Exhibit 10
PURCHASE AND SALE AGREEMENT
for
REEF VENTURES, L.P.
by and between
IMPACT INTERNATIONAL, LLC
("Impact")
- and -
COAHUILA PIPELINE, LLC
("Coahuila")
(jointly "Seller")
- and -
TIDELANDS OIL & GAS CORPORATION
("Tidelands")
- and -
ARRECEFE MANAGEMENT LLC
("Arrecefe")
(jointly "Buyer")
Dated: May 25, 2004
INDEX OF EXHIBITS AND SCHEDULES
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1. Exhibits
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Exhibit A - Tidelands Note
Exhibit B - Deed of Trust
Exhibit C - Partnership Guaranty
Exhibit D - Pledge Agreement
Exhibit E - Partnership Financial Statements
Exhibit F-1 - Assignment of GP Units
Exhibit F-2 - Assignment of Impact Units
Exhibit F-3 - Assignment of 2003 LOI
Exhibit F-4 - Assignment of 2003 P&S
Exhibit F-5 - Assignment of Gas Purchase Agreement
Exhibit F-6 - Amendment to Certificate of Limited Partnership
Exhibit F-7 - Amendment to Agreement of Limited Partnership
Exhibit G-1 - First Amendment to Stock Purchase Warrant
Exhibit G-2 - First Amendment to Registration Rights Agreement
Exhibit H - Termination Agreement
Exhibit I - Mutual Release
2. Schedules
---------
3.1(a)(vii) - Approved AFE(s)
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "Agreement") is dated and
effective as of the 25th day of May, 2004, at 8:00 a.m., Central Daylight
Savings Time (the "Effective Time"), by and among IMPACT INTERNATIONAL, LLC, an
Oklahoma limited liability company, 000 Xxxx 0xx Xxxxxx, Xxxxx 000, Xxxxx,
Xxxxxxxx 00000 ("Impact"); COAHUILA PIPELINE, LLC, an Oklahoma limited liability
company, 000 Xxxx 0xx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxxx 00000 ("Coahuila")
Impact and Coahuila being sometimes jointly referred to herein as "Seller;"
TIDELANDS OIL & GAS CORPORATION, a Nevada corporation, 0000 Xxxx Xxxxxxx,
Xxxxxxxx 0, Xxx Xxxxxxx, Xxxxx 00000 ("Tidelands"), and ARRECEFE MANAGEMENT LLC,
a Texas limited liability company, 0000 Xxxx Xxxxxxx, Xxxxxxxx 0, Xxx Xxxxxxx,
Xxxxx 00000 ("Arrecefe"), Tidelands and Arrecefe being sometimes jointly
referred to herein as "Buyer."
RECITALS:
A. Reef Ventures, L.P. (the "Partnership") was formed under the laws of
the State of Texas pursuant to that Certificate of Limited Partnership filed
with the Texas Secretary of State on April 9, 2003, and an Agreement of Limited
Partnership dated and effective April 16, 2003 at 8:00 a.m. (the "Partnership
Agreement"), by and among Coahuila, as General Partner, and Impact, Tidelands
and Blackrock Capital Corporation ("Blackrock"), as Limited Partners.
Capitalized terms not defined in this Agreement shall have the meanings given
them in the Partnership Agreement.
B. Coahuila is the General Partner of the Partnership and is the owner
of ten (10) Units (the "GP Units"), being one percent (1%) of all Units in the
Partnership issued and outstanding as of the Effective Time.
C. Impact is a Limited Partner in the Partnership and is the owner of
720 Units (the "Impact Units"), being seventy-two percent (72%) of all Units in
the Partnership issued and outstanding as of the Effective Time.
D. For purposes hereof, the term "Sold Units" shall jointly refer to
the GP Units and Impact Units.
E. Coahuila wishes to sell the GP Units to Arrecefe and Arrecefe wishes
to purchase the GP Units from Coahuila under the terms set forth below.
F. Impact wishes to sell the Impact Units to Tidelands and Tidelands
wishes to purchase the Impact Units from Impact under the terms set forth below.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are mutually agreed to among the parties hereto, Seller and
Buyer agree as follows:
1. Interests to be Purchased and Sold. Arrecefe agrees to purchase and
Coahuilla agrees to sell, for the consideration hereinafter set forth
and subject to the terms herein contained, all right, title and
interest of Coahuilla in the Partnership as of the Effective Time.
Tidelands agrees to purchase and Impact agrees to sell for the
consideration hereinafter set forth and subject to the terms herein
contained, all right, title and interest of Impact in the Partnership
as of the Effective Time.
2. Purchase Price.
(a) GP Units. The Purchase Price for the GP Units shall be Ten and
00/100th Dollars ($10.00), payable by Arrecefe to Coahuila in
cash at Closing (hereinafter defined).
(b) Impact Units. The Purchase Price for the Impact Units shall be
$6,523,773.30, payable as follows:
(i) At Closing, Tidelands will execute a promissory note
to Impact in the form attached hereto as Exhibit A
("Tidelands Note");
(ii) The Tidelands Note shall be secured by (A) a deed of
trust (the "Deed of Trust") from the Partnership to
Impact, covering the pipeline and related facilities,
easements, rights-of-way and the Gas Contract
(hereinafter defined) which comprise the project,
being that 12-inch pipeline Project for transporting
natural gas from Eagle Pass, Texas to Piedras Negras,
Mexico, as defined in the Partnership Agreement, a
copy of said Deed of Trust being attached hereto as
Exhibit B, (B) a guaranty of payment and performance
from the Partnership in the form attached hereto as
Exhibit C (the "Partnership Guaranty"), and (C) a
pledge agreement whereby the Partnership pledges to
Impact its 100% membership interest in Reef, such
pledge agreement being in the form attached hereto as
Exhibit D (the "Pledge Agreement").
3. Representations of Seller.
(a) Representations. Seller hereby represents and warrants to
Buyer that:
(i) Organization and Qualifications. (A) Impact is a
limited liability company duly formed and validly
existing under the law and jurisdiction of Oklahoma,
(B) Coahuila is a limited liability company duly
formed and validly existing under the laws and
jurisdiction of Oklahoma, and (C) the Partnership is
a limited partnership duly formed and validly
existing under the laws and jurisdiction of Texas.
(ii) Due Authorization. Seller has full power to enter
into and perform its obligations under this Agreement
and has taken all proper action to authorize entering
into this Agreement and performing its obligations
hereunder.
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(iii) Approvals. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions
contemplated hereby, nor the compliance with the
terms hereof, will result in any default under any
agreement or instrument to which Seller or the
Partnership is a party, or violate any order, writ,
injunction, decree, statute, rule or regulation
applicable to Seller or the Partnership.
(iv) Valid, Binding and Enforceable. This Agreement
constitutes and the Assignments and other agreements
and documents executed by the Seller as provided for
herein to be delivered at Closing will, when executed
and delivered, constitute the legal, valid and
binding obligation of Seller, enforceable in
accordance with their respective terms.
(v) Litigation. For the period commencing April 16, 2003
at 8:00 a.m. and ending as of the Effective Time (the
"Impact Operating Period"), there are no pending
suits, actions, or other proceedings (including
arbitration proceedings) in which Seller and the
Partnership, or either of them, are a party (or, to
Seller's knowledge, which have been threatened to be
instituted against Seller and/or the Partnership).
(vi) Financial Statements. Exhibit E sets forth the
audited financial statements of the Partnership as of
December 31, 2003, and the related statements of
income and retained earnings, together with the notes
thereto (collectively, the "Financial Statements").
The December 31, 2003 balance sheet that comprises a
part of the Financial Statements is hereinafter
referred to as the "Balance Sheet." The Financial
Statements, together with all other financial
statements of the Partnership delivered by Seller to
Buyer, are correct and complete in all material
respects for the periods stated therein and fairly
present the financial position and results of
operations of the Partnership as of the dates and for
the periods indicated, but in any event limited to
the Impact Operating Period.
(vii) Absence of Undisclosed Liabilities. As of the Closing
Date, the Partnership will not have any liabilities
or obligations, secured or unsecured, accrued or
contingent, known or unknown, except as and to the
extent (A) reflected or reserved against in the most
recent of the Financial Statements or as disclosed in
this Agreement and the Exhibits hereto, (B) Seller
has committed, on behalf of the Partnership, to the
capital expenditures set forth in Schedule 3(a)(vii)
hereof (the "Approved AFEs"), or (C) such liabilities
and/or obligations arose before the Impact Operating
Period. Seller has received no notice of any
liability or obligation excepted under clause (C)
above.
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(viii) Interim Operations. Since the date of the Financial
Statements, the business of the Partnership has been
conducted only in the ordinary and usual course
consistent with past practice. Since the date of the
Balance Sheet, there have not been, to the best of
Seller's information and belief, any material adverse
changes in the financial condition, assets or results
of operations of the Partnership. Seller is not aware
of any circumstances, other than the Xxxxx Deed and
BNC Assignment addressed in Section 3.1(a)(xviii)
below, which may cause the Partnership to suffer any
material adverse change in its business and
operations.
(ix) Permits. Solely with respect to the Impact Operating
Period:
(a) The Permits, as such term is defined in that
Purchase and Sale Agreement for Reef
Marketing, L.L.C. and Reef International,
L.L.C. by and between Tidelands, as Seller,
and Impact and Coahuila, as Buyer, dated
April 16, 2003 (the "2003 P&S") are in full
force and effect.
(b) Reef and the Partnership are in full
compliance with all terms and conditions of
the Permits, the failure with which to
comply would have a materially adverse
effect on (i) Reef International, as Reef
International is currently operated, (ii)
the Partnership, or (iii) the Project.
Neither Seller, the Partnership nor Reef has
received during the Impact Operating Period
any notice of any violation (either before
or during such period) of the Permits, or
any past, present or future events or
conditions which may interfere with
continued compliance with the Permits.
