INDEMNIFICATION AGREEMENT

 

 

                                                                    Exhibit 10.3

 

                            INDEMNIFICATION AGREEMENT

 

     This   Indemnification   Agreement (this   "Agreement")   dated the ____ day of

_______,   2005, by and between   GulfWest Energy Inc., a Texas   corporation   (the

"Company"), and ____________, an individual ("Indemnitee").

 

                                    RECITALS

 

     A.    Competent   and   experienced   persons   are   reluctant   to   serve   or to

continue   to   serve   as   directors   and   officers   of   corporations   or in other

capacities unless they are provided with adequate   protection   through insurance

or   indemnification   (or both) against   claims against them arising out of their

service and activities on behalf of the corporation.

 

     B.    The current   uncertainties   relating to the   availability   of adequate

insurance   have   increased the   difficulty   for   corporations   of attracting and

retaining competent and experienced persons to serve in such capacity.

 

      C.    The Board of Directors of the Company (the "Board of   Directors")   has

determined   that the   continuation   of present trends in litigation will make it

more difficult to attract and retain competent and experienced   persons to serve

as directors and officers of the Company,   that this situation is detrimental to

the best interests of the Company's shareholders and that the Company should act

to assure   such   persons   that there will be   increased   certainty   of   adequate

protection in the future.

 

      D.    As a supplement to and in the furtherance of the Company's Articles of

Incorporation,   as amended (the   "Articles"),   and Bylaws (the "Bylaws"),   it is

reasonable,   prudent,   desirable and necessary for the Company   contractually to

obligate   itself to   indemnify,   and to pay in   advance   expenses   on behalf of,

officers and directors to the fullest extent   permitted by law so that they will

serve or continue to serve the Company   free from   concern that they will not be

so indemnified and that their expenses will not be so paid in advance;

 

     E.    This   Agreement   is not a   substitute   for,   nor does it   diminish   or

abrogate any rights of Indemnitee under, applicable law, the Articles and/or the

Bylaws or any resolutions adopted pursuant thereto (including any contractual or

other rights of Indemnitee that may exist).

 

     F.    Indemnitee is a director   and/or officer of the Company and his or her

willingness to continue to serve in such capacity is predicated,   in substantial

part,   upon the   Company's   willingness   to indemnify   him or her to the fullest

extent   permitted   by the   laws   of the   State   of   Texas   and   upon   the   other

undertakings set forth in this Agreement.

 

 

                                    AGREEMENT

 

     NOW,   THEREFORE,   in consideration of the premises and covenants   contained

herein, the Company and Indemnitee hereby agree as follows:

 

 

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                                   ARTICLE 1

                               CERTAIN DEFINITIONS

 

     Capitalized terms used but not otherwise defined in this Agreement have the

meanings set forth below:

 

     "Corporate   Status"   means the status of a person who is or was a director,

officer,   employee   or agent of the   Company or a   director,   officer,   partner,

venturer,   proprietor,   trustee,   employee,   agent or similar functionary of any

other   Enterprise   which such   person is or was   serving   at the   request of the

Company.   In   addition   to any   service   at the actual   request of the   Company,

Indemnitee will be deemed,   for purposes of this Agreement,   to be serving or to

have   served at the   request of the   Company as a   director,   officer,   partner,

venturer, proprietor, trustee, employee, agent or similar functionary of another

Enterprise   if   Indemnitee   is or was serving as a director,   officer,   partner,

venturer,   proprietor,   trustee,   employee, agent or similar functionary of such

Enterprise   and (i)   such   Enterprise   is or at the time of such   service   was a

Controlled Affiliate, (ii) such Enterprise is or at the time of such service was

an employee   benefit   plan (or related   trust)   sponsored or   maintained   by the

Company or a Controlled Affiliate or (iii) the Company or a Controlled Affiliate

directly or indirectly   caused Indemnitee to be nominated,   elected,   appointed,

designated, employed, engaged or selected to serve in such capacity.

