B hereto. "OFFERING" means a public offering of Shares pursuant to the Prospectus following which Gulf will own less than all of the Shares. "PERSON" includes an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a stock exchange, trustee in bankruptcy, receiver or any government, any political subdivision, any agency and any entity or person exercising executive, legislative, judicial, regulatory or administrative functions of government. -2- "PROSPECTUS" means the final prospectus of the Company dated September o, 1997 relating to the initial public offering of Shares. "SHARES" means common shares in the capital of the Company and includes any shares, however called, having attributes similar to those of common shares. "TRANSFERRED INDONESIAN ASSETS" means the assets transferred to the Company in connection with the Company Reorganization. "TRANSFERRED NON-INDONESIAN ASSETS" means the assets transferred to Gulf or its subsidiaries in connection with the Gulf Reorganization. 1.2 CONSTRUCTION. Whenever the context requires, the gender of all words used herein shall include the masculine, feminine and neuter, and the number of all words shall include the singular and plural. 1.3 REFERENCES. Unless otherwise specified, the references herein to "Sections", "Subsections" or "Articles" refer to the sections, subsections or articles in this Agreement. ARTICLE II INDEMNITIES 2.1 INDEMNIFICATION BY GULF. (a) Gulf hereby covenants and agrees to protect, indemnify, defend and hold harmless the Company and its officers, directors, employees, agents, other representatives and controlled Affiliates (collectively, the "Company Indemnified Parties") from and against any and all threatened or actual claims, demands, causes of action, suits, proceedings (formal or informal), losses, damages, fines, penalties, liabilities, costs and expenses of any nature, including costs of investigation, attorneys fees and court costs, sustained or incurred by or asserted against any Company Indemnified Party, whether under the provisions of any statute or otherwise, in any way caused by or arising directly or indirectly by reason, or in consequence, of: (i) the ownership or operation of the Transferred Non-Indonesian Assets, whether before or after the date hereof, or the Gulf Reorganization; (ii) any tax consequences to the Company of the Gulf Reorganization or the Company Reorganization, including, without limitation, any consequences of any determinations by Revenue Canada, Customs, Excise and Taxation ("Revenue Canada"); provided, however, that the indemnity herein provided shall not be deemed to cover any income taxes the Company or its subsidiaries may be required to pay as a result of the ownership and operation of the Transferred Indonesian Assets; -3- (iii) any untrue statement or alleged untrue statement of a material fact contained in any Offering registration statement, any prospectus or preliminary prospectus contained therein or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading but only insofar as the same arise out of or are based upon an untrue statement or omission or alleged omission so made based upon information furnished by Gulf about Gulf (but not the Company) or its subsidiaries; (iv) any out-of-pocket expenses of the Company incurred in connection with the Offering; (v) the liquidation into the Company of Asamera Minerals Inc., a wholly-owned subsidiary of the Company ("Asamera Minerals"), or the ownership or operation of Asamera Minerals; and (vi) the agreements listed as Item 2 and Item 3 of Schedule B hereto, or the transactions contemplated therein, including any taxes arising from such transactions. (b) If any matter or thing contemplated by this Clause 2.1 (any such matter or thing being hereinafter referred to as a "Claim") is asserted against any of the Company Indemnified Parties, or if any potential Claim contemplated by this clause 2.1 shall come to the knowledge of any Company Indemnified Party, the Company Indemnified Party concerned shall notify Gulf as soon as possible of the nature of such Claim (provided that any failure to so notify shall not affect Gulf's liability under this paragraph except to the extent that it is actually prejudiced thereby) and Gulf shall, subject as hereinafter provided, be entitled (but not required) at its expense to assume the defense of any suit brought to enforce such Claim; provided however, that the defense shall be conducted through legal counsel reasonably acceptable to the Company Indemnified Party and that no admission of liability or settlement of any such Claim may be made by Gulf or the Company Indemnified Party without, in each case, the prior written consent of all the other parties hereto, such consent not to be unreasonably delayed or withheld. (c) In respect of any such Claim, a Company Indemnified Party shall have the right to retain separate or additional counsel to act on his or its behalf and participate in the defense thereof, provided that the fees and disbursements of such counsel shall be paid by the Company Indemnified Party unless (i) Gulf fails to assume the defense of such suit on behalf of the Company Indemnified Party within five Business Days of receiving notice of such Claim; (ii) Gulf and the Company Indemnified Party shall have mutually agreed to the retention of the other counsel, or (iii) the named parties to any such Claim (including any added third or impleaded party) include both the Company Indemnified Party, on the one hand, and Gulf, on the other hand, and the Company Indemnified Party shall have been advised by its counsel that representation of both parties by the same counsel would be inappropriate due to the actual or potential differing interest between them (in which case Gulf shall not have the right to assume the defense of such Claim but shall be liable to pay the reasonable fees and expenses of counsel for the Company Indemnified Party). -4- (d) With respect to any of its related Company Indemnified Parties who are not parties to this Agreement, the Company shall obtain and hold the rights and benefits of Clause 2.1 in trust for and on behalf of such Company Indemnified Parties and the Company agrees to accept such trust and to hold the benefit of and enforce performance of such covenants on behalf of such persons. 2.2 INDEMNIFICATION BY THE COMPANY. (a) The Company hereby covenants and agrees to indemnify and save harmless Gulf, each of its officers, directors, employees, agents, other representatives, shareholders and subsidiaries (other than the Company and its subsidiaries)(collectively, the "Gulf Indemnified Parties") from and against any and all threatened or actual claims, demands, causes of action, suits, proceedings (formal or informal), losses, damages, fines, penalties, liabilities, costs and expenses of any nature, including costs of investigation, attorneys' fees and court costs sustained or incurred by or asserted against any Gulf Indemnified Party, whether under the provisions of any statute or otherwise, in any way caused by or arising directly or indirectly by reason, or in consequence, of: (i) the ownership or operation of the Transferred Indonesian Assets, whether before or after the date hereof; (ii) the Corridor Financing; and (iii) any untrue statement or alleged untrue statement of a material fact contained in any Offering registration statement, any prospectus or preliminary prospectus contained therein or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading except insofar as the same arise out of or are based upon an untrue statement or omission or alleged omission so made based upon information furnished by Gulf about Gulf (but not the Company). (b) If any matter or thing contemplated by this Clause 2.2 (any such matter or thing being hereinafter referred to as a "Claim") is asserted against any of the Gulf Indemnified Parties, or if any potential Claim contemplated by this Clause 2.2 shall come to the knowledge of any Gulf Indemnified Party, the Gulf Indemnified Party concerned shall notify the Company, as soon as possible of the nature of such Claim (provided that any failure to so notify shall not affect the Company's liability under this paragraph except to the extent that it is actually prejudiced thereby) and the Company shall, subject as hereinafter provided, be entitled (but not required) at its expense to assume the defense of any suit brought to enforce such Claim; provided however, that the defense shall be conducted through legal counsel reasonably acceptable to the Gulf Indemnified Party and that no admission of liability or settlement of any such Claim may be made by the Company or the Gulf Indemnified Party without, in each case, the prior written consent of all the other parties hereto, such consent not to be unreasonably delayed or withheld. -5- (c) In respect of any such Claim, a Gulf Indemnified Party shall have the right to retain separate or additional counsel to act on his or its behalf and participate in the defense thereof, provided that the fees and disbursements of such counsel shall be paid by the Gulf Indemnified Party unless (i) the Company fails to assume the defense of such suit on behalf of the Gulf Indemnified Party within five Business Days of receiving notice of such Claim; (ii) the Company and the Gulf Indemnified Party shall have mutually agreed to the retention of the other counsel, or (iii) the named parties to any such Claim (including any added third or impleaded party) include both the Gulf Indemnified Party, on the one hand, and the Company, on the other hand, and the Gulf Indemnified Party shall have been advised by its counsel that representation of both parties by the same counsel would be inappropriate due to the actual or potential differing interest between them (in which case the Company shall not have the right to assume the defense of such Claim but shall be liable to pay the reasonable fees and expense of counsel for the Gulf Indemnified Party). (d) With respect to any of its related Gulf Indemnified Parties who are not parties to this Agreement, Gulf shall obtain and hold the rights and benefits of Clause 2.2 in trust for and on behalf of such Gulf Indemnified Parties and Gulf agrees to accept such trust and to hold the benefit of and enforce performance of such covenants on behalf of such persons. 2.3 INDEMNIFICATION PROVISIONS CONTROL. Gulf and the Company hereby agree that to the extent that representations, warranties or indemnification provisions contained in any of the agreements listed in Schedules A and B hereto are inconsistent with the provisions of Sections 2.1 and 2.2 hereof, as applicable, the provisions of Sections 2.1 or 2.2 hereof, as the case may be, will be deemed to be controlling and will supersede such provisions of such other agreement. 2.4 CERTAIN GULF OBLIGATIONS. Gulf agrees that it will take all action, and enter into such agreements, contemplated to be taken by Gulf in that certain Commitment Letter between the Company and The Chase Manhattan Bank of Canada and Chase Securities Inc. dated September 20, 1997. ARTICLE III MISCELLANEOUS 3.1 NO THIRD PARTY BENEFICIARIES. Except to the extent a third party is expressly given rights herein, any agreement to pay an amount and any assumption of liability herein contained, expressed or implied, shall be only for the benefit of the parties and their respective legal representatives, successors and assigns, and such agreement or assumption shall not inure to the benefit of the obligors of any indebtedness of any party whomsoever, if being the intention of the parties hereto that no person or entity shall be deemed a third party beneficiary of this Agreement except to the extent a third party is expressly given right herein. -6- 3.2 NOTICES. Any notice, demand, or communication required, permitted or desired to be given hereunder shall be deemed effectively given when personally delivered or mailed by prepaid certified mail, return receipt requested, address as follows: (i) if the Company to: Gulf Indonesia Resources Limited 21st Floor, Wisma 46, Kota BNI J1. Jend. Sudirman, Kav. 1 Jakarta, Indonesia Attn: Chief Operating Officer (ii) if to Gulf, to: Gulf Canada Resources Limited One Norwest Center 1700 Lincoln, Suite 5000 Denver CO 80203-4524 Attn: President or to such other address and to the attention of such other person or officer as either Party may designate by written notice pursuant to this Section 3.2. 3.3 GOVERNING LAW. This agreement has been executed and delivered in and shall be interpreted, construed and enforced pursuant to and in accordance with the laws of Alberta. 3.4 ASSIGNMENT. No assignment of this Agreement or any of the rights of obligations set forth herein by either party shall be valid without the specific written consent of the other party. 3.5 WAIVER OF BREACH. The waiver by either party of a breach or violation of any provision of this Agreement shall not operate as, or be construed to be, a waiver of any subsequent breach of the same or any other provision hereof. -7- 3.6 SEVERABILITY. In the event any provision of this Agreement is held to be unenforceable for any reason, such provision shall be severable from this Agreement if it is capable of being identified with and apportioned to reciprocal consideration or to the extent that it is a provision that is not essential and the absence of which would not have prevented the parties from entering into this Agreement. The unenforceability of a provision that has been performed shall not be grounds for invalidation of this Agreement under circumstances in which the true controversy between the parties does not involve such provision. 3.7 ARTICLE AND SECTION HEADINGS The article and section headings contained in this Agreement are for the reference purpose only and shall not effect in any way the meaning or interpretation of this Agreement. 3.8 AMENDMENTS AND CONTRACT EXECUTION This Agreement supersedes all previous contracts between the parties and constitutes the entire Agreement between the parties with respect to the subject matter of this Agreement. No oral statement or prior written material not specifically incorporated herein shall be of any force and effect, and no changes in or additions to this Agreement shall be recognized unless incorporated herein by amendment, such amendment to become effective on the date stipulated therein. -8- IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly authorized representatives as of the day and year first above written. GULF CANADA RESOURCES LIMITED By: /s/ -------------------------------------- Name: Title: Senior Vice President /s/ JOANNE ALEXANDER ASSISTANT SECRETARY GULF INDONESIA RESOURCES LIMITED By: /s/ R. AUCHINLECK -------------------------------------- Name: R. Auchinleck Title: Pres. & CEO /s/ CORPORATE SECRETARY -9- Schedule "A" 1. Sale and Purchase of Shares Agreement dated as of the 19th day of August, 1997 between Gulf and the Company relating to the purchase by the Company from Gulf of the shares of Clyde Petroleum Indonesia Ltd. 2. Share Exchange Agreement made effective as of August 19, 1997 between Gulf and the Company relating to the sale by Gulf to the Company of the shares of certain subsidiaries of Gulf. 3. Share Sale Agreement made effective as of August 15, 1997 between Clyde Expro plc and Gulf Resources (Halmahera) Ltd., a wholly-owned subsidiary of the Company, pursuant to which Clyde Expro plc sold to Gulf Resources (Halmahera) Ltd. certain assets as described in such agreement. Schedule "B" 1. Purchase and Sale of Shares Agreement dated as of the 11th day of July, 1997 between Gulf (N.A.) Limited and Asamera Minerals Inc. pursuant to which Asamera Minerals Inc. sold to Gulf (N.A.) Limited all of the shares of Asamera Resources Inc. 2. Agreement of Purchase and Sale made effective the 1st day of January, 1997 between Gulf, the Company and Asamera Minerals Inc. pursuant to which the Company sold to Asamera Minerals Inc. certain assets as described in such agreement. 3. Agreement of Purchase and Sale made effective the 1st day of January, 1997 between Gulf, the Company and Asamera Minerals Inc. pursuant to which Gulf sold to the Company certain assets as described in such agreement. EX-99.E.7 9 h97565aexv99wew7.txt CORPORATE OPPORTUNITY AGREEMENT EXHIBIT (e)(7) CORPORATE OPPORTUNITY AGREEMENT This Corporate Opportunity Agreement ("Agreement") is made and entered into as of October 1, 1997, by and between Gulf Canada Resources Limited, a Canadian corporation, and Gulf Indonesia Resources Limited, a New Brunswick corporation. WHEREAS, Gulf Indonesia is engaged in the E&P Business in Indonesia; and WHEREAS, a majority of the outstanding capital stock of Gulf Indonesia is owned by Gulf Canada; and Gulf Canada may have certain fiduciary duties to Gulf Indonesia resulting from its ownership and control of Gulf Indonesia; and WHEREAS, Gulf Canada is engaged in the E&P Business in numerous locations around the world, including, through Gulf Indonesia, in Indonesia; and WHEREAS, the law relating to fiduciary duties that Gulf Canada may owe to Gulf Indonesia is not clear; the application of such law to particular circumstances is often difficult to predict; and if a court were to hold that Gulf Canada breached any such duty Gulf Canada could be held liable for damages in a legal action brought on behalf of Gulf Indonesia; and WHEREAS, Gulf Indonesia and Gulf Canada desire to enter into this Agreement in order (i) to define duties that Gulf Canada will owe to Gulf Indonesia with respect to business opportunities and rights that Gulf Canada will have with respect to business opportunities and (ii) to specify circumstances in which Gulf Canada will be deemed not to have breached any duty to Gulf Indonesia; and NOW, THEREFORE, in consideration of the mutual covenants, rights, and obligations set forth in this Agreement, and the benefits to be derived here from, and other good and valuable consideration, the receipt and the sufficiency of which each of the parties hereto acknowledges and confesses, the parties hereto agree as follows: 1. CERTAIN DEFINED TERMS. In addition to the terms defined in this Agreement, the capitalized terms used in this Agreement will have the meanings ascribed to such terms in Exhibit A hereto, which is hereby made a part of this Agreement as if set forth in full in this Agreement. 2. AGREEMENT BY GULF INDONESIA. Gulf Indonesia agrees that until the termination of this Agreement it will not, without Gulf Canada's consent, acquire an E&P Business Asset unless such E&P Business Asset is located in Indonesia or acquire, directly or indirectly, an E&P Investment, unless a majority of the fair market value of the E&P Business Assets owned by the E&P Investment Entity are located in Indonesia. 3. AGREEMENT BY GULF CANADA. Gulf Canada agrees that until the termination of this Agreement (i) if it acquires, in a single transaction or series of related transactions, Qualifying E&P Business Assets or (ii) if it acquires, in a single transaction or series of related transactions, E&P Investments issued by E&P Investment Entities that own Qualifying E&P Business Assets, then Gulf Canada will either (x) offer (the "Offer") to Gulf Indonesia, within one year of Gulf Canada's acquisition, the opportunity to acquire all, but not part, of such Qualifying E&P Business Assets at a price equal to Gulf Canada's aggregate costs in acquiring such assets (using a reasonable allocation method if non-Indonesian E&P Business Assets were also acquired, either directly or indirectly through the acquisition of E&P Investments) plus all additional costs that would be incurred by Gulf Canada in transferring such assets to Gulf Indonesia, including without limitation, conveyance costs, interim financing costs, income or other taxes that would be incurred as a result of such transfer and costs that would be incurred in obtaining necessary third party and governmental consents to the transfer to Gulf Indonesia or (y) cause some or all of its representatives to resign from the Board of Directors of Gulf Indonesia so that a majority of the Directors of Gulf Indonesia will be individuals who are neither directors nor employees of Gulf Canada (such action referred to herein as "Required Resignation"), provided, that, in connection with any such transfer to Gulf Indonesia pursuant to clause (x) above, Gulf Canada will have the right to require Gulf Indonesia to assume any liabilities, contingent or otherwise, associated with the Qualifying E&P Business Assets transferred and to indemnify and hold harmless Gulf Canada with respect to any such liabilities, provided, further, that Gulf Canada shall have no obligation to make an Offer or effect a Required Resignation with respect to such Qualifying E&P Business Assets in the event any such Offer or the transfer to Gulf Indonesia of the applicable Qualifying E&P Business Assets pursuant to clause (x) above, (A) can not be effected because of restrictions imposed by law or (B) would violate previously existing contractual commitments to third parties or (C) would impose liability on Gulf Canada relating to a breach of fiduciary or other duties that Gulf Canada may owe to third parties, unless and until Gulf Indonesia (1) in the case of such contractual commitments provided in clause (B) above, agrees to indemnify and hold harmless Gulf Canada from the cost of obtaining relief from such contractual commitments or (2) in the case of liability for a breach of fiduciary duties provided in clause (C) above, agrees to indemnify and hold harmless Gulf Canada for any such breach resulting from any such Offer or transfer and in the case of (1) or (2) provides an opinion of counsel, reasonably satisfactory to Gulf Canada, that such indemnity is valid and binding. If Gulf Canada makes an Offer to Gulf Indonesia pursuant to the foregoing, Gulf Indonesia shall have 90 days to elect to purchase such Qualifying E&P Business Assets by giving written notice to Gulf Canada, which election shall be made by the Independent Committee of Gulf Indonesia (which must have unanimously approved such purchase if clause (B) or (C) above is applicable), and if Gulf Indonesia elects to so purchase, such transaction shall be consummated as soon as practicable. If Gulf Indonesia does not elect to purchase such Qualifying E&P Business Assets, Gulf Indonesia agrees that it will have no right to acquire, invest in, or participate in additional investments with respect to such Qualifying E&P Business Assets. In connection with the foregoing, Gulf Canada will provide written notice to Gulf Indonesia within 30 days after its acquisition of Qualifying E&P Business Assets. 4. GULF INDONESIA OPTION TO TERMINATE. In the event Gulf Canada fails to make an Offer pursuant to Section 3 above under circumstances in which it is required to either make an Offer or effect a Required Resignation, then Gulf Indonesia may in its sole discretion terminate this Agreement and one or more of the Services Agreements by giving Gulf Canada written notice of -2- such election within 90 days after the date by which Gulf Canada was required to elect to make such Offer or effect a Required Resignation. 5. Agreement to Supply Information. Gulf Canada agrees that, in connection with any Offer presented to Gulf Indonesia pursuant to Section 3 of this Agreement, Gulf Canada will furnish to Gulf Indonesia all information in Gulf Canada's possession or reasonably available to Gulf Canada regarding the Qualifying E&P Business Assets in question that it reasonably believes is material to a decision by Gulf Indonesia whether or not to pursue such opportunity. 6. Termination. This Agreement shall terminate immediately upon the earlier of (a) the first date after the date hereof on which Gulf Canada no longer owns directly or indirectly a majority of the ordinary shares of Gulf Indonesia or shares of Gulf Indonesia!s capital stock entitled under ordinary circumstances to a majority of the votes entitled to be cast in the election of Gulf Indonesia's directors or (b) Gulf Indonesia's election to terminate this Agreement pursuant to Section 4. Termination of this Agreement will not affect Gulf Canada's obligation with respect to any Qualifying E&P Business Assets acquired by Gulf Canada prior to such termination. 7. Marketing, Transportation and Sale. Notwithstanding anything to the contrary herein, Gulf Indonesia may engage in the marketing, transportation and sale worldwide of Hydrocarbons produced in Indonesia. 8. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the Province of Alberta, Canada. 