(x) Taxes.
(a) The Partnership has duly filed all tax
reports and returns required to be filed
during the Impact Operating Period and has
duly paid all taxes and other charges due or
claimed to be due during the Impact
Operating Period by federal, state, local or
foreign taxing authorities.
(b) The reserves for taxes reflected in the
Balance Sheet, if any, are reasonably
believed by Seller to be adequate and there
are no tax liens upon the Partnership, or
any of its assets, attributable to the
Impact Operating Period, except liens for
current taxes not yet due.
(c) No issue has been raised by the Internal
Revenue Service (the "IRS") in any
examination of the Partnership's federal
income tax return applicable to the Impact
Operating Period which reasonably could be
expected to result in a proposed deficiency
for any period not so examined by the IRS.
Furthermore, no state of facts exists or has
existed which would constitute grounds for
the assessment of any tax liability against
the Partnership with respect to the Impact
Operating Period.
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(xi) Liens and Encumbrances. The GP Units can and will be
delivered by Coahuila to Arrecefe at Closing free and
clear of all liens and encumbrances. The Impact Units
can and will be delivered by Impact to Tidelands at
Closing free and clear of all liens and encumbrances.
The assets of the Partnership are free and clear of
all liens and encumbrances created by, through and
under Seller or the Partnership during the Impact
Operating Period, but not otherwise. There are no
claims, pending liabilities or contingent liabilities
created by Seller or the Partnership during the
Impact Operating Period which could adversely affect
the Partnership and/or the Sold Units from and after
the Effective Time.
(xii) Bankruptcy. Neither the Seller nor the Partnership
have:
(a) made a general assignment for the benefit of
creditors;
(b) filed any voluntary petition for bankruptcy
or suffered the filing of any involuntary
petition by creditors;
(c) suffered the appointment of a receiver to
take possession of all or substantially of
their assets;
(d) suffered the attachment or other judicial
seizure of all or substantially all of their
assets;
(e) made an offer of settlement, extension or
composition to its creditors; or
(f) failed to pay debts or other obligations of
the Partnership as the same come due, but
only to the extent attributable to the
Impact Operating Period.
(xiii) Employment Liabilities. The Partnership has no
employment contract attendant to the operation and
maintenance of the Partnership.
(xiv) Gas Contract. The Gas Contracts, as defined in the
2003 P&S, have been replaced and superseded by (i)
that Base Contract for Sale and Purchase of Natural
Gas dated November 1, 2003, by and between Reef
Ventures, L.P., as seller, and ONEOK Energy Marketing
Company, as buyer, (ii) that Stock Purchase Agreement
dated April 19, 2004, whereby Coahuila Energy, L.L.C.
acquired the stock of ONEOK, Inc. (i.e., being the
parent company of ONEOK Energy Marketing Company) and
pursuant to which ONEOK assigned the Base Contract
described in clause (i) above to Coahuila Energy,
L.L.C., and (iii) that Gas Purchase Contract dated
May 26, 2003, by and between Maverick Gas Marketing,
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Ltd., as seller, and Reef Marketing, L.L.C., as
buyer, as assigned by Reef Marketing, L.L.C. to the
Partnership on or prior to the date hereof
(collectively, the "Gas Contracts"). The Gas
Contracts are in full force and effect and constitute
all contracts necessary to meet gas throughput
commitments made by the Partnership during the Impact
Operating Period and contemplated in the Project.
(xv) Violations of Law. During the Impact Operating
Period, (i) the Partnership has not been and is not
in violation of any statute, law, rule or regulation
or any judgment, order, writ, injunction or decree of
any court or tribunal in any jurisdiction or any
public, governmental or regulatory body, agency,
department, commission, board, bureau, or other
authority (domestic or foreign) which would adversely
affect the Project, (ii) no material expenditures
are, or based on present requirements will be,
required of the Partnership in order for it to comply
or remain in compliance with any such laws, statutes,
rules, regulations, orders, judgments, writs,
injunctions or decrees, and (iii) neither Seller nor
the Partnership has received any notification of any
asserted present or past failure by the Partnership
to comply with any such law, rule, regulation or
other requirements.
(xvi) Default. Neither Seller nor the Partnership is,
during the Impact Operating Period, in default under
any obligation, contract, plan or arrangement, which
default or defaults would, singly or in the
aggregate, have a material adverse effect upon the
Sold Units or the Project subsequent to the Effective
Time.
(xvii) Asset Condition. The pipeline and other tangible
assets of the Partnership are, to Seller's knowledge,
in good condition, ordinary wear and tear excepted.
(xviii) Property Description. The Partnership owns all of the
property described in Exhibits X-0, X-0, B and C of
the Deed of Trust, except to the extent Exhibit B
shows (a) the fee simple tract to be acquired by deed
(the "Xxxxx Deed") from Xxxxx Land and Cattle Company
as "Pending," and (b) the easement held by BNC
Engineering and to be assigned to the Partnership
(the "BNC Assignment") as "Pending."
(b) Survival. The representations and warranties of Seller
contained in Section 3(a) above shall survive Closing for a
period of three years; provided, however, that the
representation as to ownership set forth in subparagraph
(xviii) above shall continue to survive as long as the title
warranty contained in the Deed of Trust (or in a trustee's
deed based thereon) survives.
4. Representations of Buyer.
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(a) Buyer hereby represents and warrants to Seller that:
(i) Organization and Qualification. (A) Arrecefe is a
Texas limited liability company duly formed and
validly existing under the laws and jurisdiction of
Texas and is in good standing and qualified to do
business in the State of Texas, and (B) Tidelands is
a corporation duly incorporated, validly existing and
in good standing under the laws and jurisdiction of
Nevada.
(ii) Due Authorization. Buyer has full power to enter into
and perform its obligations under this Agreement and
has taken all proper action to authorize entering
into this Agreement and performance of its
obligations hereunder.
(iii) Approvals. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions
contemplated hereby, nor the compliance with the
terms hereof, will result in any default under any
agreement or instrument to which Buyer is a party or
violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Buyer.
(iv) Valid, Binding and Enforceable. This Agreement and
other agreements and documents executed by Buyer as
provided for herein to be delivered at Closing
constitute the legal, valid and binding obligation of
Buyer, enforceable in accordance with its terms.
(v) Litigation. There are no pending suits, actions, or
other proceedings in which Buyer is a party (or, to
Buyer's knowledge, which have been threatened to be
instituted against Buyer) which affect the execution
and delivery of this Agreement or the consummation of
the transactions contemplated hereby, and (B) for
periods prior to April 16, 2003 (the "Tidelands
Operating Period"), there are no pending suits,
actions or other proceedings (including arbitration
proceedings) in which Reef or Reef Marketing, L.L.C.
("Marketing") is a party or which pertains to the
Project (or, to Tideland's knowledge, which have been
threatened to be instituted against Reef, Tidelands
or Marketing, or with respect to the Project).
(vi) 2003 P&S. Solely for purposes of supporting
Tidelands' indemnity to Seller as set forth in
Section 6(b) hereof, Tidelands hereby incorporates by
reference, ratifies and remakes as of April 16, 2003
all representations and warranties made by Tidelands,
as seller, under the 2003 P&S as set forth in Section
3(a)(v) through (xvii).
(b) Survival. The representations and warranties of Buyer
contained in Section 4(a) above shall survive Closing for a
period of three years.
5. Closing. The closing (herein called the "Closing") of the transaction
contemplated hereby shall take place on or before May 28, 2004 at 10:00
a.m. Central Daylight Savings Time, or on such other date and time as
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the Buyer and Seller may mutually agree upon (such location, date and
time, as changed pursuant to mutual written agreement of the parties,
being herein called the "Closing Date"). At the Closing:
(a) Delivery of Assignments. (i) Coahuila shall execute,
acknowledge and deliver to Arrecefe an assignment of the GP
Units in the form attached hereto as Exhibit F-1, (ii) Impact
shall execute, acknowledge and deliver to Tidelands an
assignment of the Impact Units, in the form attached hereto as
Exhibit F-2, (iii) Impact shall cause Impact Energy Services,
LLC ("IES") to assign to Tidelands all rights and obligations
under that letter of intent between IES and Tidelands dated
February 5, 2003, as amended April 3, 2003 (the "2003 LOI"),
and Tidelands shall accept and assume all obligations of IES
under the 2003 LOI, through their joint execution of an
assignment in the form attached hereto as Exhibit F-3, and
(iv) Impact shall execute and deliver to Tidelands an
assignment of its rights and obligations under the 2003 P&S
(and Tidelands shall accept and assume the obligations of
Impact under the 2003 P&S), through their joint execution of
an assignment in the form attached hereto as Exhibit F-4, and
(v) Impact shall cause Reef Marketing, L.L.C. to execute and
deliver an Assignment of Gas Purchase Agreement in the form
attached hereto as Exhibit F-5 (collectively, the
"Assignments"). Additionally, Buyer will provide Seller a
fully executed copy of the Amendment to Certificate of Limited
Partnership in the form attached hereto as Exhibit F-6
reflecting the change of general partner of the Partnership
and the Amendment to Agreement of Limited Partnership in the
form attached hereto as Exhibit F-7 reflecting (i) the
withdrawal of Coahuilla and Impact from the Partnership and
admission of Arrecefe to the Partnership, and (ii) the waiver
by Blackrock Capital Corporation of its preferential right to
purchase and its consent to the admission of Arrecefe and
withdrawal of Coahuila and Impact from the Partnership.
(b) Payment to Seller. Buyer shall pay the Purchase Price which
shall, without limitation, include the execution by Tidelands
of the Tidelands Note and delivery of the same to Impact.
