0001157523-05-002403.txt : 20120703 0001157523-05-002403.hdr.sgml : 20120703 20050310172857 ACCESSION NUMBER: 0001157523-05-002403 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20050310 DATE AS OF CHANGE: 20050310 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GULFWEST ENERGY INC CENTRAL INDEX KEY: 0000813779 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 870444770 STATE OF INCORPORATION: TX FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-54301 FILM NUMBER: 05673323 BUSINESS ADDRESS: STREET 1: 480 N. SAM HOUSTON PARKWAY EAST STREET 2: SUITE 300 CITY: HOUSTON STATE: TX ZIP: 77060 BUSINESS PHONE: 2818201919 MAIL ADDRESS: STREET 1: 480 N. SAM HOUSTON PARKWAY EAST STREET 2: SUITE 300 CITY: HOUSTON STATE: TX ZIP: 77060 FORMER COMPANY: FORMER CONFORMED NAME: GULFWEST OIL CO DATE OF NAME CHANGE: 19960515 FORMER COMPANY: FORMER CONFORMED NAME: GULFWEST ENERGY INC// DATE OF NAME CHANGE: 19920924 FORMER COMPANY: FORMER CONFORMED NAME: FIRST PREFERENCE FUND INC DATE OF NAME CHANGE: 19910730 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GULFWEST ENERGY INC CENTRAL INDEX KEY: 0000813779 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 870444770 STATE OF INCORPORATION: TX FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 480 N. SAM HOUSTON PARKWAY EAST STREET 2: SUITE 300 CITY: HOUSTON STATE: TX ZIP: 77060 BUSINESS PHONE: 2818201919 MAIL ADDRESS: STREET 1: 480 N. SAM HOUSTON PARKWAY EAST STREET 2: SUITE 300 CITY: HOUSTON STATE: TX ZIP: 77060 FORMER COMPANY: FORMER CONFORMED NAME: GULFWEST OIL CO DATE OF NAME CHANGE: 19960515 FORMER COMPANY: FORMER CONFORMED NAME: GULFWEST ENERGY INC// DATE OF NAME CHANGE: 19920924 FORMER COMPANY: FORMER CONFORMED NAME: FIRST PREFERENCE FUND INC DATE OF NAME CHANGE: 19910730 SC 13D 1 a4838327.txt GULFWEST SC13D SCHEDULE 13D CUSIP NO. 40274P109 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (Amendment No. 4)* GulfWest Energy Inc. (Name of Issuer) Class A Common Stock, $0.001 Par Value Per Share (Title of Class of Securities) 40274P109 (CUSIP Number) _________ J. Virgil Waggoner OCM GW Holdings, LLC 6605 Cypresswood Drive, Suite 250 333 South Grand Avenue, 28th Floor Spring, Texas 77379 Los Angeles California 90071 -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person(s) Authorized to Receive Notices and Communications) February 28, 2005 ------------------------------------ (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ] . Note. Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Continued on following page(s) Page 1 of 17 Pages 1 CUSIP NO. 40274P109

====================================================================================================================== NAME OF REPORTING PERSON 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON J. Virgil Waggoner ---------------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[X] ---------------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY ---------------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO ---------------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ] IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) ---------------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States ---------------------------------------------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 0 shares SHARES ------------------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER: 16,725,943 OWNED BY EACH REPORTING ------------------------------------------------------------------- PERSON 9 SOLE DISPOSITIVE POWER: 0 shares WITH ------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER: 16,725,943 shares ---------------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 16,725,943 shares ---------------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES* ---------------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 62.04% (1) (2) ---------------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN ======================================================================================================================

(1) Based upon 19,779,319 shares of Common Stock outstanding, in addition to 7,180,714 shares of Common Stock which may be received upon conversion of securities beneficially owned (or which may be deemed beneficially owned) by the reporting person (See Item 5). (2) After the Termination Date (as defined below), the reporting person may be deemed to have sole voting and dispositive power with respect to 12,440,229 shares of Common Stock currently owned or issuable upon conversion of securities other than the Series H Convertible Preferred Stock. *SEE INSTRUCTIONS BEFORE FILLING OUT! 2 CUSIP NO. 40274P109

====================================================================================================================== NAME OF REPORTING PERSON 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON OCM GW Holdings, LLC ---------------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[X] ---------------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY ---------------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO ---------------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ] IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) ---------------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ---------------------------------------------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 0 shares SHARES ------------------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER: 62,194,197 shares OWNED BY EACH REPORTING ------------------------------------------------------------------- PERSON 9 SOLE DISPOSITIVE POWER: 0 shares WITH ------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER: 62,194,197 shares ---------------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 62,194,197 shares ---------------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES* ---------------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 85.87% (1) (2) ---------------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO ======================================================================================================================

(1) Based upon 19,779,319 shares of Common Stock outstanding, in addition to 52,648,968 shares of Common Stock which may be received upon conversion of securities beneficially owned (or which may be deemed beneficially owned) by the reporting person (See Item 5). (2) Excluding parties to the Omnibus and Release Agreement (as defined in Item 6) and other agreements described herein but not Mr. Waggoner. *SEE INSTRUCTIONS BEFORE FILLING OUT! 3 CUSIP NO. 40274P109

====================================================================================================================== NAME OF REPORTING PERSON 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON OCM Principal Opportunities Fund III, L.P. ---------------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[X] ---------------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY ---------------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not applicable ---------------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ] IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) ---------------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ---------------------------------------------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 0 shares SHARES ------------------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER: 62,194,197 shares OWNED BY EACH REPORTING ------------------------------------------------------------------- PERSON 9 SOLE DISPOSITIVE POWER: 0 shares WITH ------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER: 62,194,197 shares ---------------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 62,194,197 shares ---------------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES* ---------------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 85.87% (1) (2) ---------------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN ======================================================================================================================

(1) Based upon 19,779,319 shares of Common Stock outstanding, in addition to 52,648,968 shares of Common Stock which may be received upon conversion of securities beneficially owned (or which may be deemed beneficially owned) by the reporting person (See Item 5). (2) Excluding parties to the Omnibus and Release Agreement (as defined in Item 6) and other agreements described herein but not Mr. Waggoner. 4 CUSIP NO. 40274P109

====================================================================================================================== NAME OF REPORTING PERSON 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON OCM Principal Opportunities Fund III GP, LLC ---------------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[X] ---------------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY ---------------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not applicable ---------------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ] IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) ---------------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ---------------------------------------------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 0 shares SHARES -------- ---------------------------------------------------------- -------- ---------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER: 62,194,197 shares OWNED BY EACH REPORTING -------- ---------------------------------------------------------- -------- ---------------------------------------------------------- PERSON 9 SOLE DISPOSITIVE POWER: 0 shares WITH -------- ---------------------------------------------------------- -------- ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER: 62,194,197 shares ---------------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 62,194,197 shares ---------------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES* ---------------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 85.87% (1) (2) ---------------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO ======================================================================================================================

(1) Based upon 19,779,319 shares of Common Stock outstanding, in addition to 52,648,968 shares of Common Stock which may be received upon conversion of securities beneficially owned (or which may be deemed beneficially owned) by the reporting person (See Item 5). (2) Excluding parties to the Omnibus and Release Agreement (as defined in Item 6) and other agreements described herein but not Mr. Waggoner. 5 CUSIP NO. 40274P109

====================================================================================================================== NAME OF REPORTING PERSON 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Oaktree Capital Management, LLC ---------------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[X] ---------------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY ---------------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not applicable ---------------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ] IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) ---------------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION California ---------------------------------------------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER: 0 shares SHARES ------------------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER: 62,194,197 shares OWNED BY EACH REPORTING ------------------------------------------------------------------- PERSON 9 SOLE DISPOSITIVE POWER: 0 shares WITH ------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER: 62,194,197shares ---------------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 62,194,197 shares ---------------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES* ---------------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 85.87% (1) (2) ---------------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IA; OO ======================================================================================================================

(1) Based upon 19,779,319 shares of Common Stock outstanding, in addition to 52,648,968 shares of Common Stock which may be received upon conversion of securities beneficially owned (or which may be deemed beneficially owned) by the reporting person (See Item 5). (2) Excluding parties to the Omnibus and Release Agreement (as defined in Item 6) and other agreements described herein but not Mr. Waggoner. 6 CUSIP NO. 40274P109 Item 1. Security and Issuer This statement relates to the Class A Common Stock, par value $.01 per share (the "Common Stock"), of GulfWest Energy Inc., a Texas corporation (the "Company"), which has its principal executive offices at 480 N. Sam Houston Parkway E., Suite 300, Houston, Texas 77060. Item 2. Identity and Background a. J. Virgil Waggoner J. Virgil Waggoner ("Waggoner") is a natural person whose principal business office of Waggoner is 6605 Cypresswood Drive, Suite 250, Spring, Texas 77379. Waggoner is a United States citizen. Waggoner is a director of the Company and is currently chief executive officer of JVW Investments, Ltd., a private company. Waggoner has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or been a party to any civil proceeding as a result of which he was subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws, during the last 5 years. b. Oaktree Parties OCM GW Holdings, LLC ("Holdings"), a Delaware limited liability company, OCM Principal Opportunities Fund III, L.P., a Delaware limited partnership ("OCM Fund"), OCM Principal Opportunities Fund III GP, LLC ("OCM GP"), a Delaware limited liability company, and Oaktree Capital Management, LLC, a California limited liability company ("Oaktree" and, collectively with Holdings, OCM Fund and OCM GP, the "Oaktree Parties"; the Oaktree Parties and Waggoner are referred to collectively as the "Filing Parties"), each has its principal office at 333 South Grand Avenue, 28th Floor, Los Angeles, California 90071. The principal business of Oaktree is to provide investment advice and management services to institutional and individual investors. OCM Fund generally invests in securities and obligations of other entities over which there is a potential for OCM Fund to exercise significant influence. OCM Fund is the managing member of Holdings. OCM GP is the general partner of OCM Fund. Oaktree is the managing member of OCM GP. None of the Oaktree Parties have been convicted in a criminal proceeding or been a party to any civil proceeding as a result of which it was subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws, during the last 5 years. The controlling members and executive officers of the Oaktree Parties are listed below. The address of the principal business office of each controlling member and executive officer is 333 South Grand Avenue, 28th Floor, Los Angeles, California 90071.

Executive Officers & Controlling Members ---------------------------------------- Howard S. Marks Chairman and Principal Bruce A. Karsh President and Principal Russel S. Bernard Principal Kevin L. Clayton Principal John B. Frank Principal and General Counsel Stephen A. Kaplan Principal Larry W. Keele Principal David Kirchheimer Principal and Chief Financial and Administrative Officer David Richard Masson Principal John W. Moon Principal Sheldon M. Stone Principal Portfolio Managers ------------------ Stephen A. Kaplan Principal Ronald Beck Managing Director

7 CUSIP NO. 40274P109 To the best of the Oaktree Parties' knowledge, each controlling member and executive officer of an Oaktree Party is a United States citizen and none of the Oaktree Parties' respective controlling members and executive officers have, during the last 5 years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or been a party to any civil proceeding as a result of which he was subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration See Item 4 for a description of the Subscription Agreements and the purchase by Holdings of the Company's securities. The Oaktree Parties did not pay any additional consideration to Waggoner or any other party in connection with the execution of any of the other agreements described in Item 6. Item 4. Purpose of Transaction (a) (b) Pursuant to a Subscription Agreement dated February 28, 2005 (the "Series G Subscription Agreement"), between Holdings and the Company, Holdings purchased 81,000 shares of Series G Convertible Preferred Stock, par value $0.01 per share, of the Company (the "Series G Preferred Stock") for a purchase price of $40,500,000. Pursuant to a Subscription Agreement dated February 28, 2005 (the "Series A Subscription Agreement"), between Holdings and GulfWest Oil & Gas Company, a wholly owned subsidiary of the Company, Holdings purchased 2,000 shares of the subsidiary's Series A Cumulative Exchangeable Preferred Stock, par value $0.01 per share ("Series A Preferred Stock") for a purchase price of $1,500,000. Pursuant to a Subscription Agreement dated February 28, 2005 (the "Second Series G Subscription Agreement" and collectively with the Series G Subscription Agreement and Series A Subscription Agreement, the "Subscription Agreements"), Holdings sold 4,300 shares of Series G Preferred Stock at a price of $500 a share, the same price at which Holdings acquired the shares, to a limited number of individuals consisting of management and related or affiliated parties. Allan D. Keel, Chief Executive Officer and President of the Company, is subject to restrictions on transfers of his shares of Series G Preferred Stock for a period of 2 years. Allan D. Keel and the other purchasers of Series G Preferred Stock are subject to a right of first offer in favor of Holdings, but not with respect to shares of Common Stock received upon conversion, and are required to convert their shares to Common Stock when Holdings and its affiliates convert their shares into Common Stock in the same proportion as Holdings and its affiliates. The description contained in this Item 4 of the transactions contemplated by the Subscription Agreements is qualified in its entirety by reference to the full text of the Subscription Agreements, which are incorporated herein by reference and filed as Exhibit 99(a), 99(b) and 99(c) hereto. (c) Not applicable. (d) Effective at the closing of the transactions contemplated by the Subscription Agreements, Scott Manolis, Marshall Smith and Thomas Kaetzer resigned as members of the Company's board of directors. Waggoner and John Loehr remained as directors of the Company and B. James Ford, Skardon F. Baker and Allan D. Keel were elected to fill the vacancies resulting from the resignation of such three directors. Under the terms of the Statement of Resolution governing the Series G Preferred Stock, the holders of that series have the right to elect a majority of the Company's board of directors. 8 CUSIP NO. 40274P109 (e) The newly authorized Series G Preferred Stock purchased by Holdings ranks junior to the authorized and outstanding Cumulative Convertible Preferred Stock, Series F, of the Company (the "Series F Preferred Stock") as to dividends and liquidation, but senior to all other classes of capital stock of the Company. The Statement of Resolution governing the Series A Preferred Stock was amended to require the holders of the Series A Preferred Stock to exchange all their shares for either approximately 1,429 shares of Common Stock per share of Series A Preferred Stock or for one share of the newly authorized Series H Convertible Preferred Stock, par value $0.01 per share, of the Company (the "Series H Preferred Stock") per share of Series A Preferred Stock. The Series H Preferred Stock is convertible into Common Stock at a conversion price of $0.35 a share and ranks junior to the Series G Preferred Stock as to dividends and liquidation but senior to all other classes of preferred stock of the Company other than the Series F Preferred Stock. If no election is made by a holder of Series A Preferred Stock by March 15, 2005, such holder's shares of Series A Preferred Stock will automatically be exchanged for Common Stock. Both Waggoner and Holdings elected on February 28, 2005 to exchange their shares of Series A Preferred Stock for Series H Preferred Stock. The Series D Preferred Stock, par value $0.01 per share, which does not pay dividends, will remain of equal priority with the Cumulative Convertible Preferred Stock, Series E, par value $0.01 per share, of the Company (the "Series E Preferred Stock") as to liquidation. There has been no change to the Company's dividend policy, although in connection with the transactions referred to above the terms of the Series E Preferred Stock were amended to provide for a 6%, rather than $30, annual dividend, expressed as a percentage of the stock's $500 liquidation value plus accrued and unpaid dividends, payable quarterly. As amended, dividends on the Series E Preferred Stock will accrue but not be paid until March 31, 2009, at which time the Company will commence quarterly dividend payments. Deferred dividends on the Series E Preferred Stock may be paid to the extent the board of directors elects to do so or dividends on the Series G Preferred Stock are paid for a quarter. Accrued dividends on the Series E Preferred Stock may be converted to Common Stock at a conversion price of $0.90. Accrued and unpaid deferred dividends are to be paid on liquidation or, at the Company's option, with the consent of the holders affected, at any time. The Series G Preferred Stock provides for an 8% cash dividend, expressed as a percentage of the stock's $500 liquidation value plus accrued and unpaid dividends, which will accrue but not be paid until the dividend owing April 1, 2009 is required to be paid, at which time the Company will commence quarterly dividend payments. Deferred dividends may be paid to the extent the board of directors elects to do so. Accrued dividends on the Series G Preferred Stock may be converted to Common Stock at a conversion price of $0.90. Accrued and unpaid deferred dividends are to be paid on liquidation or, at the Company's option, with the consent of the holders affected, at any time. Holders of the newly authorized Series H Preferred Stock are entitled to quarterly dividends of 10 shares of Common Stock per share of Series H Preferred Stock, or 40 shares of Common Stock annually per shares of Series H Preferred Stock. Holders of both the Series G Preferred Stock and Series H Preferred Stock vote on an as-converted basis with the holders of the Common Stock. (f) None. (g) None. 9 CUSIP NO. 40274P109 (h) None. (i) None. (j) The Oaktree Parties currently hold their interest in the Company for investment purposes. The Filing Parties intend to continuously evaluate the Company's businesses and prospects, alternative investment opportunities and all other factors deemed relevant in determining whether additional shares of the Company's securities will be acquired by the Filing Parties or by other accounts and investment funds of which Oaktree is the general partner and/or investment manager or whether the Filing Parties or any such other accounts or investment funds will dispose of shares of the Company's securities. At any time, additional shares of securities of the Company may be acquired or some or all of the shares of the Company's securities held by the Filing Parties may be sold, in either case in the open market, in privately negotiated transactions or otherwise. Except as otherwise disclosed herein, the Filing Parties currently have no plan or proposal, beneficially or otherwise, which would be related to or would result in any of the matters described in Items 4(a)-(j) of Schedule 13D; however, as part of their respective ongoing evaluation of this investment and investment alternatives, the Filing Parties may consider such matters and, subject to applicable law, may formulate a plan with respect to such matters, and, from time to time, any Filing Party may hold discussions with or make formal proposals to the management or the Board of Directors of the Company, other shareholders of the Company or other third parties regarding such matters. Item 5. Interest in Securities of Issuer (a) and (b) Waggoner beneficially owns, and as a result of the Share Transfer Restriction Agreement and Proxy (described in Item 6) may be deemed, solely for the purpose of Rule 13d-3 of the Securities Exchange Act of 1934 (the "Exchange Act"), to share with Holdings beneficial ownership and shared voting and dispositive power for 16,725,943 shares of the Common Stock, which includes 9,545,229 shares of Common Stock, options to purchase 20,000 shares of Common Stock, warrants to purchase 625,000 shares of Common Stock, 2,250,000 shares of Common Stock issuable upon the conversion of 9,000 shares of the Series E Preferred Stock, based upon a conversion price of $2.00, and 4,285,714 shares of Common Stock issuable upon the conversion of 3,000 shares of Series H Preferred Stock, based upon a conversion price of $0.35. Waggoner's current beneficial ownership represents approximately 62.04% of the shares of the Common Stock, based upon 19,779,319 shares of Common Stock issued and outstanding as of February 28, 2005, plus the 7,180,714 shares of Common Stock which may be received upon conversion of securities beneficially owned by Waggoner. In addition, as dividends accrue on the Series E Preferred Stock and are paid on the Series H Preferred Stock, Waggoner's beneficial ownership of Common Stock will increase. Holdings beneficially owns and has voting and dispositive power for 45,468,254 shares of the Common Stock, which includes 2,857,143 shares issuable upon the conversion of 2,000 shares of Series H Preferred Stock, based upon a conversion price of $.35, and 42,611,111 shares of Common Stock issuable upon the conversion of 76,700 shares of Series G Preferred Stock, based upon a conversion price of $0.90. In addition, as a result of the Share Transfer Restriction Agreement and Proxy, Holdings may be deemed, solely for the purpose of Rule 13d-3 of the Exchange Act, to share beneficial ownership with Waggoner and to have shared dispositive and voting power with Waggoner with respect to the 16,725,943 shares of Common Stock beneficially owned by Waggoner. Holdings' current beneficial ownership may be deemed to represent approximately 85.87% of the shares of the Common Stock, based upon 19,779,319 shares of Common Stock issued and outstanding as of February 28, 2005, plus 52,648,968 shares of Common Stock which may be received upon conversion of securities beneficially owned (or which may be deemed beneficially owned) by Holdings. In addition, as dividends accrue on the Series G Preferred Stock and are paid on the Series H Preferred Stock, Holdings' beneficial ownership of Common Stock will increase. 10 CUSIP NO. 40274P109 OCM Fund is the managing member of Holdings. OCM GP is the general partner of OCM Fund. Oaktree is the managing member of OCM GP. By virtue of their relationship to Holdings each of OCM Fund, OCM GP, Oaktree and the individuals listed in Item 2(b) may be deemed to beneficially own and share voting and dispositive power with respect to the shares held of record or beneficially owned (or deemed beneficially owned) by Holdings, and therefore may be deemed to share beneficial ownership with Holding's of approximately 85.87% of the Common Stock solely for the purposes of Section 13d-3 of the Exchange Act. Each of Waggoner, OCM GP, Oaktree and the individuals listed in Item 2(b) disclaims beneficial ownership of the securities reported herein, except to the extent of their respective pecuniary interest, and the filing of this Statement shall not be construed as an admission that any such person is the beneficial owner of any such securities. Further, as of the date hereof, Bargus Partnership, Douglas Moreland and Star-Tex Trading Co., shareholders of the Company, together with Waggoner and Holdings, represent, to the best of the Filing Parties' knowledge, in the aggregate 64,672,768 shares of Common Stock, or approximately 86.33% of the Common Stock, based upon 19,779,319 shares of Common Stock issued and outstanding as of February 28, 2005, plus 55,077,539 shares of Common Stock which may be received upon conversion of securities beneficially owned (or which may be deemed beneficially owned) by Waggoner and Holdings and the three parties referred to above (which three parties executed the Omnibus and Release Agreement, described in Item 6). In addition, the purchasers of the Series G Preferred Stock pursuant to the Second Series G Subscription Agreement, together with Holdings, represent, to the best of the Filing Parties' knowledge, in the aggregate 64,583,086 shares of Common Stock, or approximately 86.32% of the Common Stock, based upon 19,779,319 shares of Common Stock issued and outstanding as of February 28, 2005, plus 55,037,857 shares of Common Stock which may be received upon conversion of securities beneficially owned (or which may be deemed beneficially owned) by Holdings and such purchasers. The Filing Parties, together with certain other shareholders of the Company referred to herein that are parties to the Omnibus and Release Agreement or any other agreement described herein, may constitute a "group" for purposes of Rule 13d-5 under the Exchange Act with respect to their respective beneficial ownership of the shares of Common Stock at the time of the applicable event requiring disclosure in this Schedule. Each Filing Party disclaims the existence of a "group" and disclaims beneficial ownership of all shares of the Common Stock other than any shares reported herein as being held of record by it. The filing of this Schedule shall not constitute an admission that the Filing Parties and such persons constitute a "group" for purposes of Rule 13d-5 promulgated under the Act. (c) Except as set forth herein, to the knowledge of the Filing Parties, with respect to the other persons named in response to paragraph (a), none of the persons named in response to paragraph (a) has effected any transactions in shares of the Common Stock during the past 60 days. (d) None. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to the Securities of the Issuer Subscription Agreements See Item 4 with respect to the Subscription Agreements. Copies of the Subscription Agreements are attached hereto as Exhibit 99(a), 99(b) and 99(c). Share Transfer Restriction Agreement and Irrevocable Proxy 11 CUSIP NO. 40274P109 Waggoner has entered into a Share Transfer Restriction Agreement, dated February 28, 2005 (the "Share Transfer Restriction Agreement") with Holdings, pursuant to which he agreed to deliver to Holdings an Irrevocable Proxy (the "Proxy") coupled with an interest with respect to his shares of Common Stock, Series E Preferred Stock and Series H Preferred Stock thereby allowing Holdings to vote such shares at any time in favor of reincorporating the Company in Delaware by merging the Company into a wholly owned Delaware subsidiary (the "Merger") or, if the Merger is not consummated by December 31, 2005, in favor of the conversion of certain of the Series G Preferred Stock into New Preferred Stock (as defined below) (the first to occur being referred to as the "Termination Date"). The proxy also grants Holdings a proxy with additional rights with respect to the Series H Preferred Stock until such time as all the Series H Preferred Stock has converted into Common Stock. Waggoner, pursuant to the terms of the Share Transfer Restriction Agreement, is subject to restrictions on the disposition or transfer of the economic or voting rights of the capital stock owned by him, including prohibitions on transfers of shares of capital stock or entering into any swap, option, future, forward or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of any such capital stock, without the consent of Holdings. The Proxy and the restrictions on disposition in the Share Transfer Restriction Agreement terminate upon the Termination Date, other than with respect to the shares of Series H Preferred Stock held by Waggoner. In addition, Waggoner agreed to exchange his shares of Series A Preferred Stock for Series H Preferred Stock pursuant to the amended terms of the Series A Preferred Stock Statement of Resolution and is required to convert any shares of Series H Preferred Stock he owns into Common Stock in the same proportion as that converted by Holdings or its affiliates. The description contained in this Item 6 of the transactions contemplated by the Share Transfer Restriction Agreement and form of Proxy are qualified in their entirety by reference to the full text of the Share Transfer Restriction Agreement and form of Proxy, both of which are incorporated herein by reference and filed as Exhibit 99(d) hereto. Shareholders Rights Agreement Holdings and the Company have entered into a Shareholders Rights Agreement (the "Shareholders Rights Agreement") dated February 28, 2005 providing Holdings with up to four demand registrations with respect to shares of Series G Preferred Stock and Common Stock upon the request of holders holding 50% or more of the registrable securities on an as converted basis, and unlimited piggyback registration rights. Pursuant to the Shareholders Rights Agreement, Holdings is entitled to receive monthly financial reports, an annual business plan and operating budget of the Company, periodic filings and other information, in addition to board observation rights. Further, the Shareholders Rights Agreement subjects the Company to various restrictive covenants affecting operation of its business. Under the Shareholders Rights Agreement Holdings has a right of first refusal to purchase any additional securities proposed to be purchased by a third party from the Company. If the Merger does not occur by July 30, 2005, the Company is required to make additional payments on the Series G Preferred Stock in the amount of $80 per share per annum until the Merger occurs or a number of shares of Series G Preferred Stock are converted into a new series of Company preferred stock ("New Preferred Stock") substantially similar to the Series G Preferred Stock except that (i) it will not have the right to vote, (ii) it will be redeemable at the holder's option on January 15, 2008, and if not redeemed the dividend will increase to 14%, (iii) it will not be convertible, (iv) it will bear a quarterly dividend at an annual rate of 12%, and (v) it will be optionally redeemable by the Company at any time. The Company is required to use its best efforts to convert certain of the shares of Series G Preferred Stock into New Preferred Stock if the Merger has not occurred by December 31, 2005. 12 CUSIP NO. 40274P109 The description contained in this Item 6 of the transactions contemplated by the Shareholders Rights Agreement is qualified in its entirety by reference to the full text of the Shareholders Rights Agreement, which is incorporated herein by reference and filed as Exhibit 99(e) hereto. Omnibus and Release Agreement Pursuant to an Omnibus and Release Agreement ("Omnibus and Release Agreement"), among Holdings, the Company and certain shareholders of the Company, dated February 28, 2005, such shareholders are prohibited from, directly or indirectly, entering into any swap, option, future, forward or other similar agreement that transfers, in whole or in part, any of the economic consequences of ownership of any Series H Preferred Stock or Common Stock, although such holders may sell the Common Stock or, after February 28, 2007, the Series H Preferred Stock. After February 28, 2007 Holdings and its affiliates have a right of first refusal to acquire any Series H Preferred Stock if a third party offers to acquire that stock, and the signatories to the Omnibus and Release Agreement have piggyback registration rights with respect to shares of Common Stock listed on Schedule I thereto or issued as a dividend on the Series H Preferred Stock. Shareholders (other than Holdings) of the Company that are party to the Omnibus and Release Agreement have agreed to vote in favor of the Merger. The restrictions imposed upon the shareholders of the Company that have executed the Omnibus and Release Agreement do not apply to shares of Common Stock owned by these shareholders, whether received upon conversion of the Series H Preferred Stock or otherwise, except as disclosed above. The description contained in this Item 6 of the transactions contemplated by the Omnibus and Release Agreement is qualified in its entirety by reference to the full text of the Omnibus and Release Agreement, which is incorporated herein by reference and filed as Exhibit 99(f) hereto. Oaktree, as the investment manager of OCM Fund, receives a management fee for managing the assets of OCM Fund. OCM GP, as the general partner of OCM Fund, has a carried interest in OCM Fund. Other than as described herein to the Filing Parties' knowledge, there are no contracts, arrangements, understandings or relationships (legal or otherwise) among the persons named in Item 2 and between such persons and any person with respect to any securities of the Company including but not limited to transfer or voting of any of the securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. Item 7. Material to be Filed as Exhibits 99(a) Subscription Agreement for the Series G Preferred Stock, dated February 28, 2005, between Holdings and the Company 99(b) Subscription Agreement for the Series A Preferred Stock, dated February 28, 2005, between Holdings and the Company 99(c) Subscription Agreement for the Series A Preferred Stock, dated February 28, 2005, among Holdings and certain individuals identified on the signature page thereto 99(d) Share Transfer Restriction Agreement, dated February 28, 2005, between Holdings and J. Virgil Waggoner 99(e) Shareholders Rights Agreement, dated February 28, 2005, between Holdings and the Company 13 CUSIP NO. 40274P109 99(f) Omnibus and Release Agreement, dated February 28, 2005, among the Company, Holdings and certain of the shareholders of the Company 99(g) Joint Filing Agreement, dated February 28, 2005, among the Oaktree Parties and J. Virgil Waggoner 14 CUSIP NO. 40274P109 SIGNATURES After reasonable inquiry and to the best of its knowledge and belief, each of the undersigned certify that the information set forth in this Statement is true, complete and correct. Date: February 28, 2005 OCM GW HOLDINGS, LLC By: OCM Principal Opportunities Fund III, L.P., its managing member By: OCM Principal Opportunities Fund III GP, LLC, its general partner By: Oaktree Capital Management, LLC, its managing member By: /s/ Stephen A. Kaplan --------------------------------------------- Name: Stephen A. Kaplan Title: Principal OCM PRINCIPAL OPPORTUNITIES FUND III, L.P. By: OCM Principal Opportunities Fund III GP, LLC, its general partner By: Oaktree Capital Management, LLC, its managin member By: /s/ Stephen A. Kaplan --------------------------------------------- Name: Stephen A. Kaplan Title: Principal 15 CUSIP NO. 40274P109 OCM PRINCIPAL OPPORTUNITIES FUND III GP, LLC By: Oaktree Capital Management, LLC, its managing member By: /s/ Stephen A. Kaplan --------------------------------------------- Name: Stephen A. Kaplan Title: Principal OAKTREE CAPITAL MANAGEMENT, LLC By: /s/ Stephen A. Kaplan --------------------------------------------- Name: Stephen A. Kaplan Title: Principal 16 CUSIP NO. 40274P109 /s/ J. Virgil Waggoner --------------------------------------------- J. Virgil Waggoner 17 Exhibit Index ------------- Name of Exhibit --------------- 99(a) Subscription Agreement for the Series G Preferred Stock, dated February 28, 2005, between Holdings and the Company 99(b) Subscription Agreement for the Series A Preferred Stock, dated February 28, 2005, between Holdings and the Company 99(c) Subscription Agreement for the Series A Preferred Stock, dated February 28, 2005, between Holdings and certain individuals identified on the signature page thereto 99(d) Share Transfer Restriction Agreement, dated February 28, 2005, between Holdings and J. Virgil Waggoner 99(e) Shareholders Rights Agreement, dated February 28, 2005, between Holdings and the Company 99(f) Omnibus and Release Agreement, dated February 28, 2005, among the Company, Holdings and certain of the shareholders of the Company 99(g) Joint Filing Agreement, dated February 28, 2005, among the Oaktree Parties and J. Virgil Waggoner 1 EX-99.A 2 a4838327ex99a.txt EXHIBIT 99(A) Exhibit 99(a) SUBSCRIPTION AGREEMENT BETWEEN GULFWEST ENERGY INC. AND OCM GW HOLDINGS, LLC DATED AS OF FEBRUARY 28, 2005 1 TABLE OF CONTENTS

ARTICLE I. THE PREFERRED SHARES...................................................................................1 Section 1.01 Issuance, Sale and Delivery of the Shares to the Purchaser.............................1 Section 1.02 Closing................................................................................1 ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................1 Section 2.01 Organization, Qualifications and Corporate Power.......................................1 Section 2.02 Authorization; No Conflict; No Violation...............................................2 Section 2.03 Consents and Approvals.................................................................2 Section 2.04 Validity...............................................................................3 Section 2.05 Authorized Capital Stock...............................................................3 Section 2.06 Reports and Financial Statements.......................................................4 Section 2.07 Disclosure Controls and Procedures; Internal Controls..................................5 Section 2.08 No Undisclosed Liabilities.............................................................6 Section 2.09 Events Subsequent to the Audited Balance Sheet Date....................................6 Section 2.10 Litigation; Compliance with Law........................................................8 Section 2.11 Proprietary Information of Third Parties...............................................8 Section 2.12 Intellectual Property..................................................................9 Section 2.13 Real Property..........................................................................9 Section 2.14 Assets (other than Oil and Gas Properties).............................................9 Section 2.15 Insurance.............................................................................10 Section 2.16 Taxes.................................................................................10 Section 2.17 Agreements............................................................................11 Section 2.18 Loans and Advances....................................................................11 Section 2.19 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons........................12 Section 2.20 Offering of the Securities............................................................12 Section 2.21 Brokers; Financial Advisors...........................................................12 Section 2.22 Transactions With Affiliates..........................................................12 Section 2.23 Employees.............................................................................13 Section 2.24 Environmental and Safety Laws.........................................................13 Section 2.25 Employee Benefits.....................................................................13 Section 2.26 Illegal or Unauthorized Payments; Political Contributions.............................14 Section 2.27 Pending Changes.......................................................................14 Section 2.28 Investment Company Act................................................................14 Section 2.29 Registration Rights...................................................................14 Section 2.30 Books and Records.....................................................................14 Section 2.31 Related Party Transactions............................................................15 Section 2.32 Disclosure............................................................................15 Section 2.33 Oil and Gas Properties................................................................15 Section 2.34 Marketing of Production...............................................................15 Section 2.35 Plugging and Abandonment Obligations..................................................16 Section 2.36 Reserve Reports.......................................................................16 Section 2.37 Construction..........................................................................16

i

ARTICLE III. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER..........................................16 Section 3.01 Representations and Warranties of the Purchaser.......................................16 Section 3.02 Certain Covenants of the Purchaser....................................................17 ARTICLE IV. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER AND THE COMPANY.......................................18 Section 4.01 Conditions to the Purchaser's Obligations at the Closing..............................18 Section 4.02 Conditions to the Company's Obligations at the Closing................................21 ARTICLE V. COVENANTS OF THE COMPANY..............................................................................22 Section 5.01 Use of Proceeds.......................................................................22 Section 5.02 Indemnity.............................................................................22 ARTICLE VI. MISCELLANEOUS ......................................................................................23 Section 6.01 Expenses..............................................................................23 Section 6.02 Survival of Agreements................................................................24 Section 6.03 Brokerage.............................................................................24 Section 6.04 Parties in Interest...................................................................24 Section 6.05 Specific Performance..................................................................24 Section 6.06 Further Assurances....................................................................25 Section 6.07 Arbitration...........................................................................25 Section 6.08 Notices...............................................................................26 Section 6.09 Governing Law.........................................................................27 Section 6.10 Entire Agreement......................................................................27 Section 6.11 Counterparts..........................................................................27 Section 6.12 Amendments and Waivers................................................................27 Section 6.13 Successors and Assigns................................................................27 Section 6.14 Severability..........................................................................28 Section 6.15 Titles and Subtitles..................................................................28 Section 6.16 Adjustments for Stock Splits, Etc.....................................................28 Section 6.17 Aggregation of Stock..................................................................28 Section 6.18 Construction..........................................................................28 Section 6.19 Remedies..............................................................................28 Section 6.20 Certain Defined Terms.................................................................29 Section 6.21 Incorporation of Exhibits, Annexes and Schedules......................................31 Section 6.22 Assignment............................................................................31