 

     "Controlled   Affiliate" means any corporation,   limited liability   company,

partnership,   joint   venture,   trust or   other   Enterprise,   whether   or not for

profit, that is directly or indirectly   controlled by the Company.   For purposes

of this   definition,   the term   "control"   means   the   possession,   directly   or

indirectly, of the power to direct, or cause the direction of, the management or

policies of an Enterprise,   whether through the ownership of voting   securities,

through other voting rights, by contract or otherwise;   provided,   however, that

direct or indirect   beneficial   ownership of capital stock or other interests in

an   Enterprise   entitling   the holder to cast 30% or more of the total number of

votes   generally   entitled to be cast in the election of   directors   (or persons

performing comparable functions) of such Enterprise will be deemed to constitute

"control" for purposes of this definition.

 

     "Disinterested Director" means a director of the Company who is not and was

not a named   defendant   or   respondent   to the   Proceeding   in   respect of which

indemnification is sought by Indemnitee.

 

     "Enterprise"   means the   Company   and any other   corporation,   partnership,

limited liability company, joint venture,   employee benefit plan, trust or other

entity or other   enterprise of which Indemnitee is or was serving at the request

of the Company in a Corporate Status.

 

     "Expenses" means all attorneys' fees,   disbursements   and retainers,   court

costs,   transcript   costs,   fees of   experts,   witness   fees,   travel   expenses,

duplicating costs, printing and binding costs,   telephone charges,   postage, fax

transmission charges,   secretarial services, delivery service fees and all other

disbursements   or   expenses   paid or incurred in   connection   with   prosecuting,

defending,   preparing to prosecute or defend, investigating,   being or preparing

to be, or as a result of being, a witness in, or otherwise   participating   in, a

Proceeding,   or in connection with seeking indemnification under this Agreement.

Expenses   will also include   Expenses   paid or incurred in   connection   with any

 

 

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appeal   resulting from any Proceeding,   including the premium,   security for and

other costs relating to any appeal bond or its   equivalent.   Expenses,   however,

will not include   amounts   paid in   settlement   by   Indemnitee   or the amount of

judgments or fines against Indemnitee.

 

     "Independent   Counsel"   means   an   attorney   or firm of   attorneys   that is

experienced in matters of corporation   law and neither   currently is, nor in the

past 5 years has been,   retained to represent:   (i) the Company or Indemnitee in

any matter   material   to either such party   (other than with   respect to matters

concerning   the   Indemnitee   under this   Agreement   and/or   the   indemnification

provisions   of the Articles or Bylaws,   or of other   indemnitees   under   similar

indemnification   agreements),   or (ii) any other party to the Proceeding   giving

rise to a claim for   indemnification   hereunder.   Notwithstanding the foregoing,

the term   "Independent   Counsel"   does not   include   any person   who,   under the

applicable   standards of   professional   conduct then   prevailing,   would have an

actual conflict of interest in representing   either the Company or Indemnitee in

an action to determine Indemnitee's rights under this Agreement.

 

     "Losses" means any loss,   liability,   judgments,   damages,   amounts paid in

settlement, fines (including excise taxes and penalties assessed with respect to

employee benefit plans),   penalties   (whether civil,   criminal or otherwise) and

all interest,   assessments   and other charges paid or payable in connection with

or in respect of any of the foregoing.