(c) Collateral Documents. Tidelands shall cause the Partnership to
execute, acknowledge (where appropriate) and deliver to Impact
the Deed of Trust, Partnership Guaranty and Pledge Agreement,
in the forms respectively attached hereto as Exhibit B,
Exhibit C and Exhibit D.
(d) First Amendment to Stock Purchase Warrant; First Amendment to
Registration Rights Agreement. The parties shall execute and
deliver counterpart originals of (i) a First Amendment to
Stock Purchase Warrant, modifying and amending that Stock
Purchase Warrant from Tidelands to Impact dated April 16,
2003, such First Amendment to Stock Purchase Warrant to be in
the form attached hereto as Exhibit G-1, and (ii) a First
Amendment to Registration Rights Agreement, modifying and
amending that Registration Rights Agreement by and between
Tidelands and Impact dated April 16, 2003, such First
Amendment to Registration Rights Agreement to be in the form
attached hereto as Exhibit G-2.
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(e) Termination Agreement. Impact and Tidelands shall jointly
execute a termination agreement (the "Termination Agreement")
in the form attached hereto as Exhibit H, whereby Impact and
Tidelands terminate (i) that letter agreement dated April 16,
2003, through which Impact conditionally committed to fund the
Project (and Liquids Project, as defined in the 2003 P&S)
subject to a $8,000,000 cap, and (ii) that side agreement
between Tidelands and Impact dated April 16, 2003, whereby
Impact agreed to fund the balance of its purchase price under
the 2003 P&S upon the satisfaction of certain conditions.
(f) Mutual Release. Tidelands and Impact shall execute and deliver
(each to the other) a mutual release in the form attached
hereto as Exhibit I (the "Mutual Release"), whereby Tidelands
and Impact (for themselves and their respective affiliates,
successors and assigns) mutually release each other from all
claims, losses, liabilities and obligations arising under the
2003 LOI and 2003 P&S.
(g) Non-Foreign Status Affidavit. If Buyer so requests, Seller
will execute and deliver to Buyer an affidavit or other
certification (as permitted by such code) that Seller is not a
"foreign person" within the meaning of Section 1445 (or
similar provisions) of the Internal Revenue Code of 1986 as
amended (i.e., that Seller is not a non-resident alien,
foreign corporation, foreign partnership, foreign trust or
foreign estate as those terms are defined in such code and
regulations promulgated thereunder).
(h) Corporate Resolutions. Buyer and Seller shall deliver to the
other Certificates of Resolutions approving the transaction
contemplated in this Agreement, and authorizing their
respective officers to execute the contracts, assignments and
other documents in connection therewith.
(i) Insurance. Buyer shall deliver to Impact a certificate of
insurance which reflects that, as of the Effective Time, Buyer
has procured commercial general liability insurance, worker's
compensation insurance, property insurance and such other
coverages and in the amounts maintained by Seller during the
Impact Operating Period with respect to the Partnership and
the Project. Such certificate of insurance shall include
Impact as a named insured. Seller shall, at Closing, cancel
all policies of insurance maintained by it during the Impact
Operating Period with respect to the Partnership and its
assets.
6. Indemnifications.
(a) Indemnification by Seller. Seller shall and does hereby
indemnify, defend and hold harmless Buyer and the Partnership,
their respective subsidiary companies, partners and other
affiliates, and their respective officers, directors,
employees, attorneys, contractors and agents (hereinafter
collectively referred to as the "Buyer Group"), from and
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against any and all claims, actions, causes of action,
demands, assessments, losses, damages, liabilities, judgments,
settlements, penalties, costs and expenses (including
reasonable attorneys' fees and expenses), of any nature
whatsoever (collectively, "Damages"), asserted against,
resulting to, imposed upon, or incurred by the Buyer Group,
directly or indirectly, by reason of or resulting from (i) any
breach by Seller of Seller's representations, warranties,
covenants or agreements contained in this Agreement
(collectively, "Buyer Claims"), to the extent and only to the
extent that such Buyer Claims arise and are communicated in
writing to Seller prior to the expiration of the three-year
anniversary of the Closing Date, and (ii) any claim which
relates to, arises from or is directly associated with the
Sold Units or the management and/or operation of the
Partnership during the Impact Operating Period to the extent
and only to the extent that such claim arises and is
communicated in writing to Seller prior to the three-year
anniversary of the Closing Date.
(b) Indemnification by Buyer. Buyer shall and does hereby
indemnify, defend and hold harmless Seller, and their
respective subsidiary companies, partners and other affiliates
(specifically including, without limitation, IES), and their
respective officers, directors, employees, attorneys,
contractors and agents (hereinafter collectively referred to
as the "Seller Group"), from and against any and all Damages
asserted against, resulting to, imposed upon or incurred by
the Seller Group, directly or indirectly, by reason of or
resulting from (i) any breach by Buyer of any of its
representations, warranties, covenants or agreements contained
in this Agreement (collectively, "Seller Claims"), to the
extent and only to the extent that such Seller Claims arise
and are communicated in writing to Buyer prior to the
three-year anniversary of the Closing Date, and (ii) any claim
which relates to, arises from or is directly associated with
(A) the management and/or operation of the Project by
Tidelands during the Tidelands Operating Period, to the extent
and only to the extent such claim arises and is communicated
in writing to Tidelands prior to the three-year anniversary of
the Closing Date, and/or (B) the ownership of the Sold Units
or the management and/or operation of the Partnership for
periods from and after the Effective Time, but not if the
claims arise from events during the Impact Operating Period.
(c) Limitation on Liability. The indemnification obligations of
the parties hereto pursuant to this Section 6 shall be subject
to the following limitations:
(i) The amount of Damages required to be paid by any
party to indemnify any other party pursuant to this
Section 6 as a result of any Seller Claim or any
Buyer Claim shall be reduced to the extent of any
amounts actually received by such other party after
the Closing Date pursuant to the terms of the
insurance policies (if any) covering such claim,
except to the extent such reduction would diminish
coverage under any such policy.
(ii) The indemnification obligations of the parties
pursuant to this Agreement shall be limited to actual
Damages and shall not, except in the case of a
willful breach of this Agreement, include punitive or
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exemplary Damages, provided that any punitive or
exemplary Damages recovered by a third party
(including any governmental entities) against a
person entitled to indemnity pursuant to this Section
6 shall be included in the Damages recoverable under
such indemnity.
(d) Procedure for Indemnification. Promptly after receipt by an
indemnified party under Section 6(a) or 6(b) of notice of the
commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against an indemnifying
party under such Section, give written notice to the
indemnifying party of the commencement thereof. The failure so
to notify the indemnifying party shall relieve it of any
liability that it may have to any indemnified party with
respect to such action. In case any such action shall be
brought against an indemnified party and it shall give written
notice to the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate
therein and, to the extent that it may wish, to assume the
defense thereof with counsel reasonably satisfactory to such
indemnified party. If the indemnifying party elects to assume
the defense of such action, the indemnified party shall have
the right to employ separate counsel at its own expense and to
participate in the defense thereof. If the indemnifying party
elects not to assume (or fails to assume) the defense of such
action, the indemnified party shall be entitled to assume the
defense of such action with counsel of its own choice, at the
expense of the indemnifying party.
7. No Commissions Owed. Seller agrees to indemnify and hold harmless Buyer
and the Partnership (and their affiliates, and their respective
officers, directors, employees, attorneys, contractors and agents of
Buyer, the Partnership and such affiliates) from and against any and
all claims, actions, causes of action, liabilities, damages, losses,
costs or expenses (including, without limitation, court costs and
attorneys' fees) of any kind or character arising out of or resulting
from any agreement, arrangement or understanding alleged to have been
made by, or on behalf of, Seller and/or the Partnership with any broker
or finder in connection with this Agreement or the transaction
contemplated hereby. Buyer agrees to indemnify and hold harmless Seller
(and their affiliates, and the respective officers, directors,
employees, attorneys, contractors and agents of Seller and such
affiliates) from and against any and all claims, actions, causes of
action, liabilities, damages, losses, costs or expenses (including,
without limitation, court costs and attorneys fees) of any kind or
character arising out of or resulting from any agreement, arrangement
or understanding alleged to have been made by, or on behalf of, Buyer
with any broker or finder in connection with this Agreement including,
without limitation, Blackrock Energy Corporation, Blackrock Capital
Corporation or Xxxxxxx X. Xxxxxxx, Xx., or the transaction contemplated
hereby.
8. Notices. All notices and other communications required under this
Agreement shall (unless otherwise specifically provided herein) be in
writing and be delivered personally, by recognized commercial courier
or delivery service which provides a receipt, by fax (with receipt
acknowledged), or by registered or certified mail (postage prepaid), at
the following addresses:
11
If to Seller: Impact International, LLC
000 Xxxx 0xx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attn: Xxx Xxxxxxxx
Fax: (000) 000-0000
Coahuila Pipeline, LLC
000 Xxxx 0xx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attn: Xxx Xxxxxxxx
Fax: (000) 000-0000
If to Buyer: Tidelands Oil & Gas Corporation
0000 Xxxx Xxxxxxx, Xxxxxxxx 0
Xxx Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxx
Fax: (____) ____________
Arrecefe Management LLC
0000 Xxxx Xxxxxxx, Xxxxxxxx 0
Xxx Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxx
Fax: (____) ____________
Such notices and other communications will be considered as properly
made, given or served as follows: (i) if delivered in person, on the
date of the personal delivery; (ii) if sent by certified mail, on the
date which is five (5) business days after deposit of the same in the
United States mail, postage prepaid, addressed as set forth herein and
certified with return receipt requested; (iii) if sent by overnight
courier, on the business day next following delivery of same to the
courier service, addressed as set forth herein; or (iv) if sent by
facsimile, on the date the facsimile is transmitted to the recipient,
as evidenced by the sender's confirmation. Either party may specify as
its proper address any other post office address within the continental
limits of the United States by giving notice to the other party, in the
manner provided in this Section, at least ten (10) days prior to the
effective date of such change of address.
