PACIFIC ASIA PETROLEUM, INC. INDEMNIFICATION AGREEMENT
Exhibit
10.4
PACIFIC ASIA PETROLEUM, INC.
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT
This
Indemnification Agreement (this Agreement) is entered into as of __________________ ____,
2007, by and among Pacific Asia Petroleum, Inc., a Delaware corporation, on behalf of itself and
all present and future subsidiaries (the “Company”), and each indemnitee (“Indemnitee”) executing
this Agreement.
Recitals
A. The Company recognizes that it is essential to the Company to retain and attract as
directors and officers the most capable persons available.
B. Indemnitee is a director and/or officer of the Company.
C. Both the Company and Indemnitee recognize the increased risk of litigation and other claims
currently being asserted against directors and officers of corporations.
D. The Certificate of Incorporation and Bylaws of the Company require the Company to indemnify
and advance expenses to its directors and officers to the fullest extent permitted under Delaware
law, and the Indemnitee has been serving and continues to serve as a director and/or officer of the
Company in part in reliance on the Company’s Certificate of Incorporation and Bylaws.
E. In recognition of Indemnitee’s need for (i) substantial protection against personal
liability based on Indemnitee’s reliance on the aforesaid Certificate of Incorporation and Bylaws,
(ii) specific contractual assurance that the protection promised by the Certificate of
Incorporation and Bylaws will be available to Indemnitee (regardless of, among other things, any
amendment to or revocation of the Certificate of Incorporation and Bylaws or any change in the
composition of the Company’s Board of Directors or acquisition transaction relating to the
Company), and (iii) an inducement to provide effective services to the Company as a director and/or
officer, the Company wishes to provide in this Agreement for the indemnification of and the
advancing of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted
under Delaware law and as set forth in this Agreement, and, to the extent insurance is maintained,
to provide for the continued coverage of Indemnitee under the Company’s directors’ and officers’
liability insurance policies.
Now Therefore, in consideration of the above premises and of Indemnitee continuing to
serve the Company directly or, at its request, with another enterprise, and intending to be legally
bound hereby, the parties agree as follows:
1. Certain Definitions.
(a) Board: the Board of Directors of the Company.
(b) Affiliate: any corporation or other person or entity that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under common control with,
the person specified.
(c) Change in Control: shall be deemed to have occurred if (i) any “person” (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) (other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportions as their ownership of stock of the Company, and
other than any person holding shares of the Company on the date that the Company first registers
under the Act or any transferee of such individual if such transferee is a spouse or lineal
descendant of the transferee or a trust for the benefit of the individual, his spouse or lineal
descendants), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 30% or more of the total
voting power represented by the Company’s then outstanding Voting Securities, or (ii) during any
period of two consecutive years, individuals who at the beginning of such period constitute the
Board and any new director whose election by the Board or nomination for election by the Company’s
stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a majority of the Board, or
(iii) the stockholders of the Company approve a merger or consolidation of the Company with any
other entity, other than a merger or consolidation that would result in the Voting Securities of
the Company outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of
the total voting power represented by the Voting Securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company
approve a plan of complete liquidation of the Company or an agreement for the sale or disposition
by the Company (in one transaction or a series of transactions) of all or substantially all of the
Company’s assets.
(d) Expenses: any expense, liability, or loss, including attorneys’ fees, judgments,
fines, ERISA excise taxes and penalties, amounts paid or to be paid in settlement, any interest,
assessments, or other charges imposed thereon, any federal, state, local, or foreign taxes imposed
as a result of the actual or deemed receipt of any payments under this Agreement, and all other
costs and obligations, paid or incurred in connection with investigating, defending, being a
witness in, participating in (including on appeal), or preparing for any of the foregoing in, any
Proceeding relating to any Indemnifiable Event.
(e) Indemnifiable Event: any event or occurrence that takes place either prior to or
after the execution of this Agreement, related to the fact that Indemnitee is or was a director or
officer of the Company, or while a director or officer is or was serving at the request of the
Company as a director, officer, employee, trustee, agent, or fiduciary of another foreign or
domestic corporation, partnership, joint venture, employee benefit plan, trust, or other
enterprise, or was a director, officer, employee, or agent of a foreign or domestic corporation
that was a predecessor corporation of the Company or of another enterprise at the request of such
predecessor corporation, or related to anything done or not done by Indemnitee in any such
capacity, whether or not the basis
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of the 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 of the
Company, as described above.