 

     "Proceeding"   means any   threatened,   pending or   completed   action,   suit,

claim,    demand,    arbitration,     alternate    dispute    resolution    mechanism,

investigation,   inquiry,   administrative hearing or any other actual, threatened

or completed proceeding, including any and all appeals, whether brought by or in

the right of the Company or otherwise,   whether civil, criminal,   administrative

or   investigative,   whether formal or informal,   and in each case whether or not

commenced   prior to the date of this Agreement,   in which   Indemnitee was, is or

will   be   involved   as a   party   or   otherwise,   by   reason   of or   relating   to

Indemnitee's   Corporate   Status and by reason of or   relating   to either (i) any

action or alleged action taken by Indemnitee   (or failure or alleged   failure of

Indemnitee   to act) or any   action or   alleged   action   (or   failure   or alleged

failure   to act) on   Indemnitee's   part,   while   acting in his or her   Corporate

Status or (ii) the fact that   Indemnitee is or was serving at the request of the

Company as director, officer, employee, partner, venturer,   proprietor,   trustee

or agent or similar functionary of another   Enterprise,   in each case whether or

not serving in such capacity at the time any Loss or Expense is paid or incurred

for which   indemnification or advancement of Expenses can be provided under this

Agreement, except one initiated by Indemnitee to enforce his or her rights under

this Agreement.   For purposes of this definition,   the term "threatened" will be

deemed to include Indemnitee's good faith belief that a claim or other assertion

may lead to institution of a Proceeding.

 

     References   to   "serving   at the   request   of the   Company"   as a   trustee,

employee,   agent or similar   functionary of an employee benefit plan include any

service as a director,   officer,   employee or agent of the Company which imposes

duties,   liabilities,   Losses or other   obligations on, or involves services by,

such person with respect to any   employee   benefit   plan,   its   participants   or

beneficiaries; and a person who acted or failed to act in the performance of his

or her duties in good faith and for a purpose he or she   reasonably   believed to

be in the best interests of the   participants   and   beneficiaries of an employee

 

 

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benefit   plan will be deemed to have acted in a manner "not   opposed to the best

interests   of the   Company"   as   referred   to   under   applicable   law or in this

Agreement.

 

                                   ARTICLE 2

                             SERVICES TO THE COMPANY

 

 

     2.1   Services to the Company.   Indemnitee   agrees to serve as a ________ of

the   Company.   Indemnitee   may at any time and for any or no reason   resign from

such position   (subject to any other   contractual   obligation or any   obligation

imposed by operation of law), in which event the Company will have no obligation

under this   Agreement to continue   Indemnitee in such   position.   This Agreement

will not be   construed   as giving   Indemnitee   any right to be   retained   in the

employ of the Company (or any other Enterprise).

 

                                   ARTICLE 3

                                  INDEMNIFICATION

 

     3.1   Company Indemnification.   Except as otherwise provided in this Article

3, if   Indemnitee   was, is or becomes a party to, or was or is   threatened to be

made a party to, or was or is otherwise involved in, any Proceeding, the Company

will indemnify and hold harmless   Indemnitee to the fullest extent   permitted by

the Articles,   Bylaws and applicable law, as the same exists or may hereafter be

amended,   interpreted   or   replaced   (but   in the   case of any   such   amendment,

interpretation   or   replacement,    only   to   the   extent   that   such   amendment,

interpretation    or    replacement    permits   the   Company   to   provide    broader

indemnification   rights than were permitted prior thereto),   against any and all

reasonable   Expenses and all Losses,   and any federal,   state,   local or foreign

taxes imposed as a result of the actual or deemed   receipt of any payments under

this   Agreement,   that are actually paid or incurred by Indemnitee in connection

with such Proceeding.   In addition,   and not withstanding anything herein to the

contrary, the Company will fully indemnify,   defend and hold harmless Indemnitee

against   any and all   Expenses   and all   Losses   that   are paid or   incurred   by

Indemnitee in connection with any threatened, pending or completed legal action,

suit,   claim,   demand,   arbitration,   alternate   dispute   resolution   mechanism,

investigation,   inquiry,   administrative hearing or any other actual, threatened

or   completed   proceeding,   including   any and all   appeals,   whether   formal or

informal,   and in each case whether or not   commenced   prior to the date of this