ii INDEX TO SCHEDULES ------------------ SCHEDULE 2.02 Certificate of Incorporation SCHEDULE 2.05 Authorized Capital Stock SCHEDULE 2.09 8-K SCHEDULE 2.10 Litigation SCHEDULE 2.12 Intellectual Property SCHEDULE 2.15 Insurance Policies SCHEDULE 2.16 Taxes SCHEDULE 2.17 Agreements SCHEDULE 2.22 Transactions with Affiliates SCHEDULE 2.23 Employees SCHEDULE 2.25 Employee Benefits SCHEDULE 2.29 Registration Rights SCHEDULE 2.32 Oil and Gas Properties SCHEDULE 2.33 Marketing of Production SCHEDULE 2.36 Reserve Reports SCHEDULE 5.01 Use of Proceeds SCHEDULE 6.20 Permitted Liens INDEX TO EXHIBITS ----------------- EXHIBIT A G Statement EXHIBIT B H Statement EXHIBIT C Form of Opinion Letter EXHIBIT D Form of Shareholders Rights Agreement EXHIBIT E Form of Director Indemnity Agreement EXHIBIT F Form of Irrevocable Proxy EXHIBIT G Form of Share Transfer Restriction Agreement EXHIBIT H Forms of Employment Agreement EXHIBIT I Forms of Certificate of Amendment EXHIBIT J Form of Joinder Agreement iii This SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of February 28, 2005, is entered into between GulfWest Energy Inc., a Texas corporation (the "Company"), and OCM GW Holdings, LLC, a Delaware limited liability company ("Purchaser"). Certain capitalized terms used herein are defined in Section 6.20 of this Agreement. RECITALS WHEREAS, the Company wishes to issue and sell to the Purchaser 81,000 shares of the Company's authorized but unissued shares of Series G Preferred Stock, par value $.01 per share (the "G Shares"); WHEREAS, the Purchaser desires to purchase the G Shares on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the premises, representations, warranties and the mutual covenants contained in this Agreement, the parties agree as follows: ARTICLE I. THE PREFERRED SHARES Section 1.01 Issuance, Sale and Delivery of the Shares to the Purchaser. At the Closing (as defined in Section 1.02), on the terms and subject to the conditions of this Agreement, the Company shall issue and sell to Purchaser, and Purchaser shall purchase from the Company 81,000 G Shares, for an aggregate of $40,500,000 (the "Purchase Price"). Section 1.02 Closing. The Closing shall take place at the offices of Akin Gump Strauss Hauer & Feld LLP in Houston, Texas on the date hereof, or at such other location, date and time as may be agreed upon between the Company and the Purchaser (such closing being called the "Closing" and such date and time being called the "Closing Date"). At the Closing, the Company shall issue and deliver to Purchaser a stock certificate or certificates in definitive form, registered in the name of Purchaser, representing 81,000 G Shares. As payment in full for the G Shares being purchased by it under this Agreement, and against delivery of the stock certificate or certificates therefor as aforesaid, on the Closing Date, the Purchaser shall pay to the Company by wire transfer or by such other method as may be reasonably acceptable to the Company, immediately available funds in the amounts contemplated by Section 1.01. ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Purchaser that, as of the Closing: Section 2.01 Organization, Qualifications and Corporate Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas and is duly licensed or qualified to transact business as a foreign corporation and is in good standing in each jurisdiction in which the nature of the business transacted by it or the character of the properties owned or leased by it requires such licensing or qualification. The Company has full corporate power and authority to own and hold its properties and to carry on its business as now conducted, to execute, deliver and perform each Transaction Document (other than obtaining shareholder consent with respect to the Merger), and to issue, sell and deliver the G Shares. 1 Section 2.02 Authorization; No Conflict; No Violation. Except as set forth in Schedule 2.02, the Company's: (a) execution and delivery of each Transaction Document (except for the Certificate of Incorporation) and performance of its obligations thereunder, (b) execution and filing of the Statement of Resolution for the G Shares, in the form of Exhibit A attached hereto (the "G Statement"), (c) execution and filing of the Statement of Resolution for the Series H Preferred Stock (the "H Shares"), in the form of Exhibit B (the "H Statement"), (d) issuance, sale and delivery of the H Shares and the shares of Class A Common Stock, par value $0.001 per share (the "Common Stock"), issuable upon conversion of the H Shares (the "H Conversion Shares" and, together with the H Shares, the "H Securities"), and (e) issuance, sale and delivery of the G Shares and the Common Stock issuable upon conversion of the G Shares (the "Conversion Shares" and together with the G Shares, the "Securities"), have been duly authorized by all requisite corporate action and will not (v) result in a violation of the Articles of Incorporation of the Company dated July 22, 1992, as amended by (A) the Certificate of Amendment of Articles of Incorporation of the Company dated September 11, 1992, (B) the Certificate of Amendment of Articles of Incorporation of the Company dated December 3, 1999 and (C) the Certificate of Amendment of Articles of Incorporation of the Company dated September 14, 2004 (as amended, the "Charter") or the Company's Bylaws (the "Bylaws"), (w) result in a violation of any applicable law, rule or regulation, or any order, injunction, judgment or decree of any court or other agency of government, (x) conflict with, result in a breach of, or constitute (or, with due notice or lapse of time or both, would constitute) a default under, or give rise to any right of termination, acceleration or cancellation under, any indenture, agreement, contract, license, arrangement, understanding, evidence of indebtedness, note, lease or other instrument to which the Company or any of its properties or assets is bound, (y) result in the creation or imposition of any Lien upon the Company or any of the Company's properties or assets or (z) require any consent, approval, notification, waiver or other similar action from any third party. Except as set forth in Schedule 2.02, no provision of any Transaction Document violates, conflicts with, results in a breach of or constitutes (or, with due notice or lapse of time or both, would constitute) a default by any other party under any indenture, agreement, contract, license, arrangement, understanding, evidence of indebtedness, note, lease or other instrument to which the Company is a party. Section 2.03 Consents and Approvals. Subject to the accuracy of the Purchaser's representations and warranties set forth in Article III, no registration or filing with, or consent or approval of or other action by, any federal, state or other governmental agency or instrumentality or any third party is or will be necessary for the Company's valid execution, delivery and performance of the Transaction Documents and the issuance, sale and delivery of the Securities and the H Securities, other than (a) those which have previously been obtained or made, (b) those which are required to be made under federal or state securities laws, which will be obtained or made, and will be effective within the time periods required by law and (c) obtaining the requisite shareholder approval with respect to the Merger. 2 Section 2.04 Validity. Each Transaction Document has been (or, with respect to the Certificate of Incorporation, will be) duly executed and delivered by the Company and constitutes (or, with respect to the Certificate of Incorporation, will constitute) the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors' rights generally and (ii) the effect of rules of law governing the availability of equitable remedies. Section 2.05 Authorized Capital Stock. (a) The Company's authorized capital stock consists of 80,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock, par value $0.01 per share (the "Preferred Stock") and is otherwise as is described on Schedule 2.05. Except as disclosed on Schedule 2.05, Seller has never had any Subsidiary and has never been a shareholder, partner, joint venturer or other equity owner of any other entity. Except as disclosed in the immediately following sentence and on Schedule 2.05, all the shares of capital stock of each Subsidiary of the Company are owned directly by the Company or a wholly owned Subsidiary of the Company. At the Closing all the capital stock of GulfWest Oil & Gas Company ("GulfWest Oil & Gas") is owned directly by the Company other than 9,950 issued and outstanding shares of Series A Cumulative Exchangeable Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock"), of GulfWest Oil & Gas, 10,000 shares of which are authorized, validly issued, fully paid and nonassessable. The holders of subscriptions, warrants, options, convertible securities, and other rights (contingent or other) to purchase or otherwise acquire equity securities of the Company, and the number of shares of Common Stock and the number of such subscriptions, warrants, options, convertible securities, and other such rights held by each and the vesting schedule thereof are as set forth in the Schedule 2.05. The designations, powers, preferences, rights, qualifications, limitations and restrictions in respect of each class and series of the Company's authorized capital stock (including the Series A Preferred Stock) are as set forth in the Charter and Statements of Resolution for each class of Preferred Stock and the Series A Preferred Stock, as the case may be, and all such designations, powers, preferences, rights, qualifications, limitations and restrictions are valid, binding and enforceable and in accordance with all applicable laws. Except as set forth in the Schedule 2.05: (i) no subscription, warrant, option, convertible security, or other right (contingent or other) to purchase or otherwise acquire equity securities of the Company is authorized or outstanding and (ii) there is no commitment by the Company to issue shares, subscriptions, warrants, options, convertible or exchangeable securities, or other such rights or to distribute to holders of any of its equity securities any evidence of indebtedness or asset. Except as set forth in the Schedule 2.05, the Company has no obligation (contingent or other) to purchase, repurchase, redeem, retire or otherwise acquire any of its equity securities or any interest therein or to pay any dividend or make any other distribution in respect thereof. Except for the Company's Preferred Stock, the Series A Preferred Stock, the warrants and options described in Schedule 2.05 and the 2004 Stock Option and Compensation Plan and the Amended and Restated 1994 Stock Option and Compensation Plan (collectively, the "Stock Plan"), no stock plan, stock purchase, stock option or other agreement or understanding between the Company and any holder of any equity securities of the Company or rights to purchase equity securities of the Company provides for acceleration or other changes in the vesting provisions or other terms of such securities, as the result of any merger, sale of stock or assets, change in control or other similar transaction by the Company. Except for the Shareholders Rights Agreement or as set forth on Schedule 2.05, there are no voting trusts or agreements, shareholders' agreements, pledge agreements, buy-sell agreements, rights of first refusal, preemptive rights or other similar rights or proxies relating to any of the Company's securities, or agreements relating to the issuance, sale, redemption, transfer or other disposition of the Company's securities. All of the outstanding securities of the Company were issued in compliance with all applicable federal and state securities laws. 3 (b) The G Shares have been duly authorized and, when issued in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable shares of the applicable sort and will be free and clear of all Liens, other than Liens that were created by Purchaser and restrictions on transfer imposed by the Transaction Documents, the Securities Act of 1933, as amended (the "Securities Act") and applicable state securities laws. The issuance, sale and delivery of the G Shares is not subject to any preemptive right of the Company's shareholders or to any right of first refusal or other right in favor of any Person. The consummation of the transactions contemplated hereunder will not result in any anti-dilution adjustment or other similar adjustment to any of the Company's outstanding securities. Any Person with any right (other than Purchaser) to purchase securities of the Company, which would be triggered as a result of the transactions contemplated under this Agreement, has waived such rights. (c) The H Securities have been duly authorized and will be duly and validly issued, fully paid and nonassessable shares of the applicable sort and will be free and clear of all Liens, other than restrictions on transfer imposed by the Omnibus and Release Agreement (the "Omnibus Agreement") between Purchaser and holders of the H Shares, the Securities Act and applicable state securities laws. The issuance, sale and delivery of the H Shares is not subject to any preemptive right of the Company's shareholders or to any right of first refusal or other right in favor of any Person and will not result in any anti-dilution adjustment or other similar adjustment to any of the Company's outstanding securities. (d) The Conversion Shares, when issued in accordance with the G Statement, will have been duly authorized, duly and validly issued, fully paid and nonassessable shares of the applicable sort and will be free and clear of all Liens, other than Liens that were created by Purchaser and restrictions on transfer imposed by the Transaction Documents, the Securities Act and applicable state securities laws. The issuance, sale and delivery of the Conversion Shares is not subject to any preemptive right of the Company's shareholders or to any right of first refusal or other right in favor of any Person. The consummation of the transactions contemplated hereunder will not result in any anti-dilution adjustment or other similar adjustment to any of the Company's outstanding securities. Any Person with any right (other than Purchaser) to purchase securities of the Company, which would be triggered as a result of the transactions contemplated under this Agreement, has waived such rights. Section 2.06 Reports and Financial Statements. The Company has furnished or made available to Purchaser true and complete copies of all forms, reports, registration statements and other documents it has filed with the Securities and Exchange Commission (the "SEC") under the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for all periods subsequent to December 31, 2000, all in the form so filed (collectively the "Company SEC Documents"). Except for the Company's Form 10-Q for the quarter ended September 30, 2004, as of their respective filing dates, the Company SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as applicable, and no Company SEC Document filed under the Exchange Act contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading, except to the extent corrected by a subsequently filed document with the SEC. No Company SEC Document filed under the Securities Act contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading at the time such Company SEC Documents became effective under the Securities Act. The Company's financial statements, including the notes thereto, included in the Company SEC Documents (the "Financial Statements") comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles consistently applied ("GAAP") and present fairly the Company's consolidated financial position at the dates thereof and of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal audit adjustments). Since the date of the most recent Company SEC Document, the Company has not effected any change in any method of accounting or accounting practice, except for any such change required because of a concurrent change in GAAP. No event since November 12, 2004 has occurred that requires the filing of a Current Report on Form 8-K (an "8-K") with the SEC for which an 8-K has not been so filed. Since January 1, 2002 the Company has timely filed all material reports, registration statements and other filings required by the SEC. As used in this Section, the term "file" or "filed" shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC. 4 Section 2.07 Disclosure Controls and Procedures; Internal Controls. (a) The Company is in the process of establishing and maintaining disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Exchange Act) that are designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known on a timely basis to management and the individuals responsible for the preparation of the Company's filings with the SEC and other public disclosure documents, particularly during the periods in which the filings made by the Company with the SEC which it may make under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act are being prepared. (b) The independent registered public accountants and the Audit Committee of the Board of Directors (the "Board") of the Company have been advised of (i) any significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data and (ii) any fraud, whether or not material, that involves management or other employees who have a role in the Company's internal controls; any material weaknesses in internal controls have been identified for the accountants; and since the date of the most recent evaluation of such disclosure controls and procedures, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses. 5 Section 2.08 No Undisclosed Liabilities. The Company has no liabilities (whether accrued, absolute, contingent or otherwise, known or unknown, and whether due or to become due or asserted or unasserted), except (a) liabilities provided for on the face of the Financial Statements, (b) liabilities (including accounts payable) incurred since December 31, 2003 (the "Audited Balance Sheet Date") in the ordinary course of business consistent with past practice that are no greater than $100,000 and (c) such other liabilities which are no more than $100,000 individually or $250,000 in the aggregate. The Company knows of no basis for the assertion against the Company of any liabilities not adequately reflected or reserved against in the Financial Statements. Section 2.09 Events Subsequent to the Audited Balance Sheet Date. Since the Audited Balance Sheet Date and except as herein expressly disclosed in the Company's Prospectus filed on December 8, 2004 pursuant to Rule 424(b)(3) under the Securities Act or most recent 8-K or except as set forth on Schedule 2.09: (a) there has been no Material Adverse Change nor, to the Company's knowledge, has any event occurred which could reasonably be expected to result in any Material Adverse Change; (b) there has not been any payment of, setting of a record date for, or declaration, setting aside or authorizing the payment of, any dividend or other distribution in respect of any shares of capital stock of the Company or any purchase, repurchase, retirement, redemption or other acquisition by the Company, of any of the outstanding shares of capital stock or other securities of, or other ownership interest in, the Company; (c) except as shown in Schedule 2.05 or made pursuant to the Company's Stock Plan, there has not been any transfer, issue, sale or other disposition by the Company of any shares of capital stock or other securities of the Company or any grant of options, warrants, calls or other rights to purchase or otherwise acquire shares of such capital stock or such other securities; (d) the Company has not materially increased the compensation payable or to become payable, or awarded or paid any bonuses to employees, officers, directors, consultants, advisors, agents, shareholders or representatives of the Company nor has the Company either entered into any employment, deferred compensation, severance or similar agreements (nor amended any such agreement) or agreed to materially increase the compensation payable or to become payable by it to any of the Company's employees, officers, directors, consultants, independent contractors, advisors, agents, shareholders or representatives or agreed to materially increase the coverage or benefits available under any severance pay, deferred compensation, bonus or other incentive compensation, pension or other employee benefit plan, payment or arrangement made to, for or with such employees, officers, directors, consultants, independent contractors, advisors, agents, shareholders or representatives, other than in the ordinary course of business consistent with past practice and with the Company's operating expense budget (a correct and complete copy of which has been provided to the Purchaser); 6 (e) the Company has not made any loans, advances, guarantees or capital contributions to, or investments in, any Person, or acquired any assets or securities of any Person other than ordinary advances for expenses incurred in the ordinary course of business; (f) there has not been satisfaction or discharge of any Lien or payment of any obligation by the Company, except in the ordinary course of business; (g) there has not been any termination or material change to a material contract or arrangement by which the Company or any of its assets is bound or subject; (h) there has not been any resignation or termination of employment of any officers or directors of the Company; (i) there has not been any damage, destruction or loss, whether or not covered by insurance, with respect to the property or assets of the Company; (j) the Company has not mortgaged, pledged or subjected to any Lien or encumbrance any of its assets, acquired any assets, or sold, assigned, transferred, conveyed, leased or otherwise disposed of any assets, except for assets acquired or sold, assigned, transferred, conveyed, leased or otherwise disposed of in the ordinary course of business consistent with the Company's past practice or Liens for taxes not yet due or payable; (k) the Company has not canceled or compromised any debt or claim, or amended, canceled, terminated, relinquished, waived or released any contract or right or settled any claim except in the ordinary course of business consistent with past practice, and which, individually or in the aggregate, has not resulted, and could not reasonably be expected to result, in a Material Adverse Change; (l) the Company has not made, or entered into any binding commitment to make, any capital expenditures or capital additions or betterments in excess of $2,000,000 in the aggregate; (m) the Company has not incurred any debts, obligations or liabilities, whether due or to become due, except current liabilities incurred in the usual and ordinary course of business, except liabilities less than $250,000 in the aggregate; (n) the Company has not entered into any material transaction except for the Transaction Documents; (o) the Company has not encountered, or been threatened with, any labor disputes, strikes, slowdowns, work stoppages or labor union organizing activities; (p) the Company has not made any change in the Company's accounting principles, methods or practices or depreciation or amortization policies or rates theretofore adopted; (q) the Company has not disclosed to any Person any trade secrets or confidential information, except for disclosures made to Persons subject to valid and enforceable confidentiality agreements or as required by applicable law; 7 (r) the Company has not suffered or experienced any change in the relationship or course of dealings between the Company and any of its suppliers or customers which supply goods or services to the Company or purchase goods or services from the Company, which has resulted in, or could reasonably be expected to result in, a Material Adverse Change; (s) the Company has not made any payment to, or received any payment from, or made or received any investment in, or entered into any transaction or series of related transactions (including the purchase, sale, exchange or lease of assets, property or services, or the making of a loan or guarantee) with any Affiliate or any members of their immediate families or any legal entity controlled by either one of them; and (t) the Company has not entered into any agreement or commitment to do any of the foregoing. Section 2.10 Litigation; Compliance with Law. (a) Except as set forth in Schedule 2.10, there is no (i) action, suit, claim, proceeding or investigation pending or, to the Company's knowledge, threatened, against or affecting the Company or its properties or assets, at law or in equity, or before or by any federal, state, municipal or other governmental body, department, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) arbitration proceeding pending or, to the Company's knowledge, threatened, against or affecting the Company or its properties or assets or (iii) governmental inquiry pending or, to the Company's knowledge, threatened, against or affecting the Company or its properties or assets, and to the Company's knowledge, there is no basis for any of the foregoing. The Company is not in default with respect to any order, writ, judgment, injunction or decree known to or served upon the Company of any court or of any federal, state, municipal or other governmental body, department, commission, board, bureau, agency or instrumentality, domestic or foreign. There is no action, suit, proceeding or investigation by the Company pending, threatened or contemplated against others. (b) The Company has not received any opinion or memorandum or legal advice from legal counsel to the effect that it is exposed, from a legal standpoint, to any liability or disadvantage which may be material to its business, prospects, financial condition, operations, property or affairs. The Company has complied, in all material respects, with all laws, rules, regulations and orders applicable to its business, operations, properties, assets, products and services, the Company has all necessary permits, licenses and other authorizations required to conduct its business as conducted and as proposed to be conducted and the Company has been operating its business pursuant to and in compliance with the terms of all such permits, licenses and other authorizations. There is no existing law, rule, regulation or order, and the Company is not aware of any proposed law, rule, regulation or order, whether federal, state, county or local, which would prohibit or restrict the Company from, or otherwise adversely affect the Company in, conducting its business in any jurisdiction in which it is now conducting business or in which it proposes to conduct business. Section 2.11 Proprietary Information of Third Parties. No third party has claimed or, to the Company's knowledge, has reason to claim, that any Person employed or retained by or affiliated with the Company has (a) violated or may be violating any of the terms or conditions of an employment, non-competition or non-disclosure agreement with such third party, (b) disclosed or may be disclosing or utilized or may be utilizing any trade secret or proprietary information or documentation of such third party or (c) interfered or may be interfering in the employment relationship between such third party and any of its present or former employees. No third party has requested information from the Company which suggests that such a claim might be contemplated. Neither the execution or delivery of this Agreement or any of the other Transaction Documents, nor the conduct or proposed conduct of the Company's business, nor the participation of any of the Company's officers, directors or employees in the conduct of the Company's business, will conflict with or result in a breach of the terms, conditions or provisions of or constitute a default under any material contract, covenant or instrument under which any such Person is obligated to a third party. 8 Section 2.12 Intellectual Property. Except as set forth in Schedule 2.12, the Company owns, or possesses adequate rights to use, all patents and patent rights, seismic data, well log data, inventions, processes, formulae, copyrights and copyright rights, trade dress, business and product names, logos, slogans, trade secrets, industrial models, processes, designs, methodologies, computer programs (including all source codes) and related documentation, technical information, manufacturing, engineering and technical drawings, know-how, concepts and all pending applications for and registrations of patents, trademarks, service marks and copyrights (together, "Intellectual Property") used in its business as currently, or as currently proposed to be, conducted. No consent of any Person is required for the Company's interest in such Intellectual Property to continue to be enforceable by the Company following the transactions contemplated the Transaction Documents. The Company's use of such Intellectual Property in its business as currently conducted (and the operation of its business) does not infringe upon any rights any other Person owns or holds. Section 2.13 Real Property. Except for interests in Oil and Gas Properties and incidental real property interests held in connection with its oil and gas operations, the Company owns no real property. Section 2.14 Assets (other than Oil and Gas Properties). The Company has good, legal and marketable title to all of its personal property and assets, in each case free and clear of all Liens other than Permitted Encumbrances. With respect to the personal property and assets that the Company leases (each as amended, supplemented or modified to date a "Personal Property and Capital Lease," and collectively, the "Personal Property and Capital Leases") (a) the Company is in compliance with such Personal Property and Capital Leases in all material respects, (b) each Personal Property and Capital Lease is enforceable in accordance with its terms and (c) except with respect to the rights of the lessors thereunder, the Company holds a valid leasehold interest free and clear of any Liens. Each Personal Property and Capital Lease is a valid and subsisting agreement, duly authorized and entered into and enforceable in accordance with its terms, and there is no default under any Personal Property and Capital Lease by the Company or by any other party thereto, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a default thereunder. The Company has delivered or otherwise made available to the Purchaser true, correct and complete copies of the Personal Property and Capital Leases. All items of personal property and assets owned or leased by the Company are in good operating condition, normal wear and tear excepted, are reasonably fit and usable for the purposes for which they are being used, are adequate and sufficient for the Company's business, and conform in all material respects with all applicable laws. 9 Section 2.15 Insurance. Schedule 2.15 hereto sets forth a list of each insurance policy (specifying the insurer, the amount of coverage, the type of insurance, the policy number, the expiration date, the annual premium (current and for each of the last three years)) maintained by the Company relating to its properties, assets, business or personnel. The Company has not received any notice or communication, either oral or written (a) regarding the actual or possible cancellation or invalidation of any of such policies or regarding any actual or possible adjustment in the amount of premiums payable with respect to any of said policies, (b) regarding any actual or possible refusal of coverage under, or any actual or possible rejection of any claim under, any of such policies, (c) that the Company will be unable to renew its existing insurance coverage as and when the same shall expire or (d) that the issuer of any such policies may be unwilling or unable to perform any of its obligations thereunder. There is no pending claim under any of the Company's insurance policies, and, to the Company's knowledge, no event has occurred or condition or circumstance exists that might (with or without notice or lapse of time) directly or indirectly give rise to, or serve as a basis for, any such claim. The Company has notified its insurers of all claims it may have under its insurance policies on a timely basis. To its knowledge, the Company is not in default with respect to any provision contained in any insurance policy, and the Company has not failed to give any notice or present any presently existing claims under any insurance policy in due and timely fashion. Section 2.16 Taxes. The Company has accurately and timely filed all federal, state, county and local tax returns and reports required to be filed by it within the applicable period, and the Company has paid all taxes shown to be due by such returns as well as all other taxes, assessments and governmental charges which have become due or payable. Such returns and reports are true and correct in all material respects. The Company has established adequate reserves on the Financial Statements for all taxes accrued but not yet payable with respect to the periods covered by such Financial Statements. All material tax elections of any type that the Company has made as of the date hereof are set forth in the Financial Statements. The Company's federal income tax returns have never been audited by the Internal Revenue Service. No claim or deficiency assessment with respect to or proposed adjustment of the Company's federal, state, county or local taxes is currently assessed or pending or, to the Company's knowledge, threatened, and there is no basis for any such claim, assessment or adjustment. There is no tax Lien (other than for current taxes not yet due and payable), whether imposed by any federal, state, county or local taxing authority, outstanding against the Company's assets, properties or business. The Company has not executed any waiver of the statute of limitations on the assessment or collection of any tax or governmental charge. The Company is not a party to any agreement relating to the sharing, allocation or indemnification of taxes. Neither the Company nor any of its present or former shareholders has ever made an election pursuant to Section 1362 or Section 341(f) of the Internal Revenue Code of 1986, as amended (the "Code"), that the Company be taxed as a Subchapter S corporation or a collapsible corporation or any other election pursuant to the Code (other than elections that relate solely to methods of accounting, depreciation or amortization) that would result in a Material Adverse Change. Except as set forth on Schedule 2.16, the Company's net operating losses for federal income tax purposes as set forth in the Financial Statements are not subject to any limitations imposed by Section 382 of the Code and the full amount of such net operating losses are available to offset the Company's taxable income for the current fiscal year and, to the extent not so used, succeeding fiscal years. Except as set forth on Schedule 2.16, consummation of the transactions contemplated by the Transaction Documents or by any other agreement, understanding or commitment (contingent or otherwise) to which the Company is a party or by which it is otherwise bound will not have the effect of limiting the Company's ability to use such net operating losses in full to offset such taxable income. The Company has withheld or collected from each payment made to each of its employees, the amount of all taxes (including federal income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes) required to be withheld or collected therefrom, and has paid the same to the proper tax receiving officers or authorized depositories. The Company has properly charged, collected and paid all applicable severance, sales, use and other similar taxes. 10 Section 2.17 Agreements. Except with respect to the Transaction Documents and the contracts set forth on Schedule 2.17, the Company is not a party to or otherwise bound by any written or oral agreement, instrument, commitment or restriction the terms of which could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Change. (b) The Company and, to the Company's knowledge, each other party thereto: (i) has performed in all material respects all the obligations required to be performed by them to date (or each non-performing party has received a valid, enforceable and irrevocable written waiver with respect to its non-performance) and (ii) has received no notice of default and are not in default (or, with due notice or lapse of time or both, would be in default) under any agreement listed on Schedule 2.17. The Company has no present expectation or intention of terminating or not fully performing any of its obligations under any agreement listed on Schedule 2.17 and the Company has no knowledge of any breach or anticipated breach by the other party thereof. The Company is in full compliance with all of the terms and provisions of its Charter and Bylaws. (c) No previous or current party to any agreement listed in Schedule 2.17 has given written notice to the Company of, or made any claim with respect to, a desire or intention to exercise any optional termination, cancellation or acceleration right thereunder, and the Company has no knowledge of any notice of, or claim with respect to, any such desire or intention. The Company has delivered or otherwise made available to the Purchaser true, correct and complete copies of each of the agreements listed in Schedule 2.17, together with all amendments, modifications, supplements or side letters affecting the obligations of any party thereunder. Each of these agreements is valid and enforceable against the Company in accordance with its terms, except to the extent limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application related to the enforcement of creditors' rights generally and (b) general principles of equity, and except that enforcement of rights to indemnification and contribution contained therein may be limited by applicable federal or state laws or the public policy underlying such laws, regardless of whether enforcement is considered in a proceeding in equity or at law. Section 2.18 Loans and Advances. The Company does not have any outstanding loans or advances to any Person and is not obligated to make any such loans or advances, except, in each case, for ordinary course advances to employees of the Company in respect of reimbursable business expenses anticipated to be incurred by them in connection with their performance of services for the Company. 11 Section 2.19 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons. The Company has not assumed, guaranteed, endorsed or otherwise become directly or contingently liable for any indebtedness of any other Person (including liability by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in such Person, or to otherwise assure any creditor of such Person against loss), except for guaranties by endorsement of negotiable instruments for deposit or collection in the ordinary course of business. Section 2.20 Offering of the Securities. Assuming, with respect to the Securities, the accuracy of the Purchaser's representations and warranties set forth in Article III, the Company has complied with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Securities and the H Securities. Neither the Company nor any Person acting on its behalf has taken any other action (including any offer, issuance or sale of any security of the Company under circumstances which might require the integration of such security with the Securities and the H Securities under the Securities Act or the rules and regulations of the Commission promulgated thereunder), in either case so as to subject the offering, issuance or sale of the Securities and the H Securities to the registration provisions of the Securities Act. Neither the Company nor any Person acting on its behalf has offered the Securities and the H Securities to any Person by means of general or public solicitation or general or public advertising, such as by newspaper or magazine advertisements, by broadcast media, or at any seminar or meeting whose attendees were solicited by such means. Section 2.21 Brokers; Financial Advisors. Other than Intermarket Management LLC, Southwest Securities, Inc. and Petrie Parkman & Co. who shall be paid fees of no more than $500,000 each for which the Company is solely responsible at closing, no agent, broker, investment banker, finder, financial advisor or other Person is or will be entitled to any broker's or finder's fee or any other commission or similar fee from the Company, directly or indirectly, in connection with the transactions contemplated by the Transaction Documents, and no Person is entitled to any fee or commission or like payment from the Company in respect thereof based in any way on agreements, arrangements or understandings made by or on the Company's behalf. Section 2.22 Transactions With Affiliates. Except as set forth in Schedule 2.22 or in the Company SEC Documents, no employee, officer, director, independent contractor, consultant, advisor, agent, shareholder or representative of the Company, or member of the family of any such Person, or any corporation, limited liability company, partnership, trust or other entity in which any such Person, or any member of the family of any such Person, is an officer, director, trustee, partner or holder of more than 5% of the outstanding equity interests thereof, is a party to, or during the past 36 months has been a party to, any transaction with the Company, including any contract, agreement or other arrangement providing for the employment of, furnishing of services by, rental of real or personal property from or otherwise requiring payments to any such Person, other than employment-at-will arrangements in the ordinary course of business. None of the Persons described in this Section 2.22 has any direct or indirect ownership interest in any Person that the Company is an Affiliate of or with which the Company has a business relationship, or any Person that competes with the Company. 12 Section 2.23 Employees. Except as set forth in Schedule 2.23, to the Company's knowledge, no executive, key employee or independent contractor and no group of the Company's executives, key employees or independent contractors has any plans to terminate his, her or its employment or relationship as an employee or independent contractor with the Company. The Company is not a party to or bound by any collective bargaining agreement, nor has it experienced any strikes, grievances, claims of unfair labor practices or other collective bargaining disputes. The Company has not committed any unfair labor practice (as determined under any law). The Company has no knowledge of any organizational effort currently being made or threatened by or on behalf of any labor union with respect to the Company's employees. Section 2.24 Environmental and Safety Laws. The Company has not caused or allowed, or contracted with any party for, the generation, use, transportation, treatment, storage or disposal of any Hazardous Substances (as defined below) in connection with the operation of its business or otherwise except in compliance with all Environmental Laws. The Company, the operation of its business, and any real property that the Company owns, leases or otherwise occupies or uses (the "Premises") are in compliance with all applicable Environmental Laws and orders or directives of any governmental authorities having jurisdiction under such Environmental Laws, including any Environmental Laws or orders or directives with respect to any cleanup or remediation of any release or threat of release of Hazardous Substances and no amounts are presently required to comply with any such applicable Environmental Laws. The Company has not received any citation, directive, letter or other communication, written or oral, or any notice of any proceeding, claim or lawsuit, from any Person arising out of the ownership or occupation of the Premises or the conduct of its operations, and the Company is not aware of any basis therefor. The Company has obtained and is maintaining in full force and effect all permits, licenses and approvals required by all Environmental Laws applicable to the Premises and the business operations conducted thereon (including operations conducted by tenants on the Premises) and is in compliance with all such permits, licenses and approvals. Except as permitted by all Environmental Laws, the Company has not caused or allowed a release, or a threat of release, of any Hazardous Substance onto, at or near the Premises, and, to the Company's knowledge, neither the Premises nor any property at or near the Premises has ever been subject to a release, or a threat of release, of any Hazardous Substance. The term "Environmental Laws" means any federal, state or local law or ordinance or regulation pertaining to the protection of human health or the environment, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Sections 11001, et seq., and the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq. The term "Hazardous Substances" includes oil, gas and other hydrocarbons, asbestos, polychlorinated biphenyls, urea formaldehyde and any materials classified as hazardous or toxic under any Environmental Laws. Section 2.25 Employee Benefits. Except as set forth in Schedule 2.25, the Company does not have in effect any employment agreements, consulting agreements with individuals, deferred compensation, incentive compensation, stock option or other equity-based stock awards, pension, or retirement welfare benefit (including group insurance) plans or agreements whether or not subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or bonus, incentive or profit-sharing plans or arrangements, or labor or collective bargaining agreements, written or oral, other than oral at-will employment agreements ("Plans"). All Plans, to the extent subject to ERISA, are in compliance with ERISA, the Code and all other applicable law. Each Plan which is an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan") and which is intended to be qualified under Section 401(a) of the Code, has received a current favorable determination or opinion letter from the Internal Revenue Service and the Company is not aware of any circumstances likely to result in revocation of any such favorable determination or opinion letter. There is no pending or, to the Company's knowledge, threatened litigation relating to the Plans. Neither the Company nor any of its Affiliates has engaged in a transaction with respect to any Plan that, assuming the taxable period of such transaction expired as of the date hereof, could subject the Company or any Affiliate to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA in an amount which would be material. No Pension Plan of the Company or any ERISA Affiliate (as defined below) is, nor has any Pension Plan of the Company or any ERISA Affiliate ever been, subject to Title IV of ERISA or Section 412 of the Code. Neither the Company, any of its Affiliates nor an entity which is considered one employer with the Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate") has contributed to a "multi-employer plan", within the meaning of Section 3(37) of ERISA, at any time on or after September 26, 1980. All contributions required to be made under the terms of any Plan have been timely made or have been reflected on the Financial Statements. No ERISA Affiliate maintains or has ever maintained any "employee benefit plan" as that term is defined in Section 3(3) of ERISA or any other employee benefit policy, arrangement or the like which could result in any liability of the Company. 13 Section 2.26 Illegal or Unauthorized Payments; Political Contributions. Neither the Company nor, to the Company's knowledge, any of the Company's employees, officers, directors, consultants, advisors, agents, shareholders or representatives has, directly or indirectly, made or authorized any payment, contribution or gift of money, property, or services, in contravention of applicable law: (a) as a kickback or bribe to any Person or (b) to any political organization, or the holder of or any aspirant to any elective or appointive public office, except for personal political contributions not involving the direct or indirect use of the Company's funds. Section 2.27 Pending Changes. To the Company's knowledge, there is no pending or threatened change in any law, rule, regulation or order applicable to its business, operations, properties, assets, products and services which is likely to result in a Material Adverse Change. Section 2.28 Investment Company Act. The Company is not, nor is it directly or indirectly controlled by or acting on behalf of, any Person that is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Section 2.29 Registration Rights. Except as described in Schedule 2.29 and except for the rights granted to the Purchaser under the Shareholders Rights Agreement, no Person has demand or other rights to cause the Company to file any registration statement under the Securities Act relating to any securities of the Company or any right to participate in any such registration statement, including piggyback registration rights. Section 2.30 Books and Records. The Company's books of account, ledgers, order books, records and documents accurately and completely reflect in accordance with usual and customary prudent business practices all material information relating to the Company's business, the location and collection of the Company's assets and the nature of all transactions giving rise to the Company's obligations and accounts receivable. The Company has previously delivered or made available to the Purchaser and its counsel complete and correct copies of the Charter and Bylaws and all amendments thereto, as in effect at the time of the Closing and all minutes and consents reflecting meetings and actions taken by the Board and its shareholders. Such minutes and consents constitute complete and accurate records of all meetings and consents in lieu of meetings of the Board and its committees, or body performing a similar function and holders of its securities since its date of incorporation or formation. 14 Section 2.31 Related Party Transactions. There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees of indebtedness by Company to or for the benefit of any of the officers or directors of the Company or their respective family members; and the Company has not, in violation of the Sarbanes-Oxley Act of 2002, directly or indirectly, extended or maintained credit, arranged for the extension of credit, or renewed an extension of credit, in the form of a personal loan to or for any director or executive officer of the Company. Section 2.32 Disclosure. The Company has disclosed to the Purchaser all facts material to the Company's business, operations, assets, liabilities, prospects, properties, condition (financial or otherwise) and results of operations. Neither this Agreement, nor any Schedule or Exhibit to this Agreement, nor any other statements, documents or certificates made or delivered in connection herewith or therewith contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein and therein not misleading in light of the circumstances under which such statements were made. None of the statements, documents, certificates or other items prepared or supplied by the Company with respect to the transactions contemplated hereby contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein not misleading in light of the circumstances under which such statements were made. There is no fact which the Company has not disclosed to the Purchaser and its counsel in writing and of which the Company is aware which has resulted in, or could result in, a Material Adverse Change. Section 2.33 Oil and Gas Properties. The Company has good and defensible title to all of the oil, gas and other mineral properties owned, or otherwise held in the name of, the Company or its affiliates (collectively, the "Oil and Gas Properties"), free and clear of all Liens and defects other than Permitted Encumbrances and other than as disclosed in Schedule 2.33. All proceeds from the sale of the Company's share of the hydrocarbons being produced from its oil and gas properties are currently being paid in full to such party by the purchasers thereof on a timely basis and none of such proceeds are currently being held in suspense by such purchaser or any other party other than in immaterial amounts. Section 2.34 Marketing of Production. Except for contracts listed on Schedule 2.33 (with respect to all of which contracts the Company represents that it or its affiliates are receiving a price for all production sold thereunder which is computed in accordance with the terms of the relevant contract and are not having deliveries curtailed substantially below the subject property's delivery capacity), there exist no material agreements for the sale of production from the leasehold and other interests in the Oil and Gas Properties (including calls on, or other rights to purchase, production, whether or not the same are currently being exercised) other than (i) agreements or arrangements pertaining to the sale of production at a price equal to or greater than a price that is the market price from time to time existing in the areas where the Oil and Gas Properties subject to such agreement or arrangement are located and (ii) agreements or arrangements that are cancelable on 90 days notice or less without penalty or detriment. 15 Section 2.35 Plugging and Abandonment Obligations. Except for wells which will be plugged and abandoned by the Company in due course over the six month time period following the date of this Agreement with an aggregate net plugging liability not to exceed $250,000, there are no wells located on the Oil and Gas Properties that (a) Company is currently obligated by law or contract to currently plug and abandon; (b) are subject to exceptions to a requirement to plug and abandon issued by a governmental body or (c) to Company's knowledge, have been plugged and abandoned, but have not been plugged in accordance in all material respects with all applicable requirements of any governmental body. Section 2.36 Reserve Reports. The information underlying the estimates of the Company's proved reserves that was supplied to Pressler & Associates (the "Reservoir Engineer") for the purposes of preparing the reserve reports and estimates of the proved reserves of the Company disclosed to the Purchaser, including, production, costs of operation, and, to the Company's knowledge, future operations and sales of production, was true and correct in all material respects on the dates such information was provided, and such information was supplied and was prepared in accordance with customary industry practices; other than normal production of the reserves, product price fluctuations, and fluctuations of demand for such products, and except as disclosed on Schedule 2.36, the Company is not aware of any facts or circumstances that would result in a materially adverse change in the reserves in the aggregate, or the aggregate present value of the future net cash flows therefrom as disclosed to the Purchaser and as reflected in the reserve reports the Reservoir Engineer prepared; the estimates of such reserves and present value as disclosed to the Purchaser and reflected in the reserve report referenced therein have been prepared in a manner that complies with the applicable requirements of the rules under the Securities Act. The Reservoir Engineer is an independent petroleum engineer with respect to the Company. Section 2.37 Construction. Where applicable in this Article II, references to the "Company" shall be deemed to include the Subsidiaries. ARTICLE III. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER Section 3.01 Representations and Warranties of the Purchaser. Purchaser represents and warrants to the Company that, as of the Closing: (a) it is an "accredited investor" within the meaning of Rule 501 of Regulation D under the Securities Act; 16 (b) it has sufficient knowledge and experience in investing in companies similar to the Company in terms of the Company's stage of development so as to be able to evaluate the risks and merits of its investment in the Company and it is able financially to bear the risks thereof; (c) it has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the G Shares to be purchased by Purchaser under this Agreement. Purchaser further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the G Shares and to obtain additional information necessary to verify any information furnished to the Purchaser or to which Purchaser had access. The foregoing, however, does not in any way limit or modify the representations and warranties made by the Company in Article II; (d) the Securities being purchased by it are being acquired for its own account for the purpose of investment and not with a view to, or for resale in connection with, any distribution thereof within the meaning of the Securities Act; provided, however, that in connection with the transactions contemplated hereby Purchaser may transfer up to 2,200 G Shares to certain individuals so long as they are "accredited investors" under Rule 501 of Regulation D under the Securities Act (the "Permitted Transfers"); (e) it understands that (i) the Securities have not been registered under the Securities Act because of their issuance in a transaction exempt from the registration requirements of the Securities Act, (ii) the Securities must be held indefinitely (subject, however, to the Company's obligation to redeem the Securities in accordance with the terms thereof, and to the Company's obligation to effect the registration of registrable securities in accordance with the Shareholders Rights Agreement) unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration, and (iii) the Securities will bear the legends to such effect set forth in Section 3.02; and (f) This Agreement and the Shareholders Rights Agreement constitute Purchaser's valid and legally binding obligations, enforceable in accordance with their terms except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors' rights generally and (ii) the effect of rules of law governing the availability of equitable remedies. Purchaser represents that it has full power and authority to enter into this Agreement and the Shareholders Rights Agreement. Section 3.02 Certain Covenants of the Purchaser. (a) Without in any way limiting the representations set forth in Section 3.01, Purchaser agrees not to make any disposition of all or any portion of its Securities unless and until: (i) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or 17 (ii) Purchaser has notified the Company of the proposed disposition and has furnished the Company with a statement of the circumstances surrounding the proposed disposition, and, at the expense of the Company, if requested by the Company in the case of clause (ii), an opinion of counsel if required under Section 3.02(c). (b) Accordingly, Purchaser acknowledges that the certificates evidencing the Securities will bear the following legend: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. (c) The legend set forth above shall be removed by the Company from any certificate evidencing Securities, and the Company shall issue a certificate without such legend to the holder thereof, if requested, upon delivery to the Company of an opinion by counsel (which may be counsel for the Company) that such security can be freely transferred without such a registration statement being in effect and that such transfer will not jeopardize the exemption or exemptions from registration pursuant to which the Company issued the G Shares. Notwithstanding the provisions of this Section 3.02(c), no such opinion of counsel shall be required by the Company for (i) transactions made pursuant to Rule 144 or Rule 144A under the Securities Act except as required by the transfer agent or (ii) any Permitted Transfer or transfer of Securities by Purchaser to a Permitted Transferee; provided, however, that in each of the foregoing cases, the transferee agrees in writing to be subject to the terms of this Article III to the same extent as if the transferee were an original Purchaser hereunder; and provided, further, that except as required by the transfer agent, no opinion from counsel shall be required for any dispositions pursuant to Rule 144(k) under the Securities Act or any removal of the legend because the Securities may be sold under Rule 144(k). ARTICLE IV. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER AND THE COMPANY Section 4.01 Conditions to the Purchaser's Obligations at the Closing. Purchaser's obligation to purchase and pay for the G Shares being purchased by it on the Closing Date is, at its option, subject to the satisfaction, on or before the Closing Date, of the following conditions, any of which may be waived in whole or in part by Purchaser: 18 (a) Opinion of Company's Counsel. Purchaser shall have received from Jackson Walker L.L.P., counsel for the Company, an opinion dated the Closing Date, in form and scope satisfactory to Purchaser, in substantially the form set forth in Exhibit C. (b) Representations and Warranties to be True and Correct. The representations and warranties of the Company under this Agreement shall be true, complete and correct at and as of the Closing in all material respects. (c) Performance. The Company shall have performed and complied in all material respects with all agreements and covenants contained herein required to be performed or complied with by it prior to or at the Closing Date. (d) All Proceedings to be Satisfactory. All corporate and other proceedings to be taken by the Company in connection with the transactions contemplated hereby and all documents incident thereto shall be satisfactory in form and substance to Purchaser and its counsel, and Purchaser and its counsel shall have received all such counterpart originals or certified or other copies of such documents as they reasonably may request. (e) Approvals. The Company shall have obtained any and all consents, waivers, registrations, approvals or authorizations, with or by any governmental body and all consents, waivers, approvals or authorizations of any other Person required for the valid execution of the Transaction Documents and for the consummation of the transactions contemplated hereby and thereby. (f) No Injunction. No governmental body or any other Person shall have issued an order, injunction, judgment, decree, ruling or assessment which shall then be in effect restraining or prohibiting the completion of the transactions contemplated hereby or under any of the other Transaction Documents, nor, shall any such order, injunction, judgment, decree, ruling or assessment be pending or, to the Company's knowledge, threatened. (g) Shareholders Rights Agreement. The Company shall have executed and delivered the Shareholders Rights Agreement in the form of Exhibit D. (h) Statements of Resolution. Confirmation shall have been received that the G Statement and the H Statement has been duly filed with and accepted by the Secretary of State of the State of Texas. (i) Director Indemnity Agreements. Company shall have executed and delivered Director Indemnity Agreements for its directors as of the Closing in the form of Exhibit E. (j) Irrevocable Proxy and Share Transfer Restriction Agreement. J. Virgil Waggoner shall have executed and delivered an Irrevocable Proxy in the form of Exhibit F, and the Company and J. Virgil Waggoner shall have executed and delivered a Share Transfer Restriction Agreement in the form of Exhibit G. 19 (k) Election of Directors. The number of directors constituting the entire Board shall have been fixed at five and each of B. James Ford, Skardon F. Baker, J. Virgil Waggoner, Allan D. Keel and John Loehr shall have been elected as a director and shall hold such position effective as of the Closing. (l) Resignation of Officers and Directors. John Loehr (as an officer) and certain directors (other than J. Virgil Waggoner and John Loehr) of the Company shall have executed and delivered resignation letters resigning from any position held with the Company or any of its subsidiaries, effective as of the Closing. (m) Employment Agreements. The Company shall have executed and delivered an Employment Agreement for Allan D. Keel and Joe Grady in the form(s) attached hereto as Exhibit H. (n) Equity Compensation Plan. The Company shall have adopted an equity compensation plan for the Company's management acceptable to Purchaser. (o) Preemptive Rights. All shareholders of the Company having any preemptive, first refusal or other rights with respect to the issuance of the G Shares (other than those contemplated by the Transaction Documents) shall have irrevocably waived the same in writing. (p) Consents of Holders of the Series A Preferred Stock and Cumulative Convertible Preferred Stock, Series E. The Company shall have received the requisite number of written consents from the holders of the Series A Preferred Stock and Cumulative Convertible Preferred Stock, Series E, consenting to the amendments to GulfWest Oil & Gas's charter and the Company's Charter, respectively, referred to in (q) below. (q) Amendments to the Company's Charter. The Company shall have received confirmation from the Texas Secretary of State that the Certificates of Amendment to the Company's Charter and Gulfwest Oil & Gas's Charter, substantially in the forms of Exhibit I, amending the terms of the Series A Preferred Stock and the Company's Cumulative Convertible Preferred Stock, Series E (collectively, the "Amendments"), respectively, have been duly filed with and accepted by the Texas Secretary of State. (r) Expenses. The Company shall have paid the fees and expenses of the Purchaser, including the fees and disbursements of the Purchaser's counsel invoiced at the Closing, in accordance with Section 6.01. (s) Supporting Documents. Purchaser and its counsel shall have received copies of the following documents: (i)(A) the Charter, certified as of a recent date by the Secretary of State of Texas, and (B) a certificate of said Secretary dated as of a recent date as to the Company's due incorporation and listing all documents of the Company on file with said Secretary and a certificate of the Comptroller of the State of Texas as to the good standing and the Company's payment of all franchise taxes; 20 (ii) a certificate of the Company's Secretary dated the Closing Date, certifying: (A) that attached thereto is a true, correct and complete copy of the Bylaws as in effect on the date of such certification and that no amendments or modifications to such Bylaws have been authorized; (B) that attached thereto is a true, correct and complete copy of all resolutions adopted by the Board authorizing the execution, delivery and performance of each of the Transaction Documents (other than the Certificate of Incorporation), the issuance, sale and delivery of the G Shares and the H Shares, and that all such resolutions are in full force and effect, have not been amended, modified or rescinded and are the only resolutions adopted in connection with the transactions contemplated by the Transaction Documents; (C) that the Charter has not been amended since the date of the last amendment referred to in the certificate delivered pursuant to clause (i)(A) above (except for the filing of the Statements of Resolution for the G Shares and the H Shares); and (D) to the incumbency and specimen signature of each officer of the Company executing any of the Transaction Documents, the stock certificates representing the G Shares and the H Shares and any certificate or instrument furnished pursuant thereto, and a certification by another authorized officer of the Company as to the incumbency and signature of the officer signing the certificate referred to in this clause (ii); (iii) a certificate, executed by an officer of the Company, dated the Closing Date, certifying to the fulfillment of the specific conditions set forth in Section 4.01(b) and (c) hereto and to the fulfillment of all of the conditions in this Article IV in general; and (iv) such additional supporting documents and other information with respect to the Company's operations and affairs as the Purchaser reasonably may request. All such documents shall be satisfactory in form and substance to the Purchaser. (t) Dividends. All accrued and unpaid dividends owing with respect to the Series A Preferred Stock and the Company's Series D, E and F Preferred Stock must have been paid. Section 4.02 Conditions to the Company's Obligations at the Closing. The Company's obligation to sell and issue the G Shares being sold and issued by it on each Closing Date is, at its option, subject to the satisfaction, on or before such Closing Date, of the following conditions, any of which may be waived in whole or in part by the Company: (a) Representations and Warranties to be True and Correct. The representations and warranties of Purchaser contained in Article III shall be true, complete and correct at and as of the Closing in all material respects. (b) Shareholders Rights Agreement. Purchaser shall have executed and delivered the Shareholders Rights Agreement. (c) Approvals. Purchaser shall have obtained any and all consents, waivers, approvals or authorizations, with or by any governmental body and all consents, waivers, approvals or authorizations of any other Person required for the valid execution of this Agreement and the Shareholder Agreement and for the consummation of the transactions contemplated hereby and thereby. 21 (d) No Injunction. No governmental body or any other Person shall have issued an order, injunction, judgment, decree, ruling or assessment which shall then be in effect restraining or prohibiting the completion of the transactions contemplated hereby, nor, to the Company's knowledge, shall any such order, injunction, judgment, decree, ruling or assessment be threatened or pending. (e) Purchase Price Paid. Subject to Section 6.01, Purchaser shall have paid the purchase price for the G Shares to the Company as set forth in Section 1.01. (f) Dividends. All accrued and unpaid dividends owing with respect to the Series A Preferred Stock and the Company's Series D, E and F Preferred Stock must have been paid. ARTICLE V. COVENANTS OF THE COMPANY The Company covenants and agrees with the Purchasers that: Section 5.01 Use of Proceeds. The Company shall use the proceeds from the sale of the G Shares to pay the debts and obligations set forth on Schedule 5.01 hereto, and to the extent any such proceeds remain after such repayment, for acquisitions, drilling opportunities and general corporate purposes. Section 5.02 Indemnity. (a) The Company agrees to indemnify, defend and hold harmless Purchaser (and its partners (and each officer and director thereof), directors, managers, officers, members, shareholders, employees, Affiliates, agents and permitted assigns) (collectively, "Indemnified Parties") from and against any and all losses, claims, liabilities, damages, deficiencies, diminution in value, costs or expenses (including interest, penalties, reasonable attorneys' fees, disbursements and related charges and any costs or expenses that an Indemnified Party incurs to enforce its right to indemnification) (collectively, "Losses") based upon, arising out of or otherwise in respect of any inaccuracy in or breach of any representations, warranties, covenants or agreements of the Company contained in this Agreement or any of the other Transaction Documents (including any Losses arising as a result of consummation of the transactions contemplated hereby under the Lease Agreement between GAR Associates IX, L.L.C. c/o Oak Leaf Management and GulfWest Energy Inc. commencing December 1, 2001, as amended by the First Amendment to Lease dated May 30, 2002). (b) The provisions of this Section 5.02 shall not limit or impair any right or remedy arising from breach of this Agreement or any of the other Transaction Documents, including (i) the adjustment to the Conversion Price (as defined in the G Statement) for the G Shares if an Indemnified Party suffers Losses of $3,000,000 or less in the aggregate, or (ii) the obligation of the Company to redeem the G Shares upon the request of the holders thereof in the event of (a) a material breach of the G Statement or (b) an Indemnified Party suffers Losses in excess of $3,000,000 in the aggregate based upon, arising out of or otherwise in respect of a breach of a covenant, representation or warranty of the Company under the Subscription Agreement or Shareholders Rights Agreement. The Company hereby agrees that any adjustment to the Conversion Price pursuant to Section 5(e) of the G Statement should be treated as an adjustment to purchase price, upon receipt of non-taxable damages by Purchaser, for all federal, state and local income tax purposes, and Company will file any and all applicable tax returns in a manner consistent therewith. Notwithstanding the foregoing, to the extent the consideration transferred under clauses (i) or (ii) is equal to the Indemnified Party's Losses, no further Losses may be claimed hereunder. 22 (c) In addition to any other remedy provided by law, injunctive relief may be obtained to enjoin the breach, or threatened breach, of any provision of this Agreement and each party shall be entitled to specific performance by the others of their obligations hereunder and thereunder. All remedies, either under this Agreement, by law or as may otherwise be afforded to the Purchaser or the Company, as the case may be, shall be cumulative. (d) THE INDEMNIFICATION PROVIDED IN THIS SECTION 5.02 WILL BE APPLICABLE WHETHER OR NOT THE SOLE, JOINT, OR CONTRIBUTORY NEGLIGENCE OF AN INDEMNIFIED PARTY PRIOR TO CLOSING OR IN CONNECTION WITH ASCERTAINING WHETHER IT HAS RIGHTS HEREUNDER IS ALLEGED OR PROVEN. THE PARTIES AGREE THE PRECEDING SENTENCE IS COMMERCIALLY CONSPICUOUS. Each Indemnified Party's rights and remedies set forth in this Agreement will survive the Closing and will not be deemed waived by such Indemnified Party's consummation of the transactions contemplated hereby and will be effective regardless of any inspection or investigation conducted, or the awareness of any matters acquired (or capable or reasonably capable of being acquired), by or on behalf of such Indemnified Party or by its directors, officers, employees or representatives or at any time (regardless of whether notice of such knowledge has been given to the Company), whether before or after the date of this Agreement or the Closing Date with respect to any circumstances constituting a condition under this Agreement, unless any waiver specifically so states. (e) If an Indemnified Party seeks indemnification hereunder, the Indemnified Party shall notify the Company by providing a written description of the claim and the amount of Losses asserted. Thereafter, the Company shall appoint a committee consisting one current director of the Company and two former directors (the "Committee") to investigate the claim. The Committee shall be responsible for resolution of the dispute with the Indemnified Party pursuant to the procedures set forth in Section 6.07. ARTICLE VI. MISCELLANEOUS Section 6.01 Expenses. At the Closing, the Company shall reimburse Purchaser for all fees and expenses incurred by Purchaser in connection with the transactions contemplated hereby, including the fees and disbursements of Purchaser's accountants, advisors, petroleum engineers and counsel. The Company agrees that the fees and expenses incurred by the Purchaser through the Closing Date in connection with the transactions contemplated hereby may be paid directly by Purchaser to the attorneys for Purchaser and deducted from the purchase price payable at the Closing by Purchaser. The Company further agrees to reimburse Purchaser on demand for such Purchaser's reasonable out-of-pocket expenses incurred in connection with any amendment to, or waiver or enforcement of, this Agreement or the other Transaction Documents. The Company shall also pay all stamp and other taxes and duties levied in connection with the issuance of the G Shares and the Common Shares. 23 Section 6.02 Survival of Agreements. All covenants, agreements, representations and warranties made in any of the Transaction Documents or any certificate or instrument delivered to the Purchaser pursuant to or in connection with any of the Transaction Documents shall survive the execution and delivery of all of the Transaction Documents, the issuance, sale and delivery of the G Shares, and all statements contained in any certificate or other instrument delivered by the Company hereunder or thereunder or in connection herewith or therewith shall be deemed to constitute representations and warranties made by the Company. Section 6.03 Brokerage. Each party hereto will indemnify and hold harmless the others against and in respect of any claim for brokerage or other commissions relative to this Agreement or to the transactions contemplated hereby, based in any way on agreements, arrangements or understandings made or claimed to have been made by such party with any third party. Section 6.04 Parties in Interest. All representations, warranties, covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. Without limiting the generality of the foregoing, all representations, covenants and agreements benefiting the Purchaser shall inure to the benefit of any and all subsequent holders from time to time of Securities. Nothing in this Agreement shall create or be deemed to create any third-party beneficiary rights in any Person not a party to this Agreement except as provided below and except with respect to any Indemnified Parties under Section 5.02. The provisions of this Agreement which are for the benefit of the Purchaser as purchaser or holder of Securities are also for the benefit of and enforceable by any subsequent holder of such G Shares who acquires at least 8,000 G Shares or receives Securities such that it would hold at least 5,000,000 shares of Common Stock on an as-converted basis to the same extent they would have been enforceable by the Purchaser, and upon any permitted assignment, the references in this Agreement to the Purchaser shall also apply to any such assignee unless the context otherwise requires; provided, however, that such assignee executes a joinder agreement in the form of Exhibit J pursuant to which it agrees to be bound by the provisions of this Agreement in the same capacity as Purchaser hereunder. Section 6.05 Specific Performance. Each Party hereto acknowledges and agrees that the other parties hereto would be irreparably damaged if any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached. Accordingly, each Party hereto agrees that the other parties hereto will be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to specifically enforce this Agreement and its terms and provisions in any action instituted in any court of the United States or any state thereof having jurisdiction over the parties in the matter, subject to Section 6.07 and Section 6.09, in addition to any other remedy to which they may be entitled, at law or in equity. 24 Section 6.06 Further Assurances. The Company and the Purchaser each agree to take such actions and execute and deliver such other documents or agreements as may be necessary or desirable for the implementation of the Transaction Documents and the consummation of the transactions contemplated hereby and thereby. Section 6.07 Arbitration. Any and all claims, counterclaims, demands, causes of action, disputes, controversies, and other matters in question arising out of or relating to this Agreement or in any way relating to the subject matter of this Agreement or the relationship between the parties hereto created by this Agreement, involving the parties hereto or their respective representatives (collectively, "Disputes") even though all or some of the Disputes allegedly are extra-contractual in nature, whether such Disputes sound in contract, tort or otherwise, at law or in equity, under state, provincial or federal law, for damages or any other relief will be resolved as follows: first, representatives of the Company and the Purchaser will meet to attempt to resolve such Dispute; provided that the foregoing shall not preclude equitable or other judicial relief to enforce the provisions hereof or to preserve the status quo pending resolution of Disputes; and provided further that resolution of Disputes with respect to claims by third Persons will be deferred until any judicial proceedings with respect thereto are concluded. If the Dispute cannot be resolved by agreement of the parties hereto, any party may at any time make a written demand for binding arbitration of the Dispute in accordance with this Section. Subject to the provisions of this Section 6.07, the Purchaser and the Company will agree upon the rules of the arbitration prior to the arbitration and based upon the nature of the Dispute; provided that to the extent that the parties hereto cannot agree on the rules of the arbitration, then the Commercial Arbitration Rules of the American Arbitration Association in effect on the date hereof, and except as the applicable rules are modified by this Agreement, will apply. As a minimum set of rules in the arbitration the parties hereto agree as follows: (a) To the extent the claims asserted are in excess of $3.0 million, the arbitration will be held before a panel of three arbitrators consisting of one arbitrator selected by the Purchaser, the other selected by the Company, and the third then selected by those two arbitrators (such third arbitrator to be neutral). If agreement cannot be reached on a third arbitrator within 30 days of the need therefor, the Chief Judge of the U.S. District Court for the Southern District of Texas shall appoint an arbitrator. If the claims asserted are less than $3.0 million, the Chief Judge of the U.S. District Court for the Southern District of Texas shall appoint a sole arbitrator. All arbitrators shall be attorneys with at least ten years experience in oil and gas transactions. (b) The arbitrator(s) will deliver their decision in writing within 20 days after the termination of the arbitration hearings. (c) The non-prevailing party will bear the costs and fees of the arbitration. (d) The arbitrator(s) final decision will be in writing but will not specify the basis for their decision, the basis for the damages award or the basis of any other remedy. The arbitrator(s)' decision will be considered as a final and binding resolution of the disagreement, will not be subject to appeal and may be entered as an order in any court of competent jurisdiction in the United States; provided that this Agreement confers no power or authority upon the arbitrator(s) (i) to render any decision that is based on clearly erroneously findings of fact, (ii) that manifestly disregards the law, or (iii) that exceeds the powers of the arbitrator(s), and no such decision will be eligible for confirmation. Each party hereto agrees to submit to the jurisdiction of any such court for purposes of the enforcement of any such order. No party will sue the other except for enforcement of the arbitrator(s)' decision if the other party is not performing in accordance with the arbitrator(s)' decision. The provisions of this Agreement will be binding on the arbitrator(s). 25 (e) Any arbitration proceeding will be conducted on a confidential basis. (f) Any arbitration proceeding shall be held in Houston, Texas. (g) Any arbitration proceeding, including discovery, shall be conducted in accordance with the Texas Rules of Civil Procedure and the Texas Rules of Evidence. Section 6.08 Notices. Any notice, request, demand or other communication required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed given under this Agreement on the earliest of: (a) the date of personal delivery, (b) the date of transmission by facsimile, with confirmed transmission and receipt, (c) two days after deposit with a nationally-recognized courier or overnight service such as Federal Express, or (d) five days after mailing via certified mail, return receipt requested. All notices not delivered personally or by facsimile will be sent with postage and other charges prepaid and properly addressed to the party to be notified at the address set forth for such party: If to Purchaser: c/o Oaktree Capital Management, LLC 333 South Grand Avenue, 28th Floor Los Angeles, California 90071 Attention: B. James Ford Telecopier: (213) 830-6394 with a copy to (which does not constitute notice): Akin Gump Strauss Hauer & Feld LLP 1111 Louisiana Street, 44th Floor Houston, Texas 77002 Phone: (713) 220-5800 Fax: (713) 236-0822 Attn: Julien Smythe If to the Company: 480 N. Sam Houston Parkway East Suite 300 Houston, Texas 77060 Phone: (281) 820-1919 Fax: (281) 260-8488 Attn: Thomas R. Kaetzer 26 with a copy to (which does not constitute notice): Jackson Walker L.L.P. 901 Main Street, Suite 6000 Dallas, Texas 75202 Phone: (214) 953-6000 Fax: (214) 953-5822 Attn: Bradley L. Whitlock Any party hereto (and such party's permitted assigns) may change such party's address for receipt of future notices hereunder by giving written notice to the Company and the other parties hereto. Section 6.09 Governing Law. This Agreement and the performance of the transactions and the obligations of the parties hereunder will be governed by and construed and enforced in accordance with the laws of the State of Texas, without giving effect to any choice of law principles. Section 6.10 Entire Agreement. This Agreement, together with the Exhibits and Schedules hereto, the certificates, documents, instruments and writings that are delivered pursuant hereto and each Transaction Document, constitutes the entire agreement and understanding of the parties hereto in respect of its subject matters and supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof or the transactions contemplated hereby. Section 6.11 Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. Section 6.12 Amendments and Waivers. This Agreement may not be amended or modified, and no provisions hereof may be waived, without the written consent of the Company and the Purchaser. No action taken pursuant to this Agreement, including without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. Section 6.13 Successors and Assigns. This Agreement and the rights and obligations of the parties hereunder shall inure to the benefit of, and be binding upon, their respective successors, assigns and legal representatives. 27 Section 6.14 Severability. The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision hereof will not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this Agreement, as applied to any party or to any circumstance, is adjudged by a court, governmental body or arbitrator not to be enforceable in accordance with its terms, the parties hereto agree that the court, governmental body, or arbitrator making such determination will have the power to modify the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its reduced form, such provision will then be enforceable and will be enforced. Section 6.15 Titles and Subtitles. The article and section headings contained in this Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement. Section 6.16 Adjustments for Stock Splits, Etc. Wherever in this Agreement there is a reference to a specific number of shares of Common Stock or G Shares of any class or series, then, upon the occurrence of any subdivision, combination or stock dividend of such class or series of stock, the specific number of shares so referenced in this Agreement will automatically be proportionally adjusted to reflect the effect of such subdivision, combination or stock dividend on the outstanding shares of such class or series of stock. Section 6.17 Aggregation of Stock. All shares held or acquired by an Affiliate will be aggregated together for the purpose of determining the availability of any rights under this Agreement. Section 6.18 Construction. The parties hereto have jointly participated in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties hereto and no presumption or burden of proof will arise favoring or disfavoring any party hereto because of the authorship of any provision of this Agreement. Any reference to any federal, state, local or foreign law will also be deemed to refer to such law as amended and all rules and regulations promulgated thereunder, unless the context otherwise requires. The words "include," "includes" and "including" will be deemed to be followed by "without limitation." Pronouns in masculine, feminine and neuter genders will be construed to include any other gender, and words in the singular form will be construed to include the plural and vice versa, unless the context otherwise requires. The words "this Agreement," "herein," "hereof," "hereby," "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The parties hereto intend that each representation, warranty and covenant contained herein will have independent significance. If any party hereto has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which such party has breached, will not detract from or mitigate the fact that such party is in breach of the first representation, warranty or covenant. Section 6.19 Remedies. The parties hereto shall have all remedies for breach of this Agreement available to them as provided by law or equity. 28 Section 6.20 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Affiliate" means, with respect to any Person, (i) any other Person of which securities or other ownership interests representing more than 10% of the voting interests are, at the time such determination is being made, owned, Controlled or held, directly or indirectly, by such Person, or (ii) any other Person which, at the time such determination is being made, is Controlling, Controlled by or under common Control with, such Person. As used herein, "Control", whether used as a noun or verb, refers to the possession, directly or indirectly, of the power to direct, or cause the direction of, the management or policies of a Person, whether through the ownership of voting securities or otherwise. "Certificate of Incorporation" is defined in the Shareholders Rights Agreement. "Lien" means a mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or otherwise, including any lien for taxes), security interest, preference, participation interest, priority or security agreement or preferential arrangement of any kind or nature whatsoever, including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing and the filing of any document under the law of any applicable jurisdiction to evidence any of the foregoing. "Merger" means, collectively, the merger of the Company into a Delaware corporation and wholly owned subsidiary of the Company governed by the Certificate of Incorporation. "Material Adverse Change" means a material adverse change in the business, operations, assets, liabilities, properties, condition (financial or otherwise) or results of operations of the Company and its Subsidiaries taken as a whole. "New Preferred Stock" is defined in the Shareholders Rights Agreement. "Oil and Gas Properties" all of the oil, gas and other mineral properties owned, or otherwise held in the name of, the Company or its affiliates. "Permitted Encumbrances" means: (i) Third-party consents to assignment of leases and contracts and preferential purchase rights which are customary in the oil and gas business; (ii) Liens for taxes or assessments or other governmental charges or levies not yet delinquent or, if delinquent, that are being contested in good faith in the normal course of business (which are not applicable to the transactions contemplated in the Transaction Documents); (iii) All rights to consent by, required notices to, filings with, or other actions by federal, state, local governmental entities or tribal entities in connection with the sale or conveyance of the Oil and Gas Properties if the same are customarily required in the oil and gas business; 29 (iv) Rights of reassignment upon the surrender or expiration of any lease; (v) Easements, rights-of-way, servitudes, permits, conditions, covenants, exceptions, reservations, surface leases and other rights with respect to surface operations, pipelines, grazing, logging, canals, ditches, reservoirs or the like, and easements for streets, alleys, highways, pipelines, telephone lines, power lines, railway and other easements and rights of way, on, over or in respect of any of the properties or any restriction on access thereto and that do not materially interfere with the ownership, operation or value of the affected property for the purposes of exploration and production of oil and gas; (vi) Landlord's Liens, operators', vendors', carriers', warehousemen's, repairmen's, mechanics', suppliers', workers', materialmen's, construction or other like liens arising by operation of law in the ordinary course of business consistent with past practice or incident to the exploration, development, construction, operation and maintenance of Oil and Gas Properties consistent with past practice each of which is in respect of obligations that are not delinquent or which are being contested in good faith by appropriate proceedings; (vii) Rights reserved to or vested in any municipality or governmental, statutory, public or tribal authority to control or regulate any of the Oil and Gas Properties in any manner; and all applicable laws, rules, regulations and orders of general applicability in the area which do not materially interfere with the ownership, operation or value of the affected property for the purposes of exploration and production of oil and gas; (viii) Liens arising under operating agreements, unitization and pooling agreements and production sales contracts containing terms and conditions customary in the industry securing amounts not yet due or, if due, being contested in good faith in the ordinary course of business; (ix) Statutory liens securing the payment of production proceeds to Persons entitled thereto not yet due or if due, being contested in good faith in the ordinary course of business; (x) Such other defects or irregularities in the title to the Oil and Gas Properties that would be considered not material by a Person engaged in the business of acquiring, ownership or operation of oil and gas properties in accordance with generally accepted industry standards; (xi) Liens in connection with workers' compensation, unemployment insurance or other social security, old age pension or public liability obligations which are not delinquent or which are being contested in good faith by appropriate proceedings; 30 (xii) Liens arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution; and (xiii) Those Liens set forth on Schedule 6.20. "Permitted Transferee" means as to any Person, (i) any general partner or managing member of such Person or (ii) any partnership, limited partnership, limited liability company, corporation or other entity organized, formed or incorporated and managed or controlled by such Person, its general partner or managing member as a vehicle for purposes of making investments. "Person" means an individual, corporation, trust, partnership, limited liability company, joint venture, unincorporated organization, government body or any agency or political subdivision thereof, or any other entity. "Shareholders Rights Agreement" means the Shareholders Rights Agreement among the Company and the Purchaser, in the form attached hereto as Exhibit D. "Subsidiary" means, as to the Company, any Person of which more than 50% of the outstanding voting power of such Person (irrespective of whether or not at the time stock of any other class or classes of such Person shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly controlled by the Company, or by one or more of its subsidiaries, or by the Company and one or more of its subsidiaries. For the purposes of this Agreement, The Madisonville Project, Ltd. and Elgin Holdings, L.L.C. shall each be deemed a Subsidiary of the Company. "Transaction Documents" means this Agreement, the G Statement, the H Statement, the Certificate of Incorporation, the Shareholders Rights Agreement, the Amendments and the Subscription Agreement dated the date hereof pursuant to which Purchaser agreed to purchase 2,000 shares of Series A Preferred Stock. Section 6.21 Incorporation of Exhibits, Annexes and Schedules. The exhibits, annexes and schedules identified in this Agreement are incorporated herein by reference and made a part hereof. Section 6.22 Assignment. Except as provided in Section 6.04, neither party may assign any rights hereunder except with the prior written consent of the other party hereto. [SIGNATURE PAGE FOLLOWS] 31 IN WITNESS WHEREOF, the Company and the Purchaser have executed this Agreement as of the day and year first above written. COMPANY: GULFWEST ENERGY INC. By: /s/ John E. Loehr ----------------- Name: John E. Loehr Title: CEO PURCHASER: OCM GW HOLDINGS, LLC By: OCM Principal Opportunities Fund III, L.P., its managing member By: OCM Principal Opportunities Fund III GP, LLC, its general partner By: Oaktree Capital Management, LLC, its managing member By: /s/ Stephen A. Kaplan ----------------------- Name: Stephen A. Kaplan Title: Principal Signature Page Subscription Agreement EX-99.B 3 a4838327ex99b.txt EXHIBIT 99(B) Exhibit 99(b) SUBSCRIPTION AGREEMENT ---------------------- February 28, 2005 GulfWest Oil & Gas Company c/o GulfWest Energy Inc. 480 N. Sam Houston Parkway, Suite 300 Houston, Texas Attn: On the date first written above, the undersigned shall purchase from GulfWest Oil & Gas Company (the "Company"), and the Company shall issue, sell and deliver to the undersigned, 2,000 validly issued, fully paid and non-assessable shares of the Company's Series A Preferred Stock, $.01 par value per share (the "Series A Preferred Stock"), for an aggregate purchase price of $1,500,000 (the "Purchase Price"). In connection with such purchase, the undersigned agrees to sign a consent amending the Statement of Resolution for the Series A Preferred Stock as contemplated by the Subscription Agreement between the undersigned and GulfWest Energy Inc. (the "Subscription Agreement"). The transactions contemplated hereby shall be deemed to have occurred immediately prior to the closing of the transactions contemplated by the Subscription Agreement. On the date first written above, the Company shall issue and deliver to the undersigned a stock certificate or certificates in definitive form, registered in the name of the undersigned, representing 2,000 shares of Series A Preferred Stock. As payment in full for the Series A Preferred Stock being purchased by it hereunder, and against delivery of the stock certificate or certificates for such shares of Series A Preferred Stock, on the date first written above the undersigned shall pay to the Company by wire transfer or by such other method as may be reasonably acceptable to the Company, immediately available funds in the amount of the Purchase Price. [Signature Page Follows] Exhibit 99(b) IN WITNESS WHEREOF, this Subscription Agreement has been duly executed and delivered on the day and year first written above. OCM GW Holdings, LLC By: OCM Principal Opportunities Fund III, L.P., its managing member By: OCM Principal Opportunities Fund III GP, LLC, its general partner By: Oaktree Capital Management, LLC, its managing member By: /s/ Stephen A. Kaplan ----------------------------------- Name: Stephen A. Kaplan Title: Principal AGREED TO AND ACCEPTED: GULFWEST OIL & GAS COMPANY By: /s/ John E. Loehr -------------------------- Name: John E. Loehr Title: CEO Signature Page to GW Letter Agreement to Purchase Series A EX-99.C 4 a4838327ex99c.txt EXHIBIT 99(C) Exhibit 99(c) SUBSCRIPTION AGREEMENT THIS SUBSCRIPTION AGREEMENT (this "Agreement") is made and entered into effective February 28, 2005, by and among OCM GW Holdings, LLC, a Delaware limited liability company ("Seller"), Allan Keel ("Keel"), and certain other individuals as set forth on the signature page hereto (collectively with Keel, "Purchasers" and, individually, a "Purchaser"). WITNESSETH: WHEREAS, Seller owns in the aggregate 81,000 shares of the Series G Convertible Preferred Stock, par value $0.01 per share (the "Preferred Stock"), of GulfWest Energy Inc. (the "Company"). WHEREAS, Seller desires to sell to the Purchasers and the Purchasers desire to purchase from Seller 4,300 shares of the Preferred Stock, in the amounts set forth opposite such individual's name on Exhibit A, and on the date set forth above Seller has committed to sell, and Purchasers have committed to Buy, such amounts. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows: 1. Sale of Stock. Subject to the terms and conditions of this Agreement, and the representations and warranties herein contained, Seller hereby agrees to sell, and each Purchaser, severally and not jointly, hereby agrees to purchase, the shares of Preferred Stock (the "Preferred Shares") as set forth on Exhibit A for the consideration hereinafter described. 2. Consideration. The purchase price to be paid by Purchasers and received by Seller for the Preferred Shares shall be $500.00 per share (the "Purchase Price") payable in accordance with Section 3(B). Each Purchaser shall pay that portion of the Purchase Price set forth on Exhibit A opposite such Purchaser's name. 3. Closing. (A) Closing Date. The closing (the "Closing") shall take place at the offices of Akin Gump Strauss Hauer & Feld LLP, 1111 Louisiana Street, 44th Floor, Houston, Texas 77002. The date of the Closing shall be February 28, 2005 and shall herein be referred to as the "Closing Date." (B) Payment of Purchase Price. The Purchase Price shall be payable to Seller as set forth on Exhibit A at the Closing in the form of wire transfers or other method as may reasonably acceptable to Seller of immediately available funds in the appropriate amounts by each Purchaser to Seller to the account of Seller, written notice of which account shall have been provided to Purchasers. (C) Seller's Closing Documents. Seller shall deliver, or cause to be delivered, to the Purchasers at Closing stock certificates for the applicable number of shares purchased hereunder accompanied by appropriate stock transfer powers duly executed by Seller. 1 (D) Purchaser's Closing Documents. Each Purchaser shall deliver, or cause to be delivered, to Seller at the Closing that portion of the Purchase Price owed by such Purchaser to Seller as set forth on Exhibit A. (E) Each Purchaser's Obligations to Close Independent. The failure of any Purchaser to perform the transactions contemplated hereby shall not affect any other Purchaser's obligation to close on the Closing Date or to be bound by the provisions of this Agreement. 4. Representations, Warranties and Covenants of Purchasers. Each Purchaser, individually and not jointly, hereby represents and warrants and covenants to Seller as of the Closing Date, as follows: (A) Purchaser has full legal power, right and authority to execute this Agreement and to perform his obligations hereunder and has taken all actions necessary to authorize the execution and delivery of this Agreement, the performance of Purchaser's obligations hereunder, and the consummation of the transactions contemplated herein. (B) The execution and delivery of this Agreement and the consummation of the transactions contemplated herein will not (i) conflict with, result in a breach or violation of any of the terms or provisions of, or constitute (or with due notice or lapse of time or both would constitute) a default under, or give rise to any right of termination, acceleration or cancellation under, any indenture, agreement, contract, license, arrangement, understanding, evidence of indebtedness, note, lease or other instrument to which Purchaser or any of his properties is bound, (ii) result in the violation of any statute, law, order, rule or regulation applicable to Purchaser of any court or of any regulatory body or administrative agency or other governmental body having jurisdiction, (iii) result in the creation or imposition of any lien or encumbrance upon Purchaser or any of his properties, or (iv) require any consent, approval, notification, waiver or other similar action from any third party. (C) Purchaser is an "accredited investor" within the meaning of Rule 501 of Regulation D under the Securities Act of 1933, as amended (the "Securities Act"); (D) Purchaser has sufficient knowledge and experience in investing in companies similar to the Company in terms of the Company's stage of development so as to be able to evaluate the risks and merits of Purchaser's investment in the Company and it is able financially to bear the risks thereof; (E) Purchaser has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the Preferred Shares to be purchased by Purchaser under this Agreement; (F) Purchaser further has had an opportunity to ask questions and receive answers from the Company and/or Seller regarding the terms and conditions of the offering of the Preferred Shares and to obtain additional information necessary to verify any information furnished to Purchaser or to which Purchaser had access; 2 (G) the Preferred Shares being purchased by Purchaser are being acquired for Purchaser's own account for the purpose of investment and not with a view to, or for resale in connection with, any distribution thereof within the meaning of the Securities Act; (H) Purchaser understands that (i) the Preferred Shares have not been registered under the Securities Act because of their issuance in a transaction exempt from the registration requirements of the Securities Act, (ii) the Preferred Shares must be held indefinitely unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration, and (iii) the Preferred Shares will bear the legends to such effect set forth in (J); (I) Without in any way limiting the representations set forth above, Purchaser agrees not to make any disposition of all or any portion of the Preferred Shares unless and until: (i) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or (ii) Purchaser has notified the Company of the proposed disposition and has furnished the Company with a statement of the circumstances surrounding the proposed disposition and any other required documentation, and, at the expense of the Company, in the case of clause (ii), an opinion of counsel if required by the Company in its discretion; (J) Accordingly, each Purchaser acknowledges that a copy of this Agreement has been delivered to the Company and that Seller has requested of Company that the certificates evidencing the Preferred Shares purchased hereunder will bear a legend substantially similar to the following: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A SUBSCRIPTION AGREEMENT, DATED FEBRUARY 28, 2005, WHICH PROVIDES, AMONG OTHER THINGS, FOR CERTAIN RESTRICTIONS ON THE TRANSFER OF SUCH SHARES. NO REGISTRATION OR TRANSFER OF ANY SHARES REPRESENTED BY THIS CERTIFICATE WILL BE MADE ON THE COMPANY'S BOOKS UNLESS SUCH RESTRICTIONS HAVE BEEN COMPLIED WITH. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF GULFWEST ENERGY INC. AND WILL BE FURNISHED UPON REQUEST TO ANY HOLDER OF THE SHARES REPRESENTED BY THIS CERTIFICATE. 3 5. Representations and Warranties of Seller. Seller hereby represents and warrants to Purchasers as of the Closing Date, as follows: (A) Seller has the relevant entity power and authority to execute and deliver this Agreement and to perform its obligations hereunder. Seller has taken all actions necessary to authorize the execution and delivery of the Agreement, the performance of Seller's obligations hereunder, and the consummation of the transactions contemplated herein. (B) Subject to the accuracy of each Purchaser's representations in Section 4, the execution and delivery of this Agreement and the consummation of the transactions contemplated herein will not (a) conflict with, result in a breach or violation of any of the terms or provisions of, or constitute (or with due notice or lapse of time or both would constitute) a default under, or give rise to any right of termination, acceleration or cancellation under, any indenture, agreement, contract, license, arrangement, understanding, evidence of indebtedness, note, lease or other instrument to which Seller or any of its properties is bound, (b) result in the violation of any statute, law, order, rule or regulation applicable to Seller of any court or of any regulatory body or administrative agency or other governmental body having jurisdiction, (c) result in the creation or imposition of any lien or encumbrance upon Seller or any of its properties, or (d) require any consent, approval, notification, waiver or other similar action from any third party. 6. Conditions Precedent to Obligations of Seller. The obligations of Seller hereunder are subject to the following conditions precedent: (A) Performance. Each covenant and agreement of each Purchaser set forth in this Agreement to be performed on or before the Closing Date shall have been duly performed in all material respects. (B) No Violation of Statutes, Orders, etc. There shall not be in effect any statute, rule, or regulation which makes it illegal for Seller to consummate the transactions contemplated hereby, or any order, decree, or judgment enjoining Seller from consummating the transactions contemplated hereby. (C) Representations and Warranties True and Correct. The representations and warranties of each Purchaser contained in this Agreement shall have been true and correct in all material respects. 7. Conditions Precedent to Obligations of the Purchasers. The obligations of the Purchasers hereunder are subject to the following conditions precedent: (A) Performance. Each covenant and agreement of Seller set forth in this Agreement to be performed on or before the Closing Date shall have been duly performed in all material respects. (B) No Violation of Statutes, Orders, etc. There shall not be in effect any statute, rule, or regulation which makes it illegal for such Purchaser to consummate the transactions contemplated hereby, or any order, decree, or judgment enjoining consummation of the transactions contemplated hereby. 4 (C) Representations and Warranties True and Correct. The representations and warranties of Seller contained in this Agreement shall have been true and correct in all material respects. 8. Indemnification. (A) Each Purchaser, severally and not jointly, shall indemnify and hold Seller and its officers, directors, agents, attorneys, employees and affiliates harmless from any damage, claim, liability or expense, including, without limitation, reasonable attorneys' fees (collectively "Damages"), arising out of or relating to the breach of any warranty, representation, covenant or agreement of such Purchaser contained in this Agreement. (B) Seller shall indemnify and hold each Purchaser and their respective agents, attorneys, employees and affiliates harmless from any Damages arising out of or relating to the breach of any warranty, representation, covenant or agreement of Seller contained in this Agreement. 