(f) Independent Counsel: the person or body appointed in connection with Section 3.
(g) Proceeding: any threatened, pending, or completed action, suit, or proceeding or
any alternative dispute resolution mechanism (including an action by or in the right of the
Company), or any inquiry, hearing, or investigation, whether conducted by the Company or any other
party, that Indemnitee in good faith believes might lead to the institution of any such action,
suit, or proceeding, whether civil, criminal, administrative, investigative, or other.
(h) Reviewing Party: the person or body appointed in accordance with Section 3.
(i) Voting Securities: any securities of the Company that vote generally in the
election of directors.
2. Agreement to Indemnify.
(a) General Agreement. In the event Indemnitee was, is, or becomes a party to or
witness or other participant in, or is threatened to be made a party to or witness or other
participant in, a Proceeding by reason of (or arising in part out of) an Indemnifiable Event, the
Company shall indemnify Indemnitee from and against any and all Expenses to the fullest extent
permitted by law, as the same exists or may hereafter be amended or interpreted (but in the case of
any such amendment or interpretation, only to the extent that such amendment or interpretation
permits the Company to provide broader indemnification rights than were permitted prior thereto).
The parties hereto intend that this Agreement shall provide for indemnification in excess of that
expressly permitted by statute, including, without limitation, any indemnification provided by the
Company’s Certificate of Incorporation, its Bylaws, vote of its shareholders or disinterested
directors, or applicable law.
(b) Initiation of Proceeding. Notwithstanding anything in this Agreement to the
contrary, Indemnitee shall not be entitled to indemnification pursuant to this Agreement in
connection with any Proceeding initiated by Indemnitee against the Company or any director or
officer of the Company unless (i) the Company has joined in or the Board has consented to the
initiation of such Proceeding; (ii) the Proceeding is one to enforce indemnification rights under
Section 5; or (iii) the Proceeding is instituted after a Change in Control (other than a Change in
Control approved by a majority of the directors on the Board who were directors immediately prior
to such Change in Control) and Independent Counsel has approved its initiation.
(c) Expense Advances. If so requested by Indemnitee, the Company shall advance (within
ten business days of such request) any and all Expenses to Indemnitee (an “Expense Advance”). The
Indemnitee shall qualify for such Expense Advances upon the execution and delivery to the Company
of this Agreement which shall constitute an undertaking providing that the Indemnitee undertakes to
repay such Expense Advances if and to the extent that it is ultimately
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determined by a court of competent jurisdiction in a final judgment, not subject to appeal,
that Indemnitee is not entitled to be indemnified by the Company. Indemnitee’s obligation to
reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged
thereon.
(d) Mandatory Indemnification. Notwithstanding any other provision of this Agreement,
to the extent that Indemnitee has been successful on the merits or otherwise in defense of any
Proceeding relating in whole or in part to an Indemnifiable Event or in defense of any issue or
matter therein, Indemnitee shall be indemnified against all Expenses incurred in connection
therewith.
(e) Partial Indemnification. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of Expenses, but not, however,
for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion
thereof to which Indemnitee is entitled.
(f) Prohibited Indemnification. No indemnification pursuant to this Agreement shall be
paid by the Company on account of any Proceeding in which judgment is rendered against Indemnitee
for an accounting of profits made from the purchase or sale by Indemnitee of securities of the
Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as
amended, or similar provisions of any federal, state, or local laws.
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3. Reviewing Party. Prior to any Change in Control, the Reviewing Party shall be any
appropriate person or body consisting of a member or members of the Board or any other person or
body appointed by the Board who is not a party to the particular Proceeding with respect to which
Indemnitee is seeking indemnification; after a Change in Control, the Independent Counsel referred
to below shall become the Reviewing Party. With respect to all matters arising after a Change in
Control (other than a Change in Control approved by a majority of the directors on the Board who
were directors immediately prior to such Change in Control) concerning the rights of Indemnitee to
indemnity payments and Expense Advances under this Agreement or any other agreement or under
applicable law or the Company’s Certificate of Incorporation or Bylaws now or hereafter in effect
relating to indemnification for Indemnifiable Events, the Company shall seek legal advice only from
Independent Counsel selected by Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld), and who has not otherwise performed services for the Company or the
Indemnitee (other than in connection with indemnification matters) within the last five years. The
Independent Counsel shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in representing either the
Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. Such
counsel, among other things, shall render its written opinion to the Company and Indemnitee as to
whether and to what extent the Indemnitee should be permitted to be indemnified under applicable
law. The Company agrees to pay the reasonable fees of the Independent Counsel and to indemnify
fully such counsel against any and all expenses (including attorneys’ fees), claims, liabilities,
loss, and damages arising out of or relating to this Agreement or the engagement of Independent
Counsel pursuant hereto.