9. Arbitration. The parties hereto agree to the following: (a) Any controversy or claim arising out of or relating to this Agreement, or the breach hereof, shall be settled by arbitration in accordance with such rules as may be agreed upon by the parties hereto, or failing agreement, in accordance with the provisions of the Arbitration Act (Alberta) as such rules may be modified herein. (b) An award rendered in connection with an arbitration pursuant to this section shall be final and binding, and judgment upon such an award may be entered and enforced in any court of competent jurisdiction. (c) The forum for arbitration under this section shall be Calgary, Alberta, and the governing law for such arbitration shall be laws of Alberta. (d) Either of the parties hereto shall have the right to commence an arbitration by sending a notice to the other which shall state inter alia: (i) the amount of the controversy (ii) the nature of the controversy and (iii) that party's nominee, if any, for arbitrator. -3- (e) Arbitration under this section shall be conducted by a single arbitrator selected by negotiations between an authorized attorney for each party. If after a period of 30 days from the demand for arbitration no single arbitrator is selected, then such single arbitrator shall be selected in accordance with the provisions of the Arbitration Act (Alberta). In connection with the selection of such single arbitrator, consideration shall be given to familiarity with the oil and gas business and experience in dispute resolution between the parties, as a judge or otherwise. (f) If the arbitrator cannot continue to serve, a successor shall be selected by the procedures set forth in Section 8(e) hereof. (g) The arbitrator shall be guided, but not bound, by the rules of evidence and by the procedural rules, including discovery provisions, of the Rules of Civil Procedure of the Province of Alberta. Any discovery shall be limited to information directly relevant to the controversy or claim in arbitration. The arbitrator's ruling on discovery and procedural matters shall be binding on the parties. (h) The parties shall each be responsible for their own costs and expenses, except for the fees and expenses of the arbitrator, which shall be shared equally by the parties hereto. -4- EXECUTED as of the date first set forth above. GULF CANADA RESOURCES LIMITED BY: /s/ -------------------------------- Name: --------------------------- Title: Senior Vice President -------------------------- /s/ [ILLEGIBLE] ASSISTANT SECRETARY GULF INDONESIA RESOURCES LIMITED BY: /s/ [ILLEGIBLE] -------------------------------- Name: [ILLEGIBLE] --------------------------- Title: PRESIDENT & CEO -------------------------- /s/ [ILLEGIBLE] CORPORATE SECRETARY -5- EXHIBIT A CERTAIN DEFINED TERMS In addition to such other defined terms as may be set forth in the Agreement of which this Exhibit A is a part, as used in such Agreement or in this Exhibit A, the following terms have the following respective meanings: "E&P Business" means the oil and gas exploration, exploitation, development and production business and includes without limitation (a) the ownership of oil and gas property interests (including concessions and production sharing agreements, and including agreements referred to in the international oil and gas industry as "service contracts" whereby a company involved in the E&P Business agrees to explore, develop and operate oil and gas properties in return for a fee for each unit of production), and (b) the ownership and operation of real and personal property used or useful in connection with exploration for Hydrocarbons, development of Hydrocarbon reserves upon discovery thereof and production of Hydrocarbons from wells located on oil and gas properties; but such term does not include the oilfield service business. "E&P Business Assets" means interests in oil and gas properties (including concessions, production sharing agreements and service contracts, as such terms are used in clause (a) of the definition of E&P Business), and real and personal property used or useful in connection with the production and sale of Hydrocarbons from wells located on oil and gas properties. "E&P Investment" means equity securities of an entity owning E&P Business Assets, which together with other equity securities owned by the acquiring entity, constitute a majority of the outstanding common equity securities of the issuer of such equity securities or are entitled to a majority of the votes entitled to be cast under ordinary circumstances in the election of directors, or members of a comparable governing body. "E&P Investment Entity" means an entity whose equity securities constitute an E&P Investment. "fair market value" means (i) for purposes of Section 2, such value as shall be determined in good faith by the Independent Committee of Gulf Indonesia and (ii) for purposes of Section 3, such value as shall be determined in good faith by the Board of Directors of Gulf Canada. "Gulf Canada" means Gulf Canada Resources Limited together with its subsidiaries and other affiliated entities directly or indirectly controlled by it, other than Gulf Indonesia and entitles directly or indirectly controlled by it "Gulf Indonesia" means Gulf Indonesia Resources Limited together with its subsidiaries and other affiliated entities directly or indirectly controlled by it. "Hydrocarbons" means oil, gas or other liquid or gaseous hydrocarbons. A-1 "Independent Committee" means a committee to be established by the Board of Directors of Gulf Indonesia comprised at all times of all of those directors of Gulf Indonesia who are neither directors nor employees of Gulf Canada nor employees of Gulf Indonesia. "Indonesia" means all territories of the Republic of Indonesia, including in each case offshore areas that are contiguous to such states, provinces or territories or portions thereof. "Qualifying E&P Business Assets" means E&P Business Assets located in Indonesia that have a fair market value in excess of $100 million at the time of Gulf Canada's acquisition thereof, directly or through the acquisition of E&P Investments issued by an E&P Investment Entity. "Services Agreements" means each of the Technical Services Agreement, the Information Services Agreement and the Administrative Services Agreement between Gulf Indonesia and Gulf Canada executed on even date herewith. A-2 EX-99.E.8 10 h97565aexv99wew8.txt TECHNICAL SERVICES AGREEMENT EXHIBIT (e)(8) TECHNICAL SERVICES AGREEMENT THIS TECHNICAL SERVICES AGREEMENT made this 1st day of October, 1997, A M O N G: GULF CANADA RESOURCES LIMITED, a corporation governed by the laws of Canada (hereinafter referred to as "Gulf") OF THE FIRST PART - and - GULF INDONESIA RESOURCES LIMITED, a corporation governed by the laws of New Brunswick (hereinafter referred to as the "Company") OF THE SECOND PART - and - EACH OF THOSE SUBSIDIARIES OF THE COMPANY WHICH HAS EXECUTED THIS AGREEMENT OR HAS OTHERWISE BECOME A PARTY HERETO OF THE THIRD PART WHEREAS the Company is a wholly-owned subsidiary of Gulf; and WHEREAS each of the signatories hereto other than Gulf and the Company (collectively, the "Subsidiaries") are currently wholly-owned subsidiaries of the Company and each Subsidiary is a party hereto in its capacity as either operator and/or working interest owner of a PSC (as defined herein); and WHEREAS it is anticipated that a portion of the Shares held by Gulf will be sold to the public in the Offering; and - 2 - WHEREAS the Company is primarily engaged in the oil and gas business, including the acquisition, development and exploration and production of oil and gas properties in Indonesia; and WHEREAS Gulf has provided certain services to the Company in the past in connection with the business of the Company, and the Company wishes to ensure that such services, and others, as set forth herein, are available to it after the Offering, in order to maximize shareholder value and in an effort to manage its affairs in a cost effective and efficient manner, and Gulf desires to render such services to the Company, all upon the terms and conditions hereinafter set forth. NOW, THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual covenants and promises contained herein and other good and valuable consideration (the receipt and adequacy whereof is hereby acknowledged), the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 DEFINED TERMS For the purpose of this Agreement, the following terms shall have the meaning ascribed thereto below unless otherwise specified: "ADMINISTRATIVE SERVICE AGREEMENT" means the administrative service agreement among the Company, certain of its subsidiaries and Gulf dated the date hereof. "AFFILIATES" means, with respect to a Person, any person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with such Person, and the term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management, activities or policies of any Person or entity, whether through the ownership of voting securities, by contract, employment or otherwise but, for greater certainty, does not include any Person deriving such rights through a PSC. "AGREEMENT" means this Technical Services Agreement, as amended from time to time pursuant to the terms hereof. "BUSINESS" means all business activities of the Company as such business is now conducted or, subject to Section 2.2, may hereafter be conducted in the future. "CHANGE OF CONTROL" means the acquisition by any Person or group of Persons of beneficial ownership (as such term is defined under Section 13(d) of the Securities Exchange Act of 1934) of - 3 - more than 50% of the outstanding ordinary shares of Gulf on a non-diluted basis, or all or substantially all of the assets or business of Gulf. "COMPANY", when used herein, means the Company and each of its Subsidiaries, unless the context otherwise requires. "CORPORATE OPPORTUNITY AGREEMENT" means the corporate opportunity agreement between the Company and Gulf dated the date hereof. "EFFECTIVE DATE" means October 1, 1997. "FEES" has the meaning set forth in Section 4.3. "INFORMATION SERVICES AGREEMENT" means the information services agreement among the Company, certain of the subsidiaries of the Company and Gulf dated the date hereof. "OFFERING" means a public offering of Shares following which Gulf will own less than all of the Shares. "PERSON" includes an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a stock exchange, trustee in bankruptcy, receiver or any government, any political subdivision, any agency and any entity or person exercising executive, legislative, judicial, regulatory or administrative functions of government. "PERTAMINA" means Perusahaan Pertambangan Minyak dan Gas Bumi Negara, a state enterprise of the Republic of Indonesia, established on the basis of law no. 8/1971. "PSC" means a production sharing contract between the Company or any of its Subsidiaries and Pertamina, and includes any technical assistance contract, enhanced oil recovery contract, and any similar contractual arrangement to which the Company or any of its Subsidiaries may be a party or which it may enter into in the normal course of Business. "SHARES" means common shares in the capital of the Company and includes any shares, however called, having attributes similar to those of common shares. "SUBSIDIARY", with respect to a corporation (the "first corporation"), means a corporation that is controlled (i) by the first corporation, (ii) by the first corporation and another corporation which is itself controlled by the first corporation, (iii) by two or more corporations, each of which is controlled by the first corporation, or that is a subsidiary of such a corporation. -4- "TECHNICAL SERVICES" means the services set forth in Section 4.1. "TERM OF AGREEMENT" means the period from the Effective Date until this Agreement is terminated or otherwise expires pursuant to Article IX hereof. 1.2 CONSTRUCTION Whenever the context requires, the gender of all words used herein shall include the masculine, feminine and neuter, and the number of all words shall include the singular and plural. 1.3 REFERENCES Unless otherwise specified, the references herein to "Sections", "Subsections" or "Articles" refer to the sections, subsections or articles in this Agreement. ARTICLE II APPOINTMENT OF GULF 2.1 APPOINTMENT The Company hereby agrees that if it is unable to provide the Technical Services for itself, it will request that Gulf provide such Technical Services pursuant and subject to this Agreement, and Gulf hereby agrees to provide such Technical Services as are requested by the Company on the terms set forth herein. 2.2 FUTURE ACTIVITIES The Technical Services to be provided shall be provided with respect to the Business, which shall include all of the assets and activities of the Company, as now owned or conducted or as may be owned or conducted in the future. Notwithstanding the foregoing, in the event the Company acquires an asset or begins performing an activity outside the oil and gas business or scope of Gulf's normal course of business, the Company may request that such new assets or activity be excluded from the Business. If, in Gulf's reasonable opinion, such asset or activity is in the normal course of Gulf's and the Company's business, Gulf may submit the question of whether or not the asset or activity should be part of the Business to the Resolution Committee as contemplated by Section 3.3, the decision of which shall be final and binding. If the asset or activity is agreed or determined not to be within the oil and gas - 5 - business or the normal course of Gulf's business, Gulf shall provide no Technical Services in respect of such asset or activity. 2.3 STATUS OF PERTAMINA Gulf acknowledges that Pertamina is the manager of oil and gas assets in Indonesia, and that Pertamina has subcontracted through the PSCs the management of such assets to Affiliates of the Company and that, as a result, the actions of Gulf hereunder are subject to the same control by Pertamina as would the actions of the Company in connection with such assets. ARTICLE III AUTHORITY AND RESPONSIBILITY OF GULF 3.1 GENERAL Gulf shall have the authority and the responsibility to render the services in connection with the Business herein described. Gulf agrees to render services hereunder in a timely and prudent manner, consistent with generally accepted standards for a business similar to the Business. Gulf shall have no obligation to advance funds to any third party (other than any employee of Gulf) for the account of the Company or to pay any sums of its own to any third party (other than any employee of Gulf) in connection with the performance of the actions which it is authorized to take hereunder. Gulf's activities under this Agreement shall be specifically subject to the terms hereof and the general control, direction and supervision of the Company. 3.2 COMPLIANCE WITH LAWS Gulf shall use all reasonable efforts to insure full compliance by itself and its agents with all laws, ordinances, regulations and orders relative to the use, operation, development and maintenance of the Business and of each country which may have jurisdiction over the Company, the Business or any of the assets of the Company. Gulf shall, on the Company's behalf and for the Company's account, use reasonable efforts to remedy any violation of any such law, ordinance, rule, regulation or order which comes to its attention. If the violation is one for which the Company might be subject to penalty, Gulf shall promptly notify the Company of such violation to allow actions to be made to remedy the violation, and Gulf shall transmit promptly to the Company a copy of any citation or other communication received by Gulf setting forth any such violation. - 6 - 3.3 RESOLUTION COMMITTEE Either the Company or Gulf under Section 2.2 may request the formation of a committee ("Resolution Committee") to determine any of the matters provided for in such section. The Resolution Committee shall have three members, one person selected by Gulf, one member of the Company's Board of Directors selected by the Company (which member may be an officer or employee of the Company but shall not be an officer, director or employee of Gulf) and one member of the Company's Audit Committee selected by such Audit Committee. Each of Gulf and the Company agree to select the members of the Committee to be selected by them within ten (10) business days of the request to form the Resolution Committee, and shall advise the other party of their respective selections. Any determination made by the Resolution Committee shall be made by a majority of the members thereof, and shall be given to the Company in writing. The Company and Gulf shall provide the members of the Resolution Committee with such information relating to the subject matter before them as they may reasonably request. 3.4 COMPLIANCE WITH OBLIGATIONS Gulf, to the extent such matters are reasonably within its control, shall use all reasonable efforts to cause compliance with all terms and conditions contained in any contract, agreement, judicial, administrative or governmental order, lease, license agreement or other contractual or security instrument affecting the Company. Gulf shall promptly notify the Company of any violation of any provision of such contracts, agreements or orders. ARTICLE IV PROVISION OF SERVICES 4.1 PROVISION OF TECHNICAL SERVICES At the request of the Company from time to time, Gulf shall provide Technical Services to the Company, subject to the general direction and supervision of the Company. Technical Services shall mean the following: (a) engineering, supervisory and related services, including field services; (b) geological, geophysical and related services; (c) legal, financial, and other services related to project financing and other commercial agreements; - 7 - (d) on-the-job training in Canada or other mutually acceptable locations for engineering, operations, geological, geophysical, accounting, financial and other personnel required to conduct the Business; and (e) such other services of a technical nature as the Company may request of Gulf from time to time. Any request for Technical Services shall specify in reasonable detail the service or work Gulf is to supply, the date or dates on which the Company desires such service to be supplied or such work to be completed and such other information as the Company deems relevant. Gulf may request clarification as to any matter contained in such request, provided that Gulf does so in a prompt and timely manner. If Gulf is unable to provide the Company with the requested Technical Services in a timely fashion within the fees set forth in Section 4.3 or at all, then the Company shall be free to obtain such services from third parties. The Company may in any event conduct Technical Services in-house. Notwithstanding anything to the contrary set forth herein, the Company may use third-party Technical Service providers to the extent required by Indonesian law, regulations or custom, or to effect cost recovery, free of any restriction contained herein. 4.2 CONSULTANTS The Company acknowledges that Gulf may use third party consultants to perform certain of the activities outlined in this Agreement. If Gulf wishes to use third party consultants, Gulf shall obtain the consent of the Company thereto, which shall not be unreasonably withheld. The Company may instruct Gulf to retain a specific third party consultant not currently retained by Gulf or not to use a specific consultant. In that event, if Gulf does not reasonably agree that the use of such recommended consultant or the failure to use Gulf's recommended consultant is advisable, Gulf may decline to perform the requested service. 4.3 FEES Fees is connection with services provided pursuant hereto ("Fees") shall be billed by Gulf monthly, with an invoice representing all actual and allocated costs for the previous month to be delivered to the Company no later than the 20th day of each month. The Company shall pay invoices within 30 days from the receipt thereof. The Fees of Gulf for the provision of services hereunder shall be determined by a detailed study and the method so determined shall be applied consistently from period to period. The method selected shall be approved by Gulf and the Company and shall be reviewed not less than every two years. The parties hereto intend that the Fees of Gulf for the provision of services hereunder shall be limited to the actual and total costs, direct and indirect (including, but not limited to, overhead and administrative cost, out-of-pocket expenses of Gulf and its employees, agents and consultants - 8 - incurred in connection with the provision of services hereunder, amounts paid by Gulf to third parties calculated by reference to the Fees and Indonesian levies and taxes) to Gulf of providing such services, provided that such Fees shall not exceed those which the Company would pay to an arm's length third party for services of comparable quality and quantity. 4.4 COST RECOVERY Gulf shall use all reasonable efforts to ensure that all services provided hereunder in respect of which the Company or any of its Subsidiaries are or could be entitled to cost recovery from any third party shall be provided for in such a manner as to ensure that such cost recovery is available. In particular and without limitation, Gulf shall ensure that all Fees which may be charged as "technical services from abroad", and all other amounts in respect of which the Company or any of its Subsidiaries may be entitled to cost recovery are invoiced in such a manner as to be readily identifiable as such. In the event that cost recovery is not available in respect of particular Fees paid by the Company hereunder principally as a result of an assignment by Gulf pursuant to section 10.5 hereof, Gulf shall reimburse those particular Fees to the Company. 4.5 AUDIT REPORT The Company shall have the right at any time to cause its independent auditors to prepare a report to it confirming that the computation of the Fee by Gulf was accurate, and Gulf shall provide all reasonable cooperation and access to such auditors in the preparation of such report. At the request of the Company, Gulf shall also provide all reasonable cooperation and access to Pertamina or any government official in the event that Pertamina or such government official shall request or undertake an audit of any Fees paid by the Company to Gulf hereunder. In the event that such audit determines that the Fees were not properly calculated, the party against which such determination is made shall have the right to cause another independent audit to be prepared. In the event of disagreement between any two such audits, the matter shall be determined pursuant to arbitration in accordance with the provisions hereof. Upon any ultimate determination, Gulf or the Company, as the case may be, shall refund or pay any Fees improperly paid, or not charged, by Gulf. ARTICLE V FINANCIAL ADMINISTRATION 5.1 BUDGETS Gulf will provide the Company with all data necessary to prepare its operating budgets in a timely manner and in any event no later than six months prior to the beginning of a fiscal year of the Company. Prior to the end of each fiscal year of the Company during the Term of Agreement, the Company shall, to the extent possible, prepare and submit to Gulf, a budget (a "Budget") for - 9 - Technical Services for the ensuing year. Gulf shall employ reasonable efforts to ensure that the actual costs of providing Technical Services shall not exceed the approved Budget either in total or in any one accounting category, in connection with any matters set forth in such Budget. ARTICLE VI INDEMNITIES 6.1 INDEMNIFICATION BY GULF Gulf shall protect, indemnify, defend and hold harmless the Company and its officers, directors, employees, agents, other representatives and Subsidiaries from any and all threatened or actual claims, demands, causes of action, suits, proceedings (formal or informal), losses, damages, fines, penalties, liabilities, costs and expenses of any nature, including attorneys' fees and court costs, sustained or incurred by or asserted against the Company or its controlled Affiliates by any Person by reason of or arising out of: (i) any breach or alleged breach of this Agreement by Gulf, its Affiliates (other than the Company or its Subsidiaries), agents, or employees; or (ii) any act or alleged act of fraud, willful misconduct or gross negligence of Gulf and its Affiliates (other than the Company or its Subsidiaries) or any of its respective employees, officers, directors or agents, or (iii) acts outside, or omissions in, the scope of Gulf's authorized duties and responsibilities contained herein. In case any action or proceeding shall be brought against the Company or any of its controlled Affiliates in respect of which the indemnification contemplated by this Section 6.1 may be sought against Gulf, Gulf, upon the receipt of notice from the Company, shall defend such action or proceeding by counsel reasonably satisfactory to the Company and Gulf, and Gulf shall pay for all expenses therefor unless such action or proceeding is resisted and defended by counsel for any carrier of public liabilities insurance that benefits the Company or Gulf. The Company shall promptly give written notice to Gulf when a claim is made against the Company for which indemnity is owed to the Company by Gulf pursuant to this Section 6.1. Gulf shall participate at its own expense in defense of such claims, but the Company shall have the right to employ its own separate counsel. The Company shall assist Gulf in the defense of any claim for which Gulf owed indemnification hereunder and is undertaking to provide a defense, by making available to Gulf such records and personnel as may be reasonably requested in the defense of such claim. 6.2 INDEMNIFICATION BY THE COMPANY The Company hereby agrees to indemnify, defend, and hold harmless Gulf and its officers, directors, employees, agents, other representatives, shareholders, employees, agents and Subsidiaries (other than the Company) from any and all threatened or actual claims, demands, causes of action, suits, proceedings (formal or informal), losses, damages, fines, penalties, liabilities, costs and expenses of any nature, including attorney's fees and court costs, sustained or incurred by or asserted against Gulf or its Affiliates, officers, directors, employees and agents by any Person by reason of - 10 - or arising out of the conduct of the Company, other than the provision of services by Gulf or any of its Affiliates pursuant to this Agreement, except to the extent Gulf indemnifies the Company under the foregoing Section 6.1. In case any action or proceeding shall be brought against Gulf in respect to which the indemnity contemplated by this Section 6.2 may be sought against the Company, Gulf shall give notice of such action to the Company, and the Company shall defend such action or proceeding by counsel reasonably satisfactory to the Company and Gulf, and the Company shall pay for all expenses therefor unless such action or proceeding is resisted and defended by counsel for any carrier of public liability insurance that benefits the Company or Gulf. Gulf shall promptly give written notice to the Company when a claim is made against Gulf for which indemnity is owed to Gulf by the Company pursuant to this Section 6.2. The Company shall participate in defense of such claims, but Gulf shall have the right to employ its own separate counsel, and Gulf shall assist the Company in the defense of any claim for which the Company owes indemnification hereunder and is undertaking to provide a defense, by making available to the Company such records and personnel of Gulf as may be reasonably requested in the defense of such claim. 