Agreement   and   whether   or not based on facts,   circumstances,   or events   that

occurred prior to the dates of this Agreement,   which Indemnitee was, is or will

be involved as a party or otherwise,   which is brought or asserted,   directly or

indirectly,   by, on behalf, or in the name of Scott Brown, Volant Energy LLC (or

any   similar   entity   owned   or   controlled   by   Scott   Brown),   or any of their

respective   affiliates   or   assigns   arising   out   of or   relating   to   (i)   the

formation,   operations,   business proposals or any actual or alleged opportunity

of Volant Energy LLC (or any similar   entity owned or controlled by Scott Brown)

directly or indirectly related to the Company,   (ii) discussions,   negotiations,

and actual or proposed   transactions between or among Oaktree Capital Management

LLC or any of its   affiliates,   the   Company,   Scott   Brown   and/or   Indemnitee,

including   without   limitation   the   transactions   contemplated   by that certain

Subscription   Agreement   dated the dated   hereof   between the Company and OCM GW

Holdings,   LLC, or (iii)   otherwise   relating to or involving   the Company.   For

purposes of this   Agreement,   the   meaning of the phrase "to the fullest   extent

 

 

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permitted by law" will include to the fullest extent permitted by Article 2.02-1

of the Texas Business   Corporation   Act ("TBCA") or any section that replaces or

succeeds   Article   2.02-1 of the TBCA with respect to such   matters,   but in the

case of any   such   replacement   or   succession,   only to the   extent   that   such

succession   permits the Company to provide broader   indemnification   rights than

were permitted prior thereto.

 

     3.2   Mandatory    Indemnification    if    Indemnitee    is   Wholly   or   Partly

Successful.   Notwithstanding   any other provision of this Agreement   (other than

Section 6.9), to the extent that Indemnitee has been wholly   successful,   on the

merits or   otherwise,   in defense of any   Proceeding   or any part   thereof,   the

Company will indemnify Indemnitee against all reasonable Expenses and all Losses

that are actually paid or incurred by Indemnitee   in   connection   therewith.   If

Indemnitee is not wholly   successful in such Proceeding,   but is successful,   on

the merits or otherwise,   as to one or more but fewer than all claims, issues or

matters   in such   Proceeding,   the   Company   will   indemnify   and hold   harmless

Indemnitee against all reasonable Expenses and all Losses that are actually paid

or incurred by Indemnitee in connection with each   successfully   resolved claim,

issue or matter on which Indemnitee was successful. For purposes of this Section

3.2, the   termination or abandonment of any Proceeding,   or any claim,   issue or

matter in such Proceeding, by dismissal with or without prejudice will be deemed

to be a successful result as to such Proceeding, claim, issue or matter.

 

     3.3   Indemnification   for Expenses of a Witness.   Notwithstanding any other

provision of this Agreement,   to the extent that Indemnitee is, by reason of his

or her Corporate   Status, a witness in any Proceeding to which Indemnitee is not

at such   time a named   defendant   or   respondent,   the   Company   will   indemnify

Indemnitee   against all Expenses   actually   paid or incurred by Indemnitee or on

his or her behalf in connection therewith.

 

     3.4   Exclusions. Notwithstanding any other provision of this Agreement, the

Company will not be obligated under this Agreement to provide indemnification in

connection with the following:

 

          (a) Any   Proceeding (or part of any   Proceeding)   initiated or brought

     voluntarily by Indemnitee   against the Company or its directors,   officers,

     employees   or   other   indemnities,    unless   the   Board   of   Directors   has

     authorized or consented to the   initiation of the   Proceeding (or such part

     of any Proceeding);   provided, however, that nothing in this Section 3.4(a)

     shall limit the right of Indemnitee to be indemnified under Section 8.4.

 

          (b) For an   accounting   of profits made from the purchase and sale (or

     sale and purchase) by   Indemnitee   of securities of the Company   within the

     meaning of   Section   16(b) of the   Exchange   Act or any   similar   successor

     statute.