9. Miscellaneous Matters.
(a) Further Assurances. Seller agrees that, after the Closing, it
shall execute and deliver, and shall otherwise cause to be
executed and delivered, from time to time, such further
instruments, notices, and other documents, and do such other
and further acts and things, as may be reasonably necessary to
more fully and effectively grant, convey and assign the Sold
Units to Buyer.
12
(b) Parties Bear Own Expenses. Each party shall bear and pay all
expenses (including, without limitation, legal fees) incurred
by it in connection with the transaction contemplated by this
Agreement.
(c) Entire Agreement. This Agreement (together with the exhibits
hereto) contains the entire understanding of the parties
hereto with respect to subject matter hereof and supersedes
all prior agreements, understandings, negotiations, and
discussions among the parties with respect to such subject
matter.
(d) Amendments, Waivers. This Agreement may be amended, modified,
supplemented, restated or discharged (and provisions hereof
may be waived) only by an instrument in writing signed by the
party against whom enforcement of the amendment, modification,
supplement, restatement or discharge (or waiver) is sought.
(e) Successors and Assigns. The Agreement shall be binding on and
inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Neither Seller
nor Buyer may assign any or all of its rights and obligations
under this Agreement to any third party except with the prior
written consent of the other party.
(f) Counterpart Execution. This Agreement may be executed in
counterparts, all of which are identical and all of which
constitute one and the same instrument. It shall not be
necessary for Buyer and Seller to sign the same counterpart.
(g) Capitalized Terms. Each capitalized term in this Agreement,
unless specifically defined herein, shall have the meaning
given such term in the 2003 P&S.
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on
the date set forth above.
"SELLER"
IMPACT INTERNATIONAL, LLC
by its Managing Member,
Impact Energy Services, LLC
By:_________________________________
Xxx Xxxxxxxx, Manager
13
COAHUILA PIPELINE, LLC
by its Sole Member,
Impact Energy Services, LLC
By:_________________________________
Xxx Xxxxxxxx, Manager
"BUYER"
TIDELANDS OIL & GAS CORPORATION
By:_________________________________
Xxxxxxx X. Xxxx, President
ARRECEFE MANAGEMENT LLC
By:_________________________________
Xxxxxxx X. Xxxx, Manager
14
EXHIBIT A
Tidelands Note
--------------
PROMISSORY NOTE
$6,523,773.30 (U.S.) May 25, 2004
FOR VALUE RECEIVED, Tidelands Oil & Gas Corporation, a Nevada
corporation, whose address is 0000 Xxxx Xxxxxxx, Xxxxxxxx 0, Xxx Xxxxxxx, Xxxxx
00000 ("Borrower"), promises to pay Impact International, L.L.C., an Oklahoma
limited liability company, whose address is 000 Xxxx 0xx Xxxxxx, Xxxxx 000,
Xxxxx, Xxxxxxxx 00000, or order (the "Lender"), the principal sum of Six Million
Five Hundred Twenty-Three Thousand Seven Hundred Seventy-Three and 30/100
Dollars ($6,523,773.30)], with interest thereon at the prime rate of interest
published from time to time by The Wall Street Journal, plus two percent (2.0%),
payable at the address of Lender set forth above, or at such other place as the
Lender may specify in writing, in lawful money of the United States of America,
payable as described in the following paragraph.
This Note shall be paid in the following manner:
(i) Borrower shall pay interest only for the first fifteen
(15) months commencing June 1, 2004, such payments being made through
five (5) quarterly payments, the first interest payment being due and
payable on September 1, 2004; provided, however, that such quarterly
payments of interest shall not exceed an amount which is equal to one
hundred percent (100%) of the net cash flow received for such preceding
quarter by Borrower and its wholly-owned subsidiary, Arrecefe
Management LLC, from Reef Ventures, L.P. For purposes hereof, "net cash
flow" shall have the same meaning given such term in Section 3.01 of
the Deed of Trust executed contemporaneously herewith and attached
hereto as Exhibit A; and
(ii) Commencing with the sixth (6th) quarter, Borrower shall
make quarterly payments of principal and interest amortized over twenty
(20) years, but not to exceed an amount which is equal to one hundred
percent (100%) of the net cash flow received for such preceding quarter
by Borrower and its wholly-owned subsidiary, Arrecefe Management LLC,
from Reef Ventures, L.P. For purposes hereof, "net cash flow" shall
have the same meaning given such term in Section 3.01 of the Deed of
Trust executed contemporaneously herewith and attached hereto as
Exhibit A; and
1
(iii) The initial payment of principal and interest payable
under subparagraph (ii) above shall be due on December 1, 2005, which
payments shall continue on a quarterly basis until the end of the
fourth (4th) year from and after the date hereof, whereupon all
remaining principal and interest owing as of June 1, 2008 (the
"Maturity Date") shall become immediately due and payable.
Borrower acknowledges that a possibility exists that indebtedness owing
hereunder as of the Maturity Date may exceed the original principal indebtedness
evidenced hereby (i.e., negative amortization).
If any amount payable under this Note is not paid in accordance with
the terms hereof, such amount shall bear interest at the rate of twelve percent
(12%) per annum until paid. In the event of such a default under this Note,
which remains uncured ten (10) days after written notice thereof to Borrower,
the entire sum of principal and any interest on past-due amounts payable
hereunder shall immediately become due and payable at the option of the Lender
of this Note, and thereafter such Lender shall have the right to proceed
immediately to enforce the rights of the Lender for the entire amount of the
Note without any notice to the Borrower or any other act by the Lender. If suit
is brought to collect this Note, the Lender shall be entitled to collect all
reasonable costs and expenses of suit including but not limited to reasonable
attorneys' fees.
Borrower may prepay the principal amount outstanding in part or in full
at any time, without penalty. Presentment, notice of dishonor, and protest are
hereby waived by all makers, sureties, guarantors and endorsers hereof. This
Note shall be binding upon Borrower and its successors and assigns.
In the event that a voluntary case is commenced by, or an involuntary
case is commenced against Borrower seeking liquidation, reorganization or other
relief with respect to Borrower's debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect, which case shall not have been
dismissed within ninety (90) days after entry of the order for relief, this Note
(together with accrued interest thereon), without any notice to Borrower or any
other act by Lender, shall become immediately due and payable without
presentment, demand, protest, notice of intent to accelerate or other notice of
any kind, all of which are hereby waived by Borrower.
Pursuant to that certain Amended Stock Purchase Warrant dated on even
date herewith by and between Borrower and Lender, a copy of which is attached
hereto as Exhibit B (the "Amended Stock Purchase Warrant"), Lender may hereafter
be required to exercise the Amended Stock Purchase Warrant, on a cash basis,
which would result in Lender's execution of a promissory note payable to
Borrower. In such event, the parties agree that such promissory note to be
delivered by Lender to Borrower under the Amended Stock Purchase Warrant will be
immediately cancelled in exchange for an amendment to this Note, whereby the
principal sum owed hereunder shall be reduced and offset by the dollar amount
owed by Lender to Borrower, i.e., incident to Lender's cash exercise under the
Amended Stock Purchase Warrant.
2
This Note is secured by (i) a Guaranty from Reef Ventures, L.P. in the
form attached hereto as Exhibit C, (ii) a Deed of Trust, Mortgage, Security
Agreement, Financing Statement and Assignment from Reef Ventures, L.P. in the
form attached hereto as Exhibit A, and (iii) a Pledge Agreement from Reef
Ventures, L.P. in the form attached hereto as Exhibit D.
DATED and effective as of May 25, 2004 at 8:01 a.m. Central Daylight
Savings Time.
TIDELANDS OIL & GAS
CORPORATION
By:__________________________
Xxxxxxx X. Xxxx, President
3
EXHIBIT B
Deed of Trust
DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT,
FINANCING STATEMENT AND ASSIGNMENT
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. A POWER OF SALE MAY ALLOW
THE LENDER OR THE TRUSTEE TO TAKE THE DEED OF TRUST PROPERTY AND SELL IT WITHOUT
GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE GRANTOR UNDER THIS
INSTRUMENT.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES.
THIS INSTRUMENT COVERS PROCEEDS OF COLLATERAL.
THIS INSTRUMENT COVERS PRODUCTS OF COLLATERAL.
THIS INSTRUMENT COVERS RIGHTS IN MINERALS AND OTHER SUBSTANCES OF VALUE WHICH
MAY BE EXTRACTED FROM THE EARTH (INCLUDING WITHOUT LIMITATION NATURAL GAS, AND
COAL BED METHANE GAS). THIS FINANCING STATEMENT IS TO BE FILED FOR RECORD, AMONG
OTHER PLACES, IN THE REAL ESTATE RECORDS OF THE COUNTY RECORDERS OF THE COUNTIES
LISTED ON EXHIBITS A-1, A-2 OR B HERETO. THE GRANTOR HAS AN INTEREST OF RECORD
IN THE REAL ESTATE CONCERNED, WHICH INTERESTS ARE DESCRIBED IN EXHIBIT B,
ATTACHED HERETO.