4. Indemnification Process and Appeal.
(a) Indemnification Payment. Indemnitee shall be entitled to indemnification of
Expenses, and shall receive payment thereof, from the Company in accordance with this Agreement as
soon as practicable after Indemnitee has made written demand on the Company for indemnification,
unless the Reviewing Party has given a written opinion to the Company that Indemnitee is not
entitled to indemnification under applicable law.
(b) Suit to Enforce Rights. Regardless of any action by the Reviewing Party, if
Indemnitee has not received full indemnification within thirty days after making a demand in
accordance with Section 4(a), Indemnitee shall have the right to enforce its indemnification rights
under this Agreement by commencing litigation in any court in the State of California or the State
of Delaware having subject matter jurisdiction thereof seeking an initial determination by the
court or challenging any determination by the Reviewing Party or any aspect thereof. The Company
hereby consents to service of process and to appear in any such proceeding. Any determination by
the Reviewing Party not challenged by the Indemnitee shall be binding on the Company and
Indemnitee. The remedy provided for in this Section 4 shall be in addition to any other remedies
available to Indemnitee at law or in equity.
(c) Defense to Indemnification, Burden of Proof, and Presumptions. It shall be a
defense to any action brought by Indemnitee against the Company to enforce this Agreement (other
than an action brought to enforce a claim for Expenses incurred in defending a Proceeding in
advance of its final disposition) that it is not permissible under applicable law for the Company
to
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indemnify Indemnitee for the amount claimed. In connection with any such action or any
determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified hereunder, the burden of proving such a defense or determination shall be on the
Company. Neither the failure of the Reviewing Party or the Company (including its Board,
independent legal counsel, or its stockholders) to have made a determination prior to the
commencement of such action by Indemnitee that indemnification of the claimant is proper under the
circumstances because Indemnitee has met the standard of conduct set forth in applicable law, nor
an actual determination by the Reviewing Party or Company (including its Board, independent legal
counsel, or its stockholders) that the Indemnitee had not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the Indemnitee has not met the
applicable standard of conduct. For purposes of this Agreement, the termination of any claim,
action, suit, or proceeding, by judgment, order, settlement (whether with or without court
approval), conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a
presumption that Indemnitee did not meet any particular standard of conduct or have any particular
belief or that a court has determined that indemnification is not permitted by applicable law.
5. Indemnification for Expenses Incurred in Enforcing Rights. The Company shall
indemnify Indemnitee against any and all Expenses that are incurred by Indemnitee in connection
with any action brought by Indemnitee for(i) indemnification or advance payment of Expenses by the
Company under this Agreement or any other agreement or under applicable law or the Company’s
Certificate of Incorporation or Bylaws now or hereafter in effect relating to indemnification for
Indemnifiable Events, and/or (ii) recovery under directors’ and officers’ liability insurance
policies maintained by the Company, but only in the event that Indemnitee ultimately is determined
to be entitled to such indemnification or insurance recovery, as the case may be. In addition, the
Company shall, if so requested by Indemnitee, advance the foregoing Expenses to Indemnitee, subject
to and in accordance with Section 2(c).
6. Notification and Defense of Proceeding.
(a) Notice. Promptly after receipt by Indemnitee of notice of the commencement of any
Proceeding, Indemnitee shall, if a claim in respect thereof is to be made against the Company under
this Agreement, notify the Company of the commencement thereof; but the omission so to notify the
Company will not relieve the Company from any liability that it may have to Indemnitee, except as
provided in Section 6(c).