9. Transfers of Preferred Stock. (A) Keel agrees that he shall not, directly or indirectly, in one transaction or a series of related transactions, for a period of two years from the date hereof, transfer, sell, assign, mortgage, hypothecate, pledge, create a security interest in or lien upon, encumber, donate, contribute, place in trust (including a voting trust) or otherwise voluntarily or involuntarily dispose of ("Transfer") any of Keel's Preferred Stock unless such Transfer (i) is effected in accordance with Sections 9, 10, or 11 or (ii) constitutes a Permitted Transfer, subject to the prior written consent of the Oaktree Parties which may be granted or withheld in their sole and absolute discretion. After the expiration of such two year period, Transfers of Preferred Stock shall be subject to Section 12; to the extent Section 12 would not apply to a Transfer of Preferred Stock, Keel agrees that any transferee receiving Preferred Stock must agree in writing to be bound by all of the provisions and conditions of this Agreement as a party hereto in the capacity of Keel. "Oaktree Parties" means Oaktree Capital Management, LLC, Seller, OCM Principal Opportunities Fund III, L.P., OCM Principal Opportunities Fund IIIA, L.P. and each of their respective Permitted Transferees and affiliates. "Permitted Transfer" means the Transfer of Preferred Stock to a Permitted Transferee who has agreed in writing to be bound by all of the provisions and conditions of this Agreement as a party hereto in the capacity of a Purchaser. "Permitted Transferee" means (a) as to a Person other than a natural Person, (i) any general partner or managing member of such Person, or (ii) any partnership, limited partnership, limited liability company, corporation or other entity organized, formed or incorporated and managed or controlled by such Person, its general partner or managing member as a vehicle for purposes of making investments and (b) as to any natural Person, (i) such Person's spouse, his siblings, or other immediate family members or any of their respective lineal descendants ("Beneficiaries"), (ii) any trust, corporation, limited liability company, partnership or other entity which was organized, formed or incorporated for the benefit of such Person's Beneficiaries and whose voting control is vested in such Person or its Beneficiaries or in a Person reasonably acceptable to the Oaktree Parties, or (iii) any bona fide recognized charity or charitable organization. 5 "Person" means any natural Person, corporation, limited liability company, limited partnership, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any government or agency or political subdivision thereof. (B) Any purported Transfer of the Preferred Stock by Keel in contravention of this Agreement shall be null and void and of no force and effect whatsoever. (C) The foregoing notwithstanding, except as contemplated by Section 11 or 12, in no event shall any of the following constitute a Transfer of shares of Preferred Stock for purposes of Section 9 or be subject to the terms hereof: (i) an exchange, reclassification or other conversion of all shares of Preferred Stock on an equivalent basis into any cash, securities or other property pursuant to a merger, consolidation or recapitalization of the Company or any of its subsidiaries (and in which event the rights and obligations of the parties shall survive such merger, consolidation or recapitalization, as the case may be) with, or Transfer by the Company or any of its subsidiaries of all or substantially all its assets to, any Person; or (ii) an exercise, exchange, redemption or conversion of Preferred Stock into shares of common stock in accordance with the terms thereof. 10. Tag Along Rights. (A) If Seller and/or any Oaktree Party proposes to Transfer any shares of Preferred Stock (such Person or Persons, "Transferor"), which represent more than 10% of the common stock outstanding on a fully diluted basis as of such date, in a single transaction or series of related transactions (a "Tag Along Transaction"), to any third party other than another Oaktree Party, then such Transferor shall offer (a "Tag Along Offer") to each Purchaser the right to include in such proposed sale a number of shares of Preferred Stock, not to exceed, in respect of any such Purchaser, that number of shares of Preferred Stock determined by application of the following formula: (i) the number of all shares of Preferred Stock to be sold by the Transferor in the Tag Along Transaction, multiplied by (ii)(A) the number of shares of Preferred Stock held by such Purchaser divided by (B) the number of shares of Preferred Stock held by all Purchasers that elect to sell in the Tag Along Transaction, plus those of the Transferor. (B) The Transferor shall give written notice to each Purchaser of the Tag Along Offer (the "Tag Along Notice") at least 20 days before the expected consummation of the Tag Along Transaction. The Tag Along Notice shall specify the proposed transferee, the number of shares of Preferred Stock to be transferred to such transferee, the amount and type of consideration to be received therefor and the place and date on which the Tag Along Transaction is to be consummated. Each Purchaser who wishes to include shares in the Tag Along Transaction in accordance with the terms of this Section 10 shall so notify the Transferor not more than 10 days after its receipt of the Tag Along Notice. The Tag Along Offer shall be conditioned upon the Transferor's Transfer of shares of Preferred Stock in the Tag Along Transaction and with the transferee named therein. If any Purchaser accepts the Tag Along Offer (each such Purchaser, a "Tag Along Seller"), the Transferor shall reduce to the extent necessary the number of shares of such Preferred Stock it otherwise would have sold in the Tag Along Transaction so as to permit each Tag Along Seller to Transfer the number of shares of such Preferred Stock that they are entitled to Transfer under this Section 10, and the Transferor and each Tag Along Seller shall Transfer the number of shares of such Preferred Stock specified in the Tag Along Offer to the proposed transferee in accordance with the terms of the Tag Along Transaction set forth in the Tag Along Notice and receive the same consideration per share. 6 (C) Only shares of Preferred Stock may be included in a Tag Along Transaction. (D) No Transfer may be made by the Transferor under this Section 10 unless, contemporaneously therewith, all Tag Along Sellers electing to participate in such Tag Along Transaction receive the amounts to which they are entitled under this Section 10. Each Tag Along Seller pursuant to this Section 10 shall be obligated to join on a pro rata basis (based on the number of shares of Preferred Stock to be sold) in any indemnification or other obligations that are part of the terms and conditions of such Tag Along Transaction (other than any such obligations that relate specifically to a particular Purchaser, such as indemnification with respect to representations and warranties given by a Purchaser regarding such Purchaser's title to and ownership of Preferred Stock). 11. Drag-Along Rights. (A) Notwithstanding any other provision in this Agreement, if Seller and/or one or more Oaktree Parties (such Person or Persons, "Seller") proposes to Transfer (other to another Oaktree Party) shares of Preferred Stock representing (a) more than 50% of the total voting power represented by the outstanding capital stock (including the Preferred Stock) then outstanding and normally entitled to vote in the election of directors of the Company ("Voting Stock") or (b) more than 50% of the total voting power represented by the outstanding Voting Stock of the Company and other securities of the Company having the right to vote upon the satisfaction of any condition or the occurrence of any contingency or event, including the exercise, exchange or conversion of the security for or into any other security (the Preferred Stock being Transferred being referred to as the "Seller Stock"), to any third party (a "Drag Along Third Party") pursuant to a bona fide offer to acquire shares of Preferred Stock (whether in the form of a purchase of shares of Preferred Stock, merger, consolidation, exchange, business combination, recapitalization or otherwise) made by an unrelated Person which has the demonstrable financial ability to consummate such a transaction ("Bona Fide Offer"), then Seller shall have the right, subject to the provisions of this Section 11, to require all Purchasers (collectively, the "Drag Along Sellers") to include in such Transfer (a "Required Sale") a portion of each such Drag Along Seller's shares of Preferred Stock (the "Drag Along Stock") by delivering notice (the "Drag Along Notice") to the Drag Along Sellers. The portion that each Drag Along Seller shall be required to include in the Required Sale shall equal the product of (i) the percentage of the Preferred Stock held by Seller that it proposes to Transfer (expressed as a percentage), divided by 100, and (ii) the aggregate number of shares of Preferred Stock held by such Drag Along Seller. (B) The Drag Along Notice shall set forth: (i) the date of such notice (the "Drag Along Notice Date"); (ii) the name and address of the Drag Along Third Party; (iii) the proposed amount and type of consideration to be paid per share of Preferred Stock for the Seller Stock, and a description in reasonable detail of the terms and conditions of payment offered by the Drag Along Third Party, together with written proposals or agreements, if any, with respect thereto; (iv) the aggregate number of shares of Seller Stock; and (v) the proposed date of the Required Sale (the "Drag Along Date"), which shall be not less than 20 nor more than 180 days after the Drag Along Notice Date. 7 (C) The Drag Along Sellers shall cooperate in good faith with Seller in connection with consummating the Required Sale (including the giving of consents and the voting of any shares of capital stock held by the Drag Along Sellers to approve the Required Sale). On the Drag Along Date, each of the Drag Along Sellers shall deliver, free and clear of all liens, claims or encumbrances, and on the same terms and conditions applicable to Seller's sale of the Seller Stock, a certificate or certificates and/or other instrument or instruments for all of its shares of Preferred Stock being sold, duly endorsed and in proper form for transfer, with the signature guaranteed, to the Drag Along Third Party in the manner and at the address indicated in the Drag Along Notice, and Seller shall cause each Drag Along Seller's share of the purchase price to be paid to such Drag Along Seller. Seller and the Drag Along Sellers shall all receive the same consideration per share. No Transfer may be made by Seller under this Section 11 unless, contemporaneously therewith, all Drag Along Sellers in such Required Sale receive the amounts to which they are entitled under this Section 11. Each Drag Along Seller pursuant to this Section 11 shall be obligated to join on a pro rata basis (based on the number of shares of Preferred Stock to be sold) in any indemnification or other obligations that are part of the terms and conditions of such Required Sale (other than any such obligations that relate specifically to a particular Purchaser, such as indemnification with respect to representations and warranties given by a Purchaser regarding such Purchaser's title to and ownership of Preferred Stock). 12. Right of First Offer. Subject to the terms and conditions in this Section 12, after the date of this Agreement (or, with respect to Keel, after the two year anniversary of the date hereof (immediately after the lapse of the Transfer restrictions in Section 9)), each Purchaser hereby grants to Seller (or such Oaktree Party designated by Seller) (the "Rights Holder") a right of first offer with respect to offers to sell Preferred Stock. To the extent this Section 12 would not apply to a Transfer of Preferred Stock, each Purchaser agrees that any transferee receiving Preferred Stock must agree in writing to be bound by all of the provisions and conditions of this Agreement as a party hereto in the capacity of Purchaser. Each time each such Purchaser determines to Transfer his Preferred Stock for cash or other consideration, such Purchaser (the "RFO Selling Purchaser") will first offer the Rights Holder the right to purchase such Preferred Stock proposed to be Transferred (the "RFO Preferred Stock") in accordance with the following provisions: (A) Such RFO Selling Purchaser shall deliver a notice by certified mail (the "Offer Notice") to the Rights Holder stating (i) it has determined to dispose of the RFO Preferred Stock, (ii) the number of shares of RFO Preferred Stock proposed to be disposed of, and (iii) the per share price and terms upon which Purchaser desires to dispose of such RFO Preferred Stock. (B) By written notification received by the RFO Selling Purchaser within 20 days after giving of the Offer Notice (the "Offer Period"), the Rights Holder may elect to purchase or obtain, at the price and on the terms specified in the Offer Notice, up to that portion of such RFO Preferred Stock as that proposed to be disposed of by the RFO Selling Purchaser and set forth in the Offer Notice. If part of all of the consideration proposed to be paid for the RFO Preferred Stock as stated in the Offer Notice is other than cash, the price stated in such Offer Notice shall be deemed to be the sum of the cash consideration, if any, specified in such Offer Notice, plus the fair market value of the non-cash consideration, determined in good faith by Seller. (C) In the notice of election made by the Rights Holder pursuant to paragraph (B) above, the Rights Holder shall state whether it has agreed to purchase all the RFO Preferred Stock set forth therein or a lesser number, and if a lesser number, how many shares. 8 (D) Any notice by the Rights Holder to purchase RFO Preferred Stock shall be binding on the Rights Holder except to the extent otherwise provided in this Section 12. (E) With respect to those shares of RFO Preferred Stock that are not subscribed by the Rights Holder, (a) the RFO Selling Purchaser shall have 60 days following the expiration of the Offer Period to sell or enter into an agreement to sell such RFO Preferred Stock to a third party at a price not less than, and upon terms no more favorable to such third party than those specified in the Offer Notice, (b) if the Rights Holder has exercised its right to purchase less than all RFO Preferred Stock pursuant to this Section 12 it shall not be obligated to consummate such purchase unless and until any remaining shares of RFO Preferred Stock set forth in the Offer Notice not elected to be purchased by the Rights Holder have actually been sold in accordance with the terms set forth in the Offer Notice, in which event a closing with respect to both the purchase by such Rights Holder and such third party shall occur simultaneously, and (c) the third party transferee must agree in writing to be bound by the terms and provisions of this Agreement as a Purchaser. If such Purchaser does not sell such RFO Preferred Stock referred to in the Offer Notice within such 60 day period or the agreement entered into with respect to such RFO Preferred Stock within such 60 day period is not consummated within 30 days of the execution thereof, the RFO Selling Purchaser shall not thereafter Transfer any Preferred Stock without first again offering such securities to the Rights Holder in the manner provided above. 13. Right to Require Conversion. At any time Seller and/or any Oaktree Party converts any or all of the Preferred Stock held by it into common stock, Seller (or such other Oaktree Party designated by Seller) may, by giving written notice to the Purchasers, require each Purchaser to convert a percentage of the Preferred Stock held by such Purchaser into common stock equal to the percentage of Preferred Stock converted by Seller and such other Oaktree Parties based on their total holdings of Preferred Stock immediately prior to such conversion. Each such Purchaser receiving such notice of conversion shall convert the required number of shares of Preferred Stock into common stock within 10 days of notice thereof subject to any limits on conversion imposed by the Company's charter. 14. Spouses. Each party hereto who is a natural person and each of their respective spouses, by their execution of this Agreement, (a) evidence that they are fully aware of, understand and fully consent and agree to the provisions of this Agreement and its binding effect upon any community property or similar marital property interest in the Preferred Stock that they may now or hereafter own and (b) agree that termination of their marital relationship with any individual party hereto for any reason shall not have the effect of removing any such Preferred Stock otherwise subject to this Agreement from coverage hereof. Each party hereto who is a natural person further agrees that he or she shall cause his or her spouse (and any subsequent spouse) to execute and deliver, within 30 days after the request of Seller, their written agreement to be bound by the terms and provisions hereof, in a form and substance satisfactory to Seller, if such spouse is not a signatory hereto in such capacity. 15. Miscellaneous. (A) Survival. Except as otherwise set forth herein, the representations, warranties, covenants, and obligations of the parties hereto contained in this Agreement shall survive the Closing. After all shares of Preferred Stock have converted into common stock, the provisions of Sections 9, 10, 11, 12 and 13 shall be of no further force or effect, provided that such Sections shall not apply in any case to any shares of common stock acquired by Purchaser upon conversion of Preferred Stock. 9 (B) No Tax Representations or Warranties. Seller and Purchasers acknowledge that no representation or warranty with respect to the tax consequences of the Agreement and the transactions contemplated therein have been made by Seller to Purchasers. Purchasers are responsible for consulting, if they so desire, with their own tax advisor regarding the tax consequences to them of the Agreement and the transactions contemplated herein. (C) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of its subject matters and supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof or the transactions contemplated hereby. (D) Amendment; Waiver. This Agreement may not be amended or modified, and no provisions hereof may be waived, without the written consent of the parties hereto. No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. (E) Notices. Any notice, request, demand or other communication required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed given under this Agreement on the earliest of: (a) the date of personal delivery, (b) the date of transmission by facsimile, with confirmed transmission and receipt, (c) two days after deposit with a nationally-recognized courier or overnight service such as Federal Express, or (d) five days after mailing via certified mail, return receipt requested. All notices not delivered personally or by facsimile will be sent with postage and other charges prepaid and properly addressed to the party to be notified at the address set forth for such party: (i) If to Holdings: c/o Oaktree Capital Management, LLC 333 South Grand Avenue, 28th Floor Los Angeles, California 90071 Attention: B. James Ford Telecopier: (213) 830-6394 with a copy to (which does not constitute notice): Akin Gump Strauss Hauer & Feld LLP 1111 Louisiana Street, 44th Floor Houston, Texas 77002 Phone: (713) 220-5200 Fax: (713) 236-0822 Attn: Julien Smythe (ii) If to a Purchaser, at the address set forth on the signature page hereto. 10 (F) Oaktree Parties. For administrative convenience, any notice or other communication to any Oaktree Party shall be deemed given, subject to Section 15(E), upon delivery to the care of Oaktree Capital Management, LLC, and any right or obligation of any Oaktree Party may be exercised or discharged, as applicable, by Oaktree Capital Management, LLC on behalf any or all Oaktree Parties. (G) Severability. The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision hereof will not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this Agreement, as applied to any party or to any circumstance, is adjudged by a court, governmental body, arbitrator not to be enforceable in accordance with its terms, the parties agree that the court, governmental body, arbitrator making such determination will have the power to modify the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its reduced form, such provision will then be enforceable and will be enforced. (H) Construction. The parties hereto have jointly participated in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties hereto and no presumption or burden of proof will arise favoring or disfavoring any party hereto because of the authorship of any provision of this Agreement. Any reference to any federal, state, local or foreign law will also be deemed to refer to such law as amended and all rules and regulations promulgated thereunder, unless the context otherwise requires. The words "include," "includes" and "including" will be deemed to be followed by "without limitation." Pronouns in masculine, feminine and neuter genders will be construed to include any other gender, and words in the singular form will be construed to include the plural and vice versa, unless the context otherwise requires. The words "this Agreement," "herein," "hereof," "hereby," "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The parties hereto intend that each representation, warranty and covenant contained herein will have independent significance. If any party hereto has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which such party has breached, will not detract from or mitigate the fact that such party is in breach of the first representation, warranty or covenant. (I) No Third Party Beneficiaries. Except as otherwise set forth in this Agreement, all representations, warranties, covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. Nothing in this Agreement shall create or be deemed to create any third-party beneficiary rights in any Person not a party to this Agreement. (J) Governing Law. This Agreement and the performance of the transactions and the obligations of the parties hereunder will be governed by and construed and enforced in accordance with the laws of the State of Texas, without giving effect to any choice of law principles. 11 (K) Descriptive Headings. The section and subsection headings contained in this Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement. (L) Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. (M) Successors and Assigns. This Agreement and the rights and obligations of the parties hereunder shall inure to the benefit of, and be binding upon, their respective successors, assigns and legal representatives. (N) Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement or any other agreement or document to be executed or delivered pursuant hereto, the prevailing party shall be entitled to reasonable attorneys' fees, costs, and disbursements in addition to any other relief to which such party may be entitled. (O) Adjustments for Stock Splits, Etc. Wherever in this Agreement there is a reference to a specific number of shares of capital stock of any class or series, then, upon the occurrence of any subdivision, combination or stock dividend of such class or series of stock, the specific number of shares so referenced in this Agreement will automatically be proportionally adjusted to reflect the effect of such subdivision, combination or stock dividend on the outstanding shares of such class or series of stock. (P) Merger. The parties acknowledge that it is intended that the Company merge into a Delaware corporation in connection with the transactions contemplated by the Subscription Agreement, dated February 25, 2005, between Seller and the Company. This Agreement shall survive such merger and shall apply to such Delaware corporation and its capital stock without any further action on the part of the parties. (SIGNATURE PAGE FOLLOWS) 12 (SUBSCRIPTION AGREEMENT SIGNATURE PAGE) IN WITNESS WHEREOF, the parties have executed this Agreement on and as of the date first written above. SELLER: OCM GW HOLDINGS, LLC By: OCM Principal Opportunities Fund III, L.P., its managing member By: OCM Principal Opportunities Fund III GP, LLC, its general partner By: Oaktree Capital Management, LLC, its managing partner By:/s/ Stephen A. Kaplan -------------------------------- Name: Stephen A. Kaplan Title: Principal 13 (SUBSCRIPTION AGREEMENT SIGNATURE PAGE) PURCHASERS: /s/ Allan Keel -------------------------------- Allan Keel, individually /s/ Robert Blevins -------------------------------- Robert Blevins, individually /s/ Greg Pipkin -------------------------------- Greg Pipkin, individually /s/ Jim Parkman -------------------------------- Jim Parkman, individually /s/ Tom Petrie -------------------------------- Tom Petrie, individually /s/ Jon Hughes -------------------------------- Jon Hughes, individually /s/ Jonathan Linken -------------------------------- Jonathan Linken, individually /s/ Tim Saxman -------------------------------- Tim Saxman, individually /s/ Harry Perrin -------------------------------- Harry Perrin, individually /s/ Martha P.W. Perrin -------------------------------- Martha P.W. Perrin, individually /s/ Randy King -------------------------------- Randy King, individually 14 EXHIBIT A Individual Preferred Shares Purchase Price ---------- ---------------- -------------- Allan Keel 600 $300,000 Robert Blevins 500 $250,000 Greg Pipkin 500 $250,000 Jim Parkman 500 $250,000 Tom Petrie 500 $250,000 Jon Hughes 500 $250,000 Jonathan Linken 500 $250,000 Tim Saxman 100 $ 50,000 Harry Perrin 50 $ 25,000 Martha P.W. Perrin 50 $ 25,000 Randy King 500 $250,000 Total 4,300 $2,150,000 15 EX-99.D 5 a4838327ex99d.txt EXHIBIT 99(D) Exhibit 99(d) SHARE TRANSFER RESTRICTION AGREEMENT This SHARE TRANSFER RESTRICTION AGREEMENT (the "Agreement"), dated as of February 28, 2005, is entered into by and between OCM GW Holdings, LLC, a Delaware limited liability company ("Holdings"), and J. Virgil Waggoner ("Shareholder"). RECITALS A. Holdings and GulfWest Energy Inc., a Texas corporation ("Company"), have entered into a Subscription Agreement of even date herewith (the "Subscription Agreement"), pursuant to which Holdings has agreed to purchase 81,000 shares of the Company's Series G Convertible Preferred Stock, par value $0.01 per share (the "Series G Preferred Stock"). B. As of the date hereof, Shareholder is the record owner and Beneficial Owner of the number of shares of (a) Class A Common Stock, par value $0.001 per share, of Company ("Common Stock"), and (b) Cumulative Convertible Preferred Stock, Series E, par value $0.01 per share, of Company ("Series E Preferred Stock") as set forth in Schedule I (the "Company Shares"). C. As of the date hereof, Shareholder is the record owner and Beneficial Owner of (a) 3,000 shares of Series A Cumulative Exchangeable Preferred Stock, par value $0.01 per share, of GulfWest Oil & Gas Company, a subsidiary of the Company (the "Series A Preferred Stock"), and (b) warrants and options to purchase shares of Common Stock; such Common Stock Equivalents (including the Series E Preferred Stock) that are convertible into or exercisable or exchangeable for the number of shares of Common Stock set forth in Schedule I. D. As a condition to its willingness to enter into the Subscription Agreement, and to induce Holdings to enter into the Subscription Agreement, Shareholder is willing to agree, to: (a) provide an irrevocable proxy in the form of Exhibit A; (b) not to transfer any Capital Stock; (c) convert his Series A Preferred Stock into Series H Convertible Preferred Stock, par value $0.01 per share, of the Company (the "Series H Preferred Stock") on or before March 15, 2005 as contemplated by the Statement of Resolution for the Series A Preferred Stock, as amended (the "Conversion Date"); and (d) such other matters as are set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants, agreements, representations and warranties herein contained, and intending to be legally bound hereby, Holdings and Shareholder hereby agree as follows: 1. Definitions. Undefined capitalized terms in this Agreement are defined in the Subscription Agreement. For this Agreement: (a) "Beneficially Own," "Beneficial Owner" or "Beneficial Ownership" with respect to any securities means having voting power or investment power with respect to such securities (as determined pursuant to Rule 13d-3(a) under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing. 1 Exhibit 99(d) (b) "Capital Stock" means any and all shares of stock, interests, participations or other equivalents (however designated) of capital stock of the Company, and any and all equivalent ownership interests in the Company, including Common Stock Equivalents and other securities convertible into capital stock of the Company, Common Stock and any shares of preferred stock of any series of the Company or its subsidiaries whether now or hereafter authorized. (c) "Common Stock Equivalents" means (without duplication with any other shares of Common Stock or Common Stock Equivalents) rights, warrants, options, convertible securities, or exchangeable securities or indebtedness, or other rights, exercisable for or convertible or exchangeable into, directly or indirectly, shares of Common Stock, or securities exercisable for or convertible or exchangeable into shares of Common Stock, whether at the time of issuance or upon the passage of time or the occurrence of some future event. (d) "Oaktree Party" means each of Oaktree Capital Management, LLC, OCM Principal Opportunities Fund III, L.P., OCM Principal Opportunities Fund IIIA, L.P., Holdings and any of the respective Permitted Transferees. (e) "Permitted Transferee" means as to any person or entity, (i) any general partner or managing member of such person or entity or (ii) any partnership, limited partnership, limited liability company, corporation or other entity organized, formed or incorporated and managed or controlled by such person or entity, its general partner or managing member as a vehicle for purposes of making investments. (d) "Termination Date" means the first to occur of (i) the merger of the Company into a Delaware corporation and wholly owned subsidiary of the Company (the "Merger") and (ii) the conversion of certain of the shares of the Company's Series G Preferred Stock into New Preferred Stock (as defined in the Shareholders Rights Agreement (the "Shareholders Rights Agreement") between Holdings and the Company, dated the date hereof) in accordance with Section 4.26(d) of the Shareholders Rights Agreement. 2. Irrevocable Proxy. Simultaneously with the execution of this Agreement, Shareholder will deliver to Holdings a proxy in the form attached hereto as Exhibit A (the "Proxy"), which will be irrevocable with respect to the Capital Stock covered thereby. The parties agree that the Proxy is a proxy coupled with an interest. 3. No Ownership Interest. Nothing contained in this Agreement will be deemed to vest in Holdings any direct or indirect ownership or incidents of ownership of or with respect to Capital Stock of which Shareholder is a record owner or Beneficial Owner. All rights, ownership and economic benefits of and relating to such Capital Stock will remain and belong to Shareholder, and Holdings will have no authority to manage, direct, superintend, restrict, regulate, govern or administer any of the policies or operations of Company or exercise any power or authority to direct Shareholder in the voting of any of such Capital Stock, except as otherwise expressly provided herein with respect to the Capital Stock subject to the Proxy. 4. Covenants, Representations and Warranties of Shareholder. Shareholder hereby represents, warrants and covenants to Company as follows: 2 Exhibit 99(d) (a) Ownership. As of the date of this Agreement, Shareholder is the record owner and Beneficial Owner of the issued and outstanding Company Shares. Schedule I sets forth the number of shares of Common Stock which, as of the date hereof, Shareholder may become the record owner and Beneficial Owner of pursuant to the exercise, exchange or conversion of Common Stock Equivalents. As of the date hereof, the Company Shares constitute all of the issued and outstanding shares of Common Stock and Series E Preferred Stock owned of record or Beneficially Owned by Shareholder. Other than the Company Shares, Shareholder neither has record ownership nor Beneficial Ownership of any other Capital Stock (except for the Common Stock Equivalents listed in Schedule I). Except as contemplated by Section 10(i) with respect to Shareholder's spouse, if any, Shareholder has the sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Capital Stock of the Company covered hereby, with no limitations, qualifications or restrictions on such rights, subject to applicable securities laws and the terms of this Agreement. (b) Power; Binding Agreement. Shareholder has the legal capacity, power and authority to enter into and perform all of Shareholder's obligations under this Agreement. This Agreement has been duly and validly executed and delivered by Shareholder and constitutes a valid and binding agreement of Shareholder, enforceable against Shareholder in accordance with its terms (except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally and by general equitable principles). There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which Shareholder is trustee whose consent is required for the execution and delivery of this Agreement or the consummation by Shareholder of the transactions contemplated hereby. (c) No Conflicts. As of the date of this Agreement, except for filings under the Exchange Act, if applicable, no filing with, and no permit, authorization, consent or approval of, any state or federal public body or authority is necessary for the execution of this Agreement by Shareholder and the consummation by Shareholder of the transactions contemplated hereby, and none of the execution and delivery of this Agreement by Shareholder, the consummation by Shareholder of the transactions contemplated hereby or compliance by Shareholder with any of the provisions hereof will (i) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which Shareholder is a party or by which Shareholder or any of Shareholder's properties or assets may be bound, (ii) require any consent, authorization or approval of any Person or (iii) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to Shareholder or any of the Capital Stock subject to this Agreement. (d) No Encumbrances. Except (i) as required by Section 2 and (ii) as disclosed in Schedule I on the date hereof, and except for the Securities Act and blue sky laws, at all times during the term hereof, all of the Capital Stock held of record or Beneficially Owned by Shareholder will be held by Shareholder free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever. 3 Exhibit 99(d) (e) Restriction on Transfer, Proxies and Non-Interference. Except as otherwise contemplated by the Subscription Agreement or this Agreement, from and after the date of this Agreement, Shareholder will not, directly or indirectly without the consent of Holdings, with respect to any Capital Stock now or hereafter owned of record or Beneficially Owned by Shareholder: (i) offer for sale, sell, announce the intention to sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to, any Capital Stock, or consent to the offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or other disposition of, any Capital Stock, (ii) enter into any swap, option, future, forward or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of any Capital Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Capital Stock, in cash or otherwise, (iii) grant any proxies or powers of attorney with respect to any Capital Stock, deposit any Capital Stock into a voting trust or enter into a voting agreement with respect to any Capital Stock, (iv) enter into any agreement or arrangement providing for any of the actions described in clause (i), (ii) or (iii) above, (v) take any action that would reasonably be expected to have the effect of preventing or disabling Shareholder from performing Shareholder's obligations under this Agreement, or (vi) request that Company register the transfer (book-entry or otherwise) of any certificate or uncertificated interest representing any Capital Stock, except as otherwise contemplated hereby. With respect to the Capital Stock other than the Series H Preferred Stock, the obligations of Shareholder under (e) shall terminate immediately after the Termination Date. (f) Stop Transfer Order. Shareholder consents to the entry of a stop transfer order with the transfer agent or agents of the Company's securities against the transfer of Capital Stock except in compliance with this Agreement or, if the Company is its own transfer agent with respect to any Capital Stock, refusal by the Company to transfer any such securities except in compliance with this Agreement. With respect to the Capital Stock other than the Series H Preferred Stock, any such stop transfer orders may be removed or refusals to transfer such Capital Stock on the Company's part pursuant to this Agreement will cease immediately after the Termination Date. (g) Restrictive Legend. Certificates evidencing Capital Stock will bear the following legend(s), as applicable, in addition to those required by the Securities Act or state blue sky laws: THE SHARES REPRESENTED HEREBY ARE SUBJECT TO A SHARE TRANSFER RESTRICTION AGREEMENT PROHIBITING THE TRANSFER OF SUCH SHARES. THE COMPANY WILL FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF, WITHOUT CHARGE, UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS OR SUCH OTHER PLACE AS THE COMPANY MAY DESIGNATE. THE SHARES REPRESENTED HEREBY ARE SUBJECT TO AN IRREVOCABLE PROXY. THE COMPANY WILL FURNISH A COPY OF SUCH IRREVOCABLE PROXY TO THE HOLDER HEREOF, WITHOUT CHARGE, UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS OR SUCH OTHER PLACE AS THE COMPANY MAY DESIGNATE. 4 Shareholder may request that such legend(s) be removed after the Termination Date, with respect to certificates representing shares of Capital Stock other than the Series H Preferred Stock. (h) Further Assurances. From time to time, at Holding's reasonable request and without further consideration, Shareholder will perform such further acts and execute and deliver such additional documents as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement and the Proxy. 5. After-Acquired Capital Stock. The terms and conditions of this Agreement will apply to any and all Capital Stock acquired by Shareholder after the date of this Agreement without any further action on the part of Shareholder or Holdings, including: (i) by purchase or by any other means of acquiring Beneficial Ownership; and (ii) in connection with any stock dividend and distribution and any shares into which or for which any or all of the Capital Stock (or any class thereof) may be changed or exchanged as may be appropriate to reflect any stock dividend or distribution, or any change in the Capital Stock (or any class thereof) by reason of any split-up, recapitalization, combination, merger, exchange of shares or the like. Shareholder shall promptly notify Holdings of any such events and Schedule I will be amended to reflect any changes to Shareholder's Capital Stock. With respect to the Capital Stock other than the Series H Preferred Stock, the provisions of this Section 5 shall terminate immediately after the Termination Date; except as otherwise set forth herein the parties agree that this Agreement shall survive the Merger and shall apply to the surviving Delaware corporation without any further action on the part of the parties. 6. Shareholder Capacity. Shareholder does not make any agreement or understanding herein in Shareholder's capacity as a director or officer of Company. Shareholder executes this Agreement solely in Shareholder's capacity as a record owner and/or Beneficial Owner of the Capital Stock and nothing herein will limit or affect any actions taken by Shareholder or any designee of Shareholder in Shareholder's capacity as an officer or director of Company or any of its subsidiaries to comply with his fiduciary obligations as an officer or director of Company. 7. Agreement to Convert Series A Preferred Stock. Effective as of the Conversion Date, Shareholder agrees to provide written notice to the Company of its request to convert Shareholder's Series A Preferred Stock to Series H Preferred Stock pursuant to Section 8 of the Statement of Resolution for the Series A Preferred Stock (as amended on the date hereof). 8. Mandatory Conversion of Series H Preferred Stock. At any time Holdings and/or any Oaktree Party converts any or all of the Series H Preferred Stock owned of record or Beneficially Owned by it into Common Stock, Shareholder shall be required to convert a number of shares of Series H Preferred Stock Beneficially Owned by Shareholder into Common Stock in proportion to the number of shares of Series H Preferred Stock converted by Holdings and such other Oaktree Parties in relation to their total holdings of Series H Preferred Stock immediately prior to such conversion. Shareholder shall so convert his shares of Series H Preferred Stock within 10 days of receiving notice of conversion from Holdings or such other Oaktree Party. 5 Exhibit 99(d) 9. Release. (a) Shareholder, on his own behalf and on behalf of each of his affiliates and all of their respective heirs, representatives, successors, and assigns, hereby releases and forever discharges each Releasee from any and all liabilities, claims, demands, debts and causes of action, whether known or unknown, suspected or unsuspected, contingent, unmatured or inchoate, both at law and in equity, which such Shareholder or any of such Shareholder's affiliates or any of their respective heirs, representatives, successors or assigns now has, have ever had or may hereafter have against the respective Releasees arising contemporaneously with or prior to the Closing (as defined in the Subscription Agreement) or on account of or arising out of any matter, cause, or event occurring contemporaneously with or prior to the Closing Date (as defined in the Subscription Agreement); provided, however, that nothing contained herein will operate to release (i) any obligations of the Company or any Oaktree Party arising under this Agreement, (ii) any obligations of the Company under the Statements of Resolution governing the Series H Preferred Stock or the Series E Preferred Stock, (iii) any claims for indemnification or reimbursement related to Shareholder's service as an officer or director of the Company, or (iv) any claims arising out of the Subscription Agreement or any document contemplated therein. (b) Shareholder hereby irrevocably covenants to refrain from, directly or indirectly, asserting any cause of action, or commencing, instituting or causing to be commenced, any action, of any kind against any Releasee, based upon any matter purported to be released hereby. (c) "Releasee" or "Releasees" means each of the Company, its subsidiaries, the Oaktree Parties and each of their respective officers, directors, managers, employees, advisors, attorneys, agents, shareholders, controlling persons, representatives and affiliates, including in each case those persons and entities currently in such positions and any persons or entities put in such positions as a result of the transactions contemplated by the Subscription Agreement, and each of their respective heirs, successors and assigns. 10. Miscellaneous. (a) Entire Agreement. This Agreement and each of the Transaction Documents constitutes the entire agreement and understanding of the parties hereto in respect of its subject matters and supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof or the transactions contemplated hereby. (b) Amendment; Waiver. This Agreement may not be amended or modified, and no provisions hereof may be waived, without the written consent of Shareholder and Holdings; provided that no amendment may be made to the provisions of Section 9 or the provisions of Section 10 affecting such Section without the consent of each affected Releasee, nor shall any waiver affect Shareholder's obligations under Section 9 or the provisions of Section 10 affecting such Section without the consent of each affected Releasee. No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. 6 (c) Notices. Any notice, request, demand or other communication required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed given under this Agreement on the earliest of: (a) the date of personal delivery, (b) the date of transmission by facsimile, with confirmed transmission and receipt, (c) two days after deposit with a nationally-recognized courier or overnight service such as Federal Express, or (d) five days after mailing via certified mail, return receipt requested. All notices not delivered personally or by facsimile will be sent with postage and other charges prepaid and properly addressed to the party to be notified at the address set forth for such party: (i) If to Holdings: c/o Oaktree Capital Management, LLC 333 South Grand Avenue, 28th Floor Los Angeles, California 90071 Attention: B. James Ford Telecopier: (213) 830-6394 with a copy to (which does not constitute notice): Akin Gump Strauss Hauer & Feld LLP 1111 Louisiana Street, 44th Floor Houston, Texas 77002 Phone: (713) 220-5200 Fax: (713) 236-0822 Attn: Julien Smythe (ii) If to Shareholder: c/o GulfWest Energy Inc. 480 N. Sam Houston Parkway East Suite 300 Houston, Texas 77060 Phone: (281) 820-1919 Fax: (281) 260-8488 7 Exhibit 99(d) (d) Severability. The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision hereof will not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this Agreement, as applied to any party or to any circumstance, is adjudged by a court, governmental body, arbitrator not to be enforceable in accordance with its terms, the parties agree that the court, governmental body, arbitrator making such determination will have the power to modify the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its reduced form, such provision will then be enforceable and will be enforced. (e) Construction. The parties hereto have jointly participated in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties hereto and no presumption or burden of proof will arise favoring or disfavoring any party hereto because of the authorship of any provision of this Agreement. Any reference to any federal, state, local or foreign law will also be deemed to refer to such law as amended and all rules and regulations promulgated thereunder, unless the context otherwise requires. The words "include," "includes" and "including" will be deemed to be followed by "without limitation." Pronouns in masculine, feminine and neuter genders will be construed to include any other gender, and words in the singular form will be construed to include the plural and vice versa, unless the context otherwise requires. The words "this Agreement," "herein," "hereof," "hereby," "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The parties hereto intend that each representation, warranty and covenant contained herein will have independent significance. If any party hereto has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which such party has breached, will not detract from or mitigate the fact that such party is in breach of the first representation, warranty or covenant. (f) Arbitration. Any and all claims, counterclaims, demands, causes of action, disputes, controversies, and other matters in question arising out of or relating to this Agreement or in any way relating to the subject matter of this Agreement or the relationship between the parties hereto created by this Agreement, involving the parties hereto or their respective representatives ("Disputes") even though all or some of the Disputes allegedly are extra-contractual in nature, whether such Disputes sound in contract, tort or otherwise, at law or in equity, under state, provincial or federal law, for damages or any other relief will be resolved as follows: first, Shareholder and representatives of Holdings will meet to attempt to resolve such Dispute. If the Dispute cannot be resolved by agreement of the parties hereto, any party may at any time make a written demand for binding arbitration of the Dispute in accordance with this Section provided that the foregoing shall not preclude equitable or other judicial relief to enforce the provisions hereof or to preserve the status quo pending resolution of Disputes; and provided further that resolution of Disputes with respect to claims by third Persons will be deferred until any judicial proceedings with respect thereto are concluded. Subject to the provisions of this Section, Shareholder and Holdings will agree upon the rules of the arbitration prior to the arbitration and based upon the nature of the Dispute; provided that to the extent that the parties hereto cannot agree on the rules of the arbitration, then the Commercial Arbitration Rules of the American Arbitration Association in effect on the date hereof, and except as the applicable rules are modified by this Agreement, will apply. As a minimum set of rules in the arbitration the parties hereto agree as follows: 8 Exhibit 99(d) (i) To the extent the claims asserted are in excess of $4.0 million, the arbitration will be held before a panel of three arbitrators consisting of one arbitrator selected by Shareholder, the other selected by Holdings, and the third then selected by those two arbitrators (such third arbitrator to be neutral). If agreement cannot be reached on a third arbitrator within 30 days of the need therefor, the Chief Judge of the U.S. District Court for the Southern District of Texas shall appoint an arbitrator. If the claims asserted are less than $4.0 million, the Chief Judge of the U.S. District Court for the Southern District of Texas shall appoint a sole arbitrator. All arbitrators shall be attorneys with at least ten years experience in oil and gas transactions. (ii) The arbitrator(s) will deliver their decision in writing within 20 days after the termination of the arbitration hearings. (iii) The non-prevailing party will bear the costs and fees of the arbitration. (iv) The arbitrator(s) final decision will be in writing but will not specify the basis for their decision, the basis for the damages award or the basis of any other remedy. The arbitrator(s)' decision will be considered as a final and binding resolution of the disagreement, will not be subject to appeal and may be entered as an order in any court of competent jurisdiction in the United States; provided that this Agreement confers no power or authority upon the arbitrator(s) (i) to render any decision that is based on clearly erroneously findings of fact, (ii) that manifestly disregards the law, or (iii) that exceeds the powers of the arbitrator(s), and no such decision will be eligible for confirmation. Each party hereto agrees to submit to the jurisdiction of any such court for purposes of the enforcement of any such order. No party will sue the other except for enforcement of the arbitrator(s)' decision if the other party is not performing in accordance with the arbitrator(s)' decision. The provisions of this Agreement will be binding on the arbitrator(s). (v) Any arbitration proceeding will be conducted on a confidential basis. (vi) Any arbitration proceeding shall be held in Houston, Texas. (vii) Any arbitration proceeding, including discovery, shall be conducted in accordance with the Texas Rules of Civil Procedure and the Texas Rules of Evidence. (g) Remedies Cumulative. The parties shall have all remedies for breach of this Agreement available to them as provided by law or equity. Without limiting the generality of the foregoing, the parties agree that in addition to any other rights and remedies available at law or in equity, the parties shall be entitled to obtain specific performance of the obligations of each party to this Agreement and immediate injunctive relief and that, in the event any action or proceeding is brought in equity or to enforce the same, no party will urge, as a defense, that there is an adequate remedy at law. No single or partial assertion or exercise of any right, power or remedy of a party hereunder shall preclude any other or further assertion or exercise thereof. 9 Exhibit 99(d) (h) No Third Party Beneficiaries. Except as otherwise set forth in this Agreement, all representations, warranties, covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. Nothing in this Agreement shall create or be deemed to create any third-party beneficiary rights in any Person not a party to this Agreement. The Company is expressly made a third party beneficiary of Section 7 and the Releasees are expressly made third party beneficiaries of Section 9. (i) Spouse. Shareholder and his spouse, if any, by their execution of this Agreement, (a) evidence that they are fully aware of, understand and fully consent and agree to the provisions of this Agreement and its binding effect upon any community property or similar marital property interest in the Capital Stock that they may now or hereafter own and (b) agree that termination of their marital relationship for any reason shall not have the effect of removing any such Capital Stock otherwise subject to this Agreement from coverage hereof. Shareholder further agrees that he shall cause his spouse (and any subsequent spouse), if any, to execute and deliver a Joinder Agreement in the form of Exhibit B. (j) Governing Law. This Agreement and the performance of the transactions and the obligations of the parties hereunder will be governed by and construed and enforced in accordance with the laws of the State of Texas, without giving effect to any choice of law principles. (k) Descriptive Headings. The section and subsection headings contained in this Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement. (l) Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. (m) Successors and Assigns. This Agreement and the rights and obligations of the parties hereunder shall inure to the benefit of, and be binding upon, their respective successors, assigns and legal representatives. (n) Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement or any other agreement or document to be executed or delivered pursuant hereto, the prevailing party shall be entitled to reasonable attorneys' fees, costs, and disbursements in addition to any other relief to which such party may be entitled. (o) Adjustments for Stock Splits, Etc. Wherever in this Agreement there is a reference to a specific number of shares of Capital Stock of any class or series, then, upon the occurrence of any subdivision, combination or stock dividend of such class or series of stock, the specific number of shares so 10 Exhibit 99(d) referenced in this Agreement will automatically be proportionally adjusted to reflect the effect of such subdivision, combination or stock dividend on the outstanding shares of such class or series of stock. 11 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the Shareholder and a duly authorized officer of Holdings on the day and year first written above. HOLDINGS: OCM GW HOLDINGS, LLC By: OCM Principal Opportunities Fund III, L.P., its managing member By: OCM Principal Opportunities Fund III GP, LLC, its general partner By: Oaktree Capital Management, LLC, its managing member By:/s/ Stephen A. Kaplan ------------------------ Name: Stephen A. Kaplan Title: Principal SHAREHOLDER: /s/ J. Virgil Waggoner ---------------------------------------------- J. Virgil Waggoner, in his individual capacity Signature Page to Share Transfer Restriction Agreement 12 SCHEDULE I Part A ------------------------------------------------ Company Shares ------------------------------------------------ ------------------------------------------------ Common Stock: 9,545,229 ------------------------------------------------ ------------------------------------------------ Series E Preferred Stock: 9,000 ------------------------------------------------ Part B