 

                                   ARTICLE 4

                             ADVANCEMENT OF EXPENSES

 

     4.1   Expense   Advances.   Except as set forth in Section   4.2,   the   Company

will, if requested by Indemnitee,   advance,   to the fullest extent   permitted by

law, to   Indemnitee   (hereinafter   an "Expense   Advance")   any and all   Expenses

 

 

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<PAGE>

 

 

actually   paid or incurred   by   Indemnitee   in   connection   with any   Proceeding

(whether prior to or after its final   disposition).   Indemnitee's   right to each

Expense   Advance   will not be subject to the   satisfaction   of any   standard   of

conduct and will be made without regard to Indemnitee's   ultimate entitlement to

indemnification   under   the   other   provisions   of   this   Agreement,    or   under

provisions of the Articles or Bylaws or otherwise.   Each Expense Advance will be

unsecured   and interest free and will be made by the Company   without   regard to

Indemnitee's ability to repay the Expense Advance;   provided,   however, that, if

applicable law requires,   an Expense   Advance will be made only upon delivery to

the Company of an affirmation of Indemnitee's   good faith belief that Indemnitee

has met the   standard   of   conduct   necessary   for such   indemnification   and an

undertaking (hereinafter,   collectively,   an "Undertaking"),   by or on behalf of

Indemnitee,   to repay such Expense   Advance if it is ultimately   determined,   by

final decision by a court or arbitrator,   as applicable,   from which there is no

further right to appeal,   that   Indemnitee is not entitled to be indemnified for

such Expenses under the Articles, Bylaws, the TBCA, this Agreement or otherwise.

An Expense   eligible for an Expense   Advance will include any and all reasonable

Expenses   incurred   pursuing   an action   to   enforce   the   right of   advancement

provided   for in this   Article 4,   including   Expenses   incurred   preparing   and

forwarding statements to the Company to support the Expense Advances claimed.

 

     4.2   Exclusions.   Indemnitee will not be entitled to any Expense Advance in

connection with any of the matters for which   indemnity is excluded   pursuant to

Section 3.4.

 

     4.3   Timing. An Expense Advance pursuant to Section 4.1 will be made within

5 business   days   after the   receipt by the   Company of a written   statement   or

statements from Indemnitee   requesting such Expense Advance (which   statement or

statements   will   include,   if   requested   by   the   Company,   reasonable   detail

underlying   the Expenses for which the Expense   Advance is   requested),   whether

such   request is made prior to or after final   disposition   of such   Proceeding.

Such   request must be   accompanied   by or preceded by the   Undertaking,   if then

required by the TBCA or any other applicable law.

 

                                   ARTICLE 5

                  CONTRIBUTION IN THE EVENT OF JOINT LIABILITY

 

     5.1   Contribution   by Company.   To the fullest extent   permitted by law, if

the indemnification   provided for in this Agreement is unavailable to Indemnitee

for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, will

contribute to the amount of Expenses and Losses actually and reasonably incurred

or paid by   Indemnitee in   connection   with any   Proceeding in proportion to the

relative   benefits   received   by the   Company and all   officers,   directors   and

employees   of the Company   other than   Indemnitee   who are   jointly   liable with

Indemnitee   (or   would be if joined in such   Proceeding),   on the one hand,   and

Indemnitee,   on the other hand, from the transaction   from which such Proceeding

arose;   provided,   however,   that   the   proportion   determined   on the   basis of

relative   benefit   may,   to the extent   necessary   to conform to law, be further

adjusted by   reference to the   relative   fault of the Company and all   officers,

directors   and employees of the Company   other than   Indemnitee   who are jointly

liable with   Indemnitee (or would be if joined in such   Proceeding),   on the one

hand,   and   Indemnitee,   on the other hand, in   connection   with the events that

resulted   in   such   Expenses   and   Losses,    as   well   as   any   other   equitable

 

 

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considerations   which applicable law may require to be considered.   The relative

fault of the Company and all   officers,   directors   and employees of the Company

other than   Indemnitee   who are jointly   liable with   Indemnitee (or would be if

joined in such Proceeding),   on the one hand, and Indemnitee, on the other hand,

will be   determined   by reference   to, among other   things,   the degree to which

their actions were motivated by intent to gain personal profit or advantage, the

degree to which their liability is primary or secondary, and the degree to which

their conduct was active or passive.