6.3 NON-ASSUMPTION OF LIABILITIES Gulf shall not, by entering into this Agreement, assume or become liable for any of the obligations, debts or other liabilities of the Company in existence or arising on or after the date hereof. Other than with respect to any damages caused by the fraud, willful misconduct or gross negligence of Gulf in rendering services hereunder, and except as provided in Section 6.1, Gulf shall not, by providing services to the Company, assume or become liable for any of the obligations, debts or other liabilities of the Company. ARTICLE VII ACCESS TO INFORMATION, BOOKS AND RECORDS; CONFIDENTIALITY; POWER OF ATTORNEY 7.1 ACCESS TO BOOKS AND RECORDS Gulf and its duly authorized representatives shall have complete access to the Company's offices, facilities and records wherever located, in order to discharge Gulf's responsibilities hereunder. All records and materials furnished to Gulf by the Company in performance of this Agreement shall at all times during the Term of Agreement remain the property of the Company. The Company and its duly authorized representatives shall have complete access to records and other information concerning the Company used by Gulf in performance of its duties hereunder. - 11 - 7.2 CONFIDENTIALITY For the Term of Agreement and for at least two years after the Term of Agreement, Gulf agrees to keep confidential all non-public information concerning the Company acquired by Gulf or its Affiliates during the Term of Agreement. For the purpose of this Section 7.2, confidential information shall not include any information available to or otherwise disclosed by the Company to third parties generally without any obligation of confidentiality. Nothing in this Section 7.2 shall prohibit any announcement or disclosure by a Party that such Party determines upon the written advice of counsel is required to be disclosed by applicable law or court order or is necessary to be disclosed in connection with litigation, provided that in any such event the Party proposing to make disclosure shall use reasonable efforts to advise the other Party as far in advance of such disclosure as possible and shall consult with the other Party on the means of complying with such obligation, and shall assist such Party in any attempt it may make to seek confidential treatment of such information. ARTICLE VIII REPRESENTATIONS AND WARRANTIES 8.1 REPRESENTATIONS AND WARRANTIES OF GULF Gulf represents and warrants to the Company as follows: (a) Gulf has the full power and authority to conduct its business and perform its obligations and consummate the transactions contemplated hereunder. (b) This Agreement has been duly authorized, executed and delivered by Gulf. (c) This Agreement is a valid and legally binding obligation of Gulf enforceable against Gulf in accordance with its terms, and the Company is entitled to the benefits thereof. (d) Gulf is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority, or in the payment of any indebtedness for borrowed money or under the terms or provisions of any agreement or instrument evidencing or securing any such indebtedness. (e) No representation or warranty of Gulf contained in this Agreement and no statement of Gulf contained in any certificate, schedule, list, financial statement or other instrument furnished to the Company pursuant to this Agreement contains, or will contain, any untrue statement of material facts, or omits, or will omit, to state a - 12 - material fact necessary to make the statements contained herein or therein not misleading. (f) There are no actions, suits, proceedings or governmental investigations or inquiries pending or threatened against Gulf or investigations or inquiries pending or threatened against Gulf or to which Gulf is a party or to which any property of Gulf is subject, which, if determined adversely to Gulf, would materially affect the operations or financial position of Gulf or its ability to perform its obligations hereunder. (g) Gulf is validly existing and in good standing under the laws of Canada and Gulf possesses all licenses, consents, approvals, authorizations and qualifications the absence of which would, individually or in the aggregate, materially adversely affect the business or properties of Gulf. (h) Neither the execution and delivery of this Agreement, nor the performance or compliance with the terms and conditions hereof, conflict with, or will result in a breach by Gulf of, or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any asset of Gulf pursuant to any of the terms, conditions or provisions of (i) the Articles of Incorporation or Bylaws of Gulf, (ii) any mortgage, deed of trust, lease, contract, agreement or other instrument to which Gulf is a party or by which Gulf may be bound or affected, or (iii) any writ, order, judgment, decree, statute, ordinance, regulation or any other restriction of any kind or character, to which Gulf is subject, or by which Gulf may be bound or affected. All representations and warranties made by Gulf in this Agreement shall survive for a period of two years from the date of this Agreement. 8.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Gulf as follows: (a) The Company has full power and authority to conduct its business and perform all its obligations and consummate the transactions contemplated hereunder. (b) This Agreement has been duly authorized, executed and delivered by the Company. (c) This Agreement is valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, and Gulf is entitled to the benefits thereof. - 13 - (d) The Company is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority, or in the payment of any indebtedness for borrowed money or under the terms or provisions of any agreement or instrument evidencing or securing any such indebtedness, except for those which the Company has to date disclosed to Gulf in writing. (e) No representation or warranty of the Company contained in this Agreement or other instrument furnished by the Company to Gulf pursuant to this Agreement contains, or will contain, any untrue statement of material fact, or omits, or will omit, to state a material fact necessary to make the statements contained herein or therein not misleading. (f) There are no actions, suits, proceedings or governmental investigations or inquiries pending or threatened against the Company or to which the Company is a party or to which any property of the Company is subject, which if determined adversely to the Company, would materially affect the operations or financial position of the Company, except for those which the Company has to date disclosed to Gulf in writing. (g) The Company is duly incorporated and validly existing and in good standing under the laws of New Brunswick and the Company possesses all licenses, consents, approvals, authorizations and qualifications (including qualifications to do business as a foreign corporation) the absence of which would individually or in the aggregate, materially adversely affect the business or properties of the Company. (h) Neither the execution and delivery of this Agreement, nor the performance or compliance with the terms and conditions hereof, conflict with, or will result in a breach by the Company of, or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any asset of the Company pursuant to any of the terms, conditions or provisions of (i) the Articles of Incorporation or Bylaws of the Company, (ii) any mortgage, deed of trust, lease, contract, agreement or other instrument to which the Company is a party or by which the Company is subject, or by which the Company may be bound or affected. All representations and warranties made by the Company in this Agreement shall survive for a period of two years from the date of this Agreement. - 14 - ARTICLE IX TERM AND TERMINATION OF AGREEMENT 9.1 INITIAL TERM The initial term of this Agreement shall be for a 10 (ten) year period beginning on the Effective Date ("Initial Term"). Thereafter, this Agreement shall automatically renew for successive five year periods ("Renewal Terms") until terminated by either party in accordance with the provisions of this Article IX. 9.2 TERMINATION This Agreement shall be terminated on the first to occur of the following: (a) In the event the parties shall mutually agree in writing, this Agreement may be terminated on the terms and dates stipulated in such writing. (b) Subject to Section 9.3, prior to the expiration of the Initial Term, if Gulf ceases to hold more than a majority of the Shares of the Company (calculated on a non-diluted basis) or ceases to hold shares of the Company entitled to a majority of the votes entitled to be cast under ordinary circumstances in the election of directors, the Company may, with or without cause, terminate this Agreement on the first day of any month thereafter by providing written advance notice to Gulf, and Gulf may terminate this Agreement on the first day of any month by giving the Company at least 12 months' advance written notice of such termination. (c) Subject to Section 9.3, Gulf or the Company may, with or without cause, terminate this Agreement on the expiration of the Initial Term or any Renewal Term by giving the other party at least 12 months' advance written notice of its intent to terminate, whereupon this Agreement shall terminate on the expiry of the Initial Term or the Renewal Term, as the case may be. (d) Subject to events of force majeure (as provided in Section 10.9 hereof), in the event either party shall fail to discharge any of its material obligations hereunder or under the Corporate Opportunity Agreement, the Administrative Services Agreement or the Information Services Agreement (collectively, the "Other Agreements"), including, without limitation, the obligation to render services in connection with the Business in a timely and prudent manner, or shall commit a material breach of this Agreement or any of the Other Agreements and such failure, default or breach shall continue for a period of thirty (30) days after the other party has served written notice of such default, this Agreement and any or all of the Other Agreements may then be - 15 - terminated at the option of the non-breaching party by written notice thereof to the breaching party specifying a proposed date of termination no more than 12 months nor less than 30 days after the date of such notice, in which case this Agreement shall terminate on the date specified in such notice, it being understood that such termination right is in addition to any other remedies that may be available to the aggrieved party. (e) Upon the dissolution or termination of the corporate existence of Gulf or cessation on Gulf's part to continue to conduct the E&P Business (as defined in the Corporate Opportunity Agreement). (f) The Company shall have the right to terminate this Agreement if there is instituted by or against Gulf any proceeding under any applicable bankruptcy law, or under any other law for the relief of debtors now or hereafter existing, or a receiver is appointed for all or substantially all of the assets of Gulf and such proceeding is not dismissed or such receiver is not discharged, as the case may be, within thirty (30) days thereafter. (g) The Company shall have the right to terminate this Agreement if Gulf shall (i) become insolvent, (ii) generally fail to, or admit in writing its inability to, pay debts as they become due, (iii) make a general assignment for the benefit of creditors, (iv) apply for, consent to or acquiesce in the appointment of a trustee, receiver or other custodian. (h) The Company shall have the right to terminate this Agreement if a substantial portion of the assets or properties of Gulf shall be seized or taken by order of a governmental agency or body, or any other writ shall be issued against Gulf or any of its assets, or if any other lawful creditor's remedy shall be asserted or exercised with respect thereof, provided that in any such case Gulf has not contested such action in good faith within 30 days' thereof. (i) The Company and Gulf shall have the right to terminate this Agreement during the 12 months following the occurrence of a Change of Control. (j) In the event that the Company shall have elected to take the actions specified in section 4 of the Corporate Opportunity Agreement. Unless otherwise provided in this section 9.2, the Company may exercise its right to terminate this Agreement under paragraphs (f) through (i) of this Section 9.2 by giving Gulf written notice specifying a proposed date of termination no more than 12 months nor less than thirty (30) days after the date of such notice, in which case this Agreement shall terminate on the date specified - 16 - in such notice. Gulf may exercise the rights of termination provided to it hereunder by giving the Company written notice specifying a proposed date of termination not less than 12 months after the date of such notice, in which case this Agreement shall terminate on the date specified in such notice. 9.3 EFFECTS OF TERMINATION The termination of this Agreement in accordance with the provisions of this Article IX shall have the following effects: (a) Except for the mutual indemnities set forth in Article VI and the covenants and the other provisions herein that by their terms expressly extend beyond the Term of Agreement, the Parties' obligations hereunder are limited to the Term of Agreement. (b) In the event this Agreement is terminated for any reason, Gulf shall immediately deliver possession to the Company of all assets, books and records of the Company in Gulf's possession and shall provide the Company with copies of all assets, books and records (including electronic copies in the format requested by the Company and reasonably within Gulf's capability) relating to the Business that are in Gulf's possession, at the cost of the Company. (c) Upon termination of this Agreement (for whatever cause, other than a material breach by Gulf of this Agreement or any of the Other Agreements), the Company shall pay to Gulf the amount of any and all costs and expenses accrued to the date of such termination which are payable by the Company to Gulf in accordance with the provisions hereof. (d) In addition to any other requirements in this Article IX, if the Company terminates this Agreement pursuant to (i) Section 9.2(a) or 9.2(b), then the Company shall pay to Gulf a fee equal to twelve months' Fees under this Agreement, and (ii) Section 9.2(c), then the Company shall pay to Gulf a Fee equal to eight months' Fees under this Agreement. In the case of clauses (i) and (ii) above, such termination fee shall be calculated based on the average of the total fees paid for the three years immediately preceding the date this Agreement terminates (or such shorter period as this Agreement has been in effect) and shall be payable on the termination date. - 17 - ARTICLE X MISCELLANEOUS 10.1 RELATIONSHIP OF PARTIES This Agreement does not create a partnership, joint venture or association or agency relationship; nor does this Agreement, or the operations hereunder, create the relationship of lessor and lessee or bailor and bailee. Nothing contained in this Agreement or in any agreement made pursuant hereto shall ever be construed to create a partnership, joint venture or association, or the relationship of lessor and lessee or bailor and bailee, or to impose any duty, obligation or liability that would arise therefrom with respect to either or both of the Parties except as otherwise expressly provided in this Agreement or any agreement made pursuant hereto. Specifically, but not by way of limitation, except as otherwise expressly provided for herein, nothing contained herein shall be construed as imposing any responsibility on Gulf for the debts or obligation of the Company or any of its Subsidiaries. Subject to the terms of this Agreement, Gulf and its Affiliates shall have the right to render similar services for other business entities and persons, including its own, whether or not engaged in the same business as the Company. 10.2 NO THIRD PARTY BENEFICIARIES Except to the extent a third party is expressly given rights herein, any agreement to pay an amount and any assumption of liability herein contained, expressed or implied, shall be only for the benefit of the parties and their respective legal representatives, successors and assigns, and such agreement or assumption shall not inure to the benefit of the holders of any indebtedness or any party whomsoever, it being the intention of the parties hereto that no person or entity shall be deemed a third party beneficiary of this Agreement except to the extent a third party is expressly given rights herein. 10.3 NOTICES Any notice, demand, or communication required, permitted, or desired to be given hereunder shall be deemed effectively given when personally delivered or mailed by prepaid certified mail, return receipt requested, addressed as follows: - 18 - (i) if to the Company to: Gulf Indonesia Resources Limited 21st Floor, Wisma 46, Kota, BNI JI. Jend. Sudirman, Kav 1 Jakarta, Indonesia Attn: Chief Operating Officer (ii) if to Gulf, to: Gulf Canada Resources Limited One Norwest Center 1700 Lincoln, Suite 5000 Denver CO 80203-4524 Attn: President or to such other address and to the attention of such other person or officer as either Party may designate by written notice pursuant to this Section 10.3. 10.4 GOVERNING LAW This agreement has been executed and delivered in and shall be interpreted, construed and enforced pursuant to and in accordance with the laws of Alberta. 10.5 ASSIGNMENT No assignment of this Agreement or any of the rights or obligations set forth herein by either party shall be valid without the specific written consent of the other party, provided that Gulf and any permitted assignees of Gulf shall have the right to assign this agreement to an Affiliate of Gulf without the consent of the Company, provided that (i) such Affiliate is controlled by Gulf, (ii) the ability of the Company to obtain cost recovery under a relevant PSC is not thereby lost, and (iii) Gulf shall remain liable for such assignee's obligations under this Agreement. 10.6 WAIVER OF BREACH The waiver by either party of a breach or violation of any provision of this Agreement shall not operate as, or be construed to be, a waiver of any subsequent breach of the same or any other provisions hereof. - 19 - 10.7 ENFORCEMENT In the event either party shall resort to legal action to enforce the terms and provisions of this Agreement, the prevailing party may recover from the other party the costs of such action including, without limitation, reasonable attorneys' fees. 10.8 ADDITIONAL ASSURANCES Upon the request of either party, the other party shall execute such additional instruments and take such additional actions as shall be necessary to effectuate this Agreement. 10.9 FORCE MAJEURE Neither party shall be liable nor deemed to be in default for any delay or failure of performance under this Agreement resulting directly or indirectly from acts of God, civil or military authority, acts of public enemy, war, accidents, fires, explosions, earthquakes, floods, failure of transportation, strikes, interruptions by either party's employees or any similar or dissimilar cause beyond the reasonable control of the party claiming the force majeure. 10.10 SEVERABILITY If any provision of this Agreement or any application thereof shall be declared or held to be invalid, illegal or unenforceable in whole or in part whether generally or in any particular jurisdiction, such provision shall be deemed to be amended to the extent necessary to cure such invalidity, illegality or unenforceability, and the validity, legality or enforceability of the remaining provisions of this Agreement, both generally and in every other jurisdiction, shall not in any way be affected or impaired thereby. 10.11 ARTICLE AND SECTION HEADINGS The articles and section headings contained in this Agreement are for reference purposes only and shall not effect in any way the meaning of interpretation of this Agreement. 10.12 ENTIRE AGREEMENT This Agreement represents the entire agreement of the Company and Gulf with respect to the subject matter hereof, and there are no promises, agreements undertakings, representations or warranties of the Company or Gulf relative to the subject matter hereof not expressly set forth or referred to herein, other than the Technical Management and Services Agreement (Corridor Block Production Sharing Contract and Facilities) between Asamera (Overseas) Limited and Gulf, dated as of January 29, 1997, which remains in full force and effect. - 20 - 10.13 ARBITRATION The parties hereto agree to the following: (a) Any controversy or claim arising out of or relating to this Agreement, or the breach hereof, shall be settled by arbitration in accordance with such rules as may be agreed upon by the parties hereto, or failing agreement, in accordance with the provisions of the Arbitration Act (Alberta) as such rules may be modified herein. (b) An award rendered in connection with an arbitration pursuant to this section shall be final and binding, and judgment upon such an award may be entered and enforced in any court of competent jurisdiction. (c) The forum for arbitration under this section shall be Calgary, Alberta, and the governing law for such arbitration shall be laws of Alberta. (d) Either of the parties hereto shall have the right to commence an arbitration by sending a notice to the other which shall state inter alia: (i) the amount of the controversy, if applicable, (ii) the nature of the controversy and (iii) that party's nominee, if any, for arbitrator. (e) Arbitration under this section shall be conducted by a single arbitrator selected by negotiations between an authorized attorney for each party. If after a period of 30 days from the demand for arbitration no single arbitrator is selected, then such single arbitrator shall be selected in accordance with the provisions of the Arbitration Act (Alberta). In connection with the selection of such single arbitrator, consideration shall be given to familiarity with the oil and gas business and experience in dispute resolution, as a judge or otherwise. (f) If the arbitrator cannot continue to serve, a successor shall be selected by the procedures set forth in Section 10.13(e) hereof. (g) The arbitrator shall be guided, but not bound, by the rules of evidence and by the procedural rules, including discovery provisions, of the Rules of Civil Procedure of the Province of Alberta. Any discovery shall be limited to information directly relevant to the controversy or claim in arbitration. The arbitrator's ruling on discovery and procedural matters shall be binding on the parties. (h) The parties shall each be responsible for their own costs and expenses, except for the fees and expenses of the arbitrator, which shall be shared equally by the parties hereto. - 21 - 10.14 ADDITIONAL PARTIES The parties hereto acknowledge and agree that additional Subsidiaries of the Company may come into existence and/or may become parties to a PSC at any time and from time to time, and in such event, the Company shall ensure that each Subsidiary which is the operator of or party to a PSC becomes party hereto. A Subsidiary shall become party hereto by executing a counterpart hereof, at which time such Subsidiary shall be deemed to be a party hereto without further formality. - 22 - IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly authorized representatives as of the day and year first above written. GULF CANADA RESOURCES LIMITED By: C.S. Glick ------------------------------- Name: C.S. Glick Title: Sr. Vice-President & C.F.O. GULF INDONESIA RESOURCES LIMITED By: /s/ R.H. Auchinleck ------------------------------- Name: R.H. Auchinleck Title: President & C.E.O. EX-99.E.9 11 h97565aexv99wew9.txt TRADE-MARK SUBLICENSE & NAME USE AGREEMENT EXHIBIT (e)(9) TRADE-MARK SUBLICENSE AND NAME USE AGREEMENT THIS AGREEMENT made effective the 28th day of August, 1997, BETWEEN: GULF CANADA RESOURCES LIMITED, a corporation pursuant to the laws of Canada (hereinafter referred to as "Gulf") - and - GULF INDONESIA RESOURCES LIMITED, a corporation pursuant to the laws of New Brunswick (collectively, with its Affiliates hereinafter referred to as the "Company") WHEREAS Gulf has entered into an agreement, as amended on August 28, 1997, for the use of certain trademark rights in "GULF" and "GULF IN ORANGE DISC DEVICE" (the "Marks") with Gulf International Lubricants Ltd., a Bermuda company ("Gulf International"), whereby Gulf International has agreed it will not take any action against Gulf with respect to Gulf's use of the Marks; and WHEREAS Gulf expects to be granted a license to use certain names and marks, a list of which is attached hereto as Schedule "A" to this Agreement (the "Trade-marks") and the right to use the name "Gulf" as part of corporate or trade name of Gulf and Gulf's controlled affiliates pursuant to an agreement (the "License Agreement") dated effective August 28, 1997 between Gulf and Gulf International Lubricants Ltd. (a Bermuda Company) ("Gulf International") in substantially the form delivered to Gulf Indonesia prior to the execution hereof; and WHEREAS the Company desires to use the Trade-marks as an authorized user in Indonesia and Singapore (the "Territory"); and WHEREAS the Company also desires to use "Gulf" (the "Name") in its corporate name. NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of TEN DOLLARS ($10.00) paid by the Company to Gulf and the mutual covenants and conditions herein contained (the receipt and adequacy whereof is hereby acknowledged), the parties hereto and agree as follows: -2- ARTICLE 1 LICENSE 1.1 Gulf hereby grants to the Company and its Affiliates (as defined in section 1.4 below) a non-exclusive, non-transferable right to use the Name in its corporate and trade-names and the Trade-marks in connection with upstream operations, including, without limitation, surveying exploration, drilling, producing, transporting, shipping and sale of unrefined hydrocarbons and all business activities relating thereto (the "Permitted Usage"), subject to the conditions and restrictions set out below or in any other agreement between the parties (the "License"). 