------------------------------------------------------------ --------------------------------------------------------- Common Stock Equivalents Number of Shares of Common Stock Issuable upon Conversion or Exercise ------------------------------------------------------------ --------------------------------------------------------- ------------------------------------------------------------ --------------------------------------------------------- 625,000 Warrants 625,000 ------------------------------------------------------------ --------------------------------------------------------- ------------------------------------------------------------ --------------------------------------------------------- 20,000 Options 20,000 ------------------------------------------------------------ --------------------------------------------------------- ------------------------------------------------------------ --------------------------------------------------------- 9,000 shares of Series E Preferred Stock 2,250,000 ------------------------------------------------------------ --------------------------------------------------------- ------------------------------------------------------------ --------------------------------------------------------- 3,000 shares of Series A Preferred Stock 4,285,714 ------------------------------------------------------------ ---------------------------------------------------------

13 EXHIBIT A IRREVOCABLE PROXY The undersigned, a shareholder of GulfWest Energy Inc., a Texas corporation (the "Company"), hereby irrevocably appoints each of OCM GW Holdings, LLC, a Delaware limited liability company ("Holdings"), and B. James Ford and Skardon F. Baker, executive officers of Holdings, and each of them as the sole and exclusive attorneys and proxies of the undersigned, with full power of substitution and resubstitution, to the full extent of the undersigned's rights with respect to: a) the number of shares of Class A common stock, par value $0.001 per share (the "Common Stock"), and the Cumulative Convertible Preferred Stock, Series E (the "Series E Preferred Stock"), of the Company (collectively, "Beneficial Common Stock") listed on the final page of this irrevocable proxy; b) any shares of the Beneficial Common Stock acquired by the undersigned by purchase or by any other means of acquiring Beneficial Ownership (as defined below), including the conversion or exchange of any securities of the Company (including the H Shares (as defined)) or any of its subsidiaries into or for shares of Beneficial Common Stock, on or after the date of this irrevocable proxy and on or before the Reincorporation Date (as defined below); c) any shares of the Series H Preferred Stock, par value $0.01 per share (the "Series H Preferred Stock" and, together with the Beneficial Common Stock, the "Company Stock"), of the Company, acquired by the undersigned by purchase or by any other means of acquiring Beneficial Ownership, including the conversion or exchange of any securities of the Company or any of its subsidiaries into or for shares of Series H Preferred Stock, on or after the date of this irrevocable proxy and on or before the Termination Date; and d) any shares of Company Stock acquired after the date of this irrevocable proxy and on or before the Reincorporation Date or Termination Date, as applicable, in connection with any stock dividend and distribution and any shares into which or for which any or all of Company Stock (or any class thereof) may be changed or exchanged as may be appropriate to reflect any stock dividend or distribution, or any change in the Company Stock (or any class thereof) because of any split-up, recapitalization, combination, merger, exchange of shares or the like with respect to such shares of the Company Stock; in each case Beneficially Owned by the undersigned (collectively, the "Shares" and, with respect to the Series H Preferred Stock, or such class or series of stock which it may be changed into or exchanged for pursuant to (d) by merger or otherwise, when referred to individually, the "H Shares"). For purposes of this irrevocable proxy, "Beneficially Own," "Beneficial Owner" or "Beneficial Ownership" with respect to any securities will mean having voting power or investment power with respect to such securities (as determined pursuant to Rule 13d-3(a) under the Securities Exchange Act of 1934, as amended), including pursuant to any agreement, arrangement or understanding, whether or not in writing. THIS IRREVOCABLE PROXY IS IRREVOCABLE AND IS COUPLED WITH AN INTEREST. It is granted pursuant to the Share Transfer Restriction Agreement between the undersigned and Holdings, dated the date hereof, and is granted in consideration of Holdings entering into the Subscription Agreement (the "Subscription Agreement"), dated the date hereof, with the Company. Upon the execution hereof, all prior proxies given by the undersigned with respect to the Shares are hereby revoked and no subsequent proxies will be given. 14 The attorneys and proxies named above will be empowered at any time on or prior to the first to occur of (i) the merger of the Company into a Delaware corporation and wholly owned subsidiary of the Company (the "Merger") and (ii) the conversion of certain of the shares of the Company's Series G Convertible Preferred Stock (the "Series G Preferred Stock") into New Preferred Stock (as defined in the Shareholders Rights Agreement (the "Shareholders Rights Agreement") between Holdings and the Company, dated the date hereof) in accordance with Section 4.26(d) of the Shareholders Rights Agreement (the "Reincorporation Date"), to vote (or cause to be voted) all of the Shares, at any annual, special or other meeting of the shareholders of the Company or series thereof, and at any adjournment or adjournments thereof, or pursuant to any consent in lieu of a meeting or otherwise (to the extent such class or series of Shares is entitled to a vote thereon under applicable law or the Company's articles of incorporation), in favor of (i) the Merger, or, (ii) if the Merger is not consummated by December 31, 2005, the conversion of certain of the Series G Preferred Stock into New Preferred Stock (as defined in the Shareholders Rights Agreement) in accordance with Section 4.26(d) of the Shareholders Rights Agreement (collectively the "Reincorporation"). The attorneys and proxies named above will be empowered, at any time on or prior to the conversion into common stock of all the H Shares received or to be received (the "Termination Date") in exchange for the undersigned's Series A Preferred Stock of GulfWest Oil & Gas Company, to vote (or cause to be voted) all of the H Shares, at any annual, special or other meeting of the shareholders of the Company or class, and at any adjournment or adjournments thereof, or pursuant to any consent in lieu of a meeting or otherwise (to the extent the Series H Preferred Stock is entitled to a vote thereon under applicable law or the Company's articles of incorporation), (i) in favor of the Reincorporation as provided for the immediately preceding paragraph, and (ii) in such a manner as determined by such attorneys and proxies in their sole and absolute discretion with respect to any and all matters on which such securities are entitled to vote on or consent with respect to as a class. The undersigned may not vote the H Shares (or provide a written consent) on any matter relating to the Merger or on which the H shares may vote as a class. Except for (i) these provisions shall survive the Merger and shall apply with respect to the surviving Delaware corporation and its capital stock without any further action on the part of the undersigned. Any obligation of the undersigned hereunder will be binding upon the successors and assigns of the undersigned. 9,545,229 Number of shares of the Common Stock that are Beneficially Owned by the undersigned and subject to this irrevocable proxy pursuant to subsection (a) above. 9,000 Number of shares of the Series E Preferred Stock that are Beneficially Owned by the undersigned and subject to this irrevocable proxy pursuant to subsection (a) above. 15 Dated: February 28, 2005 Signature of Shareholder: /s/ J. Virgil Waggoner ---------------------- Name of Shareholder: J. Virgil Waggoner 16 EXHIBIT B JOINDER AGREEMENT This Joinder Agreement (this "Joinder Agreement") is executed by the undersigned spouse ( "Spouse") of J. Virgil Waggoner ("Shareholder") pursuant to the terms of that Share Transfer Restriction Agreement between OCM GW Holdings, LLC ("Holdings") and Shareholder (as may be amended from time to time, the "Agreement"). By the execution of this Joinder Agreement, Spouse agrees as follows: 1. Joinder. Spouse hereby agrees to be bound by the terms and conditions of the Agreement to the same extent as if Spouse had executed the Agreement as an original party thereto. Nothing contained herein shall be deemed to relieve Shareholder from any liability or obligation incurred thereunder. 2. Representations and Warranties. The covenants, representations and warranties set forth in Section 4 of the Agreement are incorporated herein mutatis mutandis, and Spouse hereby makes and agrees to such covenants, representations and warranties as of the date of this Joinder Agreement (except as to the first two sentences of Section 4(a) where Shareholder represents and warrants as to both record ownership and Beneficial Ownership, to the extent Spouse may not have record ownership, or become record owner of, Capital Stock owned of record or that would be owned of record by Shareholder). 3. Notice. Any notice required as permitted by the Agreement shall be given to the Spouse at the address listed below Spouse's signature below. 4. Definitions. Undefined capitalized terms in this Joinder Agreement are defined in the Agreement. 5. Counterparts. This Joinder Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. 6. Governing Law. This Joinder Agreement shall be governed by the laws of the State of Texas, without reference to the principles of conflicts of law thereof. 17 EXECUTED AND DATED this _____ day of February ___, 2005. [SPOUSE] By:____________________ Name: Address: Attention: Telecopy: Agreed to and accepted by Holdings: OCM GW HOLDINGS, LLC By:______________________ Name: Title: 18 EX-99.E 6 a4838327ex99e.txt EXHIBIT 99(E) Exhibit 99(e) SHAREHOLDERS RIGHTS AGREEMENT BETWEEN GULFWEST ENERGY INC. AND OCM GW HOLDINGS, LLC 1 Exhibit 99(e) TABLE OF CONTENTS