THIS INSTRUMENT WAS PREPARED BY AND WHEN RECORDED OR FILED SHOULD BE RETURNED
TO:
XXX X. XXXXX
Pray, Walker, Jackman, Xxxxxxxxxx & Xxxxxx
000 Xxxxx Xxxxx
000 Xxxx 0xx Xxxxxx
Xxxxx, Xxxxxxxx 00000-0000
KNOW ALL MEN BY THESE PRESENTS THAT:
REEF VENTURES, L.P., a Texas limited partnership with offices at 000
Xxxx 0xx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxxx 00000 ("Grantor"), for and in
consideration of the sum of TEN DOLLARS ($10.00) to Grantor in hand paid by XXX
XXXXXXXX, whose address is 000 Xxxx 0xx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxxx 00000
(herein called the "Trustee"), and IMPACT INTERNATIONAL, L.L.C., an Oklahoma
limited liability company with offices at 000 Xxxx 0xx Xxxxxx, Xxxxx 000, Xxxxx,
Xxxxxxxx 00000 ("Lender"), and in further consideration of the agreement of the
Lender to extend credit to Tidelands Oil & Gas Corporation, a Nevada corporation
with offices at 0000 Xxxx Xxxxxxx, Xxxxxxxx 0, Xxx Xxxxxxx, Xxxxx 00000
("Tidelands"), as evidenced by that certain note given by Tidelands to Lender
and that certain unlimited guaranty executed by Grantor as hereinafter
described, and of the loans as hereinafter recited, and in order to secure the
payment of the indebtedness hereinafter referred to and the performance of the
obligations, covenants, agreements and undertakings of Grantor hereinafter
described, does hereby GRANT, BARGAIN, SELL, CONVEY, MORTGAGE, PLEDGE, TRANSFER,
ASSIGN and SET OVER to the Trustee and Lender with power of sale, the following
property:
A. All of Grantor's right, title and interest in and to the gas
pipelines, meters, valves, compressors, equipment and other personal property,
as the same might (with Lender's prior written approval not to be unreasonably
withheld) be modified, improved, expanded or extended from time to time (the
"Facilities") comprising that certain twelve-inch natural gas pipeline from
Eagle Pass, Texas to Piedras Negras, Coahuila, Mexico, as depicted on Exhibit
A-1 and as more particularly described in Exhibit A-2 (the "River Crossing
Project");
B. All of Grantor's interest in and to all easements, rights of way,
fee simple surface rights and surface agreements more particularly described in
Exhibit B;
C. All of Grantor's interest in, to and under all natural gas purchase
and sale agreements, including, but not limited to, those contracts more
particularly described in Exhibit C (collectively, the "Contracts");
D. All of Grantor's interest in and to all other tangibles,
miscellaneous interests or other assets on or used in connection with the Deed
of Trust Properties (as defined below), specifically, or the River Crossing
Project, generally, and, including, without limitation, all operational files,
engineering files, marketing files, accounting files, regulatory files,
production records, title opinions, reserve reports, contract files and maps,
and geophysical or geological interpretations or data; and
E. The proceeds and products of the foregoing, and all accounts
resulting from the transportation, gathering or sale of natural gas, coal bed
methane gas and other hydrocarbons by means of the Facilities, together with any
and all corrections or amendments to, or renewals, extensions or ratifications
of any of the same, or of any instrument relating thereto (collectively, the
"Deed of Trust Properties").
TO HAVE AND TO HOLD, the Deed of Trust Properties unto Lender forever,
together with all and singular the tenements, hereditaments and appurtenances
now or hereafter belonging to or appertaining to the Grantor's present or future
rights, title, interest or estate, in and to all or any part thereof.
BUT IN TRUST, NEVERTHELESS, for the benefit and security of the holders
of the indebtedness secured hereby and upon the trusts and subject to the terms
and provisions herein set forth. Upon the payment in full of all Secured
Indebtedness, Lender shall execute and deliver to Grantor a release of this Deed
of Trust Instrument in form reasonably satisfactory to Grantor.
ARTICLE I
SECURED INDEBTEDNESS
1.01. Indebtedness. This Deed of Trust (as defined below) is made
irrevocably in trust, with power of sale to secure and enforce the payment of
the following notes, obligations, indebtedness and liabilities:
(a) Guaranty. The Grantor's obligations under that certain
Guaranty to Lender dated of even date herewith (the "Guaranty"), such
Guaranty being given to secure that certain promissory note dated of
even date herewith executed by Tidelands and payable to Lender in the
aggregate principal amount of Six Million, Five Hundred Twenty-Three
Thousand Seven Hundred Seventy-Three and 30/100 Dollars
($6,523,773.30), which Note bears interest as provided therein and
contains provisions for acceleration of maturity as therein set forth
(the "Note");
(b) Deed of Trust. All indebtedness incurred or arising
pursuant to the provisions of this Deed of Trust, Mortgage with Power
of Sale, Security Agreement, Financing Statement and Assignment (herein
called the "Deed of Trust");
(c) Renewals. All guarantees given in substitution for the
Guaranty and all renewals or extensions of any of the indebtedness
evidenced by the Note or otherwise hereinabove mentioned together will
all interest, attorney's fees, and other charges thereon or incurred in
connection therewith.
1.02. Definition of Secured Indebtedness. The indebtedness referred to
in subparagraphs (a), (b) and (c) of Section 1.01 hereinabove, and all renewals
and extensions thereof and all substitutions therefor, are sometimes hereinafter
referred to as the "Secured Indebtedness."
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
2.01. Representations and Warranties. Grantor hereby represents and
warrants as follows:
(a) Authority. Grantor has full power to enter into and
perform its obligations under this Deed of Trust and has taken all
proper action to authorize entering into this Deed of Trust and the
performance its obligations hereunder.
(b) Approvals. Neither the execution and delivery of this Deed
of Trust, nor the consummation of the transactions contemplated hereby,
nor the compliance with the terms hereof, will result in any default
under any agreement or instrument to which the Grantor is a party, or
violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Grantor.
(c) Valid, Binding and Enforceable. This Deed of Trust
constitutes the legal, valid and binding obligation of the Grantor,
enforceable in accordance with its terms.
(d) Liens and Encumbrances. The Deed of Trust Properties are
free and clear of all liens and encumbrances securing debt or
indebtedness for borrowed money of whatsoever kind and nature arising
by, through and under Tidelands or Grantor and attributable to the
Grantor Operational Period (hereinafter defined), but not otherwise.
(e) Title. Grantor agrees to warrant and forever defend
Grantor's title to the Deed of Trust Properties against the claims of
all persons whomsoever claiming, or to claim the same or any part
thereof by, through or under Tidelands or Grantor during the Grantor
Operational Period but not otherwise. If the validity or priority of
this Deed of Trust, or any rights, titles, lien or interests created or
evidenced hereby with respect to the Deed of Trust Properties, or any
part thereof, shall, with respect to period of Grantor's ownership or
control prior to April 16, 2003 or subsequent to the date hereof
(herein called the "Grantor Operational Period") be endangered or
questioned, or shall be attacked, directly or indirectly, or if any
legal proceedings are instituted against Grantor in respect thereto,
Grantor will give written notice thereof to Lender, and at Grantor's
own cost and expense, will diligently endeavor to cure any defects that
may be developed or claimed, and will take all necessary and proper
steps for the prosecution or defense of such legal proceedings,
including, but not limited to, the employment of counsel, the
prosecution or defense of litigation and the release or discharge of
all such adverse claims. Lender is hereby authorized and empowered to
take such additional steps that do not interfere with Grantor's actions
as in Lender's judgment or discretion may be necessary or proper in the
prosecution or defense of such legal proceedings, including, but not
limited to, the employment of independent counsel, the prosecution or
defense of litigation, and the compromise or discharge of any adverse
claims made with respect to the Deed of Trust Properties, and, if
Lender's involvement in such legal proceedings is due to Grantor's
failure to adequately prosecute or defend such litigation, all expenses
so incurred of every kind and character shall be a demand obligation
owing by Grantor and shall bear interest from the date of expenditure
until paid at the same rate as is provided in the Note for interest on
unmatured principal, and shall be secured by the lien evidenced by this
instrument, and the party incurring such expense shall be subrogated to
all rights of the person receiving such payment.
(f) Right to Proceeds. Grantor is entitled to receive all
Proceeds (hereinafter defined) attributable to the River Crossing
Project and arising during the Grantor Operational Period.
(g) Default. Neither Tidelands nor Grantor is, during the
Grantor Operational Period, in default under any obligation, contract
(including the Contracts), plan or arrangement, which default or
defaults would, singly or in the aggregate, have a material adverse
effect upon the Deed of Trust Properties subsequent to the date of this
Deed of Trust.
2.02. Covenants. So long as the Secured Indebtedness or any part
thereof remains unpaid, and whether or not Grantor is the operator of the Deed
of Trust Properties, Grantor further covenants and agrees that either personally
or through an operator (and at Grantor's expense):
(a) Sale or Encumbrance. Grantor will not at any time during
the existence hereof, without first obtaining Lender's prior written
consent not to be unreasonably withheld, sell, assign, transfer,
mortgage, encumber or otherwise dispose of any of the Deed of Trust
Properties, or, except as provided in subparagraph (c) of this Section
2.02, remove or permit to be removed, any personal or other removable
property at any time covered hereby from the premises upon which the
same may be situated.
(b) Extensions and Renewals. By agreement with the maker or
makers of any instrument evidencing any indebtedness at any time
secured hereby, Lender, without notice to or consent of any other party
to this Deed of Trust, may from time to time extend the time of payment
of the whole or any part of such indebtedness, or may accept from said
maker or makers one or more new instruments in the same or different
form in renewal of or by way of substitution for any instrument of
indebtedness without in any manner impairing or affecting the lien of
this Deed of Trust or any of Lender's rights hereunder.
(c) Maintenance and Repair. If applicable, Grantor shall cause
to be kept and maintained in good repair and sufficient operating
condition all buildings, structures, machinery, meters, valves,
compressors, equipment, fixtures or other personal property and
improvements now or hereafter constituting part of the Deed of Trust
Properties, including the making of all necessary repairs, renewals,
replacements, additions and improvements.
(d) Operation of Deed of Trust Properties. Grantor will cause
the Deed of Trust Properties to be operated in a good and workmanlike
manner as would a prudent operator, in accordance with generally
accepted practices, all applicable rules, regulations and orders
promulgated by all duly constituted authorities and in accordance with
the provisions of the Contracts, Easements, permits and any and all
other agreements or instruments comprising or applicable to the Deed of
Trust Properties.