(b) Defense. With respect to any Proceeding as to which Indemnitee notifies the
Company of the commencement thereof, the Company will be entitled to participate in the Proceeding
at its own expense and except as otherwise provided below, to the extent the Company so wishes, it
may assume the defense thereof with counsel reasonably satisfactory to Indemnitee. After notice
from the Company to Indemnitee of its election to assume the defense of any Proceeding, the Company
shall not be liable to Indemnitee under this Agreement or otherwise for any Expenses subsequently
incurred by Indemnitee in connection with the defense of such Proceeding other than reasonable
costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ
legal counsel in such Proceeding, but all Expenses related thereto incurred after notice from the
Company of its assumption of the defense shall be at Indemnitee’s expense unless: (i) the
employment of legal counsel by Indemnitee has been authorized by the
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Company, (ii) Indemnitee has reasonably determined that there may be a conflict of interest
between Indemnitee and the Company in the defense of the Proceeding, (iii) after a Change in
Control (other than a Change in Control approved by a majority of the directors on the Board who
were directors immediately prior to such Change in Control), the employment of counsel by
Indemnitee has been approved by the Independent Counsel, or (iv) the Company shall not in fact have
employed counsel to assume the defense of such Proceeding, in each of which cases all Expenses of
the Proceeding shall be borne by the Company. The Company shall not be entitled to assume the
defense of any Proceeding brought by or on behalf of the Company or as to which Indemnitee shall
have made the determination provided for in (ii), (iii) and (iv) above.
(c) Settlement of Claims. The Company shall not be liable to indemnify Indemnitee
under this Agreement or otherwise for any amounts paid in settlement of any Proceeding effected
without the Company’s written consent, such consent not to be unreasonably withheld; provided,
however, that if a Change in Control has occurred (other than a Change in Control approved by a
majority of the directors on the Board who were directors immediately prior to such Change in
Control), the Company shall be liable for indemnification of Indemnitee for amounts paid in
settlement if the Independent Counsel has approved the settlement. The Company shall not settle any
Proceeding in any manner that would impose any penalty or limitation on Indemnitee without
Indemnitee’s written consent. The Company shall not be liable to indemnify the Indemnitee under
this Agreement with regard to any judicial award if the Company was not given a reasonable and
timely opportunity, at its expense, to participate in the defense of such action; the Company’s
liability hereunder shall not be excused if participation in the Proceeding by the Company was
barred by this Agreement.
7. Establishment of Trust. In the event of a Change in Control (other than a Change in
Control approved by a majority of the directors on the Board who were directors immediately prior
to such Change in Control) the Company shall, upon written request by Indemnitee, create a Trust
for the benefit of the Indemnitee and from time to time upon written request of Indemnitee shall
fund the Trust in an amount sufficient to satisfy any and all Expenses reasonably anticipated at
the time of each such request to be incurred in connection with investigating, preparing for,
participating in, and/or defending any Proceeding relating to an Indemnifiable Event. The amount or
amounts to be deposited in the Trust pursuant to the foregoing funding obligation shall be
determined by the Independent Counsel. The terms of the Trust shall provide that (i) the Trust
shall not be revoked or the principal thereof invaded without the written consent of the
Indemnitee, (ii) the Trustee shall advance, within ten business days of a request by the
Indemnitee, any and all Expenses to the Indemnitee (and the Indemnitee hereby agrees to reimburse
the Trust under the same circumstances for which the Indemnitee would be required to reimburse the
Company under Section 2(c) of this Agreement), (iii) the Trust shall continue to be funded by the
Company in accordance with the funding obligation set forth above, (iv) the Trustee shall promptly
pay to the Indemnitee all amounts for which the Indemnitee shall be entitled to indemnification
pursuant to this Agreement or otherwise, and (v) all unexpended funds in the Trust shall revert to
the Company upon a final determination by the Independent Counsel or a court of competent
jurisdiction, as the case may be, that the Indemnitee has been fully indemnified under the terms of
this Agreement. The Trustee shall be chosen by the Indemnitee. Nothing in this Section 7 shall
relieve the Company of any of its obligations under this Agreement. All income earned on the assets
held in the Trust shall be reported as income by the Company for federal, state, local, and foreign
tax purposes. The Company shall pay
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all costs of establishing and maintaining the Trust and shall indemnify the Trustee against
any and all expenses (including attorneys’ fees), claims, liabilities, loss, and damages arising
out of or relating to this Agreement or the establishment and maintenance of the Trust.