Page ARTICLE I DEFINITIONS.............................................................................................1 ARTICLE II REGISTRATION RIGHTS....................................................................................6 Section 2.01 Demand Registration.......................................................................6 Section 2.02 Piggyback Registrations...................................................................9 Section 2.03 Registration Procedures..................................................................11 Section 2.04 Registration Expenses....................................................................15 Section 2.05 Indemnification..........................................................................15 Section 2.06 Rule 144 and Rule 144A; Other Exemptions.................................................18 Section 2.07 Certain Limitations On Registration Rights...............................................18 Section 2.08 Limitations on Subsequent Registration Rights............................................18 Section 2.09 Restrictions on Public Sale by Holders...................................................19 Section 2.10 Transfer of Registration Rights..........................................................19 Section 2.11 Amendment................................................................................19 ARTICLE III INFORMATION RIGHTS...................................................................................19 Section 3.01 Financial Information to Holders.........................................................20 Section 3.02 Board Observation Rights.................................................................20 Section 3.03 Confidentiality..........................................................................21 Section 3.04 Acknowledgement Regarding Confidential Information.......................................21 Section 3.05 Transfer of Information Rights...........................................................21 ARTICLE IV Covenants of the Company..............................................................................21 Section 4.01 Corporate Existence......................................................................22 Section 4.02 Preservation of Property and Assets......................................................22 Section 4.03 Properties, Business, Insurance..........................................................22 Section 4.04 Directors and Officers Insurance.........................................................22 Section 4.05 Inspection, Consultation and Advice......................................................23 Section 4.06 Restrictive Agreements Prohibited........................................................23 Section 4.07 Expenses of Directors....................................................................23 Section 4.08 Compensation.............................................................................23 Section 4.09 Payment of Taxes; Trade Debt.............................................................23 Section 4.10 Internal Accounting Controls.............................................................24 Section 4.11 Activities of the Company and its Subsidiaries...........................................24 Section 4.12 Compliance with Laws.....................................................................24 Section 4.13 Keeping of Records and Books of Account..................................................24 Section 4.14 Change in Nature of Business.............................................................24 Section 4.15 Indemnity for Officers and Directors.....................................................24 Section 4.16 Publicity................................................................................24 Section 4.17 Employee and Other Stock Arrangements....................................................25 Section 4.18 Extension of Credit......................................................................25 Section 4.19 Limitations on Liens.....................................................................25 Section 4.20 Loans, Advances, etc.....................................................................25 Section 4.21 No Indebtedness; Limits on Certain Securities............................................25 Section 4.22 Discharge of Obligations.................................................................25 Section 4.23 Affiliate Transactions...................................................................25

i

Section 4.24 Disclosure Controls and Procedures; Internal Controls....................................26 Section 4.25 Pre-emptive Rights (Right of First Refusal)..............................................26 Section 4.26 Merger...................................................................................28 Section 4.27 Transfer of Covenants....................................................................29 ARTICLE V GENERAL PROVISIONS.....................................................................................30 Section 5.01 Accounting...............................................................................30 Section 5.02 Further Assurances.......................................................................30 Section 5.03 Notices..................................................................................30 Section 5.04 Governing Law............................................................................31 Section 5.05 Entire Agreement.........................................................................31 Section 5.06 Counterparts.............................................................................31 Section 5.07 Parties in Interest......................................................................31 Section 5.08 Waiver, Amendment and Termination........................................................31 Section 5.09 Severability.............................................................................32 Section 5.10 Titles and Subtitles.....................................................................32 Section 5.11 Third Parties............................................................................32 Section 5.12 Construction.............................................................................32 Section 5.13 Remedies.................................................................................33 Section 5.14 Arbitration..............................................................................33 Section 5.15 Attorneys' Fees..........................................................................34 Section 5.16 Adjustments for Stock Splits, Etc........................................................34 Section 5.17 Aggregation of Stock.....................................................................34 Section 5.18 Series G Preferred Stock Purchasers......................................................34