1.2 The Company expressly acknowledges and agrees that it shall not use the Trade-marks or Name outside the Territory except with the express prior written consent of Gulf. 1.3 The Company agrees to use the Trade-marks and Name only under and in compliance with the term of this Agreement. The Company shall conspicuously display the Trade-marks or Name and acknowledges ownership of the Trade-marks and the Name in Article 3. 1.4 "Affiliate" means any entity that is Controlled by the referenced entity, including, without limitation, entities which are Controlled by another entity which is an Affiliate. "Control" means either, directly or indirectly, a) ownership of more than fifty percent of the voting interest in any type of entity or b) to power or right, however derived, to elect, direct or control the management or actions of an entity, and "Controlled", "Controlling" and "Controls" shall have correlative meanings. ARTICLE 2 LICENSE FEE 2.1 Upon execution of this Agreement, the Company shall pay to Gulf or its nominee by cheque an amount of U.S. $44,972.60. 2.2 On or before May 1 of each calendar year during to term of this Agreement, beginning on May 1, 1998, the Company shall pay to Gulf or its nominee by cheque an annual fee in the amount of U.S. $67,000.00. -3- ARTICLE 3 OWNERSHIP OF TRADE-MARKS AND NAME 3.1 The Company acknowledges that Gulf International possesses the proprietary rights to the Trade-marks and the Name with respect to use in the Territory on or in connection with the Permitted Usage and that Gulf possesses certain rights to the use of the Trade-marks and the Name in the Territory and elsewhere pursuant to the License Agreement. The Company agrees that the Trade-marks and Name shall remain the sole property of Gulf International and remain subject to the rights of Gulf pursuant to the License Agreement. Gulf hereby grants to the Company only those rights to the Trade-marks and Name in the Territory which Gulf International has granted to Gulf pursuant to the License Agreement. This Agreement does not give the Company any interest in the Trade-marks or the Name except the right to use the Trade-marks and the Name in accordance with the terms of this Agreement. The Company shall not use the Trade-marks or the Name in any manner calculated to represent that the Company is the owner of the Trade-marks or the Name. 3.2 The Company agrees that during the term of this Agreement and thereafter, it will not dispute or contest, directly or indirectly, the validity or enforceability of the Trade-marks or the ownership of the Name, nor counsel, procure or assist anyone else to do the same, unless compelled by due process of law, nor directly or indirectly attempt to dilute the value of the goodwill attached to the Trade-marks or the Name, nor counsel, procure or assist anyone else to do the same, unless compelled by due process of law. 3.3 In any filing with a stock exchange, securities commission or other government or regulatory body which describes the Trade-marks and in any other printed promotional material (ie. corporate brochures), the Company shall disclose that the Trade-marks are used under a license granted by Gulf International to Gulf and a sub-license granted by Gulf to the Company. ARTICLE 4 PROTECTION OF RIGHTS 4.1 Any and all use of the Trade-marks and the Name by the Company in the Territory on or in connection with the Permitted Usage shall inure to the benefit of Gulf International. 4.2 It is the express purpose and a condition of this Agreement that none of the understandings and provisions contained herein prejudice in any fashion any rights of Gulf relative to the Trade-marks or the Name, and if any provision of this Agreement were to be or is interpreted by any court, or other administrative authority, in any manner which would prejudice, restrict or impede in any manner the rights of Gulf to the Trade-marks or the Name, whether or not said interpretation was made at the petition of the Company or any other person, such -4- provision of this Agreement shall be considered as invalid, or at the option of Gulf this Agreement shall be immediately terminated. ARTICLE 5 POLICING 5.1 Gulf at its expense shall take all steps that in its opinion and sole discretion are necessary or desirable to protect the Trade-marks or the Name against any infringement or dilution. The Company agrees to cooperate fully with Gulf in the defense and conservation of the Trade-marks and the Name as requested by Gulf. 5.2 The Company shall report to Gulf any actual or threatened infringement or imitation of, or improper or wrongful use of, or challenge to, the Trade-marks or the Name, immediately upon becoming aware of same and Gulf shall, at its sole discretion, determine whether or not any action shall be taken on account of such infringements, imitations, improper or wrongful use or challenges and its determination shall be final. The Company shall not be entitled to bring, or call upon, or compel Gulf to bring any action or other legal proceedings on account of such infringements, imitations, improper or wrongful use or challenges, without the written agreement of Gulf. Gulf shall not be liable for any loss, cost, damage or expense suffered or incurred by the Company because of the failure or inability of Gulf to take or consent to the taking of any action or account of any such infringements, imitations, improper or wrongful use or challenges because of the failure of any such action or proceeding. In the event that Gulf shall commence any action or legal proceeding on account of such infringements, imitations, improper or wrongful use or challenges, the Company agrees to provide all reasonable assistance (other than financial assistance) requested by Gulf in preparing for and prosecuting the same. ARTICLE 6 MAINTENANCE 6.1 Gulf shall periodically take all steps that in its opinion and sole discretion are necessary to preserve and maintain the Trade-marks in due force and duly registered (or to complete or obtain registration of any application) subject to the provisions of this Agreement. The Company agrees to cooperate with Gulf in maintaining the Trade-marks in due force and duly registered, and without limiting the foregoing, the Company shall cooperate with Gulf in registration of this Agreement as may be required and in registration of the Company as an authorized user as may be required or desirable and the Company shall pay the reasonable fees and costs to register the Company as an authorized user. -5- 6.2 The Company shall from time to time provide information, documents and assistance and execute such agreements, forms and furnish such declarations of use as may be required by Gulf in connection with the Trade-marks or the Name, their use and the registrations thereof by Gulf and to facilitate compliance with laws and protection of the Trade-marks and the Name. ARTICLE 7 QUALITY CONTROL 7.1 The goods and services provided by the Company in conjunction with the Trade-marks shall be of a quality, form and nature equivalent to those normally supplied by Gulf or on its behalf. The Company shall not use any Trade-mark which comprises a design element or stylized form in an altered or modified form without the consent of Gulf. In connection with the Permitted Usage, the Trade-marks will not be altered, or conjoined with any other registered or unregistered marks either belonging to the Company or otherwise, without the consent of Gulf. 7.2 The Company agrees to abide by the Visual Standards Manual attached hereto as Schedule "B" showing the manner in which the Trade-marks should be used in accordance with the Permitted Usage. Prior to February 20,1998, the Company shall provide Gulf with a report outlining with specificity the extent of its current usage of the Trade-marks. Following the initial report, the Company will only file such reports as and when the extent of its usage changes or if so requested by Gulf. If such usage is in violation of the terms of Permitted Usage as set forth herein, then the Company will promptly correct such violation within fifteen (15) days of written notice from Gulf. 7.3 Upon the request of Gulf, the Company shall permit an authorized representative of Gulf to inspect at all reasonable times locations in which these services are provided in connection with the Trade-marks in order to permit (Gulf to verify the quality of the goods and services associated with the Trade-marks. -6- ARTICLE 8 INDEMNITY 8.1 Subject to the provisions of this Agreement, the Company shall indemnify, defend and hold harmless Gulf, its subsidiaries and their respective officers, directors, employees and agents, from and against any and all actions, suits, claims, demands and prosecutions that may be brought or instituted against Gulf based on or arising out of the Company's activities in the Territory or from any other acts of the Company in connection with the Company's performance of this Agreement or the activities contemplated hereby, excluding claims that the use of the Trade-marks in the Territory on or in connection with the Permitted Usage constitutes infringement, passing-off, or unfair competition. 8.2 Gulf shall indemnify, defend and hold harmless the Company, its Affiliates and their respective officers, directors, employees and agents from and against any and all actions, suits, claims, demands and prosecutions that may be brought or instituted against the Company based on or arising out of claims that the use of the Trade-marks in the Territory in connection with the Permitted Usage constitutes infringement, passing-off or unfair competition. 8.3 In the event Gulf is unable to enter into the License Agreement and the Company's rights under this Agreement are adversely impacted because of such failure to enter into the License Agreement, Gulf shall indemnify, defend and hold harmless the Company, its Affiliates and their respective officers, directors, employees and agents from and against any and all actions, suits, claims, demands and prosecutions that may be brought or instituted against the Company based on or arising out of Gulf's failure to enter into the License Agreement and Gulf shall pay any and all costs and expenses (including legal fees) of the Company and its Affiliates in connection with the change of its corporate name to a name which does not infringe upon or include or refer to the word "GULF". ARTICLE 9 LAWS 9.1 This Agreement shall be governed by, subject to and interpreted in accordance with the laws of Alberta and the parties agree to attorn to the exclusive jurisdiction of the courts in Alberta. 9.2 The Company shall be responsible for ensuring that its actions under this Agreement conform with all applicable laws and regulations within the Territory. -7- 9.3 The Company shall obtain and maintain the effectiveness of all requisite licenses, authorizations, consents and government approvals necessary or appropriate to conduct business in which it is engaged and to perform its duties and obligations under this Agreement. ARTICLE 10 TERM OF THIS AGREEMENT 10.1 Unless otherwise terminated pursuant to the provisions of this Agreement or upon the mutual agreement of the parties, this Agreement and the License granted hereunder shall be in force effective on the date first written above and shall continue at the sole discretion of the Company until the License Agreement has been validly executed and delivered by Gulf and Gulf International. Unless otherwise terminated by the Company, upon the valid execution and delivery of the License Agreement by Gulf and Gulf International, this Agreement and the License granted hereunder shall be in force for as long as the License Agreement is in full force and effect ARTICLE 11 TERMINATION 11.1 This Agreement shall automatically terminate upon the occurrence of either of the following events: (a) If Gulf owns 50% or less of the issued and outstanding equity securities of the Company; or (b) upon termination of the License Agreement. 11.2 Gulf shall be entitled to terminate this Agreement immediately on written notice to the Company upon the occurrence of any of the following events: (a) If the Company assigns or attempts to assign, or transfers or attempts to transfer, by operation of law or otherwise, including by way of merger or amalgamation, without written consent of Gulf (which may be unreasonably withheld) this Agreement or any rights hereunder; (b) If the Company commits any act or becomes involved in any situation or occurrence which in the opinion of Gulf would tend to bring Gulf or the Trade-marks or the -8- Name to public disrepute, contempt, scandal, or ridicule or which, in the opinion of Gulf, would tend to shock, insult or offend the community, or any group or class thereof; (c) If the Company makes any use of the Trade-marks or the Name in conflict with or in a manner not specifically provided in this Agreement, or engages in any conduct or practice that is reasonably likely, in the sole opinion of Gulf, to adversely affect the Trade-marks or the Name, with the goodwill associated therewith, or Gulf's rights therein, and fails to correct such violation within fifteen (15) days after written notice of such violation is given to the Company by Gulf; or (d) If the Company fails to fulfill any of the obligations to be fulfilled by it pursuant to the terms of this Agreement within fifteen (15) days after written notice of such failure is given to the Company by Gulf. 11.3 Within eighteen (18) months of the expiration or termination of this Agreement: (a) The License shall revert to Gulf and the Company thereafter shall not use or refer to the Trade-marks or the Name or in any way identify itself or associate itself with the same either directly or indirectly (including without limitation as part of the Company's corporate or business name). The Company shall remove forthwith from public view all signs and advertising display materials, printed paper products, special advertising materials, business supplies, containers and wrapping material bearing the Trade-marks then in its possession; (b) Notwithstanding any dispute whatsoever that may arise or exist between the parties hereto, the Company shall cease using the Trade-marks or any confusingly similar trade name or mark; (c) The Company shall execute all such documents and do all such things as Gulf may require to remove the Company as registered user of or as an applicant to be a registered user of the Trade-marks and to transfer to Gulf all and any rights in the Trade-marks and in the goodwill associated therewith, without payment therefor, and the Company hereby irrevocably appoints Gulf as its duly authorized agent to execute such documents and to do such things. The Company agrees not to dispute, directly or indirectly, any application or action by Gulf to remove the Company as registered user of the Trade-marks; (d) The Company shall change its corporate name to one not using the Trade-marks or the Name or any words confusingly similar with the Trade-marks or the Name; and -9- (e) The Company shall destroy or deliver up all signs, brochures, cards and materials bearing the Trade-marks or the Name to Gulf. 11.4 Subject to section 11.3, on expiration or termination of this Agreement, all such other rights and obligations between the parties relating to the Trade-marks and the Name shall terminate, except for those rights or obligations which have accrued or arisen under this Agreement prior to the time of termination or which according to the provisions of this Agreement, survive the termination of same, including any rights or obligations which have accrued or arisen in respect of a breach or failure to perform, and such rights and obligations shall survive the termination of this Agreement. ARTICLE 12 ASSIGNMENT 12.1 This Agreement shall be binding upon and enure to the benefit of the parties hereto (including Affiliates of the Company), their respective successors and permitted assigns. The Company shall not assign or transfer this Agreement, or any part thereof, including by way of merger or amalgamation without first obtaining the written consent of Gulf. Any such assignment or transfer without Gulf's consent shall be void. The Company shall have no right to sublicense others to use the Trade-marks or the Name and shall carry out its obligations and duties hereunder on its own behalf without subcontractors or agents, unless prior approval in writing is obtained from Gulf. ARTICLE 13 EXPENSES 13.1 Unless otherwise specifically stated herein, each party shall bear all expenses incurred by it in connection with the performance of its undertakings hereunder. 13.2 The Company shall be liable for and agrees to hold harmless and indemnify Gulf in respect of all attorney's fees and costs associated with the enforcement by Gulf of any of the Company's obligations under this Agreement or of any of the provisions of this Agreement -10- ARTICLE 14 NOTICES 14.1 All notices, requests, consents, demands, waivers or other communications hereunder shall be in writing in the English language and shall be sent by hand delivery or courier to the addresses set forth below or by prepaid, first class registered airmail or by facsimile transmission with confirmation of transmission to the addresses set forth below. Any notice or other communication sent by facsimile shall be deemed to have been received on the business day following the sending. Any payment, notice or other communication delivered by other means shall be deemed to have been received at the time it is delivered to the applicable address either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. To the Company: GULF INDONESIA RESOURCES LIMITED 10th Floor Brunswick House 44 Chipman Hill Saint John, New Brunswick Canada E2L 2A9 Attention: President Facsimile: cc: GULF INDONESIA RESOURCES LIMITED 21st Floor Wisma 46 Kota BNI, Jl. Jend. Sudirman Kar. 1 Jakarta 10220 Indonesia Attention President Facsimile: 011 62 21574 2119 -11- To Gulf: GULF CANADA RESOURCES LIMITED Gulf Canada Square 1600, 401 9th Avenue S.W. Calgary, Alberta Canada Attention: Vice President, Corporate Services Phone: (403) 233-4000 Facsimile: (403) 233-5143 cc: GULF CANADA RESOURCES LIMITED One Norwest Center 1700 Lincoln Street, Suite 5000 Denver, Colorado 80203-4525 U.S.A. Attention: Law Department Phone: (303) 813-3800 Facsimile: (303) 832-8394 14.2 The parties may at any time designate by like notice hereunder other addresses to which notices or other communication should be transmitted. ARTICLE 15 FURTHER ACTION 15.1 Should it be necessary or desirable for the parties to execute any further agreements or provide further assurances or carry out any further act or deed, then the parties agree to carry out such further acts or deeds or provide such further documents or assurances within the spirit of this Agreement and with a view to the betterment of the relationship between the parties and based upon the good faith and mutual good will of the parties hereto. -12- ARTICLE 16 MISCELLANEOUS PROVISIONS 16.1 Waiver. The failure of any party at any time to enforce any provision of this Agreement shall not be construed as implying a waiver of such provision or of the right of that party to enforce it subsequently. 16.2 Force Majeure. Any delay or failure of either party in the performance of its obligations hereunder may be suspended if and to the extent caused by acts of God, strikes or slowdowns, fire, flood, windstorm, explosion, armed conflict, riot or sabotage, court or agency injunction, and other causes beyond the reasonable control of the party affected, on the condition that proper notice of the force majeure event causing such delay or failure is given by such party to the other within a reasonable time after the event occurs, and each of the parties hereto shall be diligent in attempting to remove such causes. 16.3 Headings. The section headings and general arrangement of this Agreement are for convenience of reference only and shall not affect its construction. 16.4 Taxes. Any withholding taxes imposed on payments made to Gulf by the Company pursuant to this Agreement shall be the responsibility of the Company. 16.5 Entire Agreement. This Agreement represents the entire agreement between the parties with respect to the subject matter hereof and supersedes any prior arrangements or understandings between the parties relating to the subject matter hereof whether written or oral, which are hereby terminated by mutual consent and all rights and obligations thereunder are hereby extinguished. The parties hereby acknowledge that it may be necessary to enter into additional agreements for purposes of recordation of licenses in various area of the Territory, and agree to enter into such additional agreements as the Company reasonably deems necessary, provided, however, that in the event of any inconsistency between any such additional agreement and this Agreement, this Agreement shall control. 16.6 Laws and Regulations. Should any provision of this Agreement be held or declared (whether formally or informally) by any competent authority to be legally void or unenforceable then that provision shall be deemed for all purposes to be severable from all other provisions of this Agreement, which other provisions shall continue in force unaffected. 16.7 Relationship of the Parties. Nothing in this Agreement is intended to constitute or appoint either party as the partner, agent of or joint venturer with the other party. -13- IN WITNESS WHEREOF the parties have executed this Agreement either directly or in two counterparts by their duly authorized representatives. GULF CANADA RESOURCES LIMITED Per: ---------------------------------- GULF INDONESIA RESOURCES LIMITED Per: ---------------------------------- Corporate Secretary SCHEDULE "A" TRADE-MARKS SCHEDULE "A" TRADEMARKS GULF [GULF LOGO]
Mark Class Registration No. - ---- ----- ---------------- INDONESIA GULF 4 264,594 GULF IN ORANGE DISC 4 267,129 SINGAPORE GULF 4 25644 GULF 1 53893 GULF IN ORANGE DISC 4 45289 GULF IN ORANGE DISC 1 53885 Application No. --------------- INDONESIA GULF IN ORANGE DISC 1 D97 18308 GULF IN ORANGE DISC 9 D97 18305 GULF IN ORANGE DISC 37 D97 18306 GULF IN ORANGE DISC 39 D97 18307 GULF IN ORANGE DISC 40 D97 18309 GULF IN ORANGE DISC 42 D97 18310 SINGAPORE GULF IN ORANGE DISC 1 8725/97 GULF IN ORANGE DISC 9 8726/97 GULF IN ORANGE DISC 37 8727/97 GULF IN ORANGE DISC 39 8728/97 GULF IN ORANGE DISC 40 8729/97 GULF IN ORANGE DISC 42 8730/97
11 SCHEDULE "B" VISUAL STANDARDS MANUAL [15 PAGE COLOR MANUAL] SCHEDULE B VISUAL STANDARDS MANUAL 12 INTRODUCTION - -------------------------------------------------------------------------------- The purpose of a company identity is to develop an awareness of the company's activities and to present the style and character of the organisation to its various audiences such as customers, suppliers, employees, shareholders and the community at large. A well organised and positive identity applied with consistency and discipline will help in achieving the desired image in the marketplace. Research has shown that Gulf is well recognised and possesses a number of positive attributes, notably its warmth and friendliness. In today's highly competitive and cluttered world, the company needs to project itself with strength and clarity and needs to be seen as dynamic and progressive. The new identity for Gulf has, therefore, been designed to enhance the perceived strength of existing elements such as the long established roundel and the original colourway, blue, orange and white. However, the essential emphasis has been radically changed to meet the requirements of modernity and efficiency. The roundel is intended as the focal point of the new identity with blue as the predominant colour. This new Gulf blue is clear and distinctive, with orange used as the accent colour, providing the necessary warmth and contrast. This manual has been prepared as an introduction to the new identity and sets out the necessary rules and guidelines for use of the Gulf roundel, the colours and associated typefaces. All visual representations of Gulf are subject to these essential disciplines, which apply to not only retail sites, installations and vehicles, but also to uniforms, printed matter, advertising and packaging. As the new identity programme develops, sections of this manual will be issued to establish detailed guidelines in each area. The support of all employees will be indispensable in applying the visual standards with a disciplined but realistic approach. DESIGN STANDARDS - -------------------------------------------------------------------------------- THE GULF ROUNDEL The Gulf roundel is the key element in the new Gulf Company Identity. In its two colour form, as illustrated, it should always appear as Gulf blue outline and letters with Gulf orange segments against a white background. The size, position and colour of all elements of the design have been carefully calculated and the roundel should never be distorted, dismantled or re-drawn. Reproduction samples of the roundel are included in this manual. Consistent application is a key objective of the company identity programme and, therefore, the disciplines for use of the roundel described in this manual should be strictly adhered to. To ensure consistency in specification, the diameter of the roundel should always be defined as the vertical height. (GULF LOGO) Specifications and guidelines for authorised versions of the roundel, Gulf colours, display formats, examples of incorrect use and recommended typefaces are detailed on the following pages of this manual. Page 3 Gulf logotype. Page 4 Approved versions of the roundel. Page 5 Colour Control - Gulf blue, Gulf orange. Page 6 The Gulf colours. Page 7 Examples of incorrect use. Page 8 Display and backgrounds. Page 9 Reproduction control. Page 10 Recommended alphabets. Page 11 Supporting typography. Page 12 Signatures. Page 13/14 Colour samples. Page 15 Samples of roundel for reproduction.