(e) Enforcement of Contracts. Grantor will cause all of the
terms and provisions, express or implied, of the Contracts, Easements
and of any other permits, agreements or instruments applicable to the
River Crossing Project or comprising the Deed of Trust Properties to be
observed and performed. If applicable, except with the prior written
consent of the Lender, Grantor will not amend or terminate any of such
Contracts, Easements, permits or agreements in whole or in part.
(f) Maintenance of Existence. Grantor will continue to
maintain Grantor's existence and Grantor's right to do business in the
State of Texas and in each other domestic or foreign jurisdiction where
any part of the Deed of Trust Properties are situated, and will pay or
cause to be paid all franchise, license, or other fees or taxes
necessary to preserve the existence of every signatory hereto, in every
domestic or foreign jurisdiction wherein any of the Deed of Trust
Properties may be situated.
(g) Taxes. Grantor will promptly pay, or cause to be paid,
before delinquent, all taxes, assessments and other governmental
charges of every kind and character now or hereafter levied, imposed or
assessed against the Deed of Trust Properties, or any part thereof, or
which might become a lien thereon, including, if applicable, all such
as may be incident to the operation, development or maintenance of said
properties, or the production of natural gas, coal bed methane gas,
casinghead gas or other hydrocarbons therefrom and will do all things
and perform all acts necessary or proper to accomplish the foregoing
and prevent the breach or forfeiture of any Contract, Easement, permit
or other agreement applicable to the River Crossing Project; provided,
however, that if Grantor shall fail, at any time, to make such
payments, Lender shall be entitled to do so on its behalf, and any such
payments by Lender shall not reduce the amount of indebtedness secured
hereby but shall be added to and become a part thereof.
(h) Debts and Liabilities. Grantor will promptly pay, or cause
to be paid, all debts and liabilities of any character, including
without limitation all debts and liabilities for labor, material and
equipment incurred during the Grantor Operational Period with respect
to the Deed of Trust Properties.
(i) Business Records. Grantor will keep accurate books and
records in accordance with generally accepted accounting principles, in
which full, true and correct entries shall be promptly made as to all
information and reports received by Grantor, including but not limited
to, all operational records and contracts concerning the Deed of Trust
Properties, and all such books and records shall upon reasonable notice
during Grantor's normal business hours be subject to inspection by
Lender and Lender's duly authorized representatives.
(j) Insurance.. Grantor will cause to be procured and kept in
force in a company or companies acceptable to Lender, all such workers'
compensation and public liability insurance as may from time to time be
reasonably required by Lender with respect to the Deed of Trust
Properties, or any part thereof; and will cause to be kept such part of
the Deed of Trust Properties which is of an insurable nature and of a
character usually insured by persons operating similar facilities or
properties insured with companies of recognized responsibility
satisfactory to Lender against loss or damage by fire and from other
causes customarily insured against; and shall notify all insurers that
Lender is a loss payee under all applicable policies. All policies
evidencing such insurance shall contain clauses providing that the
proceeds thereof shall be payable to Grantor and Lender as their
interests may appear. All amounts so received shall be applied toward
the immediate repair and restoration by Grantor of the damaged
Facilities. If Grantor has made such repairs prior to receipt of
insurance proceeds, Grantor shall be entitled to reimburse itself from
such insurance proceeds. If the Facilities have been substantially or
completely destroyed by fire or other casualty and Grantor decides not
to expeditiously reconstruct such Facilities or, with Lender's prior
written approval (not to be unreasonably withheld) to expeditiously
construct alternative facilities, the parties agree that all insurance
proceeds that are not used or to be used to reconstruct the Facilities
or to construct approved alternative Facilities shall be applied as
follows: First, to pay all costs, charges and expenses incurred by
Grantor and/or Lender in collection of such insurance proceeds; second,
to the payment of the Note and all other Secured Indebtedness; and,
third, the balance remaining, if any, being payable to Grantor.
(k) Expenses. Grantor will cause to be paid, promptly as and
when due and payable, all expenses incurred in or arising from the
operation, maintenance or development of the Deed of Trust Properties
and attributable to the Grantor Operational Period (except as may be
contested in good faith and by appropriate judicial or other
proceedings). Grantor shall neither expend nor commit to expend any
monies for the enhancement, improvement, expansion or extension of the
Facilities that would constitute and offset against Net Cash Flow (as
contemplated in Section 3.01 hereof), except with the prior written
consent to Lender, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, Lender acknowledges that it has
consented to Grantor's capital commitments which are defined as the
Approved AFEs in that Purchase and Sale Agreement of even date herewith
by and among Lender, et al., as seller, and Tidelands Oil & Gas
Corporation, et al., as buyer.
(l) Further Assurances. Whenever and as often as requested by
Lender, Grantor shall promptly execute and deliver, or cause to be
executed and delivered, all such other and further instruments,
documents or assurances (including all such as may from time to time be
required by gas producers and purchasers) and promptly shall do or
cause to be done all such other and further things as may by Lender
reasonably be deemed necessary, expedient or advisable in order to
better and more fully preserve or vest in Lender all rights, interests,
powers, benefits, privileges and advantages conferred or intended to be
conferred by this Deed of Trust, or by any other instrument delivered
simultaneously or pursuant hereto.
(m) Lender's Right to Perform; Subrogation. Grantor agrees
that if Grantor fails to perform any act or to take any action which
hereunder Grantor is required to perform or take, or to pay any money
which hereunder Grantor is required to pay, Lender, in Grantor's name
or in Lender's own name, may, but shall not be obligated to perform or
cause to be performed, such act or take such action or pay such money
and any expenses so incurred by Lender and any money so paid by Lender
shall be a demand obligation owing by Grantor, and shall bear interest
from the date of making such payment until paid, at the same rate as
provided in the Note for interest on past due principal and shall be a
part of the Secured Indebtedness and shall be secured by this Deed of
Trust and by any other instrument securing the Secured Indebtedness.
Lender, upon making any such payment, shall be subrogated to all of the
rights of the person, corporation or body politic receiving such
payment.
2.03. Continuing Effect. The above and foregoing representations,
warranties and covenants shall at all times be construed to be covenants for the
benefit of Lender and they shall remain in full force and effect,
notwithstanding the assignment hereof or the payment of all the indebtedness
secured hereby, and the release, either partially or wholly, of the lien hereof,
or any foreclosure thereof.
ARTICLE III
ASSIGNMENT OF NET CASH FLOW
3.01. Assignment and Payment. As further security for the payment of
all Secured Indebtedness and to facilitate the discharge of all such
indebtedness and as cumulative of any and all rights herein provided for,
Grantor hereby warrants, bargains, conveys, sells, transfers, assigns, sets over
and delivers unto Lender, and Lender's successors and assigns, all of Grantor's
net cash flow derived from the Deed of Trust Properties ("Net Cash Flow")
including, but not limited to, revenues, throughput charges and other sources of
income (collectively, "Proceeds") arising or resulting from Grantor's sale or
transportation of natural gas, coal bed methane gas and other hydrocarbons
pursuant to the Contracts and in the context of the River Crossing Project, and
all Proceeds derived therefrom and all accounts and contract rights of Grantor
under which such Proceeds may arise; and, it is the intention of the parties
that such assignment of Net Cash Flow shall be a present assignment. As used
herein, the term "Net Cash Flow" shall mean gross Proceeds derived by Grantor
with respect to the Deed of Trust Properties, less and except (i) the actual
costs incurred and paid by Grantor of operating, maintaining and (if approved by
Lender as contemplated in Section 2.02(k) above) improving the Deed of Trust
Properties (but excluding any cost or expense payable by Grantor to parties
affiliated with Grantor if Grantor's agreement or arrangement with its affiliate
was not pre-approved by Lender, or, if pre-approved by Lender, such cost or
expense exceeds rates or charges usual and customary in arm's-length
transactions of similar type and character), (ii) the actual costs incurred and
paid by Grantor in the purchase of any natural gas, coal bed methane gas or
other hydrocarbons to be transported through the Facilities, and (iii) Grantor's
internal general and administrative expenses not to exceed $1,000 per month.
Notwithstanding the present nature of this assignment, Grantor shall be entitled
to receive all Net Cash Flow until the Grantor receives a valid written notice
from Lender ("Lender's Notice") of a Default, as defined in Section 6.01.
3.02. Payment Orders. Independent of the foregoing provisions and
authorities herein granted, after Grantor receives a valid Lender's Notice of a
Default, Grantor agrees to execute and deliver, if applicable, any and all
transfer orders, division orders and other instruments that may be requested by
Lender at any time, including prospectively, or that may be required by any
purchaser of hydrocarbons for the purpose of effectuating the payment to Lender
of Proceeds otherwise payable by third parties to Grantor under the Contracts.
If, under any Contract, any Proceeds are required to be paid to Grantor, so that
under such Contract payment cannot be made of such Proceeds to Lender upon
receipt of Lender's Notice, Grantor's interest in all such Proceeds which, for
any reason, may be paid to Grantor shall, when received by Grantor, constitute
trust funds in Grantor's hands and shall immediately be paid over to Lender. The
foregoing notwithstanding, Lender is still entitled only to Net Cash Flow, and
Lender shall make available to Grantor promptly upon request, Proceeds received
by Lender that are excludable from Net Cash Flow.