ii Exhibit 99(e) SHAREHOLDER RIGHTS AGREEMENT This SHAREHOLDER RIGHTS AGREEMENT (this "Agreement") dated as of February 28, 2005, is entered into between GulfWest Energy, Inc., a Texas corporation (the "Company"), and OCM GW Holdings, LLC, a Delaware limited liability company ("Purchaser"). RECITALS WHEREAS, the Company and the Purchaser are parties to the Subscription Agreement dated as of the date hereof (the "Subscription Agreement") pursuant to which the Company has agreed to sell, and Purchaser has agreed to purchase, shares of Series G Convertible Preferred Stock of the Company (the "Preferred Stock"); WHEREAS, Purchaser and Gulfwest Oil and Gas Company, a Texas corporation and a subsidiary of the Company ("GOGC"), are subject to a subscription agreement with respect to the Series A Preferred Stock of GOGC. WHEREAS, the Company's and the Purchaser's respective obligations under the Subscription Agreement are conditioned upon the execution and delivery of this Agreement; and WHEREAS, in connection with the purchase by the Purchaser of the Preferred Stock pursuant to the Subscription Agreement, the Company desires to grant to certain or all of the Holders (as defined), as the case may be, certain information rights, registration rights and first refusal rights with respect to the stock of the Company held by them. NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter set forth, the parties hereto agree as follows. ARTICLE I. ---------- DEFINITIONS For purposes of this Agreement: "Affiliate" of a Person means any Person that directly or indirectly through one or more intermediaries controls or is controlled by, or is under common control with, such other Person. For purposes of this definition, the term "control" (including the terms "controlling," "controlled by" and "under common control with") means the possession, direct or indirect, of the power to cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. With respect to Purchaser, an "Affiliate" of Purchaser includes an Oaktree Party "Agreement" is defined in the preamble. "Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer, lease, assignment, or other transfer for value, whether in a single transaction or in a series of related transactions, by the Company or any of its subsidiaries to any Person other than the Company or a wholly-owned subsidiary of the Company of (i) any capital stock of any subsidiary of the Company or (ii) any other property or assets of the Company or any subsidiary of the Company; provided, however, that an Asset Sale shall not include a transaction or series of related transactions wherein the Company or its subsidiaries transfers less than 15% of the Company's and its subsidiaries' assets. 1 "Board" means the board of directors of the Company. "Certificate of Incorporation" is defined in Section 4.26(a). "Claim" is defined in Section 2.05(a). "Common Stock" means the Company's Class A Common Stock, par value $.001 per share. "Company" is defined in the preamble. "Confidential Information" is defined in Section 3.03. "Demand Request" is defined in Section 3.01(a). "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. "GOGC" is defined in the recitals. "Holder" means a Person that (i) is a party to this Agreement (or a permitted transferee hereunder) and (ii) owns Registrable Securities; provided, however, that to the extent a Person that would otherwise be a permitted transferee hereunder does not succeed to the rights and benefits of particular provisions hereof in accordance with the terms and conditions of this Agreement, such Person shall not be considered a Holder for the purposes of such provisions, or with respect to the amendment or waiver of such provisions. "Holder Indemnified Parties" is defined in Section 2.05(a). "Holder Preferred Majority" means Holders holding at least 50% of the Preferred Stock held by all Holders. "Holder Majority" means Holders holding 50% of the Registrable Securities held by all Holders. "Indebtedness" means, with respect to any Person, any indebtedness at any time outstanding, secured or unsecured, contingent or otherwise, that is for borrowed money or evidenced by notes, debentures or similar instruments, including any indebtedness that would appear as a liability on the Company's balance sheet in accordance with generally accepted accounting principals and any capital leases. 2 "Indemnified Party" is defined in Section 2.05(c). "Indemnifying Party" is defined in Section 2.05(c). "Inspector(s)" is defined in Section 2.03(a)(ii). "Investment" means (i) any transfer or delivery of cash, stock, or other property of value in exchange for Indebtedness, stock, or other security or ownership interest in any Person by way of loan, advance, capital contribution, guarantee, or otherwise and (ii) an investment deemed to have been made by the Company at the time any entity which was a wholly owned subsidiary of the Company ceases to be such a wholly owned subsidiary in an amount equal to the value of the loans and advances made, and any remaining ownership interest in, such entity immediately following such entity ceasing to be a wholly owned subsidiary of the Company. "Lien" means a mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or otherwise, including any lien for taxes), security interest, preference, participation interest, priority or security agreement, claim, charge, restriction, easement, license or preferential arrangement of any kind or nature whatsoever, including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing and the filing of any document under the law of any applicable jurisdiction to evidence any of the foregoing. "Losses" is defined in Section 2.05(a). "NASD" means the National Association of Securities Dealers, Inc. "Participating Holders" means Holders participating, or electing to participate, in an offering of Registrable Securities. "Oaktree Party" means each of Oaktree Capital Management, LLC, OCM Principal Opportunities Fund III, L.P., OCM Principal Opportunities Fund IIIA, L.P., Purchaser and any of the respective Permitted Transferees. "Oil and Gas Properties" all of the oil, gas and other mineral properties owned, or otherwise held in the name of, the Company or its Affiliates. "Permitted Encumbrances" means: (i) Third-party consents to assignment of leases and contracts and preferential purchase rights which are customary in the oil and gas business; (ii) Liens for taxes or assessments not yet due or not yet delinquent or, if delinquent, that are being contested in good faith in the normal course of business (which are not applicable to the transactions contemplated in this Agreement, the Subscription Agreement, the Certificate of Incorporation or the Statement of Resolution Establishing the Preferred Stock); 3 (iii) All rights to consent by, required notices to, filings with, or other actions by federal, state, local governmental entities or tribal entities in connection with the sale or conveyance of the Oil and Gas Properties if the same are customarily required in the oil and gas business; (iv) Rights of reassignment upon the surrender or expiration of any lease; (v) Easements, rights-of-way, servitudes, permits, surface leases and other rights with respect to surface operations, pipelines, grazing, logging, canals, ditches, reservoirs or the like, and easements for streets, alleys, highways, pipelines, telephone lines, power lines, railway and other easements and rights of way, on, over or in respect of any of the properties or any restriction on access thereto and that do not materially interfere with the ownership, operation or value of the affected property for the purposes of exploration and production of oil and gas; (vi) Materialmen's, mechanics', repairmen's, employees', contractors', operators' or other similar liens or charges arising in the ordinary course of business incidental to construction, maintenance or operation of the Oil and Gas Properties (i) if they have not been filed pursuant to law and the time for filing them has expired, (ii) if filed, they have not yet become due and payable or payment is being withheld as provided by law, or (iii) if their validity is being contested in good faith by appropriate action; (vii) Rights reserved to or vested in any municipality or governmental, statutory, public or tribal authority to control or regulate any of the Oil and Gas Properties in any manner; and all applicable laws, rules, regulations and orders of general applicability in the area which do not materially interfere with the ownership, operation or value of the affected property for the purposes of exploration and production of oil and gas; (viii) Liens arising under operating agreements, unitization and pooling agreements and production sales contracts containing terms and conditions customary in the industry securing amounts not yet due or, if due, being contested in good faith in the ordinary course of business; (ix) Statutory liens securing the payment of production proceeds to Persons entitled thereto not yet due or if due, being contested in good faith in the ordinary course of business; and (x) Such other defects or irregularities in the title to the Oil and Gas Properties that would be considered not material by a Person engaged in the business of acquiring, ownership or operation of oil and gas properties in accordance with generally accepted industry standards. "Permitted Transferee" means as to any Person, (i) any general partner or managing member of such Person or (ii) any partnership, limited partnership, limited liability company, corporation or other entity organized, formed or incorporated and managed or controlled by such Person, its general partner or managing member as a vehicle for purposes of making investments. 4 "Person" means any individual, firm, corporation, company, partnership, trust, incorporated or unincorporated association, limited liability company, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind, and shall include any successor (by merger or otherwise) of any such entity. "Proposed Registration" is defined in Section 2.02. "Purchaser" is defined in the preamble. "Registrable Securities" means any shares of Preferred Stock or Common Stock held by Purchaser or a permitted transferee hereunder including any shares issued, by virtue of the effect of antidilution provisions or combination, merger, consolidation or other similar event; provided, however, that shares of Preferred Stock or Common Stock that are considered to be Registrable Securities shall cease to be Registrable Securities (i) upon the sale thereof pursuant to an effective registration statement, (ii) upon the sale thereof pursuant to Rule 144 (or successor rule) under the Securities Act or (iii) when such securities cease to be outstanding; provided, further, that to the extent shares of Preferred Stock or Common Stock would be considered Registrable Securities hereunder but for the fact that a transferee does not succeed to the rights and benefits of particular provisions hereof in accordance with the terms and conditions of this Agreement, such securities shall not be considered Registrable Securities for the purposes of such provisions, or with respect to the amendment or waiver of such provisions. "Registration Expenses" means all expenses (other than underwriting discounts and commissions) arising from or incident to the performance of, or compliance with, Article II, including, (i) SEC, stock exchange, NASD and other registration and filing fees, (ii) all fees and expenses incurred in connection with complying with any securities or blue sky laws (including, fees, charges and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) all printing, messenger and delivery expenses, (iv) the fees, charges and disbursements of counsel to the Company and of its independent public accountants and any other accounting and legal fees, charges and expenses incurred by the Company (including, any expenses arising from any special audits or "comfort letters" required in connection with or incident to any registration), (v) the fees, charges and disbursements of any special experts retained by the Company in connection with any registration pursuant to the terms of this Agreement, (vi) all internal expenses of the Company (including, all salaries and expenses of its officers and employees performing legal or accounting duties), (vii) the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange, over-the-counter market or Nasdaq and (viii) Securities Act liability insurance (if the Company elects to obtain such insurance), regardless of whether the Registration Statement filed in connection with such registration is declared effective. "Registration Expenses" shall also include fees, charges and disbursements of one firm of counsel to all of the Participating Holders participating in any underwritten public offering pursuant to Article II (which shall be selected by a majority, based on the number of Registrable Securities to be sold, of the Participating Holders, plus, to the extent necessary, one firm of local counsel for all of the Participating Holders in each state or country where reasonably necessary). "Registration Statement" means the registration statement of the Company filed with the SEC on the appropriate form pursuant to the Securities Act which covers shares of Registrable Securities pursuant to the provisions of this Agreement and all amendments and supplements to the Registration Statement, including post-effective amendments, in each case including the prospectus contained therein, all exhibits thereto and all materials incorporated by reference therein. 5 "Representatives" is defined in Section 3.03. "Requesting Holders" is defined in Section 2.01(a). "Request Notice" is defined in Section 2.01(a). "Rights Holder" means a Holder (or group of Affiliated Holders) of 4,000 or more shares of Preferred Stock, or at least that number of shares of Common Stock into which 4,000 shares of Preferred Stock converted (or any combination of the foregoing). "Rights Holder Majority" means Rights Holders holding at least 50% of the Registrable Securities held by all Rights Holders (on an as-converted basis). "SEC" or "Commission" means the United States Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Selling Expenses" means the underwriting fees, discounts, selling commissions and stock transfer taxes applicable to all Registrable Securities registered by the Participating Holders. "Subscription Agreement" is defined in the preamble. "Successor Preferred" means the Series H Preferred Stock of the Company issued to Holder as a result of the exchange of the Series A Preferred Stock of GOGC for such Series H Preferred Stock. "Substantial Holder" means a Holder (or group of Affiliated Holders) of 8,000 or more shares of Preferred Stock, or at least that number of shares of Common Stock into which 8,000 shares of Preferred Stock converted (or any combination of the foregoing). "Substantial Holder Preferred Majority" means Substantial Holders holding at least 50% of the Preferred Stock held by all Substantial Holders. "Valid Business Reason" is defined in Section 2.01(e)(i). ARTICLE II. ----------- REGISTRATION RIGHTS Section 2.01 Demand Registration. (a) Request by Holders. If the Company receives at any time a written request from Holders owning at least 50% of the Registrable Securities (treating the Preferred Stock and the Successor Preferred on an as converted basis) (the "Requesting Holders") that the Company register Registrable Securities held by Requesting Holders (a "Demand Request"), then the Company shall, within ten days after receipt of such Demand Request, give written notice of such request ("Request Notice") to all Holders. Each Demand Request shall (x) specify the number of Registrable Securities that the Requesting Holders intend to sell or dispose of, (y) state the intended method or methods of sale or disposition of the Registrable Securities and (z) specify the expected price range (net of underwriting discounts and commissions) acceptable to the Requesting Holders to be received for such Registrable Securities. Following receipt of a Demand Request, the Company shall: 6 (i) cause to be filed, as soon as practicable, but within 60 days of the date of delivery to the Company of the Demand Request, a Registration Statement covering such Registrable Securities which the Company has been so requested to register by the Requesting Holders and other Holders who request to the Company that their Registrable Securities be registered within 20 days of the mailing of the Request Notice, providing for the registration under the Securities Act of such Registrable Securities to the extent necessary to permit the disposition of such Registrable Securities in accordance with the intended method of distribution specified in such Demand Request; (ii) use its best efforts to have such Registration Statement declared effective by the Commission as soon as practicable thereafter; and (iii) refrain from filing any other Registration Statements, other than pursuant to a Registration Statement on Form S-4 or S-8 (or similar or successor forms), with respect to any other securities of the Company until such date which is 180 days following effectiveness of the Registration Statement filed in response to the Demand Request. (b) Effective Registration Statement. A registration requested pursuant to this Section 2.01 shall not be deemed to have been effected: (i) unless a Registration Statement with respect thereto has become effective and remained effective in compliance with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such Registration Statement until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the Holders thereof set forth in such Registration Statement; (ii) if, after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court and has not thereafter become effective, or if the offering of Registrable Securities is not consummated for any reason, including if the underwriters of an underwritten public offering advise the Participating Holders that the Registrable Securities cannot be sold at a net price per share equal to or above the net price disclosed in the preliminary prospectus; (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived; or (iv) if the Requesting Holders are cut back to fewer than 80% of the Registrable Securities requested to be registered. (c) Selection of Underwriters. If the Company is required to file a Registration Statement covering any Registrable Securities of any Participating Holders pursuant to Section 2.01(a) and the proposed public offering is to be an underwritten public offering, the managing underwriter shall be one or more nationally recognized investment banks selected by a majority in interest of the Participating Holders and reasonably acceptable to the Company. 7 (d) Priority for Demand Registration. Notwithstanding any other provision of this Section 2.01, if the managing underwriter of an underwritten public offering determines and advises the Participating Holders and the Company in writing that the inclusion of all securities proposed to be included by the Company and any other holders of securities to be registered in the underwritten public offering would materially and adversely interfere with the successful marketing of the Participating Holders' Registrable Securities, then the Company and other holders of securities to be registered shall not include any securities in excess of the amount, if any, of securities which the managing underwriter of such underwritten public offering shall reasonably and in good faith agree in writing to include in such public offering in addition to the amount of Registrable Securities to be registered for the Participating Holders. The Company will be obligated to include in such Registration Statement, as to each Participating Holder, only a portion of the Registrable Securities such Participating Holder has requested be registered equal to the ratio which such Participating Holder's requested Registrable Securities bears to the total number of Registrable Securities requested to be included in such Registration Statement by all Participating Holders who have requested that their Registrable Securities be included in such Registration Statement. Pursuant to the foregoing provision, the securities to be included in a registration requested by the Requesting Holders pursuant to Section 2.01 shall be allocated: (i) first, to the Participating Holders; provided, however, that no Registrable Securities requested to be included in the registration by a Holder or its assignees shall be excluded from the registration until all shares proposed to be registered by the Company's founders, officers, directors or employees are excluded from the registration; (ii) second, to the Company; and (iii) third, to any other shareholders of the Company requesting registration of securities of the Company (provided that each such shareholder agrees to be bound by the provisions of Section 2.09 to the same extent as the Holders with respect to such securities or any other securities convertible into or exchangeable for such securities). (e) Limitations on Demand Registrations. (i) The Company may delay making a filing of a Registration Statement or taking action in connection therewith by not more than 60 days if the Company provides a written certificate signed by the President and Chief Executive Officer of the Company to the Participating Holders, prior to the time it would otherwise have been required to file such Registration Statement or take such action pursuant to this Section 2.01, stating that the Board has determined in good faith that the filing of such Registration Statement would be seriously detrimental to the Company or would otherwise materially adversely affect a financing, acquisition, disposition, merger or other material transaction (collectively, a "Valid Business Reason") and that it is therefore essential to defer the filing of the Registration Statement; provided, however, that such right to delay a Demand Request shall be exercised by the Company not more than once in any 12-month period and the Company shall only have the right to delay a Demand Request so long as such Valid Business Reason exists, and during such time, the Company may not file a Registration Statement for securities to be issued and sold for its own account or for that of anyone other than the Holders. 8 (ii) The Company shall only be obligated to effect four Demand Requests pursuant to this Section 2.01. (iii) The Company shall not be required to comply with a Demand Request unless the reasonably anticipated aggregate gross proceeds to be raised (before any underwriting discounts and commissions) would be equal to or exceed the greater of (i) $5,000,000 and (ii) 5% of the Registrable Securities, as determined in good faith by the Board; provided, however, that if the Holders of Registrable Securities are requesting to register the sale of 75% of the remaining Registrable Securities, the foregoing thresholds shall not apply to such Demand Request. (f) Cancellation of Registration. A majority in interest of the Participating Holders may cancel a proposed registration of Registrable Securities pursuant to this Section 2.01 when, (i) in their discretion, market conditions are so unfavorable as to be seriously detrimental to an offering pursuant to such registration or (ii) the request for cancellation is based upon material adverse information relating to the Company that is different from the information known to the Participating Holders at the time of the Demand Request. Such cancellation of a registration shall not be counted as one of the four Demand Requests and notwithstanding anything to the contrary in the Agreement, the Company shall be responsible for the expenses of the Participating Holders incurred in connection with the registration before the cancellation. Section 2.02 Piggyback Registrations. (a) Right to Include Registrable Securities. At any time the Company proposes for any reason to register any of its Common Stock under the Securities Act, either for its own account or for the account of a securityholder of the Company exercising demand registration rights other than Demand Requests pursuant to Section 2.01 or pursuant to a Registration Statement on Forms S-4 or S-8 (or similar or successor forms) (a "Proposed Registration"), the Company shall promptly give written notice of such Proposed Registration to all of the Holders (which notice shall be given not less than 20 days before the expected effective date of the Company's Registration Statement) and shall offer such Holders the right to request inclusion of any of such Holder's Registrable Securities in the Proposed Registration. No registration pursuant to this Section 2.02 shall relieve the Company of its obligation to register Registrable Securities pursuant to a Demand Request, as contemplated by Section 2.01. The rights to piggyback registration may be exercised an unlimited number of occasions. (b) Piggyback Procedure. Each Holder shall have ten days from the date of receipt of the Company's notice referred to in Section 2.02(a) to deliver to the Company a written request specifying the number of Registrable Securities such Holder intends to sell and such Holder's intended method of disposition. Any Holder may withdraw such Holder's request for inclusion of such Holder's Registrable Securities in any Registration Statement pursuant to this Section 2.02 by giving written notice to the Company of such withdrawal; provided, however, that the Company may ignore a notice of withdrawal made within 24 hours of the time the Registration Statement is to become effective. Subject to Section 2.02(d), the Company shall use its best efforts to include in such Registration Statement all such Registrable Securities so requested to be included therein; provided, however, that the Company may at any time withdraw or cease proceeding with any such Proposed Registration if it withdraws or ceases proceeding with the registration of all other securities originally proposed to be registered. If the Proposed Registration by the Company is, in whole or in part, an underwritten public offering of securities of the Company, any request under this Section 2.02(b) shall specify that the Registrable Securities be included in the underwriting on the same terms and conditions as the shares, if any, otherwise being sold through underwriters under such registration. 9 (c) Selection of Underwriters. The managing underwriter for any Proposed Registration that involves an underwritten public offering shall be one or more reputable regionally or nationally recognized investment banks selected by the Company and reasonably acceptable to a majority in interest of the Participating Holders. (d) Priority for Piggyback Registration. Notwithstanding any other provision of this Article II, if the managing underwriter of an underwritten public offering determines and advises the Company and the Participating Holders in writing that the inclusion of all Registrable Securities proposed to be included by the Participating Holders in the underwritten public offering would materially and adversely interfere with the successful marketing of the Company's securities, then the Participating Holders may not include any Registrable Securities in excess of the amount, if any, of Registrable Securities which the managing underwriter of such underwritten public offering shall reasonably and in good faith agree in writing to include in such public offering in addition to the amount of securities to be registered for the Company. The Company must include in such Registration Statement, as to each Participating Holder, only a portion of the Registrable Securities such Participating Holder has requested be registered equal to the ratio which such Participating Holder's requested Registrable Securities bears to the total number of Registrable Securities requested to be included in such Registration Statement by all Participating Holders who have requested that their Registrable Securities be included in such Registration Statement. Pursuant to the foregoing provision, the securities to be included in a registration initiated by the Company shall be allocated: (i) first, to the Company; (ii) second, if granted in accordance with Section 2.08, to any others requesting registration of securities of the Company pursuant to demand registration rights (provided that each such Person agrees to be bound by the provisions of Section 2.09 to the same extent as the Holders with respect to such securities or any other securities convertible into or exchangeable for such securities); (iii) third, to the Participating Holders; provided, however, that no Registrable Securities requested to be included in the registration by a Holder or its assignees shall be excluded from the registration until all shares proposed to be registered by the Company's founders, officers, directors or employees are excluded from the registration; and 10 (iv) fourth, to any others requesting registration of securities of the Company (provided that each such Person agrees to be bound by the provisions of Section 2.09 to the same extent as the Holders with respect to such securities or any other securities convertible into or exchangeable for such securities). If as a result of the provisions of this Section 2.02(d), any Participating Holder may not include all of its Registrable Securities in a registration that such Holder has requested to be so included, such Participating Holder may withdraw such Participating Holder's request to include Registrable Securities in such Registration Statement. Section 2.03 Registration Procedures. (a) Obligations of the Company. The Company shall use its best efforts to effect the registration and sale of the Registrable Securities in accordance with the intended method of distribution thereof as promptly as possible, and in connection with any such request, the Company shall, as expeditiously as possible: (i) Preparation of Registration Statement; Effectiveness. Prepare and file with the SEC a Registration Statement (in any event not later than 60 days after receipt of a Demand Request to file a Registration Statement with respect to Registrable Securities) on any form on which the Company then qualifies, which counsel for the Company shall deem appropriate and pursuant to which such offering may be made in accordance with the intended method of distribution thereof (except that the Registration Statement shall contain such information as may reasonably be requested for marketing or other purposes by the managing underwriter), and use its best efforts to cause any registration required hereunder to become effective as soon as practicable after the initial filing thereof and remain effective until all Registrable Securities have been sold in accordance with the methods of distribution set forth in the Registration Statement; (ii) Participation in Preparation. Provide any Participating Holder, any underwriter participating in any disposition pursuant to the Registration Statement, and any attorney, accountant or other agent retained by any Participating Holder or underwriter (each, an "Inspector" and, collectively, the "Inspectors"), the opportunity to participate (including reviewing, commenting on and attending all meetings) in the preparation of the Registration Statement, each prospectus included therein or filed with the SEC and each amendment or supplement thereto; (iii) Due Diligence. For a reasonable period prior to the filing of the Registration Statement pursuant to this Agreement, make available for inspection and copying by the Inspectors such financial and other information and books and records, pertinent corporate documents and properties of the Company and its subsidiaries and cause the officers, directors, employees, counsel and independent certified public accountants of the Company and its subsidiaries to respond to such inquiries and to supply all information reasonably requested by any such Inspector in connection with the Registration Statement, as shall be reasonably necessary, in the judgment of the respective counsel referred to in Section 2.03(a)(ii), to conduct a reasonable investigation within the meaning of the Securities Act; 11 (iv) General Notifications. Promptly notify in writing the Participating Holders, the sales or placement agent, if any, therefor and the managing underwriter of the securities being sold, (A) when the Registration Statement or the prospectus included therein or any prospectus amendment or supplement or post-effective amendment has been filed, and, with respect to any the Registration Statement or any post-effective amendment, when the same has become effective, (B) when the SEC notifies the Company whether there will be a "review" of the Registration Statement (C) of any comments (oral or written) by the SEC and by the blue sky or securities commissioner or regulator of any state with respect thereto and (D) of any request by the SEC for any amendments or supplements to the Registration Statement or the prospectus or for additional information; (v) 10b-5 Notification. Promptly notify in writing the Participating Holders, the sales or placement agent, if any, therefor and the managing underwriter of the securities being sold pursuant to the Registration Statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act upon discovery that, or upon the happening of any event as a result of which, any prospectus included in the Registration Statement (or amendment or supplement thereto) contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made, and the Company shall promptly prepare a supplement or amendment to such prospectus and file it with the SEC (in any event no later than ten days following notice of the occurrence of such event to each Participating Holder, the sales or placement agent and the managing underwriter) so that after delivery of such prospectus, as so amended or supplemented, to the purchasers of such Registrable Securities, such prospectus, as so amended or supplemented, shall not contain an 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 under which they were made; (vi) Notification of Stop Orders; Suspensions of Qualifications and Exemptions. Promptly notify in writing the Participating Holders, the sales or placement agent, if any, therefor and the managing underwriter of the securities being sold of the issuance by the SEC of (A) any stop order issued or threatened to be issued by the SEC or (B) any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and the Company agrees to use its best efforts to (x) prevent the issuance of any such stop order, and in the event of such issuance, to obtain the withdrawal of any such stop order and (y) obtain the withdrawal of any order suspending or preventing the use of any related prospectus or suspending the qualification of any Registrable Securities included in the Registration Statement for sale in any jurisdiction at the earliest practicable date; (vii) Amendments and Supplements. Prepare and file with the SEC such amendments, including post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement continuously effective for the applicable time period required hereunder and, if applicable, cause the related prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all securities covered by the Registration Statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in the Registration Statement as so amended or in such prospectus as so supplemented. In addition to the foregoing, on two occasions, at the request of Holders of greater than 50% of the Registrable Securities, the Company shall prepare and file a prospectus supplement containing the information reasonably requested by underwriters (which may include "S-1 level" information) in connection with an underwritten offering of Registrable Securities. The Holders may only make such a request if it is with respect to the greater of (i) a sale of Registrable Securities with expected proceeds in excess of $3.0 million and (ii) a sale of greater than 30% of the Registrable Securities. To the extent any such supplement is not permitted under law at the time of such request, the Company shall file a new registration statement with respect to such securities on the form requested by the underwriters and such Holders. 12 (viii) Acceleration. If a majority in interest of the Participating Holders so request, request acceleration of effectiveness of the Registration Statement from the SEC and any post-effective amendments thereto, if any are filed; provided that at the time of such request, the Company believes in good faith that it is unnecessary to amend further the Registration Statement to comply with this subparagraph. If the Company wishes to further amend the Registration Statement prior to requesting acceleration, it may take five business days to so amend prior to requesting acceleration; (ix) Copies. Furnish as promptly as practicable to each Participating Holder and Inspector prior to filing the Registration Statement or any supplement or amendment thereto, copies of the Registration Statement, supplement or amendment as it is proposed to be filed, and after such filing such number of copies of the Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto), the prospectus included in the Registration Statement (including each preliminary prospectus) and such other documents as each such Participating Holder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Participating Holder; (x) Blue Sky. Use its reasonable best efforts to, prior to any public offering of the Registrable Securities, register or qualify (or seek an exemption from registration or qualifications) such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any Participating Holder or underwriter may request, and to continue such qualification in effect in each such jurisdiction for as long as is permissible pursuant to the laws of such jurisdiction, or for as long as a Participating Holder or underwriter requests or until all of such Registrable Securities are sold, whichever is shortest, and do any and all other acts and things which may be reasonably necessary or advisable to enable any Participating Holder to consummate the disposition in such jurisdictions of the Registrable Securities; 13 (xi) Other Approvals. Use its reasonable best efforts to obtain all other approvals, consents, exemptions or authorizations from such governmental agencies or authorities as may be necessary to enable the Participating Holders and underwriters to consummate the disposition of Registrable Securities; (xii) Agreements. Enter into customary agreements (including any underwriting agreements in customary form), and take such other actions as may be reasonably required in order to expedite or facilitate the disposition of Registrable Securities; (xiii) "Cold Comfort" Letter. Obtain a "cold comfort" letter from the Company's independent public accountants in customary form and covering such matters of the type customarily covered by "cold comfort" letters as the managing underwriter may reasonably request, and reasonably satisfactory to a majority in interest of the Participating Holders; (xiv) Legal Opinion. Furnish, at the request of any underwriter of Registrable Securities on the date such securities are delivered to the underwriters for sale pursuant to such registration, an opinion, dated such date, of counsel representing the Company for the purposes of such registration, addressed to the Holders, and the placement agent or sales agent, if any, thereof and the underwriters, if any, thereof, covering such legal matters with respect to the registration in respect of which such opinion is being given as such underwriter may reasonably request and as are customarily included in such opinions, and reasonably satisfactory to a majority in interest of the Participating Holders; (xv) SEC Compliance, Earnings Statement. Comply with all applicable rules and regulations of the SEC and make available to its shareholders, as soon as reasonably practicable, but no later than 15 months after the effective date of the Registration Statement, an earnings statement covering a period of 12 months beginning after the effective date of the Registration Statement, in a manner which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (xvi) Certificates, Closing. Provide officers' certificates and other customary closing documents; (xvii) NASD. Cooperate with each Participating Holder and each underwriter participating in the disposition of such Registrable Securities and underwriters' counsel in connection with any filings required to be made with the NASD; (xviii) Road Show. Cause appropriate officers as are requested by an managing underwriter to participate in a "road show" or similar marketing effort being conducted by such underwriter with respect to an underwritten public offering; (xix) Listing. Use its best efforts to cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed and if not so listed, to be listed on the NASD automated quotation system; 14 (xx) Transfer Agent, Registrar and CUSIP. Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereto and a CUSIP number for all such Registrable Securities, in each case, no later than the effective date of such registration; (xxi) Private Sales. Use its reasonable best efforts to assist a Holder in facilitating private sales of Registrable Securities by, among other things, providing officers' certificates and other customary closing documents; and (xxii) Best Efforts. Use its reasonable best efforts to take all other actions necessary to effect the registration of the Registrable Securities contemplated hereby. (b) Seller Information. The Company may require each Participating Holder as to which any registration of such Holder's Registrable Securities is being effected to furnish to the Company with such information regarding such Participating Holder and such Participating Holder's method of distribution of such Registrable Securities as the Company may from time to time reasonably request in writing. If a Participating Holder refuses to provide the Company with any of such information on the grounds that it is not necessary to include such information in the Registration Statement, the Company may exclude such Participating Holder's Registrable Securities from the Registration Statement if the Company provides such Participating Holder with an opinion of counsel to the effect that such information must be included in the Registration Statement and such Participating Holder continues thereafter to withhold such information. The exclusion of a Participating Holder's Registrable Securities shall not affect the registration of the other Registrable Securities to be included in the Registration Statement. (c) Notice to Discontinue. Each Participating Holder whose Registrable Securities are covered by the Registration Statement filed pursuant to this Agreement agrees that, upon receipt of written notice from the Company of the happening of any event of the kind described in Section 2.03(a)(v), such Participating Holder shall forthwith discontinue the disposition of Registrable Securities until such Participating Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 2.03(a)(v) or until it is advised in writing by the Company that the use of the prospectus may be resumed and has received copies of any additional or supplemental filings which are incorporated by reference into the prospectus, and, if so directed by the Company in the case of an event described in Section 2.03(a)(v), such Participating Holder shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Participating Holder's possession, of the prospectus covering such Registrable Securities which is current at the time of receipt of such notice. Section 2.04 Registration Expenses. Except as otherwise provided herein, all Registration Expenses shall be borne by the Company. All Selling Expenses relating to Registrable Securities registered shall be borne by the Participating Holders of such Registrable Securities pro rata on the basis of the number of shares so registered. Section 2.05 Indemnification. (a) Indemnification by the Company. The Company agrees, notwithstanding termination of this Agreement, to indemnify and hold harmless to the fullest extent permitted by applicable law, each Holder, each of its directors, officers, employees, advisors, agents and general or limited partners (and the directors, officers, employees, advisors and agents thereof), their respective Affiliates and each Person who controls (within the meaning of the Securities Act or the Exchange Act) any of such Persons, and each underwriter and each Person who controls (within the meaning of the Securities Act or the Exchange Act) any underwriter (collectively, "Holder Indemnified Parties") from and against any and all losses, claims, damages, expenses (including, reasonable costs of investigation and fees, disbursements and other charges of counsel and experts and any amounts paid in settlement effected with the Company's consent, which consent shall not be unreasonably withheld or delayed) or other liabilities (collectively, "Losses") to which any such Holder Indemnified Party may become subject under the Securities Act, Exchange Act, any other federal law, any state or common law or any rule or regulation promulgated thereunder or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) are resulting from or arising out of or based upon (i) any untrue, or alleged untrue, statement of a material fact contained in the Registration Statement, prospectus or preliminary prospectus (as amended or supplemented) or any document incorporated by reference in any of the foregoing or resulting from or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in light of the circumstances under which they were made), not misleading, or (ii) any violation by the Company of the Securities Act, Exchange Act, any other federal law, any state or common law or any rule or regulation promulgated thereunder or otherwise incident to any registration, qualification or compliance and in any such case, the Company will promptly reimburse each such Holder Indemnified Party for any legal expenses and any other Losses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability, action or investigation or proceeding (collectively, a "Claim"). Such indemnity obligation shall remain in full force and effect regardless of any investigation made by or on behalf of the Holder Indemnified Parties and shall survive the transfer of Registrable Securities by such Holder Indemnified Parties. 15 (b) Indemnification by Holders. In connection with any proposed registration in which a Holder is participating pursuant to this Agreement, each such Holder shall furnish to the Company in writing such information with respect to such Holder as the Company may reasonably request or as may be required by law for use in connection with the Registration Statement or prospectus or preliminary prospectus to be used in connection with such registration and each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, any underwriter retained by the Company and their respective directors, officers, partners, employees, advisors and agents, their respective Affiliates and each Person who controls (within the meaning of the Securities Act or the Exchange Act) any of such Persons to the same extent as the foregoing indemnity from the Company to the Holders as set forth in Section 2.05(a) (subject to the exceptions set forth in the foregoing indemnity, the proviso to this sentence and applicable law), but only with respect to any such information furnished in writing by such Holder expressly for use therein; provided, however, that, unless such liability is directly caused by such Holder's willful or intentional misconduct, the liability of any such Holder under this Section 2.05(b) shall be limited to the amount of the net proceeds received by such Holder in the offering giving rise to such liability. Such indemnity obligation shall remain in full force and effect regardless of any investigation made by or on behalf of the Holder Indemnified Parties (except as provided above) and shall survive the transfer of Registrable Securities by such Holder. 16 (c) Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder (the "Indemnified Party") agrees to give prompt written notice to the indemnifying party (the "Indemnifying Party") after the receipt by the Indemnified Party of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which the Indemnified Party intends to claim indemnification or contribution pursuant to this Agreement; provided, however, that, the failure so to notify the Indemnifying Party shall not relieve the Indemnifying Party of any liability that it may have to the Indemnified Party hereunder unless and to the extent such Indemnifying Party is materially prejudiced by such failure. If notice of commencement of any such action is given to the Indemnifying Party as above provided, the Indemnifying Party may participate in and, to the extent it may wish, jointly with any other Indemnifying Party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by it and reasonably satisfactory to such Indemnified Party. The Indemnified Party may employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be paid by the Indemnified Party unless (i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party fails to assume the defense of such action with counsel satisfactory to the Indemnified Party in its reasonable judgment or (iii) the named parties to any such action reasonably believe that the representation of such Indemnified Party and the Indemnifying Party by the same counsel would be inappropriate under applicable standards of professional conduct. In the case of clause (ii) above and (iii) above, the Indemnifying Party may not assume the defense of such action on behalf of such Indemnified Party. No Indemnifying Party shall be liable for any settlement entered into without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party may, without the written consent of the Indemnified Party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened Claim in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Party is an actual or potential party to such Claim) unless such settlement, compromise or judgment (A) includes an unconditional release of the Indemnified Party from all liability arising out of such Claim and (B) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of any Indemnified Party. The rights afforded to any Indemnified Party hereunder shall be in addition to any rights that such Indemnified Party may have at common law, by separate agreement or otherwise. (d) Contribution. If the indemnification provided for in this Section 2.05 from the Indemnifying Party is unavailable or insufficient to hold harmless an Indemnified Party in respect of any Losses, then the Indemnifying Party, in lieu of indemnifying the Indemnified Party, shall contribute to the amount paid or payable by the Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and the Indemnified Party, as well as any other relevant equitable considerations. The relative faults of the Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the Indemnifying Party's and Indemnified Party's relative intent, knowledge, access to information and opportunity to correct or prevent such action; provided, however, that, unless such liability is directly caused by such Holder's willful or intentional misconduct, the liability of any such Holder under this Section 2.05(d) shall be limited to the amount of the net proceeds received by such Holder in the offering giving rise to such liability. The amount paid or payable by a party as a result of the Losses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in Section 2.05(a), (b) and (c), any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. 17 The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 2.05(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this Section 2.05(d). Section 2.06 Rule 144 and Rule 144A; Other Exemptions. The Company shall (i) file in a timely manner all reports and other documents required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder and (ii) take such further action as each Holder may reasonably request (including providing any information necessary to comply with Rule 144), all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (x) Rule 144 under the Securities Act, as such rules may be amended from time to time or (y) any other rules or regulations now existing or hereafter adopted by the SEC. Upon the written request of a Holder, the Company shall deliver to the Holder a written statement as to whether it has complied with such requirements. Section 2.07 Certain Limitations On Registration Rights. No Holder may participate in the Registration Statement hereunder unless such Holder completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements, and other documents reasonably required under the terms of such underwriting arrangements and agrees to sell such Holder's Registrable Securities on the basis provided in any underwriting agreement approved by the Holder or Holders entitled hereunder to approve such arrangements; provided, however, that no such Holder shall be required to make any representations or warranties to the Company or the underwriters in connection with any such registration other than representations and warranties as to (i) such Holder's ownership of its Registrable Securities to be sold or transferred, (ii) such Holder's power and authority to effect such transfer and (iii) such matters pertaining to compliance with securities laws as may be reasonably requested. Such Holders of Registrable Securities to be sold by such underwriters may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of the Company to and for the benefit of such underwriters, shall also be made to and for the benefit of such Holders and that any or all of the conditions precedent to the obligations of the underwriters under the underwriting agreement be conditions precedent to the obligations of the Holders. Section 2.08 Limitations on Subsequent Registration Rights. The Company will not, without the prior written consent of the Holders of at least 66-2/3% of the Registrable Securities then outstanding, enter into any agreement (or amendment or waiver of the provisions of any agreement) with any holder or prospective holder of any securities of the Company that would grant such holder registration rights that are more favorable, pari passu or senior to those granted to the Holders hereunder. 18 Section 2.09 Restrictions on Public Sale by Holders. If requested by the lead managing underwriter with respect to any firm underwriting public offering in which Holders are permitted to participate hereunder, each Holder of Registrable Securities agrees not to effect any public sale or distribution of any Registrable Securities being registered or of any securities convertible into or exchangeable or exercisable for such Registrable Securities, including a sale pursuant to Rule 144 under the Securities Act, during a period of not more than 180 days after any firm underwriting public offering of Common Stock of the Company, commencing on the effective date of the Registration Statement (the "Lock-Up Period"), unless expressly authorized to do so by the lead managing underwriter; provided, however, that if any other holder of securities of the Company is subject to a shorter period or receives more advantageous terms relating to the Lock-Up Period, then the Lock-Up Period shall be such shorter period and also on such more advantageous terms. Notwithstanding the foregoing, the Holders shall not be required to sign lock-up agreements unless other Persons permitted to include securities on such Registration Statement and all of the Company's directors, officers and shareholders owning 5% or more of the Company's fully diluted voting stock have signed substantially similar lock-up agreements with the managing underwriters. Any such lock-up agreements signed by the Holders shall contain reasonable and customary exceptions. Section 2.10 Transfer of Registration Rights. The rights of a Holder hereunder may be transferred or assigned in connection with a transfer of Registrable Securities to any transferee who, after such transfer, by itself or together with its Affiliates, would become a Rights Holder. Notwithstanding the foregoing, such rights may only be transferred or assigned provided that all of the following additional conditions are satisfied: (a) such transfer or assignment is effected in accordance with applicable securities laws; (b) such transferee or assignee executes a Joinder Agreement in the form of Exhibit B; and (c) the Company is given written notice by such Holder of such transfer or assignment, stating the name and address of the transferee or assignee and identifying the Registrable Securities with respect to which such rights are being transferred or assigned. Section 2.11 Amendment. The provisions of this Article II may be waived or amended by the agreement of a Rights Holder Majority. 19 ARTICLE III. ------------ INFORMATION RIGHTS The Company may fail, in any particular instance, to comply with any covenant or condition set forth in this Article III, or amend such covenant or condition, if before or (in the case of a waiver) after the time for such compliance a Substantial Holder Preferred Majority either waives or amends in writing such compliance in such instance or generally waives or amends compliance with such covenant or condition, but no such waiver or amendment shall extend to or affect such covenant or condition except to the extent so expressly waived or amended, and, until such waiver or amendment becomes effective, the obligations and duties of the Company in respect of any such covenant or condition shall remain in full force and effect. 20 Section 3.01 Financial Information to Holders. Other than for any period a Substantial Holder requests to not receive the following information, the Company shall furnish to such Substantial Holder: (a) Monthly Reports. As soon as available, but in any event within 30 days after the end of each calendar month (except the last month of the Company's fiscal year), monthly unaudited financial statements, including a consolidated balance sheet as of the end of such month, a consolidated statement of income and a consolidated statement of cash flows for such month and the current fiscal year to date, in each case setting forth in comparative form the figures for the corresponding periods of the previous fiscal year and the Company's projected financial statements for the current fiscal year and showing deviations from the Company's budget, such financial statements to be prepared in accordance with U.S. generally accepted accounting principles consistently applied (with the exception of footnotes). Monthly financial statements shall be accompanied by a certification of the principal financial or accounting officer of the Company as to the conformity of the financial statements with this Section 3.01(a). (b) Business Plan and Operating Budget. (i) as soon as practicable, but in any event within five days after adoption by the Board and no later than 30 days prior to the commencement of each fiscal year of the Company, an annual business plan and operating budget for the next immediate fiscal year, which business plan shall include a projection of income and projected cash flow statement for each fiscal quarter in such fiscal year and a projected balance sheet as of the end of each fiscal quarter in such fiscal year and (ii) within a reasonable time after its preparation, any amendment to such previously delivered annual business plan and operating budget. (c) Document Delivery. promptly furnish (i) all documents that are, or would be, required to be filed under the Exchange Act by a company whose securities are listed on a national securities exchange; (ii) copies of any document relating to the affairs of the Company that has been delivered to any other securityholder of the Company or broadly to the financial community; (iii) copies of all management letters from accountants; and (iv) all documents prepared by or for the Company as to compliance, defaults, material adverse changes, material litigation, disputes or similar matters. (d) Reserve Reports. as soon as available, but in any event within five days after receipt by the Company thereof, each oil and gas reserve engineering report created on behalf of the Company. (e) Requests from Substantial Holders. promptly upon request, such other information relating to the financial condition, business, prospects, litigation, regulatory or governmental matters or corporate affairs of the Company that such Substantial Holders may from time to time reasonably request. Section 3.02 Board Observation Rights. So long as any shares of the Preferred Stock are outstanding, the Company shall permit a representative of each Substantial Holder to attend all meetings of the Board (whether such meeting is held by telephone or other telecommunications equipment or in person) and shall furnish to each Substantial Holder notice of such meetings and a copy of all communications made to or among the members of the Board contemporaneously with the initial delivery of such communications. 21 Section 3.03 Confidentiality. Any Holder receiving non-public information concerning the Company pursuant to Section 3.01 and/or Section 3.02 ("Confidential Information") agrees and acknowledges that, except as required by applicable law, it will take all measures reasonably practicable to ensure Confidential Information will not be disclosed to anyone except its employees, affiliates, officers, directors, partners, agents, advisors or representatives (collectively, the "Representatives") to extent such Representatives are subject to substantially similar terms and conditions as are referred to in this Section 3.03. For this Section 3.03, Confidential Information shall not include any information that, with respect to any Holder (i) becomes generally available to the public other than as a result of a disclosure by a Holder or any Representative of a Holder in violation of Section 3.03, (ii) was in such Holder's possession prior to the disclosure of the Confidential Information pursuant to this Section 3.03 or (iii) becomes available to such Holder or such Holder's Representative on a non-confidential basis from a source other than the Company. Section 3.04 Acknowledgement Regarding Confidential Information. Each Holder acknowledges and agrees that certain laws prohibit such Holder from trading securities of the Company on the basis of material Confidential Information, though this Section 3.04 shall not be enforceable against, and shall not give rise to a cause of action against, any Holder. Section 3.05 Transfer of Information Rights. The rights and benefits of a Holder hereunder may be transferred or assigned in connection with a transfer of any of the Preferred Stock to any transferee who, after such transfer, by itself or together with its Affiliates, would become a Substantial Holder. Notwithstanding the foregoing, such rights may only be transferred or assigned provided that all of the following additional conditions are satisfied: (a) such transfer or assignment is effected in accordance with applicable securities laws; (b) such transferee or assignee executes a Joinder Agreement in the form of Exhibit B; and (c) the Company is given written notice by such Holder of such transfer or assignment, stating the name and address of the transferee or assignee and identifying the Registrable Securities with respect to which such rights are being transferred or assigned. ARTICLE IV. ----------- COVENANTS OF THE COMPANY Except with respect to Section 4.25 and Section 4.26, the Company may fail, in any particular instance, to comply with any covenant or condition set forth in this Article IV, or amend any such covenant or condition, if before or (in the case of a waiver) after the time for such compliance a Substantial Holder Preferred Majority either waives or amends in writing such compliance in such instance or generally waives or amends compliance with such covenant or condition, but no such waiver or amendment shall extend to or affect such covenant or condition except to the extent so expressly waived or amended, and, until such waiver or amendment shall become effective, the obligations and duties of the Company in respect of any such covenant or condition shall remain in full force and effect. With respect to Section 4.25, such waiver or amendment may only be effected by the consent of a Rights Holder Majority and, with respect to Section 4.26, such waiver or amendment may only be effected by the consent of a Holder Preferred Majority. 22 Section 4.01 Corporate Existence. The Company shall preserve and maintain, and, except as otherwise permitted by Section 4.11, cause each of its subsidiaries to preserve and maintain, its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified, and cause each of its subsidiaries to qualify and remain qualified, as a foreign corporation in each jurisdiction in which such qualification is necessary or desirable in view of its business and operations or the ownership or lease of its properties. Section 4.02 Preservation of Property and Assets. The Company shall use its best efforts to secure, preserve and maintain, and cause each of its subsidiaries to use its best efforts to secure, preserve and maintain, all licenses, permits and other rights to use all patents and patent rights, trademarks and trademark rights, trade names and trade name rights, service marks and service mark rights, service names and service name rights, brand names, inventions, processes, formulae, copyrights and copyright rights, trade dress, business and product names, logos, slogans, trade secrets, industrial models, processes, designs, methodologies, computer programs (including all source codes) and related documentation, technical information, manufacturing, engineering and technical drawings, know-how, concepts and all pending applications for and registrations of patents, trademarks, service marks and copyrights owned or possessed by it and deemed by the Company to be material to the conduct of its business or the business of such subsidiary. The Company shall also use its best efforts to maintain and preserve, and cause each of its subsidiaries to use its best efforts to maintain and preserve, all of its other properties and assets necessary for the proper conduct of its business, in good repair, working order and condition, ordinary wear and tear excepted, and, from time to time, make all necessary and proper repairs, renewals, replacements, additions and improvements thereto; and the Company and its subsidiaries will at all times comply with each material provision of all leases to which any of them is a party or under which any of them occupies property if the breach of such provision might have a material and adverse effect on the business, assets, liabilities, prospects, condition, financial or otherwise, or operations of the Company. Section 4.03 Properties, Business, Insurance. The Company shall obtain and maintain and cause each of its subsidiaries to maintain as to its respective properties and business, with financially sound and reputable insurers, insurance against such casualties and contingencies and of such types and in such amounts as is consistent with past practices of the Company. The Company shall not cause or permit any assignment or change in beneficiary and shall not borrow against any such policy. If requested by a Holder (if holding, in the aggregate, at least a majority of the then outstanding Preferred Stock (or shares of Common Stock converted from the Preferred Stock)), the Company will add one designee of such Holder as a notice party for such policy and shall request that the issuer of such policy provide such designee with ten days notice before such policy is terminated (for failure to pay premiums or otherwise) or assigned or before any change is made in the beneficiary thereof. Section 4.04 Directors and Officers Insurance. The Company will (i) upon a Substantial Holder's written request, obtain and maintain directors and officers' liability insurance in the amount of at least $5,000,000 and (ii) at all times exercise the powers granted to it by its Articles of Incorporation and bylaws (together, the "Organizational Documents"), and by applicable law to indemnify and hold harmless to the fullest extent permitted by applicable law present or former directors and officers of the Company against any threatened or actual claim, action, suit, proceeding or investigation made against them arising from their service in such capacities (or service in such capacities for another enterprise at the request of the Company). 23 Section 4.05 Inspection, Consultation and Advice. The Company shall permit, and cause each of its subsidiaries to permit, each Substantial Holder and such persons as it may designate, at such Substantial Holder's expense, to visit and inspect any of the properties of the Company and such subsidiary, examine their books and take copies and extracts therefrom, discuss the affairs, finances and accounts of the Company and such subsidiary with their officers, employees and public accountants (and the Company hereby authorizes said accountants to discuss with such holder and such designees such affairs, finances and accounts), and consult with and advise the management of the Company and such subsidiary as to the Company's affairs, finances and accounts, all at reasonable times and upon reasonable notice; provided, however, that in the event of the Company's breach of any of the covenants contained in this Section 4.05, the Company shall be responsible for the fees and expenses incurred by such Substantial Holder in enforcing its rights under this Section 4.05. Section 4.06 Restrictive Agreements Prohibited. Neither the Company nor any of its subsidiaries shall become a party to any agreement that by its terms restricts the Company's performance of this Agreement, any of the other Transaction Documents (as defined in the Subscription Agreement) or the Organizational Documents. Section 4.07 Expenses of Directors. The Company shall promptly reimburse in full, each director of the Company who is not an employee of the Company and who is appointed by the Holders of the Preferred Stock, for all of his or her reasonable out-of-pocket expenses incurred in attending each meeting of the Board or any committee thereof. Section 4.08 Compensation. The Company shall not pay compensation to its management in excess of that compensation customarily paid to management in companies of similar size, of similar maturity, and in similar businesses without the unanimous written consent of the Board. Section 4.09 Payment of Taxes; Trade Debt. The Company shall pay and discharge, and cause each of its subsidiaries to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income, profits or business, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might become a Lien or charge upon any properties of the Company or any of its subsidiaries; provided, however, that neither the Company, nor its subsidiaries, shall be required to pay any such tax, assessment, charge, levy or claim which is being contested or extended in good faith and by appropriate proceedings if the Company or such subsidiary shall have set aside on its books sufficient reserves, if any, with respect thereto. The Company shall pay and cause each of its subsidiaries to pay, when due, or in conformity with customary trade terms, all lease obligations, all trade debt, and all other Indebtedness incident to the operations of the Company or such subsidiary, except such as are being contested in good faith and by proper proceedings if the Company or such subsidiary shall have set aside on its books sufficient reserves, if any, with respect thereto. 24 Section 4.10 Internal Accounting Controls. The Company shall devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that (a) transactions are executed in accordance with Company management's general or specific authorization, (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and to maintain accountability for assets, (c) access to assets is permitted only in accordance with Company management's general or specific authorization, and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Section 4.11 Activities of the Company and its Subsidiaries. The Company may not, nor may it permit any of its subsidiaries to, consummate an Asset Sale. Further, the Company shall not (a) organize or acquire any entity that is a subsidiary unless such subsidiary is wholly-owned (directly or indirectly) by the Company, (b) permit any of its subsidiaries to consolidate or merge, or sell or transfer greater than 15% of its assets, except that such subsidiaries may (i) consolidate or merge into or with or sell or transfer assets to any other subsidiary of the Company, or (ii) merge into or sell or transfer assets to the Company, (c) sell, pledge or otherwise transfer any shares of capital stock of any of its subsidiaries, except to the Company or another of its subsidiaries, or permit any of its subsidiaries to issue, sell, pledge or otherwise transfer any shares of its capital stock or the capital stock of any of its subsidiaries, except to the Company or another of the Company's subsidiaries or (d) permit any of its subsidiaries to purchase or set aside any sums for the purchase of, or pay any dividend or make any distribution on, any shares of its stock, except for dividends or other distributions payable to the Company or another of its subsidiaries. Section 4.12 Compliance with Laws. The Company shall use its commercially reasonable efforts to comply, and to cause each of its subsidiaries to comply, with all applicable laws, rules, regulations and orders. Section 4.13 Keeping of Records and Books of Account. The Company shall keep, and cause each of its subsidiaries to keep, adequate records and books of account, in which complete entries will be made in accordance with generally accepted accounting principles consistently applied, reflecting all financial transactions of the Company and such subsidiary, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made. Section 4.14 Change in Nature of Business. The Company shall not make, or permit any of its subsidiaries to make, any material change in the nature of its business as currently conducted and proposed to be conducted by the Company. Section 4.15 Indemnity for Officers and Directors. The Company shall at all times maintain provisions in its Organizational Documents indemnifying all directors against liability to the maximum extent permitted under the laws of the State of Texas. Section 4.16 Publicity. The Company shall not issue or cause the publication of any press release, advertisement or other public communication relating to (a) any Holder (or any of its Affiliates) or (b) this Agreement or any other Transaction Document, without each Holder's prior written consent. 25 Section 4.17 Employee and Other Stock Arrangements. The Company will not issue any of its capital stock, or grant an option or rights to subscribe for, purchase or acquire any of its capital stock, to any employee, consultant, officer or director of the Company or any of its subsidiaries, except pursuant to an equity compensation plan duly approved by the shareholders of the Company or pursuant to options or warrants outstanding as of the date of this Agreement. Each acquisition of any shares of capital stock of the Company or any option or right to acquire any shares of capital stock of the Company by an employee, officer or director of the Company will be conditioned upon the execution and delivery by the Company and such employee, officer or director of an agreement substantially in a form approved by the Board. Section 4.18 Extension of Credit. The Company shall not, nor shall it permit its subsidiaries to, extend credit by any method or in any form or manner in excess of $1,000,000, other than open account credit extended to customers in the ordinary course of business. Section 4.19 Limitations on Liens. The Company shall not, nor shall it permit any of its subsidiaries to, create, incur, assume, or suffer to exist any Liens upon any of their respective assets, except for Permitted Encumbrances or Liens securing Indebtedness permitted under Section 4.21. Section 4.20 Loans, Advances, etc. The Company shall not, nor shall it permit its subsidiaries to, make any loans, advances, or capital contributions to, or Investments in, any other Person (other than to its wholly owned subsidiaries to the extent that they remain wholly owned subsidiaries) in excess of $500,000. Section 4.21 No Indebtedness; Limits on Certain Securities. The Company shall not, nor shall it permit any of its subsidiaries to, create, incur, guarantee, or assume any Indebtedness or otherwise become liable or responsible for the obligations of any other Person in excess of $1,000,000, except in connection with a first priority secured reserve based credit facility with no equity or reserve based incentives. If the Company issues any class of capital stock that would be considered Junior Stock under the Statement of Resolution with respect to the Preferred Stock without the consent of a Preferred Holder Majority, then no such capital stock may be issued unless 50% of the net proceeds therefrom are used to make an offer to all of the holders of Preferred Stock to redeem their shares of Preferred Stock, on a pro rata basis at the Preferred Liquidation Preference thereof (as defined in the statement of resolution with respect thereto). Section 4.22 Discharge of Obligations. The Company shall not, nor shall it permit any subsidiary to, pay, discharge, or satisfy any claims, liabilities or obligations (whether accrued, absolute, contingent, unliquidated, or otherwise, and whether asserted or unasserted), other than the payment, discharge, or satisfaction in the ordinary course of business consistent with past practice, or in accordance with their terms. Section 4.23 Affiliate Transactions. Neither the Company nor any of its subsidiaries will, directly or indirectly enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with or for the benefit of any of its Affiliates (other than transactions between the Company and a wholly-owned subsidiary of the Company or among wholly-owned subsidiaries of the Company) (an "Affiliate Transaction"), unless approved of in good faith by a majority of the members of the Board of Directors of the Company. The foregoing restrictions on Affiliate Transactions will not apply to (i) reasonable and customary directors' fees, indemnification, and similar arrangements and payments thereunder, (ii) any issuance of securities pursuant to stock option or stock ownership plans approved by the Board of Directors of the Company, and (iii) transactions pursuant to agreements in existence on the date hereof. 26 Section 4.24 Disclosure Controls and Procedures; Internal Controls. (a) The Company will maintain disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Exchange Act) that (i) are designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known on a timely basis to management and the individuals responsible for the preparation of the Company's filings with the SEC and other public disclosure documents, particularly during the periods in which the filings made by the Company with the SEC which it may make under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act are being prepared, (ii) are evaluated for effectiveness as of the end of the periods covered by the Company's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as the case may be, filed with the SEC, and (iii) are effective to perform the functions for which they were established; and (b) The independent registered public accountants and the Audit Committee of the Board will be advised by the Company of (i) any significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data and (ii) any fraud, whether or not material, that involves management or other employees who have a role in the Company's internal controls. Any material weaknesses in internal controls will be identified for the Company's accountants. Section 4.25 Pre-emptive Rights (Right of First Refusal). (a) Subject to the terms and conditions specified in this Section 4.25, the Company hereby grants to each Rights Holder a right of first refusal with respect to future sales by the Company of its New Securities (as defined). (b) Each time the Company receives an offer to purchase any shares of or securities convertible into or exercisable for any shares of any class of its capital stock (the "New Securities"), the Company shall allow each Rights Holder to purchase its Proportionate Share (as hereinafter defined) of such New Securities in accordance with the following provisions: (i) The Company shall deliver a notice by certified mail (the "Offer Notice") to each Rights Holder stating (i) it has received from a third party a bona fide offer to purchase such New Securities, (ii) the number and class of New Securities proposed to be purchased by such third party (whether preferred shares or common shares of the Company), and (iii) the per share purchase price and terms, if any, upon which such third party proposes to purchase such New Securities. 27 (ii) By written notification received by the Company within 20 days after giving of the Offer Notice (the "Offer Period"), each Rights Holder may elect to purchase or obtain, at the price and on the terms specified in the Offer Notice, up to that portion and type of such New Securities specified in the Offer Notice which equals the proportion (the "Proportionate Share") that the number of Registrable Securities issued and held by such Rights Holder (on an as-converted basis) bears to the total number of Registrable Securities (on an as-converted basis). (iii) In the notice of election made by a Rights Holder pursuant to paragraph (ii) above, such Rights Holder shall state whether it has agreed to purchase its Proportionate Share of the New Securities or a lesser number, and if a lesser number, how many. (iv) Any notice by a Rights Holder to purchase New Securities shall be binding on such Rights Holder except to the extent otherwise provided in this Section 4.25. (v) Each Rights Holder shall have a right of oversubscription such that, if any other Rights Holder fails to elect to purchase its full Proportionate Share of the New Securities, the other Rights Holders shall, among them, have the right to purchase up to the balance of such New Securities not so purchased. Such Rights Holders may exercise such right of oversubscription by electing to purchase more than their Proportionate Share of the New Securities by so indicating in their written notice given pursuant to paragraph (ii) above. If, as a result thereof, the oversubscription commitments of the Rights Holders exceed the total number of the New Securities available, the oversubscribing Rights Holders shall be cut back with respect to their oversubscriptions on a pro rata basis in accordance with their respective Proportionate Share or as they may otherwise agree among themselves. (c) With respect to those New Securities that are not subscribed by the Rights Holders, (a) the Company shall have a 60 day period following the expiration of the Offer Period to sell or enter into an agreement to sell the New Securities to the third party that so offered to purchase such New Securities at a price not less than, and upon terms no more favorable to such third party than those specified in the Offer Notice, and (b) no Rights Holder that has exercised his, her or its right to purchase any New Securities pursuant to this Section 4.25 shall be obligated to consummate such purchase unless and until any New Securities available for issuance and sale to such third party have actually been issued and sold in accordance with the terms set forth in the Offer Notice, in which event a closing with respect to both the purchase by such Rights Holder and such third party shall occur simultaneously. If the Company does not sell such New Securities within such 60 day period or the agreement entered into with respect to such New Securities within such 60 day period is not consummated within 30 days of the execution thereof, the Company shall not thereafter issue or sell any New Securities without first again offering such securities to the Rights Holders in the manner provided above. (d) The right of first refusal in this Section 4.25 shall not be applicable (i) to the issuance or sale of Common Stock or incentive shares (or options therefor) pursuant to a stock option plan (or similar equity incentive plan) to employees, consultants, managers or directors and approved by the Board, (ii) the issuance of securities pursuant to the conversion or exercise of convertible or exercisable securities, (iii) the issuance of securities in connection with a bona fide business acquisition of or by the Company, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise, in each case, approved by the Board, (iv) the issuance of securities to banks, equipment lessors and similar financial institutions in connection with commercial credit arrangements or equipment financings that have a primary purpose other than the raising of equity capital, or (v) to or after consummation of any merger or consolidation of the Company. 28 Section 4.26 Merger. (a) Proxy Statement. As promptly as practicable after the execution of this Agreement, the Company will prepare and file with the SEC a proxy statement (together with any amendments thereof or supplements thereto, in each case in the form or forms mailed to Company's shareholders, the "Proxy Statement") relating to the meeting of Company's shareholders to be held in connection with merger of the Company into a Delaware corporation and wholly owned subsidiary of the Company governed by a Certificate of Incorporation ("Certificate of Incorporation") substantially in the form attached as Exhibit A (the "Merger"). As promptly as practicable the Company will mail the Proxy Statement to its shareholders. The Proxy Statement will include the recommendation of the Board in favor of approving the Merger. The Proxy Statement will not be filed with the SEC by, and no amendment or supplement to the Proxy Statement will be made by, the Company without the approval of the Holders (which approval will not be unreasonably withheld or delayed). The Holders and the Company each will advise the other, promptly after it receives notice thereof, of any request by the SEC for amendment of the Proxy Statement or comments thereon and responses thereto or requests by the SEC for additional information. (b) Shareholders Meeting. The Company will, in accordance with applicable law and the Organizational Documents, duly call, give notice of, convene and hold a special meeting of its shareholders for the purpose of approving the Merger by the Company's shareholders in accordance with applicable law and the Organizational Documents. The Company will use its reasonable efforts to cause the meeting to occur within 60 days after the date on which the Proxy Statement is first mailed to shareholders. (c) Payments Under Certain Circumstances. (i) Payments ("Payments") with respect to the Registrable Securities shall be assessed as provided below if (i) the Merger has not been approved by the Board and the Company's shareholders by July 30, 2005 or (ii) all requisite filings to effectuate the Merger have not been made, and accepted by, each of the Texas and Delaware Secretary of States by July 30, 2005 (a "Default"). The foregoing will constitute a Default whatever the reason for any such event and whether it is voluntary or involuntary or is beyond the Company's control or pursuant to operation of law or as a result of any action or inaction by any third party. (ii) Payments shall accrue on the Preferred Stock from and including the date on which the Default occurs to but excluding the date on which the Default has been cured (or the date on which the New Preferred Stock has been created and certain of the Preferred Stock has been converted into such New Preferred Stock as provided for below), at a rate of $80 per share of Preferred Stock per annum (subject to adjustment for splits, recombinations and similar matters). Other than the obligation of payment of any Payments in accordance with the terms hereof, the Company will have no other liabilities for monetary damages with respect to a Default, except as set forth below regarding creation of the New Preferred Stock and conversion of certain of the shares of the Preferred Stock into such New Preferred Stock. With respect to each Holder, the Company's obligations to pay Payments remain in effect only so long as the securities held by the Holder are Registrable Securities. 29 (iii) Any amounts of Payments due will be payable in cash monthly at the end of each month until the Default is cured or the New Preferred Stock is created and certain of such Preferred Stock has been converted into such New Preferred Stock as contemplated below. The amount of Payments will be determined on the basis of a 360-day year comprised of twelve 30-day months, and the actual number of days on which Payments accrued during such period. (d) Creation of New Series of Preferred Stock. If, by December 31, 2005, the Default is not cured, the Company shall use its best efforts to convert (on a pro rata basis based on the number of shares of Preferred Stock held by each such Holder in proportion to the total number of shares of Preferred Stock issued and outstanding) an amount of shares of Preferred Stock into New Preferred Stock, such that the remaining shares of Preferred Stock shall have sufficient shares of Common Stock into which they may convert. The "New Preferred Stock" shall be a series of preferred stock, substantially similar to the Preferred Stock, except that: (i) it shall not have the right to vote except as required by law; (ii) it shall be mandatorily redeemable at the holder's option on January 15, 2008, and if not so redeemed, the dividend rate thereon shall increase to 14%; (iii) it shall not be convertible; (iv) it shall bear a quarterly dividend at an annual rate of 12%; and (v) it shall be optionally redeemable by the Company at any time. Section 4.27 Transfer of Covenants. Except with respect to Section 4.25 and Section 4.26, the rights and benefits of a Holder hereunder may be transferred or assigned in connection with a transfer of the Preferred Stock to any transferee who, after such transfer, by itself or together with its Affiliates, would become a Substantial Holder. With respect to Section 4.25, the rights of a Holder hereunder may be transferred or assigned in connection with a transfer of Registrable Securities to any transferee who, after such transfer, by itself or together with its Affiliates, would become a Rights Holder. With respect to Section 4.26, the rights of a Holder hereunder may be transferred or assigned in connection with a transfer of Preferred Stock to any Person. Notwithstanding the foregoing, such rights may only be transferred or assigned provided that all of the following additional conditions are satisfied: (a) such transfer or assignment is effected in accordance with applicable securities laws; (b) such transferee or assignee executes a Joinder Agreement in the form of Exhibit B; and (c) the Company is given written notice by such Holder of such transfer or assignment, stating the name and address of the transferee or assignee and identifying the securities with respect to which such rights are being transferred or assigned. 30 ARTICLE V. ---------- GENERAL PROVISIONS Section 5.01 Accounting. The Company covenants that it will not make any change in the Company's accounting principles, methods or practices or depreciation or amortization policies or rates currently in effect, including any change from "full cost pool" to "successful efforts" accounting. Section 5.02 Further Assurances. The Company and each Holder agree to take such actions and execute and deliver such other documents or agreements as may be necessary or desirable for the implementation of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby. Section 5.03 Notices. Any notice, request, demand or other communication required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed given under this Agreement on the earliest of: (a) the date of personal delivery, (b) the date of transmission by facsimile, with confirmed transmission and receipt, (c) two days after deposit with a nationally-recognized courier or overnight service such as Federal Express, or (d) five days after mailing via certified mail, return receipt requested. All notices not delivered personally or by facsimile will be sent with postage and other charges prepaid and properly addressed to the party to be notified at the address set forth for such party: If to Purchaser: c/o Oaktree Capital Management, LLC 333 South Grand Avenue, 28th Floor Los Angeles, California 90071 Attention: B. James Ford Telecopier: (213) 830-6394 with a copy to (which does not constitute notice): Akin Gump Strauss Hauer & Feld LLP 1111 Louisiana Street, 44th Floor Houston, Texas 77002 Phone: (713) 220-5200 Fax: (713) 236-0822 Attn: Julien Smythe If to the Company: 480 N. Sam Houston Parkway East Suite 300 Houston, Texas 77060 Phone: (281) 820-1919 Fax: (281) 260-8488 Attn: Thomas R. Kaetzer 31 with a copy to (which does not constitute notice): Jackson Walker L.L.P. 901 Main Street, Suite 6000 Dallas, Texas 75202 Phone: (214) 953-6000 Fax: (214) 953-5822 Attn: Bradley L. Whitlock Any party hereto (and such party's permitted assigns) may change such party's address for receipt of future notices hereunder by giving written notice to the Company and the other parties hereto. Section 5.04 Governing Law. This Agreement and the performance of the transactions and the obligations of the parties hereunder will be governed by and construed and enforced in accordance with the laws of the State of Texas, without giving effect to any choice of law principles. Section 5.05 Entire Agreement. This Agreement and each of the other Transaction Documents, constitutes the entire agreement and understanding of the parties hereto in respect of its subject matters and supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof or the transactions contemplated hereby. Section 5.06 Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. Section 5.07 Parties in Interest. Except as otherwise set forth in this Agreement, all representations, warranties, covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. Without limiting the generality of the foregoing, except as otherwise set forth in this Agreement all representations, covenants and agreements benefiting a Holder shall inure to the benefit of any and all subsequent Holders from time to time of Registrable Securities. Nothing in this Agreement shall create or be deemed to create any third-party beneficiary rights in any Person not a party to this Agreement except with respect to any Indemnified Party under Section 2.05. Section 5.08 Waiver, Amendment and Termination. Except as otherwise set forth in this Agreement, the provisions of this Agreement may be waived or amended by the agreement of a Holder Majority; provided, however, that no such amendment or waiver may affect any provision of this Agreement, including the second sentence of this Section 5.08, intended for the benefit of holders of a specified percentage or amount of securities hereunder, or which would otherwise affect the rights of such holders, unless such amendment or waiver is consented to by a Holder Preferred Majority, Rights Holder Majority or Substantial Holder Preferred Majority, as the case may be. Upon the conversion of all the Registrable Securities that are Preferred Stock into Common Stock this Agreement shall terminate except for Article I, Article II, the preamble to Article IV, Section 4.25, Section 4.26, Section 4.27, and Article V (except for Section 5.01), which in each case shall survive termination or expiration of this Agreement; provided, however, that (i) Section 4.25 shall terminate upon the last to occur of (a) conversion of all the Registrable Securities that are Preferred Stock into Common Stock and (b) five years from the date hereof and (ii) Section 4.26 shall terminate upon the first to occur of (a) the Merger and (b) the conversion of certain of the shares of Preferred Stock into New Preferred Stock in accordance with Section 4.26(d). 32 Section 5.09 Severability. The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision hereof will not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this Agreement, as applied to any party or to any circumstance, is adjudged by a court, governmental body, arbitrator not to be enforceable in accordance with its terms, the parties agree that the court, governmental body, arbitrator making such determination will have the power to modify the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its reduced form, such provision will then be enforceable and will be enforced. Section 5.10 Titles and Subtitles. The article and section headings contained in this Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement. Section 5.11 Third Parties. Nothing in this Agreement, express or implied, is intended to confer upon any Person other than the parties hereto and the Indemnified Parties and their successors and assigns, any rights or remedies by reason of this Agreement. Section 5.12 Construction. The parties hereto have jointly participated in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties hereto and no presumption or burden of proof will arise favoring or disfavoring any party hereto because of the authorship of any provision of this Agreement. Any reference to any federal, state, local or foreign law will also be deemed to refer to such law as amended and all rules and regulations promulgated thereunder, unless the context otherwise requires. The words "include," "includes" and "including" shall be deemed to be followed by "without limitation." Pronouns in masculine, feminine and neuter genders will be construed to include any other gender, and words in the singular form will be construed to include the plural and vice versa, unless the context otherwise requires. The words "this Agreement," "herein," "hereof," "hereby," "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The parties hereto intend that each representation, warranty and covenant contained herein will have independent significance. If any party hereto has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which such party has breached, will not detract from or mitigate the fact that such party is in breach of the first representation, warranty or covenant. 33 Section 5.13 Remedies. The parties shall have all remedies for breach of this Agreement available to them as provided by law or equity. Without limiting the generality of the foregoing, the parties agree that in addition to any other rights and remedies available at law or in equity, the parties shall be entitled to obtain specific performance of the obligations of each party to this Agreement and immediate injunctive relief and that, in the event any action or proceeding is brought in equity or to enforce the same, no party will urge, as a defense, that there is an adequate remedy at law. No single or partial assertion or exercise of any right, power or remedy of a party hereunder shall preclude any other or further assertion or exercise thereof. Section 5.14 Arbitration. Any and all claims, counterclaims, demands, causes of action, disputes, controversies, and other matters in question arising out of or relating to this Agreement or in any way relating to the subject matter of this Agreement or the relationship between the parties hereto created by this Agreement, involving the parties hereto or their respective representatives ("Disputes") even though all or some of the Disputes allegedly are extra-contractual in nature, whether such Disputes sound in contract, tort or otherwise, at law or in equity, under state, provincial or federal law, for damages or any other relief will be resolved as follows: first, representatives of the Company and such Holder(s) will meet to attempt to resolve such Dispute. If the Dispute cannot be resolved by agreement of the parties hereto, any party may at any time make a written demand for binding arbitration of the Dispute in accordance with this Section 5.14; provided that the foregoing shall not preclude equitable or other judicial relief to enforce the provisions hereof or to preserve the status quo pending resolution of Disputes; and provided further that resolution of Disputes with respect to claims by third Persons will be deferred until any judicial proceedings with respect thereto are concluded. Subject to the provisions of this Section 5.14, such Holder(s) and the Company will agree upon the rules of the arbitration prior to the arbitration and based upon the nature of the Dispute; provided that to the extent that the parties hereto cannot agree on the rules of the arbitration, then the Commercial Arbitration Rules of the American Arbitration Association in effect on the date hereof, and except as the applicable rules are modified by this Agreement, will apply. As a minimum set of rules in the arbitration the parties hereto agree as follows: (a) To the extent the claims asserted are in excess of $4.0 million, the arbitration will be held before a panel of three arbitrators consisting of one arbitrator selected by such Holder(s), the other selected by the Company, and the third then selected by those two arbitrators (such third arbitrator to be neutral). If agreement cannot be reached on a third arbitrator within 30 days of the need therefor, the Chief Judge of the U.S. District Court for the Southern District of Texas shall appoint an arbitrator. If the claims asserted are less than $4.0 million, the Chief Judge of the U.S. District Court for the Southern District of Texas shall appoint a sole arbitrator. All arbitrators shall be attorneys with at least ten years experience in oil and gas transactions. (b) The arbitrator(s) will deliver their decision in writing within 20 days after the termination of the arbitration hearings. (c) The non-prevailing party will bear the costs and fees of the arbitration. 34 (d) The arbitrator(s) final decision will be in writing but will not specify the basis for their decision, the basis for the damages award or the basis of any other remedy. The arbitrator(s)' decision will be considered as a final and binding resolution of the disagreement, will not be subject to appeal and may be entered as an order in any court of competent jurisdiction in the United States; provided that this Agreement confers no power or authority upon the arbitrator(s) (i) to render any decision that is based on clearly erroneously findings of fact, (ii) that manifestly disregards the law, or (iii) that exceeds the powers of the arbitrator(s), and no such decision will be eligible for confirmation. Each party hereto agrees to submit to the jurisdiction of any such court for purposes of the enforcement of any such order. No party will sue the other except for enforcement of the arbitrator(s)' decision if the other party is not performing in accordance with the arbitrator(s)' decision. The provisions of this Agreement will be binding on the arbitrator(s). (e) Any arbitration proceeding will be conducted on a confidential basis. (f) Any arbitration proceeding shall be held in Houston, Texas. (g) Any arbitration proceeding, including discovery, shall be conducted in accordance with the Texas Rules of Civil Procedure and the Texas Rules of Evidence. Section 5.15 Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement or any other agreement or document to be executed or delivered pursuant hereto, the prevailing party shall be entitled to reasonable attorneys' fees, costs, and disbursements in addition to any other relief to which such party may be entitled. Section 5.16 Adjustments for Stock Splits, Etc. Wherever in this Agreement there is a reference to a specific number of shares of Common Stock or Preferred Stock of any class or series, then, upon the occurrence of any subdivision, combination or stock dividend of such class or series of stock, the specific number of shares so referenced in this Agreement will automatically be proportionally adjusted to reflect the effect of such subdivision, combination or stock dividend on the outstanding shares of such class or series of stock. Section 5.17 Aggregation of Stock. All shares held or acquired by Affiliates will be aggregated together for the purpose of determining the availability of any rights under this Agreement.Section 5.18 Series G Preferred Stock Purchasers. Notwithstanding anything in this Agreement to the contrary, the parties acknowledge that Purchaser may transfer shares of the Preferred Stock to certain individuals as contemplated by Section 3.01 of the Subscription Agreement, which individuals shall be entitled to the benefits of Article II as would a Holder of Registrable Securities hereunder, regardless of the number of shares received by such individuals, provided that each such individual agrees in writing to be bound hereby to the same extent as Purchaser. [SIGNATURE PAGE FOLLOWS] 35 IN WITNESS WHEREOF, the Company and Purchaser have executed this Agreement as of the day and year first above written. COMPANY: GULFWEST ENERGY, INC. By: /s/ John E. Loehr Name:John E. Loehr Title: Chief Executive Officer PURCHASER: OCM GW HOLDINGS, LLC By: OCM Principal Opportunities Fund III, L.P., its managing member By: OCM Principal Opportunities Fund III GP, LLC, its general partner By: Oaktree Capital Management, LLC, its managing member By: /s/ Stephen A. Kaplan ----------------------- Name: Stephen A. Kaplan Title: Principal Signature Page to Shareholder Rights Agreement Exhibit A --------- CERTIFICATE OF INCORPORATION OF [GULFWEST ENERGY INC.] THE UNDERSIGNED, acting as the incorporator of a corporation under and in accordance with the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended from time to time (the "DGCL"), hereby adopts the following Certificate of Incorporation for such corporation: ARTICLE VI. ----------- NAME The name of the corporation is [GulfWest Energy Inc.] (the "Corporation"). ARTICLE VII. ------------ PURPOSE The purpose for which the Corporation is organized is to engage in any or all lawful acts and activities for which corporations may be incorporated under the DGCL. ARTICLE VIII. ------------- REGISTERED AGENT The street address of the initial registered office of the Corporation in the State of Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle, and the name of the Corporation's initial registered agent at such address is Corporation Trust Center. ARTICLE IX. ----------- CAPITALIZATION Section 9.01 Authorized Capital Stock The total number of shares of all classes of capital stock which the Corporation is authorized to issue is [________] shares of common stock, par value $0.001 per share (the "Common Stock"), and [________] shares of preferred stock, par value $0.001 per share (the "Preferred Stock"). Unless specifically provided otherwise herein, the holders of such shares shall be entitled to one vote for each share held in any stockholder vote in which any of such holders is entitled to participate. Section 9.02 Preferred Stock (a) The Preferred Stock may be issued from time to time in one or more series. The Board of Directors (the "Board") is hereby expressly authorized to provide for the issuance of shares of Preferred Stock in one or more series and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and relative, participating, optional and other special rights, if any, of each such series and the qualifications, limitations and restrictions thereof, as shall be stated in the resolution(s) adopted by the Board providing for the issuance of such series and included in a certificate of designations (a "Preferred Stock Designation") filed pursuant to the DGCL. [Preferred Stock Designations to be filed concurrently with the filing of this Certificate containing substantially the same terms and conditions as those Preferred Stock Statements of Resolution, as amended, to be in place with respect to GulfWest Energy Inc. immediately following the closing of the Series G Preferred Stock purchase.] (b) The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the outstanding shares of Common Stock, without a vote of the holders of the Preferred Stock, or any series thereof, unless a vote of any such holders of Preferred Stock is required pursuant to another provision of this Certificate (including any Preferred Stock Designation). Section 9.03 Common Stock (a) The holders of shares of Common Stock shall be entitled to one vote for each such share on each matter properly submitted to the stockholders on which the holders of shares of Common Stock are entitled to vote. Except as otherwise required by law or this Certificate (including any Preferred Stock Designation), at any annual or special meeting of the stockholders the Common Stock shall have the exclusive right to vote for the election of directors and on all other matters properly submitted to a vote of the stockholders. Notwithstanding the foregoing, except as otherwise required by law or this Certificate (including a Preferred Stock Designation), holders of Common Stock shall not be entitled to vote on any amendment to this Certificate (including any amendment to any Preferred Stock Designation) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Certificate (including any Preferred Stock Designation). (b) Subject to the rights of the holders of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive such dividends and other distributions (payable in cash, property or capital stock of the Corporation) when, as and if declared thereon by the Board from time to time out of any assets or funds of the Corporation legally available therefor and shall share equally on a per share basis in such dividends and distributions. (c) In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, and subject to the rights of the holders of Preferred Stock in respect thereof, the holders of shares of Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of Common Stock held by them. ARTICLE X. ---------- INCORPORATOR The name and mailing address of the incorporator is as follows:

----------------------------------------------------- ----------------------------------------------------- Name Address ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- Elizabeth Ann Murfee Akin Gump Strauss Hauer & Feld LLP 1111 Louisiana Street, 44th Floor Houston, Texas 77002 ----------------------------------------------------- -----------------------------------------------------

ARTICLE XI. ----------- DIRECTORS Section 11.01 Board Powers The business and affairs of the Corporation shall be managed by, or under the direction of, the Board. In addition to the powers and authority expressly conferred upon the Board by statute, this Certificate or the Bylaws of the Corporation (the "Bylaws"), the Board is hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the DGCL, this Certificate and any Bylaws adopted by the stockholders; provided, however, that no Bylaws hereafter adopted by the stockholders shall invalidate any prior act of the Board that would have been valid if such Bylaws had not been adopted. Section 11.02 Number and Election (a) Unless and except to the extent that the Bylaws shall so require, the election of directors need not be by written ballot. (b) Except as required by any Preferred Stock Designation, the number of directors of the Corporation, other than those who may be elected by the holders of one or more series of Preferred Stock entitled to elect a specified number of directors voting separately by class or series, shall be fixed from time to time exclusively by the Board pursuant to a resolution adopted by a majority of the Whole Board. For purposes of this Certificate, "Whole Board" shall mean the total number of directors the Corporation would have if there were no vacancies. Section 11.03 Initial Directors Upon the filing of this Certificate, the powers of the incorporator shall terminate. The name and mailing address of the persons who are to serve as the initial directors until the first annual meeting of stockholders of the Corporation or until such director's successor is duly elected and qualified are as follows: Name Address ---- ------- B. James Ford 480 North Sam Houston Parkway East Suite 300 Houston, Texas 77060 Skardon F. Baker J. Virgil Waggoner Allan D. Keel John Loehr Section 11.04 Newly Created Directorships and Vacancies Newly created directorships resulting from an increase in the number of directors and any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal or other cause may be filled solely by a majority vote of the directors then in office, even if less than a quorum, or by a sole remaining director (and not by stockholders except as specified in a Preferred Stock Designation), and any director so chosen shall hold office for the remainder of the full term of such directorship and until his or her successor has been elected and qualified, subject, however, to such director's earlier death, resignation, retirement, disqualification or removal. ARTICLE XII. ------------ BYLAWS In furtherance and not in limitation of the powers conferred upon it by law, the Board may adopt, amend, alter or repeal the Bylaws. The Bylaws also may be adopted, amended, altered or repealed by the stockholders. ARTICLE XIII. ------------- MEETINGS OF STOCKHOLDERS Section 13.01 Meetings Except as otherwise required by law or the terms of any one or more series of Preferred Stock, special meetings of stockholders of the Corporation may be called only by the Chairman of the Board, President, or the Board pursuant to a resolution adopted by a majority of the Whole Board, and the ability of the stockholders to call a special meeting is hereby specifically denied. Section 13.02 No Action by Written Consent Except as otherwise expressly provided by the terms of any series of Preferred Stock permitting the holders of such series of Preferred Stock to act by written consent or as may be approved in advance by the Board, any action required or permitted to be taken by stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders and may not be effected by written consent in lieu of a meeting. Section 13.03 Advance Notice Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the By-Laws. ARTICLE XIV. ------------ LIMITED LIABILITY; INDEMNIFICATION Section 14.01 Limitation of Personal Liability No person who is or was a director of the Corporation shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted by the DGCL as the same exists or hereafter may be amended. If the DGCL is hereafter amended to authorize corporate action further limiting or eliminating the liability of directors, then the liability of a director to the Corporation or its stockholders shall be limited or eliminated to the fullest extent permitted by the DGCL, as so amended. Any repeal or amendment of this Section 14.01 by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Certificate inconsistent with this Section 14.01 will, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to further limit or eliminate the liability of directors) and shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or amendment or adoption of such inconsistent provision with respect to acts or omissions occurring prior to such repeal or amendment or adoption of such inconsistent provision. Section 14.02 Indemnification (a) Each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding") by reason of the fact that he or she is or was a director of the Corporation or, while a director of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter a "Covered Person"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized or permitted by applicable law, as the same exists or may hereafter be amended, against all expense, liability and loss (including, without limitation, attorneys' fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred or suffered by such Covered Person in connection with such proceeding, and such right to indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except for proceedings to enforce rights to indemnification, the Corporation shall indemnify a Covered Person in connection with a proceeding (or part thereof) initiated by such Covered Person only if such proceeding (or part thereof) was authorized by the Board. The right to indemnification conferred by this Section 14.02 shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending or otherwise participating in any such proceeding in advance of its final disposition. (b) The rights conferred on any Covered Person by this Section 14.02 shall not be exclusive of any other rights which any Covered Person may have or hereafter acquire under law, this Certificate, the Bylaws, an agreement, vote of stockholders or disinterested directors, or otherwise. (c) Any repeal or amendment of this Section 14.02 by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Certificate inconsistent with this Section 14.02, will, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to provide broader indemnification rights on a retroactive basis than permitted prior thereto), and will not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision in respect of any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision. (d) This Section 14.02 shall not limit the right of the Corporation, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other than Covered Persons. ARTICLE XV. ----------- AMENDMENT OF CERTIFICATE OF INCORPORATION The Corporation reserves the right at any time from time to time to amend, alter, change or repeal any provision contained in this Certificate, and any other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by this Certificate, the Bylaws or the DGCL; and except as set forth in ARTICLE XIV, all rights, preferences and privileges herein conferred upon stockholders, directors or any other persons by and pursuant to this Certificate in its present form or as hereafter amended are granted subject to the right reserved in this Article. [Signature page follows] IN WITNESS WHEREOF, the incorporator of the Corporation hereto has caused this Certificate of Incorporation to be duly executed as of [___________], 2005. ---------------------------------------- [______________], Incorporator [Certificates of Designation to Come] EX-99.F 7 a4838327ex99f.txt EXHIBIT 99(F) Exhibit 99(f) OMNIBUS AND RELEASE AGREEMENT This OMNIBUS AND RELEASE AGREEMENT (the "Agreement"), dated as of February 28, 2005, is entered into by and among OCM GW Holdings, LLC, a Delaware limited liability company ("Holdings"), GulfWest Energy Inc., a Texas corporation (the "Company"), and those Shareholders of the Company set forth on the signature page hereto (each a "Shareholder" and collectively the "Shareholders"). RECITALS A. Holdings and the Company have entered into a Subscription Agreement of even date herewith (the "Subscription Agreement"), pursuant to which Holdings has agreed to purchase 81,000 shares of the Company's Series G Convertible Preferred Stock, par value $0.01 per share (the "Series G Preferred Stock"). B. As of the date hereof, the Shareholders are the record owners and Beneficial Owners of that number of shares of Series H Convertible Preferred Stock, par value $0.01 per share, as set forth in Schedule I. C. As a condition to its willingness to enter into the Subscription Agreement, Holdings has required that each Shareholder agree, and to induce Holdings to enter into the Subscription Agreement, each Shareholder is willing to agree, to, among other things, the release of the certain persons and entities and restrictions on the disposition of their H Shares (as defined) and Common Stock as set forth herein. D. The Company is granting certain registration rights to the Shareholders. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants, agreements, representations and warranties herein contained, and intending to be legally bound hereby, Holdings and the Shareholders hereby agree as follows: 1. Definitions. Undefined capitalized terms in this Agreement are defined in the Subscription Agreement. For purposes of this Agreement: (a) "Beneficially Own," "Beneficial Owner" or "Beneficial Ownership" with respect to any securities means having voting power or investment power with respect to such securities (as determined pursuant to Rule 13d-3(a) under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing. (b) "Bona Fide Offer" means any bona fide offer to acquire shares of H Shares (whether in the form of a purchase of shares of H Shares, merger, consolidation, exchange, business combination, recapitalization or otherwise) made by an unrelated Person which has the demonstrable financial ability to consummate such a transaction. (c) "H Shares" means shares of the Series H Convertible Preferred Stock of the Company, par value $.001. References to a person's or entity's H Shares shall include any H Shares Beneficially Owned by such Shareholder or any H Shares acquired by a Shareholder after the date hereof without any further action on the part of the Shareholders or Holdings, including acquisitions: (i) by purchase or by any other means of acquiring Beneficial Ownership; and (ii) in connection with any stock dividend and distribution and any shares into which or for which any or all of the Series H Convertible Preferred Stock (or any class thereof) may be changed or exchanged as may be appropriate to reflect any stock dividend or distribution, or any change in the Series H Convertible Preferred Stock (or any class thereof) by reason of any split-up, recapitalization, combination, exchange of shares or the like. B-1 Exhibit 99(f) (d) "Oaktree Parties" means Oaktree Capital Management, LLC, Holdings, OCM Principal Opportunities Fund III, L.P., OCM Principal Opportunities Fund IIIA, L.P. and each of their respective Permitted Transferees and affiliates. (e) "Permitted Transferee" means, with respect to a Person, (i) any general partner or managing member of such Person, or (ii) any partnership, limited partnership, limited liability company, corporation or other entity organized, formed or incorporated and managed or controlled by such Person, its general partner or managing member as a vehicle for purposes of making investments. 2. No Ownership Interest. Nothing contained in this Agreement will be deemed to vest in Holdings any direct or indirect ownership or incidents of ownership of or with respect to securities of the Company of which any Shareholder is a record owner or Beneficial Owner. All rights, ownership and economic benefits of and relating to such securities will remain and belong to such Shareholder, and Holdings will have no authority to manage, direct, superintend, restrict, regulate, govern or administer any of the policies or operations of Company or exercise any power or authority to direct such Shareholder in the voting of any of such securities, except as otherwise expressly provided herein. 3. Covenants, Representations and Warranties of the Shareholders. Each Shareholder hereby represents, warrants and covenants to Company, severally and not jointly, as follows: (a) Ownership. As of the date hereof, such Shareholder is the record owner and Beneficial Owner of the number of issued and outstanding H Shares set forth in Schedule I with respect to such Shareholder. Except as contemplated by Section 9(i) with respect to such Shareholder's spouse, if any, such Shareholder has the sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all H Shares, with no limitations, qualifications or restrictions on such rights, subject to applicable securities laws and the terms of this Agreement. (b) Power; Binding Agreement. If such Shareholder is an individual, such Shareholder has the legal capacity, power and authority to enter into and perform all of such Shareholder's obligations under this Agreement. If such Shareholder is an entity, it is an entity duly organized, created or formed, validly existing and in good standing under the laws of its jurisdiction of organization, creation or formation, such Shareholder has the power and authority to perform all of such Shareholder's obligations under the Agreement, and the performance of all of such Shareholder's obligations under this Agreement have been duly authorized by all requisite entity action. This Agreement has been duly and validly executed and delivered by such Shareholder and constitutes a valid and binding agreement of such Shareholder, enforceable against such Shareholder in accordance with its terms (except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally and by general equitable principles). There is no beneficiary or Shareholder of a voting trust certificate or other interest of any trust of which such Shareholder is trustee whose consent is required for the execution and delivery of this Agreement or the consummation by such Shareholder of the transactions contemplated hereby. B-2 (c) No Conflicts. As of the date of this Agreement, except for filings under the Exchange Act, if applicable, no filing with, and no permit, authorization, consent or approval of, any state or federal public body or authority is necessary for the execution of this Agreement by such Shareholder and the consummation by such Shareholder of the transactions contemplated hereby, and none of the execution and delivery of this Agreement by such Shareholder, the consummation by such Shareholder of the transactions contemplated hereby or compliance by such Shareholder with any of the provisions hereof will (i) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which such Shareholder is a party or by which such Shareholder or any of such Shareholder's properties or assets may be bound, (ii) require any consent, authorization or approval of any person or entity or (iii) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to such Shareholder or any H Shares. (d) Restriction on Transfers. Except as otherwise contemplated by this Agreement, such Shareholder will not: (i) from and after the date of this Agreement and ending at such time as such Shareholder no longer is a record owner or Beneficial Owner of any H Shares, directly or indirectly, enter into any swap, option, future, forward or other similar agreement that transfers, in whole or in part, any of the economic consequences of ownership of any H Shares or the Company's Class A Common Stock, par value $0.001 per share (the "Common Stock") (the "Covered Securities"), whether any such transaction is to be settled by delivery of any security, in cash or otherwise; provided, however, that such Shareholder may sell shares of Common Stock to the extent not prohibited by the foregoing; (ii) from and after the date of this Agreement and until the second anniversary of the date hereof, directly or indirectly without the written consent of Holdings, with respect to any H Shares, offer for sale, sell, announce the intention to sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to, any H Shares, or consent to the offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or other disposition of, any H Shares, including pursuant to a Bona Fide Offer; B-3 Exhibit 99(f) (iii) enter into any agreement or arrangement providing for any of the actions described in clause (i) or (ii) above until expiration of the applicable time period set forth therein; (iv) take any action that would reasonably be expected to have the effect of preventing or disabling such Shareholder from performing such Shareholder's obligations under this Agreement; or (v) request that Company register the transfer (book-entry or otherwise) of any certificate or uncertificated interest representing any H Shares, or Common Stock to be delivered pursuant to a transaction in violation of clause (i) above, except as otherwise contemplated hereby. (e) Stop Transfer Order. Each Shareholder consents to the entry of a stop transfer order with the transfer agent or agents of Company's securities against the transfer of such Shareholder's H Shares except in compliance with this Agreement or, if the Company is its own transfer agent with respect to any H Shares or Common Stock, refusal by the Company to transfer any such H Shares or Common Stock to be delivered pursuant to a transaction in violation of Section 3(d)(i), except in compliance with this Agreement. (f) Further Assurances. From time to time, at Holding's reasonable request and without further consideration, such Shareholder will perform such further acts and execute and deliver such additional documents as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement. 4. Right of First Refusal. (a) Subject to the terms and conditions in this Section 4, on and after the second anniversary of the date the first H Share is issued to such Shareholder (immediately following the lapse of the restrictions set forth in Section 3(d)(ii)), each Shareholder hereby grants to Holdings (or such Oaktree Party designated by Holdings) (the "Rights Shareholder") a right of first refusal with respect to offers to purchase its H Shares. (b) Each time each such Shareholder receives a Bona Fide Offer, such Shareholder (the "RFR Selling Shareholder") will allow the Rights Shareholder to purchase such H Shares subject to the Bona Fide Offer (the "RFR Capital Stock") in accordance with the following provisions: (i) Such RFR Selling Shareholder shall deliver a notice by certified mail (the "Offer Notice") to the Rights Shareholder stating (i) it has received from a third party a bona fide offer to acquire such RFR Capital Stock, (ii) the number of shares of RFR Capital Stock proposed to be acquired by such third party, and (iii) the per share price and terms, if any, upon which such third party proposes to acquire such RFR Capital Stock. B-4 Exhibit 99(f) (ii) By written notification received by the RFR Selling Shareholder within 20 days after giving of the Offer Notice (the "Offer Period"), the Rights Shareholder may elect to purchase or obtain, at the price and on the terms specified in the Offer Notice, up to that number of shares of RFR Capital Stock as that proposed to be acquired from the RFR Selling Shareholder and set forth in the Offer Notice. (iii) In the notice of election made by the Rights Shareholder pursuant to paragraph (ii) above, the Rights Shareholder shall state whether it has agreed to purchase all the RFR Capital Stock set forth therein or a lesser number, and if a lesser number, how many shares. (iv) Any notice by the Rights Shareholder to purchase RFR Capital Stock shall be binding on the Rights Shareholder except to the extent otherwise provided in this Section 4. (v) With respect to those shares of RFR Capital Stock that are not subscribed by the Rights Shareholder, (a) the RFR Selling Shareholder shall have 60 days following the expiration of the Offer Period to sell or enter into an agreement to sell such RFR Capital Stock to the third party that so offered to purchase such RFR Capital Stock at a price not less than, and upon terms no more favorable to such third party than those specified in the Offer Notice, (b) if the Rights Shareholder has exercised its right to purchase less than all RFR Capital Stock pursuant to this Section 4 it shall not be obligated to consummate such purchase unless and until any remaining shares of RFR Capital Stock set forth in the Offer Notice not elected to be purchased by the Rights Shareholder have actually been sold in accordance with the terms set forth in the Offer Notice, in which event a closing with respect to both the purchase by such Rights Shareholder and such third party shall occur simultaneously, and (c) the proposed third party transferee must agree in writing to be bound by the terms and provisions of this Agreement as a Shareholder. If the Company does not sell such RFR Capital Stock referred to in the Offer Notice within such 60 day period or the agreement entered into with respect to such RFR Capital Stock within such 60 day period is not consummated within 30 days of the execution thereof, the RFR Selling Shareholder shall not thereafter issue or sell any H Shares without first again offering such securities to the Rights Shareholder in the manner provided above. 5. Shareholder Capacity. If such Shareholder is an officer or director of the Company, such Shareholder does not make any agreement or understanding herein in such Shareholder's capacity as a director or officer of Company. Such Shareholder executes this Agreement solely in such Shareholder's capacity as a record owner and/or Beneficial Owner of Company securities and nothing herein will limit or affect any actions taken by such Shareholder or any designee of such Shareholder in such Shareholder's capacity as an officer or director of Company or any of its subsidiaries to comply with his fiduciary obligations as an officer or director of Company. B-5 Exhibit 99(f) 6. Oaktree Parties. For administrative convenience, any notice or other communication to any Oaktree Party shall be deemed given, subject to Section 9(c), upon delivery to the care of Oaktree Capital Management, LLC, and any right or obligation of any Oaktree Party may be exercised or discharged, as applicable, by Oaktree Capital Management, LLC on behalf any or all Oaktree Parties 7. Release. (a) Each Shareholder, on behalf of such Shareholder and each of such Shareholder's affiliates and all of their respective heirs, representatives, successors, and assigns, hereby releases and forever discharges each Releasee from any and all liabilities, claims, demands, debts and causes of action, whether known or unknown, suspected or unsuspected, contingent, unmatured or inchoate, both at law and in equity, which such Shareholder or any of such Shareholder's affiliates or any of their respective heirs, representatives, successors or assigns now has, have ever had or may hereafter have against the respective Releasees arising contemporaneously with or prior to the Closing or on account of or arising out of any matter, cause, or event occurring contemporaneously with or prior to the Closing Date including any rights to indemnification or reimbursement from the Company or any of its subsidiaries, whether pursuant to their respective organizational documents, contract or otherwise and whether or not relating to actions pending on, or asserted after, the Closing; provided, however, that nothing contained herein will operate to release any obligations of the Company or any Oaktree Party arising under this Agreement or the Statement of Resolution governing the H Shares. (b) Each Shareholder hereby irrevocably covenants to refrain from, directly or indirectly, asserting any cause of action, or commencing, instituting or causing to be commenced, any action, of any kind against any Releasee, based upon any matter purported to be released hereby. (c) "Releasee" or "Releasees" means each of the Company, its subsidiaries, the Oaktree Parties and each of their respective officers, directors, managers, employees, advisors, attorneys, agents, Shareholders, controlling persons, representatives and affiliates, including in each case those persons and entities currently in such positions and any persons or entities put in such positions as a result of the transactions contemplated hereby, and each of their respective heirs, successors and assigns. 8. Piggyback Registration Rights. (a) Right to Include Registrable Securities. At any time the Company proposes for any reason to register any of its Common Stock under the Securities Act, either for its own account or for the account of a securityholder of the Company exercising demand registration rights other than pursuant to a Registration Statement on Forms S-4 or S-8 (or similar or successor forms) (a "Proposed Registration"), the Company shall promptly give written notice of such Proposed Registration to all of the Shareholders holding Registrable Securities (which notice shall be given not less than 20 days before the expected effective date of the Company's Registration Statement) and shall offer such Shareholders the right to request inclusion of any of such Shareholder's Registrable Securities in the Proposed Registration. The rights to piggyback registration may be exercised an unlimited number of occasions. B-6 Exhibit 99(f) (b) Piggyback Procedure. Each Shareholder shall have ten days from the date of receipt of the Company's notice referred to in Section 8(a) to deliver to the Company a written request specifying the number of Registrable Securities such Shareholder intends to sell and such Shareholder's intended method of disposition. Any Shareholder may withdraw such Shareholder's request for inclusion of such Shareholder's Registrable Securities in any Registration Statement pursuant to this Section 8 by giving written notice to the Company of such withdrawal; provided, however, that the Company may ignore a notice of withdrawal made within 24 hours of the time the Registration Statement is to become effective. Subject to Section 8(d), the Company shall use its reasonable best efforts to include in such Registration Statement all such Registrable Securities so requested to be included therein; provided, however, that the Company may at any time withdraw or cease proceeding with any such Proposed Registration if it withdraws or ceases proceeding with the registration of all other securities originally proposed to be registered. If the Proposed Registration is, in whole or in part, an underwritten public offering of securities of the Company, any request under this Section 8(b) shall specify that the Registrable Securities be included in the underwriting on the same terms and conditions as the shares, if any, otherwise being sold through underwriters under such registration. (c) Priority for Piggyback Registration. Notwithstanding any other provision of this Section 8, if the managing underwriter of an underwritten public offering determines and advises the Company that the inclusion of all Registrable Securities proposed to be included by the Participating Shareholders in the underwritten public offering would materially and adversely interfere with the successful marketing of the Company's securities, then the Participating Shareholders may not include any Registrable Securities in excess of the amount, if any, of Registrable Securities which the managing underwriter of such underwritten public offering shall reasonably and in good faith agree in writing to include in such public offering in addition to the amount of securities to be registered for the Company. The Company must include in such Registration Statement, as to each Participating Shareholder, only a portion of the Registrable Securities such Participating Shareholder has requested be registered equal to the ratio which such Participating Shareholder's requested Registrable Securities bears to the total number of Registrable Securities requested to be included in such Registration Statement by all Participating Shareholders who have requested that their Registrable Securities be included in such Registration Statement. Pursuant to the foregoing provision, the securities to be included in a registration initiated by the Company shall be allocated: (i) first, to the Company; B-7 Exhibit 99(f) (ii) second, to any others requesting registration of securities of the Company pursuant to demand registration rights; (iii) third to persons or entities exercising registration rights under the Shareholders Rights Agreement of the Company, dated the date hereof, as amended from time to time; and (iv) fourth, to the Participating Shareholders and others having the right to include securities in such Registration Statement. If as a result of the provisions of this Section 8(c), any Participating Shareholder may not include all of its Registrable Securities in a registration that such Shareholder has requested to be so included, such Participating Shareholder may withdraw such Participating Shareholder's request to include Registrable Securities in such Registration Statement. (d) Registration Procedures. The Company shall use its best efforts to effect the registration and sale of the Registrable Securities in accordance with the intended method of distribution thereof as promptly as possible, and in connection with any such request, the Company shall, as expeditiously as possible: (i) Preparation of Registration Statement; Effectiveness. Prepare and file with the SEC a Registration Statement on any form on which the Company then qualifies, which counsel for the Company shall deem appropriate and pursuant to which such offering may be made in accordance with the intended method of distribution thereof (except that the Registration Statement shall contain such information as may reasonably be requested for marketing or other purposes by the managing underwriter), and use its best efforts to cause any registration required hereunder to become effective as soon as practicable after the initial filing thereof and remain effective until all Registrable Securities have been sold in accordance with the methods of distribution set forth in the Registration Statement; (ii) 10b-5 Notification. Promptly notify in writing the Participating Shareholders, the sales or placement agent, if any, therefor and the managing underwriter of the securities being sold pursuant to the Registration Statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act upon discovery that, or upon the happening of any event as a result of which, any prospectus included in the Registration Statement (or amendment or supplement thereto) contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made, and the Company shall promptly prepare a supplement or amendment to such prospectus and file it with the SEC (in any event no later than ten days following notice of the occurrence of such event to each Participating Shareholder, the sales or placement agent and the managing underwriter) so that after delivery of such prospectus, as so amended or supplemented, to the purchasers of such Registrable Securities, such prospectus, as so amended or supplemented, shall not contain an 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 under which they were made; B-8 Exhibit 99(f) (iii) Notification of Stop Orders; Suspensions of Qualifications and Exemptions. Promptly notify in writing the Participating Shareholders, the sales or placement agent, if any, therefor and the managing underwriter of the securities being sold of the issuance by the SEC of (A) any stop order issued or threatened to be issued by the SEC or (B) any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and the Company agrees to use its best efforts to (x) prevent the issuance of any such stop order, and in the event of such issuance, to obtain the withdrawal of any such stop order and (y) obtain the withdrawal of any order suspending or preventing the use of any related prospectus or suspending the qualification of any Registrable Securities included in the Registration Statement for sale in any jurisdiction at the earliest practicable date; (iv) Amendments and Supplements. Prepare and file with the SEC such amendments, including post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement continuously effective for the applicable time period required hereunder and, if applicable, cause the related prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all securities covered by the Registration Statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in the Registration Statement as so amended or in such prospectus as so supplemented; (v) Blue Sky. Use its reasonable best efforts to, prior to any public offering of the Registrable Securities, register or qualify (or seek an exemption from registration or qualifications) such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any Participating Shareholder or underwriter may request, and to continue such qualification in effect in each such jurisdiction for as long as is permissible pursuant to the laws of such jurisdiction, or for as long as a Participating Shareholder or underwriter requests or until all of such Registrable Securities are sold, whichever is shortest, and do any and all other acts and things which may be reasonably necessary or advisable to enable any Participating Shareholder to consummate the disposition in such jurisdictions of the Registrable Securities; (vi) Other Approvals. Use its reasonable best efforts to obtain all other approvals, consents, exemptions or authorizations from such governmental agencies or authorities as may be necessary to enable the Participating Shareholders and underwriters to consummate the disposition of Registrable Securities; B-9 (vii) Agreements. Enter into customary agreements (including any underwriting agreements in customary form), and take such other actions as may be reasonably required in order to expedite or facilitate the disposition of Registrable Securities; (viii) SEC Compliance, Earnings Statement. Comply with all applicable rules and regulations of the SEC and make available to its Shareholders, as soon as reasonably practicable, but no later than 15 months after the effective date of the Registration Statement, an earnings statement covering a period of 12 months beginning after the effective date of the Registration Statement, in a manner which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (ix) Certificates, Closing. Provide officers' certificates and other customary closing documents; (x) NASD. Cooperate with each Participating Shareholder and each underwriter participating in the disposition of such Registrable Securities and underwriters' counsel in connection with any filings required to be made with the NASD; (xi) Listing. Use its best efforts to cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed and if not so listed, to be listed on the NASD automated quotation system; (xii) Transfer Agent, Registrar and CUSIP. Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereto and a CUSIP number for all such Registrable Securities, in each case, no later than the effective date of such registration; and (xiii) Best Efforts. Use its reasonable best efforts to take all other actions necessary to effect the registration of the Registrable Securities contemplated hereby. B-10 Exhibit 99(f) (e) Seller Information. The Company may require each Participating Shareholder as to which any registration of such Shareholder's Registrable Securities is being effected to furnish to the Company with such information regarding such Participating Shareholder and such Participating Shareholder's method of distribution of such Registrable Securities as the Company may from time to time reasonably request in writing. If a Participating Shareholder refuses to provide the Company with any of such information on the grounds that it is not necessary to include such information in the Registration Statement, the Company may exclude such Participating Shareholder's Registrable Securities from the Registration Statement if the Company provides such Participating Shareholder with an opinion of counsel to the effect that such information should be included in the Registration Statement and such Participating Shareholder continues thereafter to withhold such information. The exclusion of a Participating Shareholder's Registrable Securities shall not affect the registration of the other Registrable Securities to be included in the Registration Statement. (f) Notice to Discontinue. Each Participating Shareholder whose Registrable Securities are covered by the Registration Statement filed pursuant to this Agreement agrees that, upon receipt of written notice from the Company of the happening of any event of the kind described in Section 8(d)(ii) or 8(d)(iii), such Participating Shareholder shall forthwith discontinue the disposition of Registrable Securities until such Participating Shareholder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 8(d)(ii) or 8(d)(iii) or until it is advised in writing by the Company that the use of the prospectus may be resumed and has received copies of any additional or supplemental filings which are incorporated by reference into the prospectus, and, if so directed by the Company in the case of an event described in Section 8(d)(ii) or 8(d)(iii), such Participating Shareholder shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Participating Shareholder's possession, of the prospectus covering such Registrable Securities which is current at the time of receipt of such notice. (g) Registration Expenses. Except as otherwise provided herein, all Registration Expenses shall be borne by the Company. All Selling Expenses relating to Registrable Securities registered shall be borne by the Participating Shareholders of such Registrable Securities pro rata on the basis of the number of shares so registered. (h) Indemnification. (i) Indemnification by the Company. The Company agrees, notwithstanding termination of this Agreement, to indemnify and hold harmless to the fullest extent permitted by applicable law, each Shareholder, each of its directors, officers, employees, advisors, agents and general or limited partners (and the directors, officers, employees, advisors and agents thereof), their respective Affiliates and each Person who controls (within the meaning of the Securities Act or the Exchange Act) any of such Persons, and each underwriter and each Person who controls (within the meaning of the Securities Act or the Exchange Act) any underwriter (collectively, "Shareholder Indemnified Parties") from and against any and all losses, claims, damages, expenses (including, reasonable costs of investigation and fees, disbursements and other charges of counsel and experts and any amounts paid in settlement effected with the Company's consent, which consent shall not be unreasonably withheld or delayed) or other liabilities (collectively, "Losses") to which any such Shareholder Indemnified Party may become subject under the Securities Act, Exchange Act, any other federal law, any state or common law or any rule or regulation promulgated thereunder or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) are resulting from or arising out of or based upon (i) any untrue, or alleged untrue, statement of a material fact contained in the Registration Statement, prospectus or preliminary prospectus (as amended or supplemented) or any document incorporated by reference in any of the foregoing or resulting from or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in light of the circumstances under which they were made), not misleading, or (ii) any violation by the Company of the Securities Act, Exchange Act, any other federal law, any state or common law or any rule or regulation promulgated thereunder or otherwise incident to any registration, qualification or compliance and in any such case, the Company will promptly reimburse each such Shareholder Indemnified Party for any legal expenses and any other Losses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability, action or investigation or proceeding (collectively, a "Claim"). Such indemnity obligation shall remain in full force and effect regardless of any investigation made by or on behalf of the Shareholder Indemnified Parties and shall survive the transfer of Registrable Securities by such Shareholder Indemnified Parties. B-11 Exhibit 99(f) (ii) Indemnification by Shareholders. In connection with any proposed registration in which a Shareholder is participating pursuant to this Agreement, each such Shareholder shall furnish to the Company in writing such information with respect to such Shareholder as the Company may reasonably request or as may be required by law for use in connection with the Registration Statement or prospectus or preliminary prospectus to be used in connection with such registration and each Shareholder agrees, severally and not jointly, to indemnify and hold harmless the Company, any underwriter retained by the Company and their respective directors, officers, partners, employees, advisors and agents, their respective Affiliates and each Person who controls (within the meaning of the Securities Act or the Exchange Act) any of such Persons to the same extent as the foregoing indemnity from the Company to the Shareholders as set forth in Section 8(h)(i) (subject to the exceptions set forth in the foregoing indemnity, the proviso to this sentence and applicable law), but only with respect to any such information furnished in writing by such Shareholder expressly for use therein; provided, however, that, unless such liability is directly caused by such Shareholder's willful or intentional misconduct, the liability of any such Shareholder under this Section 8(h)(ii) shall be limited to the amount of the net proceeds received by such Shareholder in the offering giving rise to such liability. Such indemnity obligation shall remain in full force and effect regardless of any investigation made by or on behalf of the Shareholder Indemnified Parties (except as provided above) and shall survive the transfer of Registrable Securities by such Shareholder. (iii) Conduct of Indemnification Proceedings. Any person or entity entitled to indemnification hereunder (the "Indemnified Party") agrees to give prompt written notice to the indemnifying party (the "Indemnifying Party") after the receipt by the Indemnified Party of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which the Indemnified Party intends to claim indemnification or contribution pursuant to this Agreement; provided, however, that, the failure so to notify the Indemnifying Party shall not relieve the Indemnifying Party of any liability that it may have to the Indemnified Party hereunder unless and to the extent such Indemnifying Party is materially prejudiced by such failure. If notice of commencement of any such action is given to the Indemnifying Party as above provided, the Indemnifying Party may participate in and, to the extent it may wish, jointly with any other Indemnifying Party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by it and reasonably satisfactory to such Indemnified Party. The Indemnified Party may employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be paid by the Indemnified Party unless (i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party fails to assume the defense of such action with counsel satisfactory to the Indemnified Party in its reasonable judgment or (iii) the named parties to any such action reasonably believe that the representation of such Indemnified Party and the Indemnifying Party by the same counsel would be inappropriate under applicable standards of professional conduct. In the case of clause (ii) above and (iii) above, the Indemnifying Party may not assume the defense of such action on behalf of such Indemnified Party. No Indemnifying Party shall be liable for any settlement entered into without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party may, without the written consent of the Indemnified Party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened Claim in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Party is an actual or potential party to such Claim) unless such settlement, compromise or judgment (A) includes an unconditional release of the Indemnified Party from all liability arising out of such Claim and (B) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of any Indemnified Party. The rights afforded to any Indemnified Party hereunder shall be in addition to any rights that such Indemnified Party may have at common law, by separate agreement or otherwise. B-12 Exhibit 99(f) (iv) Contribution. If the indemnification provided for in this Section 8(h) from the Indemnifying Party is unavailable or insufficient to hold harmless an Indemnified Party in respect of any Losses, then the Indemnifying Party, in lieu of indemnifying the Indemnified Party, shall contribute to the amount paid or payable by the Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and the Indemnified Party, as well as any other relevant equitable considerations. The relative faults of the Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the Indemnifying Party's and Indemnified Party's relative intent, knowledge, access to information and opportunity to correct or prevent such action; provided, however, that, unless such liability is directly caused by such Shareholder's willful or intentional misconduct, the liability of any such Shareholder under this Section 8(h)(iv) shall be limited to the amount of the net proceeds received by such Shareholder in the offering giving rise to such liability. The amount paid or payable by a party as a result of the Losses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in Sections 8(h)(i), 8(h)(ii), or 8(h)(iii), any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. B-13 Exhibit 99(f) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8(h)(iv) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this Section 8(h)(iv). (i) Rule 144 and Rule 144A; Other Exemptions. The Company shall use its commercially reasonable efforts to (i) file in a timely manner all reports and other documents required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder and (ii) take such further action as each Shareholder may reasonably request (including providing any information necessary to comply with Rule 144), all to the extent required from time to time to enable such Shareholder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (x) Rule 144 under the Securities Act, as such rules may be amended from time to time or (y) any other rules or regulations now existing or hereafter adopted by the SEC. Upon the written request of a Shareholder, the Company shall deliver to the Shareholder a written statement as to whether it has complied with such requirements. (j) Certain Limitations On Registration Rights. No Shareholder may participate in the Registration Statement hereunder unless such Shareholder completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements, and other documents reasonably required under the terms of such underwriting arrangements and agrees to sell such Shareholder's Registrable Securities on the basis provided in any underwriting agreement approved by the Shareholder or Shareholders entitled hereunder to approve such arrangements; provided, however, that no such Shareholder shall be required to make any representations or warranties to the Company or the underwriters in connection with any such registration other than representations and warranties as to (i) such Shareholder's ownership of its Registrable Securities to be sold or transferred, (ii) such Shareholder's power and authority to effect such transfer and (iii) such matters pertaining to compliance with securities laws as may be reasonably requested. Such Shareholders of Registrable Securities to be sold by such underwriters may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of the Company to and for the benefit of such underwriters, shall also be made to and for the benefit of such Shareholders and that any or all of the conditions precedent to the obligations of the underwriters under the underwriting agreement be conditions precedent to the obligations of the Shareholders. B-14 (k) Restrictions on Public Sale by Shareholders. If requested by the lead managing underwriter with respect to any firm underwriting public offering in which Shareholders are permitted to participate hereunder, each Shareholder of Registrable Securities agrees not to effect any public sale or distribution of any Registrable Securities being registered or of any securities convertible into or exchangeable or exercisable for such Registrable Securities, including a sale pursuant to Rule 144 under the Securities Act, during a period of not more than 180 days after any firm underwriting public offering of Common Stock of the Company, commencing on the effective date of the Registration Statement (the "Lock-Up Period"), unless expressly authorized to do so by the lead managing underwriter; provided, however, that if any other Shareholder of securities of the Company is subject to a shorter period or receives more advantageous terms relating to the Lock-Up Period, then the Lock-Up Period shall be such shorter period and also on such more advantageous terms. Notwithstanding the foregoing, the Shareholders shall not be required to sign lock-up agreements unless other Persons permitted to include securities on such Registration Statement and all of the Company's directors and executive officers have signed substantially similar lock-up agreements with the managing underwriters. Any such lock-up agreements signed by the Shareholders shall contain reasonable and customary exceptions. (l) Transfer of Registration Rights. The rights of a Shareholder under this Section 8 may not be transferred or assigned in connection with a transfer of Registrable Securities. (m) Amendment. The provisions of this Section 8 may be waived or amended by the agreement of Shareholders holding a majority of the Registrable Securities. (n) Definitions. For this Section 8: "Claim" is defined in Section 8(h)(i). "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. "Indemnified Party" is defined in Section 8(h)(iii). "Indemnifying Party" is defined in Section 8(h)(iii). "Losses" is defined in Section 8(h)(i). "NASD" means the National Association of Securities Dealers, Inc. "Participating Shareholders" means Shareholders participating, or electing to participate, in an offering of Registrable Securities. "Proposed Registration" is defined in Section 8(a). "Registrable Securities" means any shares of Common Stock held by Shareholder as listed as Registrable Securities on Schedule I and any shares of Common Stock issued to a Shareholder as a dividend on H Shares, including any resulting shares issued, by virtue of the effect of antidilution provisions or combination, merger, consolidation or other similar event; provided, however, that shares of Common Stock that are considered to be Registrable Securities shall cease to be Registrable Securities (i) upon the sale thereof pursuant to an effective registration statement, (ii) upon the first anniversary of the date of the issuance of such shares or (iii) when such securities cease to be outstanding. B-15 Exhibit 99(f) "Registration Expenses" means all expenses (other than underwriting discounts and commissions) arising from or incident to the performance of, or compliance with, Section 8, including, (i) SEC, stock exchange, NASD and other registration and filing fees, (ii) all fees and expenses incurred in connection with complying with any securities or blue sky laws (including, fees, charges and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) all printing, messenger and delivery expenses, (iv) the fees, charges and disbursements of counsel to the Company and of its independent public accountants and any other accounting and legal fees, charges and expenses incurred by the Company (including, any expenses arising from any special audits or "comfort letters" required in connection with or incident to any registration), (v) the fees, charges and disbursements of any special experts retained by the Company in connection with any registration pursuant to the terms of this Agreement, (vi) all internal expenses of the Company (including, all salaries and expenses of its officers and employees performing legal or accounting duties), (vii) the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange, over-the-counter market or Nasdaq and (viii) Securities Act liability insurance (if the Company elects to obtain such insurance), regardless of whether the Registration Statement filed in connection with such registration is declared effective. "Registration Expenses" shall not include fees, charges and disbursements of any firm of counsel to any Participating Shareholders. "Registration Statement" means the registration statement of the Company filed with the SEC on the appropriate form pursuant to the Securities Act which covers shares of Registrable Securities pursuant to the provisions of this Agreement and all amendments and supplements to the Registration Statement, including post-effective amendments, in each case including the prospectus contained therein, all exhibits thereto and all materials incorporated by reference therein. "SEC" or "Commission" means the United States Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Selling Expenses" means the underwriting fees, discounts, selling commissions and stock transfer taxes applicable to all Registrable Securities registered by the Participating Shareholders. "Shareholder Indemnified Parties" is defined in Section 8(h)(i). 9. Miscellaneous. (a) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of its subject matter and supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof or the transactions contemplated hereby. B-16 Exhibit 99(f) (b) Amendment; Waiver. This Agreement may not be amended or modified, and no provisions hereof may be waived, without the written consent of Shareholders holding a majority of the H Shares governed by this Agreement at the relevant time and Holdings; provided that no amendment may be made to Section 7 or the provisions of Section 9 affecting such Section without the consent of each affected Releasee. No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. Notwithstanding the foregoing, Shareholders holding a majority of the H Shares governed by this Agreement at the relevant time and Holdings may waive the performance of a party to this Agreement; provided that no such waiver shall affect any Shareholders obligations under Section 7 or the provisions of Section 9 affecting such Section without the consent of each affected Releasee. (c) Notices. Any notice, request, demand or other communication required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed given under this Agreement on the earliest of: (a) the date of personal delivery, (b) the date of transmission by facsimile, with confirmed transmission and receipt, (c) two days after deposit with a nationally-recognized courier or overnight service such as Federal Express, or (d) five days after mailing via certified mail, return receipt requested. All notices not delivered personally or by facsimile will be sent with postage and other charges prepaid and properly addressed to the party to be notified at the address set forth for such party: (i) If to Holdings: c/o Oaktree Capital Management, LLC 333 South Grand Avenue, 28th Floor Los Angeles, California 90071 Attention: B. James Ford Telecopier: (213) 830-6394 B-17 Exhibit 99(f) with a copy to (which does not constitute notice): Akin Gump Strauss Hauer & Feld LLP 1111 Louisiana Street, 44th Floor Houston, Texas 77002 Phone: (713) 220-5800 Fax: (713) 236-0822 Attn: Julien Smythe (ii) If to a Shareholder: To the name and address beside such Shareholder's name on the signature page hereto. (d) Severability. The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision hereof will not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this Agreement, as applied to any party or to any circumstance, is adjudged by a court, governmental body, arbitrator not to be enforceable in accordance with its terms, the parties agree that the court, governmental body, arbitrator making such determination will have the power to modify the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its reduced form, such provision will then be enforceable and will be enforced. (e) Construction. The parties hereto have jointly participated in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties hereto and no presumption or burden of proof will arise favoring or disfavoring any party hereto because of the authorship of any provision of this Agreement. Any reference to any federal, state, local or foreign law will also be deemed to refer to such law as amended and all rules and regulations promulgated thereunder, unless the context otherwise requires. The words "include," "includes" and "including" will be deemed to be followed by "without limitation." Pronouns in masculine, feminine and neuter genders will be construed to include any other gender, and words in the singular form will be construed to include the plural and vice versa, unless the context otherwise requires. The words "this Agreement," "herein," "hereof," "hereby," "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The parties hereto intend that each representation, warranty and covenant contained herein will have independent significance. If any party hereto has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which such party has breached, will not detract from or mitigate the fact that such party is in breach of the first representation, warranty or covenant. B-18 Exhibit 99(f) (f) Arbitration. Any and all claims, counterclaims, demands, causes of action, disputes, controversies, and other matters in question arising out of or relating to this Agreement or in any way relating to the subject matter of this Agreement or the relationship between the parties hereto created by this Agreement, involving the parties hereto or their respective representatives ("Disputes") even though all or some of the Disputes allegedly are extra-contractual in nature, whether such Disputes sound in contract, tort or otherwise, at law or in equity, under state, provincial or federal law, for damages or any other relief will be resolved as follows: first, each affected Shareholder and representatives of Holdings will meet to attempt to resolve such Dispute. If the Dispute cannot be resolved by agreement of the affected parties hereto, any such party may at any time make a written demand for binding arbitration of the Dispute in accordance with this Section provided that the foregoing shall not preclude equitable or other judicial relief to enforce the provisions hereof or to preserve the status quo pending resolution of Disputes; and provided further that resolution of Disputes with respect to claims by third Persons will be deferred until any judicial proceedings with respect thereto are concluded. Subject to the provisions of this Section, such Shareholder(s) and Holdings will agree upon the rules of the arbitration prior to the arbitration and based upon the nature of the Dispute; provided that to the extent that the parties hereto cannot agree on the rules of the arbitration, then the Commercial Arbitration Rules of the American Arbitration Association in effect on the date hereof, and except as the applicable rules are modified by this Agreement, will apply. As a minimum set of rules in the arbitration the parties hereto agree as follows: (i) To the extent the claims asserted are in excess of $4.0 million, the arbitration will be held before a panel of three arbitrators consisting of one arbitrator selected by Shareholder(s), the other selected by Holdings, and the third then selected by those two arbitrators (such third arbitrator to be neutral). If agreement cannot be reached on a third arbitrator within 30 days of the need therefor, the Chief Judge of the U.S. District Court for the Southern District of Texas shall appoint an arbitrator. If the claims asserted are less than $4.0 million, the Chief Judge of the U.S. District Court for the Southern District of Texas shall appoint a sole arbitrator. All arbitrators shall be attorneys with at least ten years experience in oil and gas transactions. (ii) The arbitrator(s) will deliver their decision in writing within 20 days after the termination of the arbitration hearings. (iii) The non-prevailing party will bear the costs and fees of the arbitration. (iv) The arbitrator(s) final decision will be in writing but will not specify the basis for their decision, the basis for the damages award or the basis of any other remedy. The arbitrator(s)' decision will be considered as a final and binding resolution of the disagreement, will not be subject to appeal and may be entered as an order in any court of competent jurisdiction in the United States; provided that this Agreement confers no power or authority upon the arbitrator(s) (i) to render any decision that is based on clearly erroneously findings of fact, (ii) that manifestly disregards the law, or (iii) that exceeds the powers of the arbitrator(s), and no such decision will be eligible for confirmation. Each party hereto agrees to submit to the jurisdiction of any such court for purposes of the enforcement of any such order. No party will sue the other except for enforcement of the arbitrator(s)' decision if any other party is not performing in accordance with the arbitrator(s)' decision. The provisions of this Agreement will be binding on the arbitrator(s). B-19 (v) Any arbitration proceeding will be conducted on a confidential basis. (vi) Any arbitration proceeding shall be held in Houston, Texas. (vii) Any arbitration proceeding, including discovery, shall be conducted in accordance with the Texas Rules of Civil Procedure and the Texas Rules of Evidence. (g) Remedies Cumulative. The parties shall have all remedies for breach of this Agreement available to them as provided by law or equity. Without limiting the generality of the foregoing, the parties agree that in addition to any other rights and remedies available at law or in equity, the parties shall be entitled to obtain specific performance of the obligations of each party to this Agreement and immediate injunctive relief and that, in the event any action or proceeding is brought in equity or to enforce the same, no party will urge, as a defense, that there is an adequate remedy at law. No single or partial assertion or exercise of any right, power or remedy of a party hereunder shall preclude any other or further assertion or exercise thereof. (h) No Third Party Beneficiaries. Except as otherwise set forth in this Agreement, all representations, warranties, covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. Nothing in this Agreement shall create or be deemed to create any third-party beneficiary rights in any Person not a party to this Agreement; provided that the Releasees are expressly made third party beneficiaries of this Agreement. (i) Spouse. Each Shareholder and his spouse, if any, by their execution of this Agreement, (a) evidence that they are fully aware of, understand and fully consent and agree to the provisions of this Agreement and its binding effect upon any community property or similar marital property interest in the securities of the Company that they may now or hereafter own and (b) agree that termination of their marital relationship for any reason shall not have the effect of removing any such securities otherwise subject to this Agreement from coverage hereof. Each Shareholder further agrees that he shall cause his spouse (and any subsequent spouse), if any, to execute and deliver a Joinder Agreement in the form of Exhibit A. (j) Governing Law. This Agreement and the performance of the transactions and the obligations of the parties hereunder will be governed by and construed and enforced in accordance with the laws of the State of Texas, without giving effect to any choice of law principles. B-20 Exhibit 99(f) (k) Descriptive Headings. The section and subsection headings contained in this Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement. (l) Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. If a Shareholder listed on the signature page hereto does not execute this Agreement, this Agreement shall not be binding against such Shareholder but shall be binding against those Shareholders who do execute the Agreement. (m) Successors and Assigns. This Agreement and the rights and obligations of the parties hereunder shall inure to the benefit of, and be binding upon, their respective successors, assigns and legal representatives. (n) Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement or any other agreement or document to be executed or delivered pursuant hereto, the prevailing party shall be entitled to reasonable attorneys' fees, costs, and disbursements in addition to any other relief to which such party may be entitled. (o) Adjustments for Stock Splits, Etc. Wherever in this Agreement there is a reference to a specific number of units or shares of any Company security of any class or series, then, upon the occurrence of any subdivision, combination or stock dividend of such class or series of stock, the specific number of shares so referenced in this Agreement will automatically be proportionally adjusted to reflect the effect of such subdivision, combination or stock dividend on the outstanding shares of such class or series of stock. (p) Termination. Sections 3(d)-(f) and 4 will terminate as to a Shareholder without any action of any party hereto on the later of (i) two years from the date the first H Share was issued and (ii) such time as all of such Shareholder's H Shares have converted into Common Stock. Holdings may terminate Sections 3(d)-(f) and 4 at any time as to any or all party(ies) by giving ten days written notice to the other parties hereto. Section 7 and the provisions of Section 9 affecting such section may not be terminated without the consent of each person affected, including the third party beneficiaries thereof. (q) Merger. The parties acknowledge that it is intended that the Company merge into a Delaware corporation in connection with the transactions contemplated by the Subscription Agreement. This Agreement shall survive such merger and shall apply to such Delaware corporation and its capital stock without any further action on the part of the parties. Each Shareholder agrees to vote in favor such merger. B-21 Exhibit 99(f) (r) Letter Agreement. Each Shareholder is party to the Letter Agreement dated April 22, 2004, by and among the Company, Gulfwest Oil & Gas Company and the other signatories thereto. Each Shareholder agrees to exercise no rights under such agreement. In addition, to the extent requested by the Company, each Shareholder will execute consents, amendments and waivers to such agreement to effect the transactions contemplated hereby. Notwithstanding the foregoing, the Company and the Shareholders agree that, as provided in the Letter Agreement, the Company will keep the shelf Registration Statement on Form S-1 (SEC Registration No. 333-116048) effective and current under the Securities Act of 1933, as amended, at its expense until December 8, 2006. B-22 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the Shareholders and Holdings on the day and year first written above. GULFWEST ENERGY INC. By:___________________ Name: Title: OCM GW HOLDINGS, LLC By: _________________ Name: Title: SHAREHOLDERS PETRO CAPITAL ADVISORS By:____________________ Name: Title: XMEN, LLC By:_____________________ Name: Title: BARRY S. COHN REVOCABLE TRUST By:_____________________ Name: Title: BARGUS PARTNERSHIP By: ___________________ Name: Title: __________________________ Patrick Parker ________________________ Douglas Moreland _______________________ Bruce Goldstein _______________________ Edwin J. Haggerty STAR-TEX TRADING CO. By: ________________________ Name: Title: ______________________________ J. Virgil Waggoner SCHEDULE I

--------------------------------------- ------------------------ --------------------------------- Shareholder H Shares Registrable Securities --------------------------------------- ------------------------ --------------------------------- --------------------------------------- ------------------------ --------------------------------- Petro Capital Advisors 1,000 75,000 --------------------------------------- ------------------------ --------------------------------- --------------------------------------- ------------------------ --------------------------------- Patrick Parker 600 45,000 --------------------------------------- ------------------------ --------------------------------- --------------------------------------- ------------------------ --------------------------------- Douglas Moreland 1,000 75,000 --------------------------------------- ------------------------ --------------------------------- --------------------------------------- ------------------------ --------------------------------- Xmen, LLC 1,200 90,000 --------------------------------------- ------------------------ --------------------------------- --------------------------------------- ------------------------ --------------------------------- Bruce Goldstein 40 3,000 --------------------------------------- ------------------------ --------------------------------- --------------------------------------- ------------------------ --------------------------------- Barry S. Cohn Rev. Trust 150 11,250 --------------------------------------- ------------------------ --------------------------------- --------------------------------------- ------------------------ --------------------------------- Bargus Partnership 500 37,500 --------------------------------------- ------------------------ --------------------------------- --------------------------------------- ------------------------ --------------------------------- Edwin J. Haggerty 260 19,500 --------------------------------------- ------------------------ --------------------------------- --------------------------------------- ------------------------ --------------------------------- Star-Tex Trading Co. 200 15,000 --------------------------------------- ------------------------ --------------------------------- --------------------------------------- ------------------------ --------------------------------- J. Virgil Waggoner 3,000 225,000 --------------------------------------- ------------------------ ---------------------------------

EXHIBIT A JOINDER AGREEMENT This Joinder Agreement (this "Joinder Agreement") is executed by the undersigned spouse ( "Spouse") of ___________ ("Shareholder") pursuant to the terms of that Share Transfer Restriction and Right of First Refusal Agreement among OCM GW Holdings, LLC ("Holdings") and the Shareholders set forth on the signature page thereto (as may be amended from time to time, the "Agreement"). By the execution of this Joinder Agreement, Spouse agrees as follows: 1. Joinder. Spouse hereby agrees to be bound by the terms and conditions of the Agreement to the same extent as if Spouse had executed the Agreement as an original party thereto. Nothing contained herein shall be deemed to relieve Shareholder from any liability or obligation incurred thereunder. 2. Representations and Warranties. The covenants, representations and warranties set forth in Sections 3 and 4 of the Agreement are incorporated herein mutatis mutandis, and Spouse hereby makes and agrees to such covenants, representations and warranties as of the date of this Joinder Agreement (except as to the first sentence of Section 3(a) where Shareholder represents and warrants as to both record ownership and Beneficial Ownership, to the extent Spouse may not have record ownership, or become record owner of, securities of the Company owned of record or that would be owned of record by Shareholder). 3. Notice. Any notice required as permitted by the Agreement shall be given to the Spouse at the address listed below Spouse's signature below. 4. Definitions. Undefined capitalized terms in this Joinder Agreement are defined in the Agreement. 5. Counterparts. This Joinder Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. 6. Governing Law. This Joinder Agreement shall be governed by the laws of the State of Texas, without reference to the principles of conflicts of law thereof. EXECUTED AND DATED this _____ day of __________, 200_. [SPOUSE] By:____________________ Name: Address: Attention: Telecopy: Agreed to and accepted by Holdings: OCM GW HOLDINGS, LLC By:__________________ Name: Title: Agreed to and accepted by the Company: GULFWEST ENERGY INC. By:___________________ Name: Title: EX-99.G 8 a4838327ex99g.txt EXHIBIT 99(G) Exhibit 99(g) JOINT FILING AGREEMENT PURSUANT TO RULE 13d-1(k)(1) The undersigned acknowledge and agree that the foregoing statement on Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to this statement on Schedule 13D shall be filed on behalf of each of the undersigned without the necessity of filing additional joint filing agreements. The undersigned acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning it contained therein, but shall not be responsible for the completeness and accuracy of the information concerning the others, except to the extent that it knows or has reason to believe that such information is inaccurate. This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall constitute one and the same instrument. Date: February 28, 2005 OCM GW HOLDINGS, LLC By: OCM Principal Opportunities Fund III, L.P., its managing member By: OCM Principal Opportunities Fund III GP, LLC, its general partner By: Oaktree Capital Management, LLC, its managing member By: /s/ Stephen A. Kaplan -------------------------------- Name: Stephen A. Kaplan Title: Principal OCM PRINCIPAL OPPORTUNITIES FUND III, L.P. By: OCM Principal Opportunities Fund III GP, LLC, its general partner By: Oaktree Capital Management, LLC, its managing member By: /s/ Stephen A. Kaplan ----------------------------------- Name: Stephen A. Kaplan Title: Principal GulfWest Energy Joint Filing Agreement Exhibit 99(g) OCM PRINCIPAL OPPORTUNITIES FUND III GP, LLC By: Oaktree Capital Management, LLC, its managing member By: /s/ Stephen A. Kaplan ----------------------------------- Name: Stephen A. Kaplan Title: Principal OAKTREE CAPITAL MANAGEMENT, LLC By: /s/ Stephen A. Kaplan ----------------------------- Name: Stephen A. Kaplan Title: Principal GulfWest Energy Joint Filing Agreement Exhibit 99(g) /s/ J. Virgil Waggoner ------------------------ J. Virgil Waggoner GulfWest Energy Joint Filing Agreement