 

     5.2   Indemnification   for   Contribution   Claims by Others.   To the   fullest

extent   permitted by law, the Company will fully   indemnify and hold   Indemnitee

harmless from any claims of contribution which may be brought by other officers,

directors or employees of the Company who may be jointly liable with   Indemnitee

for any Loss or Expense arising from a Proceeding.

 

                                   ARTICLE 6

                       PROCEDURES AND PRESUMPTIONS FOR THE

                 DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION

 

     6.1   Notification of Claims; Request for Indemnification. Indemnitee agrees

to notify   promptly the Company in writing of any claim made against   Indemnitee

for   which   indemnification   will or   could   be   sought   under   this   Agreement;

provided,   however,   that a   delay   in   giving   such   notice   will   not   deprive

Indemnitee of any right to be indemnified under this Agreement unless,   and then

only to the extent that,   the Company did not otherwise   learn of the Proceeding

and such delay is materially prejudicial to the Company's ability to defend such

Proceeding;   and,   provided,   further,   that   notice will be deemed to have been

given without any action on the part of Indemnitee in the event the Company is a

party to the same   Proceeding.   The   omission   to notify   the   Company   will not

relieve the Company from any liability for indemnification   which it may have to

Indemnitee   otherwise than under this   Agreement.   Indemnitee may deliver to the

Company   a written   request   to have the   Company   indemnify   and hold   harmless

Indemnitee   in   accordance   with this   Agreement.   Subject to Section 6.9,   such

request may be   delivered   from time to time and at such   time(s) as   Indemnitee

deems   appropriate   in his or her   sole   discretion.   Following   such a   written

request for indemnification,   Indemnitee's   entitlement to indemnification shall

be   determined   according   to Section 6.2.   The   Secretary of the Company   will,

promptly upon receipt of such a request for indemnification, advise the Board of

Directors in writing that Indemnitee has requested indemnification.   The Company

will be entitled to participate in any Proceeding at its own expense.

 

     6.2   Determination   of Right to   Indemnification.   Upon written   request by

Indemnitee   for   indemnification   pursuant to Section 6.1 hereof with respect to

any Proceeding,   a   determination,   if, but only if, required by applicable law,

with   respect to   Indemnitee's   entitlement   thereto   will be made by one of the

following,   at the   election   of   the   Indemnitee:   (1) so   long   as   there   are

Disinterested Directors with respect to such Proceeding,   a majority vote of the

Disinterested Directors,   regardless of whether the Disinterested Directors make

up a quorum of the Board of Directors, (2) a majority vote of a committee of one

or   more   Disinterested    Directors    designated   by   a   majority   vote   of   the

Disinterested   Directors, (3) Independent Counsel in a written opinion delivered

to the Board of Directors, a copy of which will also be delivered to Indemnitee,

 

 

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or (4) by the   shareholders   in a vote   excluding   shares held by all   directors

other than Disinterested Directors. In the event that there are no Disinterested

Directors,   the   determination   shall   be made   in   accordance   with   (4) of the

preceding   sentence.   The election by   Indemnitee   to use a   particular   person,

persons or entity to make such   determination   is to be   included in the written

request for indemnification   submitted by Indemnitee (and if no election is made

in the request it will be assumed that   Indemnitee   has elected the   Independent

Counsel to make such   determination   to the extent permitted by applicable law).

The   person,   persons   or   entity   chosen   to make a   determination   under   this

Agreement of the Indemnitee's entitlement to indemnification will act reasonably

and in good faith in making such determination.

 

     6.3   Selection of Independent   Counsel. If