DESIGN STANDARDS - -------------------------------------------------------------------------------- THE GULF LOGOTYPE The use of the single logotype 'Gulf' is permitted for use in certain applications e.g. service station signware and vehicles. However, any proposed use of this logotype will need appropriate authorisation. The only colours authorised for use are Gulf blue on a white or light neutral background or white reversed out of a Gulf blue background. This logotype should never be used to read 'Gulf' in text or headline copy. [GULF LOGO] DESIGN STANDARDS - -------------------------------------------------------------------------------- APPROVED VERSIONS - USE OF COLOUR Whenever possible the Gulf roundel should be used in two colours, Gulf blue, and Gulf orange, against a white background, see diagram 1. Where either or both of the recommended colours are not available, only the versions shown in diagrams 2, 3 and 4 should be used. In single colour printing or black and white advertising material, either of the one colour versions 3 and 4, are available. Other single colour applications may arise when neither Gulf blue nor black are available. Although these circumstances should be avoided, a colour at least as dark as Gulf blue should be used. No single or two colour combinations are permitted other than those illustrated below. When the roundel is to be used against a background colour or in a page layout, guidelines for display are detailed on page 8. When the roundel is to be used on a background of the same colour as the 'Gulf' letters and the keyline, the keyline should be dropped. The background would then appear up to and including the keyline, with the white outline retained. [GULF LOGO] 1. TWO COLOUR, RECOMMENDED. [GULF LOGO] 2. TWO COLOUR, PERMITTED. [GULF LOGO] 3. ONE COLOUR, RECOMMENDED. [GULF LOGO] 4. ONE COLOUR, PERMITTED. [GULF LOGO] 5. GOLD AND SILVER, RECOMMENDED. [GULF LOGO] 6. GOLD AND SILVER, PERMITTED. DESIGN STANDARDS - -------------------------------------------------------------------------------- INTRODUCTION TO THE USE OF COLOUR Color is likely to be the most memorable aspect of a company's identity. Whilst a colour cannot be protected or used in any exclusive sense, its consistent use in the context of the overall design is of paramount importance in establishing a distinctive identity: Every opportunity should be taken to use the recommended two colour version of the Gulf roundel. However, the use of colour extends beyond the reproduction of the roundel. The choice of supporting colours needs careful consideration in order that the desired impression is not changed or diluted. Extra care should be taken to avoid echoing the colours used by competitors. COLOUR CONTROL Whenever the Gulf roundel appears in colour, care should be taken to ensure correct reproduction. Gulf blue and Gulf orange are new colours which have been specially formulated for the new design. These colours supercede all previous standard specifications. Colour swatches for use in specifying Gulf blue and Gulf orange are included in the reproduction samples section of this manual. Ink formulae for use in printing are based on different paper stocks. 1. The ink specification for Gulf blue and Gulf orange on coated stock is intended for use on white art paper or board with a gloss or semi gloss finish. 2. The ink specification for Gulf blue and Gulf orange on uncoated stock is to be used on white cartridge paper or board with a dull, matt uncoated finish. The colour swatches for reproduction provided in this manual are the controls by which inks or paints should be matched. VISUAL MATCHING The two Gulf colours are not 'off the shelf' inks or paints. They are to be visually matched for all applications. The formulae given will normally provide a colour match, but printing inks do vary in effect depending on differences in the surface texture, the finish and the absorbency of papers and other materials. For this reason visual matching is essential. Printing inks mixed to the formulations may be obtained from manufacturers using the Pantone Matching System. As printers normally order the required inks for a particular job, authorised colour swatches provided with final artwork will provide the necessary guide for a visual match. OTHER APPLICATIONS When specifying colours for use in applications other than printing such as paint, screen inks, plastics, vinyls and industrial coatings, all colours should be visually matched by means of the authorised reproduction samples provided. USE OF SECONDARY COLOURS The basic colours in the identity programme are Gulf blue and Gulf orange. The effectiveness of these colours is dependent on the careful and limited use of secondary and supporting colours. In particular, it should be remembered that Gulf blue is the dominant colour and secondary colour should complement but not overpower the roundel or the blue emphasis. Neutral colours, off-white, beige, and black, have been selected for specific applications such as service stations and vehicles. Please refer to the appropriate section of this manual before specifying colours in these areas. Reproduction samples of the colours are included in this manual. DESIGN STANDARDS - -------------------------------------------------------------------------------- THE GULF COLORS [GULF BLUE - PANTONE 301 LOGO] The two key colours in the identification programme are Gulf blue and Gulf orange. The colour specification references for use in printed media are: Pantone 301 - Gulf blue The formula for this colour is 78.8% process blue, 18.2% reflex blue, 3% black, available from all printers using the widely available Pantone matching system. Pantone 165 - Gulf orange The formula for this colour is 50% yellow, 50% warm red, available from printers using the Pantone matching system. [GULF ORANGE - PANTONE 165 LOGO] Four colour process To achieve Gulf blue and Gulf orange when specifying the colour for four colour process the following formulae should be used. Gulf blue 100% cyan, 40% magneta, 20% black. Gulf orange 100% yellow, 60% magneta. Whilst these specifications and formulae will provide the desired colours, different paper stocks and surface textures do produce different colours. Therefore, all colours should be visually matched at proofing stage before print production commences. DESIGN STANDARDS - -------------------------------------------------------------------------------- INCORRECT USE OF THE ROUNDEL The roundel is a registered design and must never be altered. The "Gulf" lettering has been specially designed and cannot be reproduced using a standard typeface. Therefore, no portion of the mark can be changed in design or extracted and used alone. The new identity has been created to provide the basis for improvement in all visual communications. The total design of each item needs to be reconsidered. For instance, just simply the replacement of the old roundel with the new one, or resetting the text in the recommended typeface will not suffice. A new approach to typographic design and page layout is to be encouraged. The examples set out below illustrate a number of mistakes, which are likely to occur in use if not carefully checked. [GULF LOGO] Do not switch the colours [GULF LOGO] Do not remove the segments [GULF LOGO] Do not use a tint on the shapes [GULF LOGO] Do not enclose within another design or restrict the space around [GULF LOGO] Do not mutilate or cut off part of the roundel [GULF LOGO] Do not change the colours [GULF LOGO] Do not remove the keyline [GULF LOGO] Do not reverse black to white [GULF LOGO] Do not infringe on the design with visually competing elements [GULF LOGO] Do not use the roundel to create a read-through DESIGN STANDARDS - -------------------------------------------------------------------------------- DISPLAY AND BACKGROUNDS An important factor in identification is control of the background area upon which the Gulf roundel is displayed. The roundel should normally appear in its recommended form in two colours on a white background with no containing shape. 1. It should stand free, away from visually competing elements and even when there are limitations, a minimum area of white space should be retained on all sides. 2. When the roundel is used in two colours on a dark contrasting colour background, the version of the mark with a double keyline is to be used to separate the roundel from the background. 3. When the roundel is used in two colours on a dark, matching colour background, the single keyline version is to be used with the solid colour printed up to and including the keyline. 4. As in diagram 3, a single colour application on a matching background uses the single keyline version to separate the mark from the solid area around. The roundel should never be reversed black to white out of a solid. See page 7 for incorrect use. [GULF LOGO] 1. Minimum area surrounding [GULF LOGO] 2. Two colour, dark background [GULF LOGO] 3. Two colour, dark background [GULF LOGO] 4. One colour, same background DESIGN STANDARDS - -------------------------------------------------------------------------------- REPRODUCTION CONTROL To maintain a consistent, high quality appearance in all applications, the roundel must always be clear, sharp and undistorted. To ensure this, reproduction should only be made from one of the following: 1. A photoprint from a negative. 2. An original, dimensionally-stable photo mechanical transfer. 3. Printed reproduction proofs available in the reproduction materials section of this manual. MINIMUM SIZE While the Gulf roundel has been designed for use in virtually all sizes, extremely small sizes of reproduction should be avoided. An overall 10mm across the vertical diameter is considered the smallest reproducible size. Below this size the Gulf roundel does not read properly. Larger sizes should be used where possible as small sizes become distorted easily and are, therefore, less effective. Take care when specifying small sizes in print media where loss of quality is likely, e.g. foil-blocking, screen printing, four colour process and newspaper advertising. [GULF LOGO] DESIGN STANDARDS - -------------------------------------------------------------------------------- RECOMMENDED ALPHABETS FOR TITLES THE ALPHABETS ILLUSTRATED ARE RECOMMENDED FOR TITLING AND DISPLAY USE IN PRINTED MATERIAL AND ADVERTISING. THEY HAVE ALSO BEEN SELECTED FOR USE IN THE RETAIL SITE IDENTIFICATION PACKAGE ON SIGNS AND GRAPHIC PANELS. -------------------------- ABCDEFGHIJKLMNOPQ RSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 -------------------------- Helvetica Bold Condensed 1. For use where a bolder version is required. The condensed nature of the typeface provides economical use of the space available. -------------------------- ABCDEFGHIJKLMNOPQ RSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 -------------------------- Helvetica Medium Condensed 2. The medium condensed version is likely to be the most popular combination for legibility and impact. -------------------------- ABCDEFGHIJKLMNOPQ RSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 -------------------------- Helvetica Regular Condensed 3. For more discreet use the light condensed version is a suitable option. 10 DESIGN STANDARDS - ------------------------------------------------------------------------------- SUPPORTING TYPOGRAPHY - ---------------------------------------------------------- HELVETICA BOLD HELVETICA BOLD ITALIC HELVETICA BOLD HELVETICA BOLD ITALIC HELVETICA MEDIUM HELVETICA MEDIUM ITALIC Helvetica Medium Helvetica Medium Italic HELVETICA REGULAR HELVETICA REGULAR ITALIC Helvetica Regular Helvetica Regular Italic - ----------------------------------------------------------
Sans Serif HELVETICA AND ITC GARAMOND ARE THE PREFERRED TYPEFACES CHOSEN FOR USE WITHIN THE NEW IDENTITY. IF THESE TYPEFACES ARE NOT AVAILABLE, UNIVERS AND TIMES ARE RECOMMENDED ALTERNATIVES. - ---------------------------------------------------------- GARAMOND BOLD GARAMOND BOLD ITALIC GARAMOND BOLD GARAMOND BOLD ITALIC GARAMOND BOOK GARAMOND BOOK ITALIC Garamond Book Garamond Book Italic GARAMOND LIGHT GARAMOND LIGHT ITALIC Garamond Light Garamond Light Italic - ----------------------------------------------------------
Serif 11 DESIGN STANDARDS - -------------------------------------------------------------------------------- SIGNATURES The Gulf roundel has been combined with the company name in prescribed arrangements which should never be altered on printed materials. These signatures are used as endorsements in advertising and company publications. Four formats have been established: 1. Company name below and centered. 2. Company name at the right of the roundel on one line. 3. Company name underneath and ranged left of the roundel on one line. 4. Company name underneath and ranged right of the roundel on one line. The company name should always appear in Helvetica Bold Condensed upper and lower case lettering. The height of capital letters in these signatures is exactly the same as the height of the Gulf letters in the roundel (Y). In all circumstances, the space between the company name and the Gulf roundel is the same as the cap height (Y). [GULF LOGO] COMPANY NAME [GULF LOGO] COMPANY NAME [GULF LOGO] COMPANY NAME [GULF LOGO] COMPANY NAME 12 GULF BLUE - PANTONE 301 GULF BLUE - PANTONE 301 GULF BLUE - PANTONE 301 ON COATED STOCK. ON COATED STOCK. ON COATED STOCK. The formula for this colour is The formula for this colour is The formula for this colour is 78.8% process blue, 18.2% reflex blue, 78.8% process blue, 18.2% reflex blue, 78.8% process blue, 18.2% reflex blue, 3% black. 3% black. 3% black. To achieve Gulf blue out of four colour To achieve Gulf blue out of four colour 100% cyan, 40% magenta, 20% black. process use the following formula: process use the following formula: process use the following formula: 100% cyan, 40% magenta, 20% black. 100% cyan, 40% magenta, 20% black. 100% cyan, 40% magenta, 20% black. Colour reproduction must visually match Colour reproduction must visually match Colour reproduction must visually match this swatch. this swatch. this swatch. GULF BLUE - PANTONE 301 GULF BLUE - PANTONE 301 GULF BLUE - PANTONE 301 ON COATED STOCK. ON COATED STOCK. ON COATED STOCK. The formula for this colour is The formula for this colour is The formula for this colour is 78.8% process blue, 18.2% reflex blue, 78.8% process blue, 18.2% reflex blue, 78.8% process blue, 18.2% reflex blue, 3% black. 3% black. 3% black. To achieve Gulf blue out of four colour To achieve Gulf blue out of four colour To achieve Gulf blue out of four colour process use the following formula: process use the following formula: process use the following formula: 100% cyan, 40% magenta, 20% black. 100% cyan, 40% magenta, 20% black. 100% cyan, 40% magenta, 20% black. Colour reproduction must visually match Colour reproduction must visually match Colour reproduction must visually match this swatch. this swatch. this swatch. GULF BLUE - PANTONE 301 GULF BLUE - PANTONE 301 GULF BLUE - PANTONE 301 ON COATED STOCK. ON COATED STOCK. ON COATED STOCK. The formula for this colour is The formula for this colour is The formula for this colour is 78.8% process blue, 18.2% reflex blue, 78.8% process blue, 18.2% reflex blue, 78.8% process blue, 18.2% reflex blue, 3% black. 3% black. 3% black. To achieve Gulf blue out of four colour To achieve Gulf blue out of four colour To achieve Gulf blue out of four colour process use the following formula: process use the following formula: process use the following formula: 100% cyan, 40% magenta, 20% black. 100% cyan, 40% magenta, 20% black. 100% cyan, 40% magenta, 20% black. Colour reproduction must visually match Colour reproduction must visually match Colour reproduction must visually match this swatch. this swatch. this swatch. GULF BLUE - PANTONE 301 GULF BLUE - PANTONE 301 GULF BLUE - PANTONE 301 ON COATED STOCK. ON COATED STOCK. ON COATED STOCK. The formula for this colour is The formula for this colour is The formula for this colour is 78.8% process blue, 18.2% reflex blue, 78.8% process blue, 18.2% reflex blue, 78.8% process blue, 18.2% reflex blue, 3% black. 3% black. 3% black. To achieve Gulf blue out of four colour To achieve Gulf blue out of four colour To achieve Gulf blue out of four colour process use the following formula: process use the following formula: process use the following formula: 100% cyan, 40% magenta, 20% black. 100% cyan, 40% magenta, 20% black. 100% cyan, 40% magenta, 20% black. Colour reproduction must visually match Colour reproduction must visually match Colour reproduction must visually match this swatch. this swatch. this swatch. GULF BLUE - PANTONE 301 GULF BLUE - PANTONE 301 GULF BLUE - PANTONE 301 ON COATED STOCK. ON COATED STOCK. ON COATED STOCK. The formula for this colour is The formula for this colour is The formula for this colour is 78.8% process blue, 18.2% reflex blue, 78.8% process blue, 18.2% reflex blue, 78.8% process blue, 18.2% reflex blue, 3% black. 3% black. 3% black. To achieve Gulf blue out of four colour To achieve Gulf blue out of four colour To achieve Gulf blue out of four colour process use the following formula: process use the following formula: process use the following formula: 100% cyan, 40% magenta, 20% black. 100% cyan, 40% magenta, 20% black. 100% cyan, 40% magenta, 20% black. Colour reproduction must visually match Colour reproduction must visually match Colour reproduction must visually match this swatch. this swatch. this swatch. GULF BLUE - PANTONE 301 GULF BLUE - PANTONE 301 GULF BLUE - PANTONE 301 ON COATED STOCK. ON COATED STOCK. ON COATED STOCK. The formula for this colour is The formula for this colour is The formula for this colour is 78.8% process blue, 18.2% reflex blue, 78.8% process blue, 18.2% reflex blue, 78.8% process blue, 18.2% reflex blue, 3% black. 3% black. 3% black. To achieve Gulf blue out of four colour To achieve Gulf blue out of four colour To achieve Gulf blue out of four colour process use the following formula: process use the following formula: process use the following formula: 100% cyan, 40% magenta, 20% black. 100% cyan, 40% magenta, 20% black. 100% cyan, 40% magenta, 20% black. Colour reproduction must visually match Colour reproduction must visually match Colour reproduction must visually match this swatch. this swatch. this swatch.