3.03. Indemnification Against Third Party Claims. Grantor agrees to
indemnify and hold harmless Lender, and Lender's successors and assigns, against
any and all liabilities, actions, claims, judgments, costs, charges and
attorney's fees paid by or received by Lender, either before or after the
payment in full of the Secured Indebtedness, to the extent the liabilities,
actions, claims, judgments, costs, charges and attorney's fees are based upon
Grantor's actions with respect to the Deed of Trust Properties occurring or
accruing during the Grantor Operational Period, and if Grantor fails to defend
Lender, Lender shall have the right to defend against any such claims or
actions, employing attorneys of Lender's selection, and in such case, if not
furnished with a satisfactory indemnity, Lender shall have the right to
compromise and adjust any such claims, actions and judgments. All amounts paid
by Lender in compromise, satisfaction or discharge of any such claim, action or
judgment, and all court costs, attorneys' fees and other expenses of every
character incurred by Lender pursuant to the provisions of this Section 3.03
shall be a demand obligation owing by Grantor and shall bear interest from date
of expenditure until paid at the same rate as is provided in the Note for
interest on past due principal, and shall be part of the Secured Indebtedness
and shall be secured by this Deed of Trust and by any other instrument securing
the Secured Indebtedness if said Deed of Trust or other instrument has not
already been released. Contingent liability under this Section 3.03 shall not be
considered part of the Secured Indebtedness if all other Secured Indebtedness
has been paid in full prior to such contingent liability becoming
non-contingent.
3.04. Continuing Obligation. Nothing herein contained shall detract
from or limit the absolute obligation of Grantor under this Deed of Trust
regardless of whether the Proceeds herein assigned are sufficient to pay the
Secured Indebtedness, and the rights of this assignment shall be cumulative of
all other security of any and every character now or hereafter existing to
secure the payment of the Deed of Trust and all other Secured Indebtedness.
ARTICLE IV
WAIVER AND PARTIAL RELEASE
4.01. Waiver. Lender may at any time and from time to time in writing
(a) waive compliance of Grantor with any covenant herein made by Grantor to the
extent and in the manner specified in such writing; and (b) consent to Grantor
doing any act which hereunder Grantor is prohibited from doing, or to Grantor
failing to do any act which Grantor hereunder is required to do, to the extent
and in the manner specified in such writing. No such act shall in any way impair
the rights of Lender in such writing.
4.02. No Impairment of Lien. The lien and other security rights of
Lender hereunder shall not be impaired by any indulgence, including but not
limited to (a) any renewal, extension or modification which Lender may grant
with respect to any Secured Indebtedness; (b) any surrender, compromise,
release, renewal, extension, exchange or substitution which Lender may grant in
respect of any item of the Deed of Trust Properties or any part thereof, or
interest therein, or any of the Proceeds; and (c) any release or indulgence
granted to any endorser, guarantor or surety to any Secured Indebtedness.
ARTICLE V
POSSESSION UNTIL DEFAULT, DEFEASANCE
5.01. Possession by Grantor. Unless a Default as defined and specified
in Section 6.01 hereof shall occur and be continuing, Grantor shall retain
custody and control of the Deed of Trust Properties (except the Net Cash Flow,
if applicable, following a valid Lender's Notice as provided under Article III
above) and shall manage, operate, develop and use the same and every part
thereof; subject, however, to the terms and provisions of this Deed of Trust.
ARTICLE VI
DEFAULT AND REMEDIES IN EVENT OF DEFAULT
6.01. Events of Default. The term "Default" as used in this Deed of
Trust shall mean the occurrence of any of the following events, unless they are
due to actions of Lender or its affiliates, or any officer, director, manager,
employee or agent of any of them:
(i) The failure of Tidelands to make due and punctual payments
of the Note or of any other Secured Indebtedness or of any installment
of principal or interest or any part of any of them, as the same shall
become due and payable, if such failure continues for ten (10) business
days after written notice thereof to Tidelands;
(ii) Following a valid Lender's Notice pursuant to Section
3.01 herein, the failure of Grantor to pay over to Lender any of
Grantor's Net Cash Flow within five (5) business days of receipt of
Lender's Notice;
(iii) The failure of Tidelands or Grantor to timely and
properly observe, keep or perform any covenant, agreement, warranty or
condition herein (or in the Note or any guaranty or pledge agreement
executed contemporaneously herewith) required to be observed, kept or
performed and such failure is not remedied within ten (10) business
days after receipt of written notice of such failure from Lender;
(iv) Tidelands, Reef International L.L.C. ("Reef
International") or Grantor becomes insolvent or makes an assignment for
the benefit of creditors;
(v) Institution of receivership proceedings against Tidelands,
Reef International or Grantor or involving any of the Deed of Trust
Properties, or in the event of the institution of any proceedings by or
against Tidelands, Reef International or Grantor under the Federal
Bankruptcy Act as now existing or hereafter amended, provided that, in
the case of an involuntary proceeding the proceeding remains
undismissed or unstayed for a period of ninety (90) days; or
(vi) If, to the extent any of the following in this
subparagraph (vi) are due to actions of Tidelands or Grantor during the
Grantor Operational Period, the lien and security interest and priority
of this Deed of Trust are not fully maintained at all times, or
Tidelands or Grantor is found or adjudged not to be lawfully seized of
any right, title, interest or estate herein covenanted or warranted to
be held or owned by such party, or Grantor is found or adjudged not to
have good right and lawful authority to encumber and otherwise involve
the Deed of Trust Properties or any part thereof, as herein provided.
"Insolvent" shall mean, for purposes of Section 6.01(iv) above, that Tidelands,
Reef International or Grantor (as the case may be) is not paying its debts as
the same become due and payable.
6.02. Remedies. Upon the occurrence of a Default, Lender shall have the
option, by giving notice in writing to Grantor, of declaring all Secured
Indebtedness in its entirety to be immediately due and payable, and Lender shall
thereupon have any and all of the following remedies:
(a) Right to Possession. Lender may take possession of the
Deed of Trust Properties or any part thereof (Grantor agreeing to give
immediate peaceable possession) and, to the full extent of Grantor's
right to do so, (i) act in Grantor's stead under any and all Contracts
comprising the Deed of Trust Properties, and (ii) collect and maintain,
operate or control the Deed of Trust Properties, and, if applicable,
may apply all or any part of the Proceeds derived from Lender's receipt
of Proceeds to the payment of any development, operation or maintenance
expense incident to the Deed of Trust Properties in any order of
application as Lender may elect; provided, that in the event of any
dispute or question whatsoever concerning such Proceeds or the
application thereof, Lender may hold the same in a special account
without interest until such dispute or question is finally settled to
Lender's satisfaction.
(b) Judicial Foreclosure. Lender may institute suit to
foreclose the lien of this Deed of Trust in any Court having
jurisdiction. In any such suit, Lender may, at Lender's option, apply
for and shall be entitled, as a matter of right, to the appointment of
a receiver to take possession and control of, operate, maintain and
preserve the Deed of Trust Properties or any part thereof, including
the right to act in Grantor's stead under any and all Contracts
comprising the Deed of Trust Properties, and the right to the Proceeds
from the Deed of Trust Properties, to the full extent of Grantor's
right to do so, and to disburse the Net Cash Flow for application upon
the Secured Indebtedness until the same and all costs are fully paid.
Said receiver may be authorized to sell or dispose of all or any part
of the Deed of Trust Properties under orders of the Court appointing
the receiver as such. Grantor agrees that in the event of any
foreclosure sale, the Deed of Trust Properties or any part thereof may
be sold with or without appraisement as Lender may elect, and such
election may be exercised at any time prior to the entry of the decree
of foreclosure. Should Lender elect to have the Deed of Trust
Properties sold without appraisement, then Grantor hereby expressly
waives appraisement. The proceeds of such sale, after paying therefrom
the costs advanced or incurred by Lender in the foreclosure suit,
including the costs of sale and any costs and expenses incurred in the
operation of the Deed of Trust Properties by a receiver appointed upon
the application of Lender, shall be applied FIRST to the payment of all
costs and expenses incurred by Lender in Lender's operation of the Deed
of Trust Properties if the same are so operated, and any and all sums
advanced by Lender for the purpose of protecting the security, with
interest at the legal rate; SECOND, to the payment of all Secured
Indebtedness and other sums then secured hereby, including interest and
attorney's fees, in such order of application as Lender may elect; and
THIRD, any remaining balance to Grantor.
(c) Foreclosure by Power of Sale. Lender, as an alternative to
judicial foreclosure, shall have the power to direct the Trustee to
sell the Deed of Trust Properties without resort of judicial process.
At its sole option, Lender may elect to exercise the power of sale as
provided under and pursuant to Chapter 51, ss.51002 of the Texas
Property Code, as the same may be amended from time to time, and for
such purposes Grantor authorizes Lender and Trustee or Lender's and
Trustee's attorneys or agents, and grants to Lender and Trustee and
Lender's or Trustee's attorneys or agents the power to sell and convey
the Deed of Trust Properties to a purchaser (which such purchaser may
be the Lender) and to foreclose all right, title, interest and estate
of Grantor and all other persons having an interest subject to the lien
of this Deed of Trust in and to the Deed of Trust Properties.
A POWER OF SALE HAS BEEN GRANTED IN THIS DEED OF TRUST. A POWER OF SALE
MAY ALLOW THE LENDER AND/OR THE TRUSTEE TO TAKE THE DEED OF TRUST
PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION
UPON DEFAULT BY THE GRANTOR UNDER THIS DEED OF TRUST.
(d) Remedies Cumulative. All remedies herein expressly
provided for are cumulative of any and all other remedies existing at
law or in equity, and Lender and Trustee shall, in addition to the
remedies herein provided, be entitled to avail itself of all such other
remedies as may now or hereafter exist at law or in equity for the
collection of the Secured Indebtedness and enforcement of the covenants
herein, and the foreclosure of the liens evidenced hereby including,
without limitation, the right to foreclosure upon that Pledge of
Membership Interest given by Grantor to Lender as collateral for the
guaranty of the Note; and, the resort to any remedy provided for
hereunder or thereunder or provided for by law shall not prevent the
concurrent or subsequent employment of any other appropriate remedy or
remedies.