8. Non-Exclusivity. The rights of Indemnitee hereunder shall be in addition to any
other rights Indemnitee may have under the Company’s Certificate of Incorporation, Bylaws,
applicable law, or otherwise; provided, however, that this Agreement shall supersede any prior
indemnification agreement between the Company and the Indemnitee. To the extent that a change in
applicable law (whether by statute or judicial decision) permits greater indemnification than
would be afforded currently under the Company’s Certificate of Incorporation, Bylaws, applicable
law, or this Agreement, it is the intent of the parties that Indemnitee enjoy by this Agreement the
greater benefits so afforded by such change.
9. Liability Insurance. To the extent the Company maintains an insurance policy or
policies providing general and/or directors’ and officers’ liability insurance, Indemnitee shall be
covered by such policy or policies, in accordance with its or their terms, to the maximum extent of
the coverage available for any Company director or officer.
10. Period of Limitations. No legal action shall be brought and no cause of action
shall be asserted by or on behalf of the Company or any Affiliate of the Company against
Indemnitee, Indemnitee’s spouse, heirs, executors, or personal or legal representatives after the
expiration of two years from the date of accrual of such cause of action, or such longer period as
may be required by state law under the circumstances. Any claim or cause of action of the Company
or its Affiliate shall be extinguished and deemed released unless asserted by the timely filing and
notice of a legal action within such period; provided, however, that if any shorter period of
limitations is otherwise applicable to any such cause of action, the shorter period shall govern.
11. Amendment of this Agreement. No supplement, modification, or amendment of this
Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be binding unless in the form of a writing signed by
the party against whom enforcement of the waiver is sought, and no such waiver shall operate as a
waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in
exercising any right or remedy hereunder shall constitute a waiver thereof.
12. Subrogation. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall
execute all papers required and shall do everything that may be necessary to secure such rights,
including the execution of such documents necessary to enable the Company effectively to bring suit
to enforce such rights.
13. No Duplication of Payments. The Company shall not be liable under this Agreement
to make any payment in connection with any claim made against Indemnitee to the extent Indemnitee
has otherwise received payment (under any insurance policy, Bylaw, or otherwise) of the amounts
otherwise indemnifiable hereunder.
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14. Binding Effect. This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective successors (including any direct or
indirect successor by purchase, merger, consolidation, or otherwise to all or substantially all of
the business and/or assets of the Company), assigns, spouses, heirs, and personal and legal
representatives. The Company shall require and cause any successor (whether direct or indirect by
purchase, merger, consolidation, or otherwise) to all, substantially all, or a substantial part, of
the business and/or assets of the Company, by written agreement in form and substance satisfactory
to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform if no such succession had taken
place. The indemnification provided under this Agreement shall continue as to Indemnitee for any
action taken or not taken while serving in an indemnified capacity pertaining to an Indemnifiable
Event even though he may have ceased to serve in such capacity at the time of any Proceeding.
15. Severability. If any provision (or portion thereof) of this Agreement shall be
held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable, the
remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore,
to the fullest extent possible, the provisions of this Agreement (including, without limitation,
each portion of this Agreement containing any provision held to be invalid, void, or otherwise
unenforceable, that is not itself invalid, void, or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, void, or unenforceable.
16. Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware applicable to contracts made and to be performed
in such State without giving effect to its principles of conflicts of laws.
17. Notices. All notices, demands, and other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given if delivered by
hand, against receipt, or mailed, postage prepaid, certified or registered mail, return receipt
requested, and addressed to the Company at:
Pacific Asia Petroleum, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
and to Indemnitee at:
_____________________________
_____________________________
_____________________________
Attention: _____________________
_____________________________
_____________________________
Attention: _____________________
Notice of change of address shall be effective only when given in accordance with this
Section. All notices complying with this Section shall be deemed to have been received on the date
of hand delivery or on the third business day after mailing.
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18. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
[SIGNATURE PAGES FOLLOW]
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In Witness Whereof, the parties hereto have executed this Indemnification Agreement
on and as of the day and year first above written.
“Company”
Pacific
Asia Petroleum, Inc., a Delaware corporation
By: ______________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
By: ______________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
AGREED TO AND ACCEPTED:
“Indemnitee”
___________________________________
By: ________________________________
Name: ___________________________
Title: ___________________________
By: ________________________________
Name: ___________________________
Title: ___________________________
SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT
PACIFIC ASIA PETROLEUM, INC.
PACIFIC ASIA PETROLEUM, INC.