GULF ORANGE - PANTONE 165 GULF ORANGE - PANTONE 165 GULF ORANGE - PANTONE 165 ON COATED STOCK. ON COATED STOCK. ON COATED STOCK. The formula for this colour is The formula for this colour is The formula for this colour is 50% warm red, 50% yellow. 50% warm red, 50% yellow. 50% warm red, 50% yellow. To achieve Gulf orange out of four colour To achieve Gulf orange out of four colour To achieve Gulf orange out of four colour process use the following formula: process use the following formula: process use the following formula: 100% yellow, 60% magenta 100% yellow, 60% magenta. 100% yellow, 60% magenta. Colour reproduction must visually match Colour reproduction must visually match Colour reproduction must visually match this swatch. this swatch. this swatch. GULF ORANGE - PANTONE 165 GULF ORANGE - PANTONE 165 GULF ORANGE - PANTONE 165 ON COATED STOCK. ON COATED STOCK. ON COATED STOCK. The formula for this colour is The formula for this colour is The formula for this colour is 50% warm red, 50% yellow. 50% warm red, 50% yellow. 50% warm red, 50% yellow. To achieve Gulf orange out of four colour To achieve Gulf orange out of four colour To achieve Gulf orange out of four colour process use the following formula: process use the following formula: process use the following formula: 100% yellow, 60% magenta. 100% yellow, 60% magenta. 100% yellow, 60% magenta. Colour reproduction must visually match Colour reproduction must visually match Colour reproduction must visually match this swatch. this swatch. this swatch. GULF ORANGE - PANTONE 165 GULF ORANGE - PANTONE 165 GULF ORANGE - PANTONE 165 ON COATED STOCK. ON COATED STOCK. ON COATED STOCK. The formula for this colour is The formula for this colour is The formula for this colour is 50% warm red, 50% yellow. 50% warm red, 50% yellow. 50% warm red, 50% yellow. To achieve Gulf orange out of four colour To achieve Gulf orange out of four colour To achieve Gulf orange out of four colour process use the following formula: process use the following formula: process use the following formula: 100% yellow, 60% magenta. 100% yellow, 60% magenta. 100% yellow, 60% magenta. Colour reproduction must visually match Colour reproduction must visually match Colour reproduction must visually match this swatch. this swatch. this swatch. GULF ORANGE - PANTONE 165 GULF ORANGE - PANTONE 165 GULF ORANGE - PANTONE 165 ON COATED STOCK. ON COATED STOCK. ON COATED STOCK. The formula for this colour is The formula for this colour is The formula for this colour is 50% warm red, 50% yellow. 50% warm red, 50% yellow. 50% warm red, 50% yellow. To achieve Gulf orange out of four colour To achieve Gulf orange out of four colour To achieve Gulf orange out of four colour process use the following formula: process use the following formula: process use the following formula: 100% yellow, 60% magenta. 100% yellow, 60% magenta. 100% yellow, 60% magenta. Colour reproduction must visually match Colour reproduction must visually match Colour reproduction must visually match this swatch. this swatch. this swatch. GULF ORANGE - PANTONE 165 GULF ORANGE - PANTONE 165 GULF ORANGE - PANTONE 165 ON COATED STOCK. ON COATED STOCK. ON COATED STOCK. The formula for this colour is The formula for this colour is The formula for this colour is 50% warm red, 50% yellow. 50% warm red, 50% yellow. 50% warm red, 50% yellow. To achieve Gulf orange out of four colour To achieve Gulf orange out of four colour To achieve Gulf orange out of four colour process use the following formula: process use the following formula: process use the following formula: 100% yellow, 60% magenta. 100% yellow, 60% magenta. 100% yellow, 60% magenta. Colour reproduction must visually match Colour reproduction must visually match Colour reproduction must visually match this swatch. this swatch. this swatch. GULF ORANGE - PANTONE 165 GULF ORANGE - PANTONE 165 GULF ORANGE - PANTONE 165 ON COATED STOCK. ON COATED STOCK. ON COATED STOCK. The formula for this colour is The formula for this colour is The formula for this colour is 50% warm red, 50% yellow. 50% warm red, 50% yellow. 50% warm red, 50% yellow. To achieve Gulf orange out of four colour To achieve Gulf orange out of four colour To achieve Gulf orange out of four colour process use the following formula: process use the following formula: process use the following formula: 100% yellow, 60% magenta. 100% yellow, 60% magenta. 100% yellow, 60% magenta. Colour reproduction must visually match Colour reproduction must visually match Colour reproduction must visually match this swatch. this swatch. this swatch.
[GULF LOGO] EX-99.E.10 12 h97565aexv99wew10.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT (e)(11) REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT made the 1st day of October, 1997, BETWEEN: GULF INDONESIA RESOURCES LIMITED, a corporation pursuant to the laws of New Brunswick (hereinafter referred to as "Gulf Indonesia") OF THE FIRST PART, - and - GULF CANADA RESOURCES LIMITED, a corporation pursuant to the laws of Canada (hereinafter referred to as "Gulf') OF THE SECOND PART. WHEREAS Gulf Indonesia is a wholly-owned subsidiary of Gulf; and WHEREAS it is anticipated that a portion of the shares of Gulf Indonesia held by Gulf will be sold to the public in the Offering; and WHEREAS Gulf Indonesia believes it to be in its best interests to provide for certain matters related to the sale of securities of Gulf Indonesia after the Offering; NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual covenants and promises contained herein and other good and valuable consideration (the receipt and adequacy whereof is hereby acknowledged), the parties hereto agree as follows: 2 ARTICLE 1 DEFINITIONS 1.1 Defined Terms For the purpose of this Agreement, the following terms shall have the meaning ascribed thereto below unless otherwise specified: "AFFILIATES" means, with respect to a Person, any person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with such Person, and the term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management, activities or policies of any Person or entity, whether through the ownership of voting securities, by contract, employment or otherwise. "BOARD OF DIRECTORS" means the board of directors of Gulf Indonesia. "BUSINESS DAY" means a day other than a Saturday or Sunday or a day when banks in the cities of Calgary or New York are not generally open for business. "CBCA" means the Canada Business Corporations Act as from time to time amended. "COMPANY SECURITIES" mean any securities of Gulf Indonesia. "EXEMPT OFFERING" means a private placement, a sale pursuant to Rule 144 or Rule 144A, or other sale of Company Securities, which is exempt from any registration or prospectus requirements under Securities Laws in the jurisdictions where Company Securities are to be offered or sold and any other applicable jurisdictions. "EXEMPT OFFERING DOCUMENTS" means, in connection with an Exempt Offering, an offering document or documents in a form which counsel to Gulf and counsel to Gulf Indonesia shall consider suitable for private placement or sale in the jurisdiction in which such Exempt Offering is effected or proposed to be effected and which shall comply with all applicable Securities Laws. "MISREPRESENTATION" and "MATERIAL FACT" shall have the meanings ascribed thereto under applicable Securities Laws in Canada. "OFFERING" means a public offering of common shares of Gulf Indonesia following which Gulf will own less that all of such shares. "PERSON" includes an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a stock exchange, trustee in bankruptcy, receiver or any government, any political subdivision, any agency and any entity or person exercising executive, legislative, judicial, regulatory or administrative functions of government. 3 "PUBLIC OFFERING" means a secondary distribution or distribution to the public of Company Securities which is not an Exempt Offering and which complies with all applicable Securities Laws. "PUBLIC OFFERING DOCUMENTS" means, in connection with a Public Offering, a prospectus (preliminary and final), a registration statement or other form of disclosure document in a form which counsel to Gulf and counsel to Gulf Indonesia shall consider suitable for the Public Offering in accordance with the intended method thereof, and which complies with all applicable Securities Laws. "RULE 144" and "RULE 144A" mean Rule 144 and Rule 144A, respectively, promulgated under the United States Securities Act of 1933, as amended. "SECURITIES LAWS" means, with respect to any particular jurisdiction, the securities legislation and rules and regulations, including policy statements and notices adopted or issued by securities regulatory authorities, in such jurisdiction. "SHELF REGISTRATION STATEMENT" means a registration statement for the registration of securities on a delayed or continuous basis pursuant to Rule 415 and successor rules under the Securities Act of 1933, as amended, and such analogous rules and regulations issued by securities regulatory authorities in other jurisdictions. "SUBSIDIARY" has the meaning set forth in Section 2(5) of the CBCA. "UNDERWRITERS" means any underwriter(s) or agent(s) in connection with a Public Offering or Exempt Offering, which shall be selected by the party making a request hereunder (and which shall be acceptable to Gulf Indonesia, acting reasonably). 1.2 CONSTRUCTION Whenever the context requires, the gender of all words used herein shall include the masculine, feminine and neuter, and the number of all words shall include the singular and plural. 1.3 REFERENCES Unless otherwise specified, the references herein to "Sections", "Subsections" or "Articles" refer to the sections, subsections or articles in this Agreement. 4 ARTICLE 2 REGISTRATION RIGHTS 2.1 PUBLIC OFFERING (a) Gulf shall be entitled to request, from time to time (each, a "Request"), but not more than twice in any 12 month period, by written notice to Gulf Indonesia, that Gulf Indonesia assist Gulf, as the case may be, in connection with a Public Offering of all or part of the Company Securities held by Gulf, provided that the total market value (determined at the date of the Request) of the Company Securities referred to in the Request shall not be less than US $50 million. In addition, after the third anniversary of the closing of the Offering, such Request may include the filing of a Shelf Registration Statement as part of the Public Offering Documents. Gulf shall be entitled to require that the Public Offering be made in any jurisdiction where Gulf Indonesia is, at that time, a reporting issuer, registrant, or the equivalent thereof, and in any other jurisdiction provided that Gulf Indonesia shall not, solely as a result thereof, be required to qualify generally to do business, subject itself to taxation or consent to general service of process in such jurisdiction other than service of process in connection with such offering. Upon receipt by Gulf Indonesia of a Request, Gulf Indonesia shall proceed as expeditiously as reasonably possible to complete the steps and procedures necessary or desirable to complete the Public Offering, and without limiting the generality of the foregoing, Gulf Indonesia shall: (i) during the period commencing from the receipt of the Request until 90 days (or such shorter period as may be provided in respect of issuances or sales of Company Securities by Gulf Indonesia in the relevant underwriting, agency, distribution or similar agreement) after closing of the Public Offering, agree that it shall not, without the consent of Gulf which consent shall not be unreasonably withheld, allot or issue any Company Securities or announce publicly any intention to do so, provided that Gulf Indonesia shall be permitted to fulfill any pre-existing contractual obligations to issue Company Securities including, without limitation, its obligations under Company benefit plans; (ii) prepare Public Offering Documents in the form appropriate for the type of Public Offering specified in the Request and have the same, when and as requested by Gulf, filed (accompanied by any documentation required under applicable Securities Laws) with the relevant securities regulatory authorities in all relevant jurisdictions and use its best efforts to cause the final versions of any such filed Public Offering Documents to become and remain effective for a period of 12 months after its effective date or, if shorter, until the distribution of the securities contemplated thereby is completed, provided, in the case of a Shelf Registration Statement, the Public Offering Documents shall remain effective until the distribution of the securities contemplated thereby is completed; 5 (iii) prior to filing a Public Offering Document, furnish to Gulf and each Underwriter, if any, selected by Gulf in the transaction, copies of such Public Offering Document as are proposed to be filed or delivered, and thereafter furnish to Gulf and each Underwriter, if any, in the transaction, such number of copies of such Public Offering Document (in each case including all exhibits thereto and all documents incorporated by reference therein) and such other documents as Gulf or each underwriter may reasonably request in order to facilitate the intended transaction; (iv) promptly notify Gulf and any Underwriter of the occurrence of an event which could reasonably be considered to result in a misrepresentation or a material misstatement or omission in a Public Offering Document, and prepare a supplement or amendment to such Public Offering Document in form and substance reasonably satisfactory to Gulf so that, as thereafter delivered to the purchasers or proposed purchasers, such Public Offering Document (taken together with the amendment or supplement) will contain full, true and plain disclosure relating to the Company Securities and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, in light of the circumstances in which it is made; and cause the amendment or supplement to be filed as provided under applicable Securities Laws and promptly make available to Gulf and any Underwriter in the transaction copies of any such supplement or amendment; (v) make available for inspection by Gulf and any Underwriter participating in the transaction and any solicitor, accountant, reserve engineer or other professional retained by Gulf or an Underwriter (collectively, the "Professionals"), all financial and other records, pertinent corporate documents and properties of Gulf Indonesia (collectively, the "Records") as shall be reasonably necessary to enable Gulf, any Underwriter and the Professionals to complete their respective due diligence and cause Gulf Indonesia's officers, directors and employees to supply all information reasonably requested by any Professionals in connection with such Public Offering Document. Records which Gulf Indonesia determines, in good faith, to be confidential and which it notifies the Professionals are confidential shall not be disclosed by the Professionals unless and to the extent the disclosure of such Records would be required under applicable Securities Laws. Gulf agrees that information obtained by it as a result of such inspection shall not be used except for the purpose of fulfilling its due diligence obligations; (vi) use its best efforts to furnish to Gulf and to each Underwriter, if any, in a transaction, a signed counterpart, addressed to Gulf or each Underwriter, of: (A) an opinion or opinions of counsel to Gulf Indonesia and (B) a comfort letter or comfort letters from Gulf Indonesia's auditors; 6 each covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as Gulf or the Underwriter(s) reasonably request and in form and substance satisfactory to counsel to Gulf and the Underwriter(s); (vii) use its best efforts to cause all Company Securities to be issued in connection with the Public Offering, to be listed on each stock exchange on which securities of that type issued by Gulf Indonesia are then listed, if not already listed; (viii) enter into customary agreements on usual commercial terms, and take such steps as are customary for transactions of a similar nature (including signing and certifying Public Offering Documents and any supplement or amendment thereto in the customary manner and entering into an underwriting or agency agreement among Gulf Indonesia, Gulf, and the Underwriter(s)) and take such other actions as are reasonably required in order to expedite or facilitate the intended transaction; and (ix) use its best efforts to complete the Public Offering under the Securities Laws of the applicable jurisdictions and do any and all other acts and things that may be reasonably necessary or advisable to facilitate completion of the Public Offering. (b) Gulf shall promptly furnish in writing to Gulf Indonesia such information regarding the distribution of Company Securities as Gulf Indonesia may from time to time reasonably request and such other information as may be legally required in connection with the preparation or filing of any Public Offering Document. (c) Gulf agrees that upon receipt of any notice from Gulf Indonesia pursuant to Section 2.1 (a)(iv), it shall forthwith discontinue the disposition of Company Securities pursuant to such Public Offering Document applicable to such Company Securities until it shall have received copies of such amendment or supplement, and if so directed by Gulf Indonesia, Gulf shall deliver to Gulf Indonesia all copies, other than permanent file copies, then in its possession, of such Public Offering Document covering such Company Securities at the time of receipt of such notice. (d) Gulf Indonesia may postpone for a reasonable period of time (but not exceeding 60 days) the filing or effectiveness of any Public Offering Document required pursuant to this Section 2.1 if the Board of Directors of Gulf Indonesia determines (in good faith in a written resolution) that such event: (i) would have a material adverse effect upon any plan or proposal, then under active consideration by the Board of Directors, for Gulf Indonesia or any of its material Subsidiaries to engage in a material acquisition or disposition of assets (other than in the ordinary course of business) or any material merger, consolidation, tender offer or similar material business combination, or 7 (ii) would have a material, adverse effect on a proposed public offering of Company Securities for the account of Gulf Indonesia, if Gulf Indonesia then expects, and has taken substantial steps prior to receipt of the applicable Request, to make such offering. Any such postponement shall begin when Gulf Indonesia gives written notice thereof to Gulf and shall continue until Gulf Indonesia gives written notice of the termination thereof to Gulf, provided that, with respect to such postponement, Gulf Indonesia shall give such notice of termination as soon as the condition giving rise thereto has ceased to exist and, during such postponement (other than during a postponement pursuant to Clause (ii) above), shall take such steps as are necessary to insure that the requested Public Offering will be effected in accordance with the provisions of this Agreement as soon as practicable after such postponement is terminated; and provided further that Gulf Indonesia may only exercise the rights set forth in Clauses (i) and (ii) above one time each during any period of 365 consecutive days. Each such notice of postponement shall specify the basis for the postponement and an approximation of the anticipated delay and shall include a copy of the resolution setting forth the relevant determination of the Board of Directors. (e) If the Company proposes to sell any Company Securities (other than by a registration on Form S-4, Form S-8 or any successor or similar form under Securities Laws, or in connection with a tender offer, merger or other acquisition), the Company shall as soon as practicable give notice of such proposed sale (a"Proposed Sale") to Gulf, including the material terms thereof. Gulf shall have no less that 48 hours from receipt of such notice to advise the Company that it wishes to sell Company Securities in such Proposed Sale, in which event Gulf shall be entitled to participate in the Proposed Sale; provided if (i) a Proposed Sale pursuant to this Section 2.1(e) involves an underwritten offering of the Company Securities being registered for sale for the account of the Company, to be distributed (on a firm commitment basis) by or through one or more underwriters of recognized national or regional standing under underwriting terms appropriate for such a transaction, and (ii) the managing underwriter of such underwritten offering shall inform the Company and Gulf by letter of its belief that the number of securities requested to be included in such registration exceeds the number which can be sold in (or during the time of) such offering or that the inclusion would adversely affect the marketing of the securities to be sold by the Company therein, then the Company may include all securities proposed to be sold by the Company to be sold for its own account and may decrease the number of Company Securities so proposed to be sold and so requested to be included in such registration by Gulf to the extent necessary to reduce the number of securities to be included in the registration statement to the level recommended by the managing underwriter. 8 2.2 EXEMPT OFFERING Gulf shall be entitled to request, from time to time, but not more than twice in any 12 month period, by written notice to Gulf Indonesia to, and Gulf Indonesia shall, provided that the total market value (determined at the date of the notice) of the Company Securities referred to in the notice shall not be less than US $50 million: (a) prepare a summary information document with respect to the business and affairs of Gulf Indonesia and its Subsidiaries and their condition (financial and otherwise), historical financial performance and prospects, which is suitable for distribution in the private transaction market or prepare and, if required, file with securities regulatory authorities in Canada or the United States or such other jurisdiction as Gulf may select, an Exempt Offering Document in respect of a proposed Exempt Offering of all or a part of the Company Securities held by Gulf; (b) gather, catalogue and make available copies of information customarily found in data rooms in respect of the sale of exploration and production corporations or their assets in the private transaction market; (c) provide access to such data rooms and provide knowledgeable staff to assist in answering information requests and correcting and supplementing information which has been given to prospective transaction participants and/or their professional advisors, subject to prospective transaction participants having entered into confidentiality agreements reasonably satisfactory to Gulf Indonesia, (d) comply with such provisions of Section 2.1 that are applicable to Exempt Offerings and Exempt Offering Documents to the same extent as if such Exempt Offerings and Exempt Offering Documents were referred to therein; and (e) cooperate and assist in its efforts to effect a sale of Company Securities or other form of transaction, in the private transaction market. 2.3 EXPENSES All out-of-pocket and other expenses of Gulf Indonesia with respect to each Public Offering or Exempt Offering hereunder (whether or not effective), including, without limitation, the following: (a) all fees and expenses in connection with the qualification of Company Securities to be registered for offering and sale under provincial, state securities and "Blue Sky" laws, if applicable, including reasonable fees and disbursements of counsel for any placement or sales agents or underwriters in connection therewith; 9 (b) all expenses relating to the preparation, printing, distribution and reproduction of the Public Offering Documents or Exempt Offering Documents, as the case may be, each amendment or supplement to the foregoing, the certificates representing Company Securities to be sold, each agreement with and among any placement or sales agents or underwriters and all documents delivered pursuant thereto; (c) all fees and expenses of any escrow agent or custodian; (d) all reasonable fees and expenses of counsel and independent accountants to Gulf Indonesia (including fees and expenses relating to any opinions) delivered pursuant hereto; and (e) all fees and expenses in connection with the listing or approval for quotation and trading of Company Securities as required; shall be borne by Gulf Indonesia, provided that from and after the third Request by Gulf hereunder, Gulf shall bear the out-of-pocket expenses of Gulf Indonesia incurred in connection therewith. For purposes of this Section 2.3, each request by Gulf pursuant to Section 2.2 for which Gulf does not pay the out-of-pocket expenses of Gulf Indonesia shall be a "Request." For greater certainty: (f) all prospectus, registration and filing fees; and (g) all fees and expenses of any Underwriter engaged (including reasonable fees and expenses of its counsel); shall be borne by Gulf in any event. Except as aforesaid, each party shall bear its own costs and expenses incurred in connection with such matters. 2.4 Indemnity (a) Gulf Indonesia agrees to indemnify and hold harmless Gulf and the Affiliates, officers, directors, employees, partners and agents of Gulf from and against any and all losses, claims, damages, liabilities and expenses, including costs of investigation and reasonable fees and expenses of legal counsel which arise out of, or are based upon: (i) any liability pursuant to a provision of (including any indemnity in) any underwriting agreement, purchase agreement, agency agreement or other document related to each Public Offering or Exempt Offering to which Gulf Indonesia is a party and directly or indirectly arising out of or based upon any misrepresentation, breach of warranty, untrue statement or alleged untrue statement, whether of a material fact or otherwise, or any omission or alleged omission to state a fact, material or not, of or pertaining to Gulf Indonesia, Gulf Indonesia's Subsidiaries, and their business and operations, or included 10 in any written information provided by Gulf Indonesia for inclusion therein, required to be stated or necessary to make a statement therein not misleading, in light of the circumstances in which it is made; or (ii) any misrepresentation or alleged misrepresentation, breach of warranty, or untrue statement or alleged untrue statement, whether of a material fact or otherwise of or pertaining to Gulf Indonesia, Gulf Indonesia's Subsidiaries, and their business and operations, or included in any information provided by Gulf Indonesia contained in any Public Offering Document or Exempt Offering Document (including an amendment or supplement thereto) relating to a Public Offering or an Exempt Offering, or in any underwriting agreement, purchase agreement, agency agreement or other document related to such transaction to which Gulf Indonesia is a party, or arising out of or based upon any omission or alleged omission to state in any such Public Offering Document or Exempt Offering Document (including any amendment or supplement thereto), or any such underwriting agreement, purchase agreement, agency agreement or other document a fact, material or not, of or pertaining to Gulf Indonesia, Gulf Indonesia's Subsidiaries, and their business and operations, or included in any written information provided by Gulf Indonesia for inclusion therein, required to be stated therein or necessary to make a statement therein not misleading, in light of the circumstances in which it is made; Notwithstanding the foregoing, Gulf Indonesia shall not be liable to Gulf in any such case to the extent that any such losses, claims, damages, liabilities or expenses arise out of or are based upon any misrepresentation, breach of warranty, untrue statement or omission or alleged untrue statement or omission made in such Public Offering Document or Exempt Offering Document (including any amendment or supplement), or any such underwriting agreement, purchase agreement, agency agreement or other document, in reliance upon and in conformity with written information furnished to Gulf Indonesia for inclusion therein by Gulf, or the failure by Gulf to comply with any of its obligations in connection with such Public Offering or Exempt Offering. (b) Gulf Indonesia also agrees, upon request by Gulf; to indemnify any Underwriters in connection with the Public Offering, their officers, directors, employees and agents and each person who controls such Underwriters on substantially the same basis as the indemnification of Gulf provided herein. 11 (c) Gulf Indonesia may require, as a condition to including any Company Securities in any Public Offering Document or Exempt Offering Document filed, pursuant to Sections 2.1 and 2.2, and to entering into any agency or underwriting agreement with respect thereto, that Gulf Indonesia shall have received an undertaking from Gulf to indemnify and hold harmless Gulf Indonesia and each of its Affiliates, officers, directors, employees, partners and agents from and against any and all losses, claims, damages, liabilities and expenses, including costs of investigation and reasonable fees and expenses of legal counsel which arise out of, or are based upon an untrue statement or alleged untrue statement of a material fact in such Public Offering Document or Exempt Offering Document (including an amendment or supplement thereto) or any omission or alleged omission to state a material fact, required to be stated therein or necessary to make a statement therein not misleading, in light of the circumstances in which it is made, 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 reliance upon and in conformity with written information furnished to Gulf Indonesia for inclusion therein by Gulf; provided however that Gulf shall not be required to undertake liability under this Subsection 2.4(c) for any amounts in excess of the dollar amount of the gross proceeds received by Gulf from the sale of its Company Securities pursuant to such offering, in such case as reduced by any damages or other amounts that Gulf was otherwise required to pay by reason of such untrue statement or omission. 2.5 Contribution If the indemnification provided for in Section 2.4 is unavailable or insufficient to hold harmless Gulf and/or Gulf Indonesia, as the case may be, in respect of any losses, claims, damages or liabilities or actions in respect thereof, then Gulf Indonesia and Gulf, as the case may be, shall in lieu of indemnifying Gulf or Gulf Indonesia, as the case may be, contribute to the amount paid or payable by Gulf Indonesia and/or Gulf, as the case may be, as a result of such losses, claims, damages, liabilities or actions in such proportion as is appropriate to reflect the relative fault of Gulf Indonesia or Gulf, as the case may be, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or actions as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by Gulf Indonesia or Gulf, as the case may be, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Gulf Indonesia and Gulf agree that it would not be just and equitable if contribution pursuant to this paragraph were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this paragraph. The amount paid or payable by Gulf Indonesia or Gulf, as the case may be, as a result of the losses, claims, damages, liabilities or actions in respect thereof referred to above in this paragraph shall be deemed to include any legal or other expenses reasonably incurred by Gulf Indonesia or Gulf, as the case may be, in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this paragraph, the amount that Gulf shall be required 12 to contribute shall not exceed the total price at which the securities sold by Gulf was offered to the public. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the United States Securities Act of 1933 (the "Securities Act") shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 2.6 Rule 144 Gulf Indonesia covenants to and with Gulf that Gulf Indonesia shall timely file the reports required to be filed by it under the Securities Act and the United States Securities Exchange Act of 1934 (the "Exchange Act") (including but not limited to the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Securities and Exchange Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder (or, if Gulf Indonesia is not required to file such reports, will, upon the request of any holder of Company Securities, make publicly available other information) and will take such further action as any holder of Company Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Company Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any holder of Company Securities, Gulf Indonesia will deliver to such holder a written statement as to whether it has complied with such requirements. 2.7 Compliance with Securities Laws Gulf agrees that it will at all times comply with the requirements of all applicable Securities Laws with respect to its transactions in securities of Gulf Indonesia, including Rule lOb-6 under the Exchange Act (to the extent applicable to it). ARTICLE 3 MISCELLANEOUS 3.1 Notices All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopier) and, unless otherwise expressly provided herein, shall be delivered during normal business hours by hand, by Federal Express or other reputable overnight commercial delivery service, or by telecopier notice, confirmation of receipt received, addressed as follows, or to such other address as may be hereafter notified by the respective parties hereto: 13 Gulf: Gulf Canada Resources Limited One Norwest Center 1700 Lincoln, Suite 5000 Denver, CO 80203-4524 Attention: President Gulf Indonesia: Gulf Indonesia Resources Limited 21st Floor, Wisma 46, Kota, BNI JF, Jend. Sudirman.Kav I Jakarta, Indonesia Attention: Chief Operating Officer Any notice, request or demand delivered personally or by telecopier shall be deemed to have been given and received on the day it is so delivered if that day is a Business Day or the next Business Day, as the case may be. 3.2 Calculation of Time Periods Unless otherwise specified herein, the period of time within which or following which any act is to be done or step taken pursuant to this Agreement shall be calculated by excluding the day on which the period commences and including the day on which the period ends. If the last day of such period is not a Business Day, the period in question shall end on the next Business Day. 3.3 Applicable Law This Agreement shall be interpreted and governed in accordance with the laws of the Province of Alberta (being the forum conveniens) and the parties hereby submit to the jurisdiction of the courts of Alberta in connection with any dispute concerning this Agreement or the subject matter thereof. Service of any documents on the parties hereto in connection with any legal proceedings shall be effective if the same are delivered by courier to the addresses for notice set forth herein. 3.4 Severability If any provision of this Agreement or any application thereof shall be declared or held to be invalid, illegal or unenforceable in whole or in part whether generally or in any particular jurisdiction, such provision shall be deemed to be amended to the extent necessary to cure such 14 invalidity, illegality or unenforceability, and the validity, legality or enforceability of the remaining provisions of this Agreement, both generally and in every other jurisdiction, shall not in any way be affected or impaired thereby. 3.5 Entire Agreement This Agreement represents the entire agreement of Gulf Indonesia and Gulf with respect to the subject matter hereof, and there are no promises, agreements, undertakings, representations or warranties of Gulf Indonesia or Gulf relative to the subject matter hereof not expressly set forth or referred to herein. 3.6 Amendments No amendment or modification of this Agreement shall be binding unless in writing and signed by all of the parties hereto. 3.7 Waiver No waiver by any party hereto of any breach of any of the provisions of this Agreement shall take effect or be binding upon the party unless in writing and signed by such party. Unless otherwise provided therein, such waiver shall not limit or affect the rights of such party with respect to any other breach. 3.8 Time of Essence Time shall be of the essence of this Agreement. 3.9 Successors and Assigns This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Gulf shall be entitled to assign the rights and obligations hereunder to a purchaser of Company Securities, provided that the assignee holds at least 10% of the common shares of Gulf Indonesia and agrees in writing to be bound by the terms hereof and becomes a party hereto. 3.10 Counterparts This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute one and the same agreement. 15 3.11 Further Acts The parties hereto agree to execute and deliver such further and other documents and perform and cause to be performed such further and other acts and things as may be reasonably necessary or desirable in order to give full effect to this Agreement and every part thereof. 16 In Witness Whereof the parties hereto have executed this agreement on the date first above written. GULF INDONESIA RESOURCES LIMITED Per: [SIG] Per: [SIG] GULF CANADA RESOURCES LIMITED Per: [SIG] Per: [SIG] EX-99.E.11 13 h97565aexv99wew11.txt TECHNICAL SERVICES AGREEMENT EXHIBIT (e)(12) [EXECUTION COPY) TECHNICAL SERVICES AGREEMENT between GULF INDONESIA RESOURCES LIMITED and CONOCO INC. THIS TECHNICAL SERVICES AGREEMENT (this "Agreement") is made and entered into this 9th day of November 2001 (the "Effective Date") by and between: 1) GULF INDONESIA RESOURCES LIMITED, a corporation continued and existing under the laws of New Brunswick, Canada and having its registered office at Wisma 46 - Kota BNI JL. Jenderal Sudirman Kav. I, Jakarta, 10220 Indonesia ("Gulf"); and 2) CONOCO INC., a Corporation organized and existing under the laws of Delaware U.S.A. and having its office at 600 North Dairy Ashford Rd. Houston Texas, 77079 ("Conoco"): Gulf and Conoco are referred to either Individually as "Party" or collectively as "Parties" and shall include their respective successors. WHEREAS: A) Gulf and Conoco are both primarily engaged in the oil and gas business, including the acquisition, development, exploration and production of oil and gas properties; and B) Seventy-two percent (72%) of the shares of Gulf are indirectly owned or controlled by Conoco Inc.; and C) In order to maximum shareholder value and in an effort to better manage the affairs of each Party in a more cost effective and efficient manner the Parties wish to co-operate as to certain Technical Services as contemplated herein, provided that said co-operation is not in conflict with other existing arrangements that either Gulf or Conoco or any of their Subsidiaries (as defined below) may as of the Effective Date have with third parties. NOW THEREFORE, the Parties hereby agree as follows: 1. PURPOSE This Agreement shall provide a framework under which Gulf and Conoco and their respective Subsidiaries shall co-operate with each other concerning the Technical Services contemplated herein for the mutual benefit of the Parties. For purposes of this Agreement, "Subsidiary" with respect to a corporation (the "first corporation"), means a corporation that is controlled (i) by the first corporation, (ii) by the first Corporation and another corporation which is itself controlled by the first corporation, (iii) by two or more corporations, each, of which is controlled by the first corporation, or that is a subsidiary of such a corporation. Gulf and Conoco shall each appoint a representative who will act as the main point of communication between each of them and their respective Subsidiaries in order to facilitate the activities related to this Agreement and the provision of Technical Services contemplated herein. Each Party acknowledges that Perusahaan Pertambangan Minyak dan Gas Bumi Negara ("PERTAMINA") is currently the manager of oil and gas assets in Indonesia, and that PERTAMINA has subcontracted through production sharing contracts the management of such assets to Subsidiaries of Gulf and to Subsidiaries of Conoco and that, as a result, the 1 actions of Gulf and Conoco (or their respective Subsidiaries or other Affiliates) hereunder are subject to the same control by PERTAMINA as would the actions of Gulf or Conoco in connection with such assets. For purposes of this Agreement, (i) "PSC" means a production sharing contract between either Gulf or Conoco, as the case may be, or any of its Subsidiaries and PERTAMINA, and includes any technical assistance contract, enhanced oil recovery contract, and any similar contractual arrangement to which Gulf, Conoco or any of its Subsidiaries may be a party or which it may enter into in the normal course of its business; and (ii) "Affiliate" means, with respect to a person, any person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, such person, and the term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management, activities or policies of any person or entity, whether through the ownership of voting securities, by contract, employment or otherwise but, for greater certainty, does not include any person deriving such rights through a PSC. 2. AUTHORITY & RESPONSIBILITY OF CONOCO 2.1 Conoco shall have the responsibility to render the Technical Services as contemplated herein in support of the business of Gulf (and its Subsidiaries) as set forth herein. Conoco agrees to endeavor to ensure timely delivery of deliverables in respect of any activities to be carried out hereunder. Conoco shall perform all activities contemplated hereunder in a prudent manner consistent with generally accepted standards for the oil and gas business. Conoco's activities under this Agreement shall be specifically subject to the terms hereof and the general control, direction and supervision of Gulf. 2.2 Conoco shall use all reasonable efforts to ensure full compliance by itself and its agents with all applicable laws, ordinances, regulations and orders relative to the provision of the Technical Services contemplated herein in each country which may have jurisdiction over the provision of such Technical Services. 3. PROVISION OF TECHNICAL SERVICES 3.1 At the request of Gulf from time to time, Conoco shall provide Technical Services to Gulf (or one of its Subsidiaries), subject to the general direction and supervision of Gulf. For purposes of this Agreement, "Technical Services" shall mean the following: (a) engineering, supervisory and related services, including field services; (b) geological, geophysical and related services; (c) legal, financial, and other services related to project financing and other commercial agreements; (d) on-the-job training in the United States or other mutually acceptable locations for engineering, operations, geological, geophysical, accounting, financial, legal, human resources and other personnel required to conduct the business of Gulf and its Subsidiaries; and 2 (e) such other services of a similar nature to those set forth above as a requesting Party may request of another Party from time to time; 3.2 (a) Conoco agrees to make its personnel available on an "on-call basis" to assist Gulf, if requested pursuant to this Agreement, on matters or tasks as may be agreed between the Parties. (b) In addition to on-call Technical Services, Conoco agrees to provide experienced experts to Gulf, if requested to do so pursuant to this Agreement, on a long basis through secondment of its employees for an indefinite period as may be agreed between the Parties. While on secondment, such experts shall at all times be under the full control of Gulf and shall at all times serve the interests of Gulf in the same manner as would Gulf's own personnel. Gulf and Conoco shall consult with respect to any employees of Conoco (or its other Affiliates) which Conoco proposes to assign or second to Gulf. Seconded employees will remain employees of Conoco for salary and benefit purposes and be compensated in accordance with the policies of Conoco and Conoco shall charge Gulf for the actual costs of any seconded employees, including but not limited to salary benefits allowances and other compensation which is paid to or on behalf of the seconded employee, as well as any costs or fees described herein. (c) All Conoco employees assisting Gulf in any capacity pursuant to this Agreement shall work under the supervision and direction of Gulf and serve at the pleasure of Gulf. Gulf shall have the right to require that Conoco recall any of its assigned or seconded employees by giving sixty (60) days prior written notice. 3.3 Any request to Conoco for Technical Services shall specify in reasonable written detail the Technical Services being requested the date or dates on which the requesting Party desires such Technical Services to be supplied or completed and such other information as may be reasonably necessary or relevant. Conoco may request clarification as to any matter contained in such request, in a timely manner. Upon receiving a request for Technical Services, Conoco shall reply by submitting a project sheet that describes the work to be performed, timing, and estimated costs associated with the performance of the Technical Services. If Conoco is unable so provide Gulf with the requested Technical Services in a timely fashion within a mutually agreed fee structure, then Gulf shall be free to obtain such services from third parties. If the project sheet is agreed between the Parties, then it shall be signed by authorized representatives of both Gulf and Conoco, and be administered pursuant to the terms of this Agreement. The Parties intend that the Fees for the provision of Technical Services hereunder shall be limited to the actual total costs, direct and indirect (including, but not limited to, overhead and administrative costs, out-of-pocket expenses of the Party providing the Technical Services and its employees, agents and consultants incurred in connection with the provision of Technical Services hereunder, amounts paid by a Party to third parties calculated by reference to the Fees and Indonesian levies and taxes) to the Party providing such Technical Services, provided that such Fees shall not exceed those which the requesting Party would pay to an arms' length third party for services of comparable quality, quantity and location. It is the intent of the Parties that Conoco, and its Affiliates and Subsidiaries, should neither gain a profit nor suffer a loss as a result of performing the Technical Services pursuant to this Agreement. 3 Gulf may at all times and in any event in its discretion conduct Technical Services separately and/or in-house. Notwithstanding anything to the contrary set forth herein, Gulf may use third party service providers to the extent required by Indonesia law, regulations or custom, or to effect cost recovery, free of any restriction contained herein. 4. FINANCIAL ADMINISTRATION When requested to do so in writing by Gulf and supplied with all necessary information including a scope of work upon which to base its budget projection, Conoco will provide Gulf with necessary information to prepare its operating budgets in a timely manner and in any event no later than six (6) months prior to the beginning of a fiscal year of Gulf. Prior to the end of each fiscal year of Gulf during the term of this Agreement, Gulf shall, to the extent possible, prepare and submit to Conoco, a budget (the "Budget") for Technical Services for the ensuing year. Conoco and Gulf shall jointly employ reasonable efforts to ensure that the annual costs of providing Technical Services hereunder shall not exceed the approved Budget either in total or in any one accounting category in connection with any matters set forth in such Budget. 5. CONSULTANTS The provisions of this Agreement are not exclusive in favor of either Party, and each Party acknowledges and agrees that Gulf may use third party consultants to perform certain of the activities outlined in this Agreement, and Conoco may provide comparable technical services to itself or other subsidiaries as requested. The Parties may mutually agree upon retaining a specific third party consultant not currently retained by either Party for certain Technical Services in order to avoid needless cost or duplication. 6. FEES Fees in connection with Technical Services provided pursuant to this Agreement ("Fees") shall be billed monthly by the Party performing such Technical Services to the requesting Party, with an invoice representing all actual and allocated costs for the previous month to be delivered to the requesting Party no later than the 20th of each month. The requesting Party shall pay invoices within thirty (30) days from the receipt thereof. 7. COST RECOVERY A Party providing Technical Services hereunder shall use all reasonable efforts to ensure that all Technical Services provided hereunder in respect of which it or any of its Subsidiaries are or could be entitled to cost recovery under the PSC shall be provided for in such a manner as to facilitate the successful cost recovery of such expenses. In particular and without limitation, each Party acknowledges and agrees that the approval of PERTAMINA shall be required for all Fees which may be charged as "Technical Services from abroad" and should to the extent practicable be included in the annual AFE for Technical Services Abroad that is submitted to PERTAMINA. All amounts in respect of which a Party or any of its Subsidiaries may be entitled to cost recovery shall be invoiced in such a manner as to be readily identifiable as such. 4 8. AUDIT REPORT Gulf and Conoco shall have the right at any time to cause its auditors to prepare a report to it confirming that the computation of the Fee by a Party was accurate, and the other Party(s) shall provide all reasonable cooperation and access to such auditors in the preparation of such report. At the request of a Party, the other Party(s) shall also provide all reasonable cooperation and access to PERTAMINA or any government official in the event that PERTAMINA or such government official shall request or undertake an audit of any Fees paid hereunder. In the event that any audit conducted by a Party hereto determines that the Fees were not properly calculated, the Party against which such determination is made shall have the right to cause another independent audit to be prepared. In the event of disagreement between any two such audits, the matter shall be determined between the Parties hereto pursuant to arbitration in accordance with the provisions hereof. Upon any ultimate determination, Gulf or Conoco, as the case may be, shall refund or pay any Fees improperly paid, or not charged, to the other. 9. TERM AND TERMINATION OF AGREEMENT 9.1 The initial term of this Agreement shall be for a ten (10) year period beginning on the Effective Date. Thereafter, this Agreement shall automatically renew for successive five (5) year periods until terminated in accordance with the terms of this Article 9. 9.2 This Agreement shall be terminated at the earliest of the following occurrences: (a) at such time as Gulf and Conoco shall mutually agree in writing, this Agreement may be terminated on the terms and dates stipulated in such writing. (b) at the expiration of the Initial Term or any Renewal Term, should either Gulf or Conoco elect, with or without cause, to terminate this Agreement by giving the other party at least twelve (12) months' advance written notice of its intent to terminate. In such event, after proper notice, this Agreement shall terminate on the expiry of the Initial Term or the Renewal Term, as the case may be. (c) Subject to events of force majeure (as provided in Section 14.5 hereof), in the event either Party shall fail to discharge any of its material obligations hereunder, including, without limitation, the obligation to render Technical Services under the terms of this Agreement or the "Administrative Services" or the "Information Services" under the Administrative & Information Services Agreement between the parties in a timely and prudent manner, or shall commit a material breach of this Agreement or the Administrative & Information Services Agreement and such failure, default or breach shall continue for period of thirty (30) days after the other Party has served written notice of such default, this Agreement and the Administrative & Information Services Agreement may then be terminated at the option of the non-breaching Party by written notice therefore to the breaching Party specifying a proposed date of termination at least thirty (30) days after the date of such notice, it being understood that such termination right is in addition to any other remedies that may be available to the aggrieved Party. 5 (d) Upon the dissolution or termination of the corporate existence of either Party or cessation on the part of either Party to continue to conduct its oil and gas business; (e) if there is instituted by or against either Party any proceeding under any applicable bankruptcy law, or under any other law for the relief of debtors now or hereafter existing, or a receiver is appointed for all or substantially all of the assets of the Party and such proceeding is not dismissed or such receiver is not discharged, as the case may be, within thirty (30) days thereafter; (g) if either Party shall (i) become insolvent, (ii) generally fail to, or admit in writing its inability to, pay debts as they become due, (iii) make a general assignment for the benefit of creditors, (iv) apply for, consent to or acquiesce in the appointment of a trustee, receiver or other custodian. (h) if a substantial portion of the assets or properties of either Party shall be seized or taken by order of a governmental agency or body, or any other writ shall be issued against such Party or any of its assets, or if any other lawful creditor's remedy shall be asserted or exercised with respect thereof, provided that in any such case such Party has not contested such action in good faith within thirty (30) days thereof. (i) either Party shall have the right to terminate this Agreement during the twelve (12) months following the occurrence of a Change of Control in the other Party. For purposes of this Agreement, "Change of Control" means the acquisition by any person or group of persons of beneficial ownership (as such term is defined under Section 13(d) of the U.S. Securities Exchange Act of 1934 as amended) of more than 50% of the outstanding ordinary shares on an undiluted basis, or all or substantially all of the assets or business of such Party not seeking to invoke this right of termination under this clause Unless otherwise provided in this Section 9.2, either Party may exercise its right to terminate this Agreement by giving the other Party written notice specifying a proposed date of termination no more than twelve (12) months nor less than thirty (30) days after the date of such notice, in which case this Agreement shall terminate on the date specified in such notice. 9.3 The termination of this Agreement in accordance with the provisions of this Article 9 shall have the following effects: (a) Except for the mutual indemnities set forth in Article 12 and the covenants and the other provisions herein that by their terms expressly extend beyond the Term of Agreement, the Parties' obligations hereunder are limited to the Term of Agreement. (b) In the event this Agreement is terminated for any reason, the Party providing Technical Services shall immediately deliver possession to the requesting Party of all assets, books and records of the requesting Party in the other Party's possession 6 and shall provide the requesting Party with copies of all assets, books and records (including electronic copies in the format requested by the requesting Party and reasonably within the other Party's capability) relating to his Technical Services that are in the other Party's possession, at the cost of the requesting Party. (c) Upon termination of this Agreement (for whatever cause, other than a material breach by a Party of this Agreement), Gulf shall pay to Conoco the amount of any and all costs and expenses accrued to the date of such termination which are payable in accordance with the provisions hereof, together with any costs actually incurred which result from the termination of this Agreement. 9.4 Notwithstanding termination of this Agreement, each Party shall remain bound by the provisions of Article 10.2. 10. ACCESS TO BOOKS AND RECORDS; CONFIDENTIALITY; CONFLICTS OF INTEREST 10.1 Except as otherwise provided under the Confidentiality Agreement between the parties dated 15 October 2001, Conoco and its duly authorized representatives shall have complete access to Gulf's offices, facilities and records wherever located, as necessary in order to discharge Conoco's responsibilities hereunder. All records and materials furnished to Conoco by Gulf in performance of this Agreement shall at all times during the term of this Agreement remain the property of Gulf. Gulf and its duly authorized representatives shall have complete access to records and other information concerning Gulf (and its Subsidiaries) used by Conoco in performance of its duties hereunder. 10.2 During the term of this Agreement and for a period of three (3) years thereafter, any information and data acquired, interpreted, developed or disclosed in connection with the Technical Services provided under this Agreement shall be treated by the receiving Party as confidential and shall not be disclosed by the receiving Party except to its directors, officers, employees and to the directors, officers, employees of its Affiliates, and to its consultants, without the prior written consent of the disclosing Party. Both Parties shall ensure that the person to whom confidential information is provided is aware of the confidentiality obligations under this Agreement and shall ensure that such persons comply with the confidentiality provisions of this Agreement. 10.3 Conoco undertakes that it shall avoid any conflict of interest between the interests of its other Subsidiaries and other Affiliates and the interests of Gulf and its Subsidiaries in dealing with suppliers, customers and all other persons doing or seeking to do business with Gulf in connection with the Technical Services contemplated under this Agreement. 10.4 The provisions contained in Section 10.2 shall survive the termination of this Agreement. 11. GOVERNING LAW AND DISPUTE RESOLUTION 11.1 This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York. 7 11.2 Any dispute, controversy, or claim arising under this Agreement, including any disputes as to the construction, performance, interpretation, breach, termination, enforceability or invalidity of this Agreement, that cannot be settled amicably by the Parties within thirty (30) days of receipt by the Parties of a notice of such dispute, shall be finally settled by a three (3) person arbitration panel under the UNCITRAL arbitration rules as in force on the date of this Agreement and in accordance with the following provisions: (a) The Parties by mutual agreement shall select the three (3) person panel within thirty (30) days of the notice of the dispute described above. If the Parties have not selected the three person panel within such thirty (30) day period, then the entire panel shall be selected by the Secretary-General of the Permanent Court of Arbitration at the Hague (provided that the requirements set forth in clause (b) below are satisfied); (b) Each arbitrator shall be fluent in English and shall be experienced in the oil and gas industry; (c) The site of the arbitration shall be in London. The language of the arbitration shall be English; (d) The Parties agree that the award made by the panel shall be final and conclusive and binding upon the Parties; (e) Any expenses incurred in connection with the appointment of the arbitrator(s) and the performance of the arbitration shall be shared equally by the Parties. Each Party shall pay its own expenses incurred in connection with the arbitration; (f) The Parties agree that no Party shall have any right to commence or maintain any suit or legal proceeding until the dispute has been determined in accordance with these arbitration procedures and then only for enforcement of the award made in such arbitration. In the case of a lawsuit or any other legal proceeding being commenced against any Party to enforce any arbitration award or for any other purpose related to this Agreement, the Parties agree that they are subject to the non-exclusive jurisdiction of, and hereby irrevocably elect permanent domicile at, the District Court of Central Jakarta, Indonesia. The Parties expressly agree to waive any provisions of any applicable law or regulation of Indonesia or any competent authority that provide the possibility to appeal the decision of the arbitrators so that there shall be no appeal to any court from the decision of the arbitrators; and (g) Each of the Parties hereby expressly waives any Indonesian laws and regulations, decrees or policies having the force of law that would otherwise give a right to appeal the decision of the panel and the Parties agree that, in accordance with Article 60 of the Indonesian Arbitration Law, neither Party shall appeal to any court from the award or decision contained therein, so that on the decision taken by the panel there shall be no other Indonesian authority or panel. Each of the Parties waive the applicability of Articles 48.1 and 73(B) of the Indonesian Arbitration Law; however, the Parties do acknowledge among themselves that it is 8 their intent that an arbitration under this Agreement be completed within one hundred eighty (180) days from the selection of the three person panel. 12. INDEMNITIES 12.1 Indemnification by Conoco Conoco shall protect, indemnify, defend and hold harmless Gulf and its officers, directors, employees, agents, other representatives and Subsidiaries (together the "Gulf Indemnitees") from any and all threatened or actual claims, demands, causes of action, suits, proceedings (formal or informal), losses, damages, fines, penalties, liabilities, costs and expenses of any nature, including attorney's fees and court costs, sustained or incurred by or asserted against a Gulf Indemnitee by any person by reason of or arising out of: (i) any breach or alleged breach of this Agreement by Conoco, its Affiliates (other than a Gulf Indemnitee), agents, or employees; or (ii) any act or alleged act of fraud, willful misconduct or gross negligence of Conoco or its Affiliates (other than a Gulf Indemnitee) or any of their respective employees, officers, directors or agents, or (iii) acts outside, or omissions in, the scope of Conoco's or its Subsidiary's authorized duties and responsibilities contained herein. In case any action or proceeding shall be brought against a Gulf Indemnitee in respect of which indemnification may be sought against Conoco pursuant to this Section 11.1, then Conoco, upon receipt of notice from Gulf, shall defend such action or proceeding by counsel reasonably satisfactory to Gulf and Conoco, and Conoco shall pay for all expenses therefore unless such action or proceeding is resisted and defended by counsel for any carrier of public liability insurance that benefits Gulf or Conoco. Gulf shall promptly give written notice to Conoco when a claim is made against a Gulf Indemnitee for which indemnity is owed pursuant to this Section 12.1. Conoco shall participate at its own expense on defense of such claims, but Gulf shall have the right to employ its own separate counsel. Gulf shall assist Conoco in the defense of any claim for which Conoco owes indemnification hereunder and is undertaking to provide a defense, by making available to Conoco such records and personnel as may be reasonably required in the defense of such claim. 12.2 Indemnification by Gulf Gulf shall protect, indemnify, defend and hold harmless Conoco and its officers, directors, employees, agents, other representatives and Subsidiaries (together the "Conoco Indemnitees") from any and all threatened or actual claims, demands, causes of action, suits, proceedings (formal or informal), losses, damages, fines, penalties, liabilities, costs and expenses of any nature, including attorney's fees and court costs, sustained or incurred by or asserted against a Conoco Indemnitee by any person by reason of or arising out of: (i) any breach or alleged breach of this Agreement by Gulf, its Affiliates (other than a Conoco Indemnitee), agents, or employees; or (ii) any act or alleged act of fraud, willful misconduct or gross negligence of Gulf or its Affiliates (other than a Conoco Indemnitee) or any of their respective employees, officers, directors or agents, or (iii) acts outside, or omissions in, the scope of Gulf's or its Subsidiary's authorized duties and responsibilities contained herein. In case any action or proceeding shall be brought against a Conoco Indemnitee in respect of which indemnification may be sought against Gulf pursuant to this Section 12.2, then Gulf, upon receipt of notice from Conoco, shall defend such action 9 or proceeding by counsel reasonably satisfactory to Conoco and Gulf, and Gulf shall pay for all expenses therefore unless such action or proceeding is resisted and defended by counsel for any carrier of public liability insurance that benefits Conoco or Gulf. Conoco shall promptly give written notice to Gulf when a claim is made against a Conoco Indemnitee for which indemnity is owed pursuant to this Section 12.2. Gulf shall participate at its own expense on defense of such claims, but Conoco shall have the right to employ its own separate counsel. Conoco shall assist Gulf in the defense of any claim for which Gulf owes indemnification hereunder and is undertaking to provide a defense, by making available to Gulf such records and personnel as may be reasonably required in the defense of such claim. 13. NOTICES 13.1 Except as otherwise specifically provided herein, all notices and communications under this Agreement shall be deemed to have been properly given when received if sent to Parties by email transmission to the appointed representative for each Party from time to time pursuant to Section 1 hereof, by telex, by telefax, or by acknowledged hand delivery: if to Gulf or one of its Subsidiaries that is a Party hereto as follows: GULF INDONESIA RESOURCES LIMITED Wisma 46, Kota BNI, Level 21 Jl. Jend. Sudirman Kav. I Jakarta. 10220 Indonesia. Attention: Vice President, Finance Telefax: 62 - 21 5730737 if to Conoco or one of its Subsidiaries that is a Party hereto as follows: CONOCO INC. 600 North Dairy Ashford Rd. Houston Texas, 77079 Attention: Assistant to the President--Exploration Production AAME Telefax: 1-281-293-2270 13.2 Gulf and Conoco may by giving notice thereof to the other change of its address for notice at any time. 14. MISCELLANEOUS 14.1 It is not the intention of the Parties to create, nor shall this Agreement be deemed or construed to create a partnership, joint venture, association, trust or fiduciary relationship, or to authorize any Party to act as an agent, servant, or employee for any other Party. 10 14.2 This Agreement is not intended to and shall not be deemed to impose any obligations upon the Parties to enter into any further transactions or impose any other obligation on either Party hereto with respect to areas of Technical Services hereunder. Without limiting the foregoing, this Agreement shall not be interpreted as creating any form of exclusive arrangement between the Parties, nor shall it place any restrictions on either Party in the conduct of their normal business. 14.3 Any modification, variation or alteration to the terms of this Agreement shall be effective and valid if confirmed in writing by the Parties. 14.4 No assignment of this Agreement or any of the rights or obligations set forth herein by a Party shall be valid without the specific written consent of both Gulf and Conoco, which will not be unreasonably withheld. Notwithstanding the foregoing, Gulf and Conoco and any of their permitted assignees shall have the right to assign this Agreement to an Affiliate without the consent of the other Parties hereto, provided that (i) such Affiliate is controlled by Gulf, or by Conoco, (ii) the ability of Gulf (or its Subsidiaries) or Conoco (or its other Affiliates) to obtain cost recovery under a relevant PSC is not thereby lost, and (iii) Gulf or Conoco, as the case may be, shall remain liable for such assignee's obligations and liabilities under this Agreement. 14.5 The waiver by a Party of a breach or violation of any provision of this Agreement shall not operate as, or be construed to be, a waiver of any subsequent breach of the same or any other provisions hereof. 14.6 In the event either Party shall resort to legal action to enforce the terms and provisions of this Agreement, the prevailing Party may recover from the other Party the costs of such action including, without limitation, reasonable attorneys' fees. 14.7 Upon the request of a Party, the other Parties shall execute such additional instruments and take such additional actions as shall be necessary to effectuate this Agreement. 14.8 No Party shall be liable nor deemed to be in default for any delay or failure of performance under this Agreement resulting directly or indirectly from acts of God, civil or military authority, acts of public enemy, war accidents, fires, explosions, earthquakes, floods, failure of transportation, strikes, interruptions by a Party's employees or any similar or dissimilar cause beyond the reasonable control of the Party claiming the force majeure. 14.9 If any provision of this Agreement or any application thereof shall be declared or held to be invalid, illegal or unenforceable in whole or in part whether generally or in any particular jurisdiction, such provision shall be deemed to be amended to the extent necessary to cure such invalidity, illegality or unenforceability, and the validity, legality or enforceability of the remaining provision of this Agreement, both generally and in every other jurisdiction, shall not in any way be affected or impaired thereby. 14.10 No Party shall be liable to the other under this Agreement for direct, indirect or consequential damages including but not limited to economic losses, loss of profit or business interruption, loss of contract or business opportunity. 14.11 The Parties hereto agree that as of the Effective Date hereof, it is in the best interest of the Parties that this Agreement shall supercede all terms and conditions of the Technical 11 Services Agreement dated as of 1 October 1997 between Gulf and Gulf Canada Resources Limited (presently known as Conoco Canada Inc. and presently an indirectly wholly-owned subsidiary of Conoco Inc.) as well as all other previous oral or written discussions, offers, proposals, or positions between the Parties. 14.12 The Parties hereto acknowledge and agree that additional Subsidiaries of Gulf may come into existence and/or may become parties to a PSC at any time and from time to time, and in such event, Gulf shall ensure that each Subsidiary which is the operator of or party to a PSC becomes a party hereto. A Subsidiary shall become a party hereto by executing a counterpart hereof and delivering a copy thereof to each of Gulf and Conoco, at which time of delivery such Subsidiary shall be deemed to be a Party hereunder without further formality. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives on the day and year first above written. For and on behalf of: For and on behalf of: GULF INDONESIA RESOURCES CONOCO INC. LIMITED /s/ PAUL C. WARWICK /s/ JAMES D. McCOLGIN - -------------------------------- ---------------------------------- Name: Paul C. Warwick Name: James D. McColgin Title: President and CEO Title: President-Exploration Production AAME 12 -----END PRIVACY-ENHANCED MESSAGE-----