ARTICLE VII
CONCERNING THE TRUSTEE
7.01 The Trustee may resign by an instrument in writing addressed to
the Lender. The Trustee or any successor or substitute Trustee may be removed at
any time with or without cause by an instrument in writing executed by the
Lender and such power of removal may be exercised as frequently and at such
times as the Lender may elect. In case of the absence, death, resignation or
removal of the Trustee, or the inability, failure, or refusal of the Trustee to
act, a successor or substitute Trustee may be appointed by the Lender by
instrument complying with any applicable requirements of law, and in the absence
of any such requirement, without other formality than appointment and
designation in writing executed by the Lender. Such right to appoint a
substitute Trustee shall exist and may be exercised as often and whenever the
Lender may elect. Such appointment and designation shall be full evidence of the
right and authority to make the same and of all facts therein required, and upon
the making of any such appointment and designation, all of the estate and title
of the Trustee in the Deed of Trust Properties shall vest in the named successor
Trustee and he or she shall thereupon succeed to, hold, possess and exercise all
the rights, powers, privileges, immunities and duties herein conferred upon the
Trustee. All references herein to the Trustee shall be deemed to refer to the
Trustee (including any successor appointed and designated as herein provided)
from time to time acting hereunder.
If no successor Trustee shall have been appointed as contemplated by
the foregoing provisions in this Section 7.01, or if the person appointed shall
not have accepted the appointment, within thirty (30) days after the occurrence
of a vacancy in the office of the Trustee, the Lender or such retiring Trustee
may apply to any court of competent jurisdiction to appoint a successor Trustee
or Trustees.
7.02 Any Trustee from time to time serving hereunder shall have the
absolute right, acting independently, to take any action and to exercise any
right, remedy, power or privilege conferred upon the Trustee, and any action
taken by any Trustee from time to time serving hereunder shall be binding upon
all other Trustees and no person dealing with any Trustee from time to time
serving hereunder shall be obligated to confirm the power and authority of such
Trustee to act without the concurrence of the other Trustees.
7.03 The Trustee shall not be required to take any action for the
enforcement of this instrument or the exercise of any rights or remedies
hereunder or to appear in or defend any action, suit or other proceeding in
connection therewith, where, in the opinion of the Trustee, such action will be
likely to involve him in expense or liability, unless the Trustee be tendered
security and indemnity satisfactory to him, against cost, expense or liability
in connection therewith.
7.04 It shall be no part of the duty of the Trustee to see to any
recording, filing or registration of this instrument or any other instrument
supplemental hereto, or to see to the payment of or be under any duty in respect
of any tax or assessment or other governmental charge which may be levied or
assessed on the Deed of Trust Properties or against Grantor or to see to the
performance or observance by Grantor of any of the covenants or agreements
herein contained. The Trustee shall not be responsible for the execution,
acknowledgement or validity of this instrument or of any instrument supplemental
hereto or of the Guaranty; or for the sufficiency of the security purported to
be created hereby, and makes no representation in respect thereof or in respect
of the rights of the holder of the Guaranty. The Trustee shall have the right to
consult with legal counsel upon any matters arising hereunder, and shall be
fully protected in relying as to legal matters on the advice of the legal
counsel. The Trustee shall not incur any personal liability hereunder except for
his own gross negligence or willful misconduct; and the Trustee shall have the
right to rely on any instrument, document or signature authorizing or supporting
any action taken or proposed to be taken by him hereunder, believed by him in
good faith to be genuine.
ARTICLE VIII
MISCELLANEOUS
8.01. Security Interest. This instrument is a deed of trust and
mortgage of both real and personal property and, if applicable, Grantor does
hereby grant a security interest to Lender in the Deed of Trust Properties. This
instrument therefore shall constitute a security agreement and a financing
statement under the Uniform Commercial Code of each state in which any of the
Deed of Trust Properties is located, as now and hereinafter in effect (the
"Commercial Code") and shall cover all of the collateral hereinabove described
and all proceeds of collateral. To effectuate the purposes of the foregoing and
to further secure the indebtedness evidenced by the Guaranty, Grantor hereby
grants to Lender, effective as of the date that Grantor has rights in the
collateral, a security interest in and to the Deed of Trust Properties insofar
as the Deed of Trust Properties consist of equipment, apparatus, machinery,
fixtures and any and all other personal property of any kind or character
attached to the real property or defined in and subject to the provisions of the
Commercial Code, including the proceeds and products from any and all of such
personal property. In addition to all other rights, powers, privileges and
remedies, upon the occurrence of one or more events of Default as herein
provided, if applicable, Lender shall be entitled to exercise all of the rights,
powers, privileges and remedies available to a secured party upon default under
the Commercial Code, and under the Uniform Commercial Code of each state in
which any of the Deed of Trust Properties is located. The Deed of Trust shall be
filed for record, among other places, in the real estate records of each county
in which the Deed of Trust Properties are located, and when filed in such
counties shall be effective as a financing statement covering fixtures located
on natural gas and/or coal bed methane properties (and accounts arising
therefrom).
8.02. No Waivers by Lender. All options and rights of election herein
provided for the benefit of Lender are continuing and the failure to exercise
any such option or right or election upon a particular default or breach or upon
any subsequent default or breach shall not be construed as a waiver of the right
to exercise such option or election at any later date. No exercise of the rights
and powers herein granted and no delay or omission in the exercise of such
rights or powers shall be held to exhaust the same or be construed as a waiver
thereof, and every such right and power may be exercised at any time and from
time to time.
8.03. Notice. Any notice, request, demand or other instrument which may
be required or permitted to be given or furnished to or served upon Grantor,
Lender or Trustee shall be addressed to (i) Grantor at the address shown above,
(ii) Lender at the address shown above, (iii) Trustee at the address shown
above, or (iv) Grantor, Lender or Trustee at such different address(es) as shall
have been designated by written notice actually received by Lender, Grantor
and/or Trustee, as applicable, at least ten (10) days in advance of the date
upon which such change of address shall be effective under this Section 8.03.
8.04. Binding Effect. All terms, conditions, covenants, warranties and
agreements contained herein shall be binding upon the heirs, executors,
administrators, personal representatives, successors and assigns of Grantor, and
shall be deemed to be covenants running with the estate or in the land and all
said provisions shall likewise inure to the benefit of Trustee and Lender, and
their successors and assigns.
8.05. Severability. The invalidity of any provision or provisions
hereof shall not in any way affect the remaining provisions of this Deed of
Trust.
8.06. Counterparts. This Deed of Trust may be executed in numerous
counterparts, each of which shall be deemed an original, and all of which are
identical and together shall constitute one and the same instrument; provided
that, to facilitate recordation, in any particular counterpart portions of
Exhibit "A" hereto which describe properties situated in counties other than the
county in which such counterpart is to be recorded may have been omitted.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, this instrument has been executed and delivered
effective as of the 25th day of May, 2004 at 8:01 a.m. Central Daylight Savings
Time.
GRANTOR:
REEF VENTURES, L.P.
By: Arrecefe Management LLC, General Partner
By: ________________________________________
Name:Xxxxxxx X. Xxxx
Title: Manager
This Deed of Trust, Mortgage with Power of Sale, Security Agreement,
Financing Statement and Assignment is executed by the undersigned solely for the
purpose of acknowledging and accepting the benefits conferred on Lender and to
evidence its agreement with the covenants of Lender set forth herein.
"LENDER"
IMPACT INTERNATIONAL, L.L.C.
By: /s/ Xxx Xxxxxxxx
_________________________________________
Impact Energy Services, L.L.C., Manager
A C K N O W L E D G E M E N T
STATE OF ______________ )
) ss.
COUNTY OF ____________ )
Before me, the undersigned, a Notary Public, in and for this State, on
the _____ day of May, 2004, personally appeared Xxxxxxx X. Xxxx, to me known to
be identical person who subscribed the name of the maker thereof to the
foregoing instrument as the Manager of Arrecefe Management LLC, which is the
General Partner of Reef Ventures, L.P. and acknowledged to me that he executed
the same as his free and voluntary act and deed and as the free and voluntary
act and deed of such corporation, for the uses and purposes therein set forth.
Given under my hand and seal of office the day and year last above
written.
_____________________ ________________________________
My Commission expires Notary Public
A C K N O W L E D G E M E N T
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
Before me, the undersigned, a Notary Public, in and for this State, on
the _____ day of May, 2004, personally appeared Xxx Xxxxxxxx to me known to be
identical person who subscribed the name of the maker thereof to the foregoing
instrument as the authorized agent of the Manager of Impact Energy Services,
L.L.C., and acknowledged to me that he executed the same as his free and
voluntary act and deed and as the free and voluntary act and deed of such
corporation, for the uses and purposes therein set forth.
Given under my hand and seal of office the day and year last above
written.
_____________________ ________________________________
My Commission expires Notary Public
EXHIBIT A-1
DEPICTION OF LOCATION OF FACILITIES
EXHIBIT A-2
DESCRIPTION OF FACILITIES
EXHIBIT B
EASEMENTS
EXHIBIT C
CONTRACTS
1. Base Contract for Sale and Purchase of Natural Gas dated November 1,
2003, by and between Reef Ventures, L.P., as seller, and ONEOK Energy
Marketing Company, as buyer, as assigned by ONEOK Energy Marketing
Company to Coahuila Energy, L.L.C. pursuant to the terms of that Stock
Purchase Agreement dated April 19, 2004.
2. Gas Purchase Contract dated May 20, 2003, by and between Maverick Gas
Marketing, Ltd., as Seller, and Reef Marketing, LLC, as Buyer.
EXHIBIT C
---------
Guaranty from Reef Ventures, L.P.
GUARANTY
OF
REEF VENTURES, L.P.
--------------------------------------------------------------------------------
THIS GUARANTY ("Guaranty") is made effective as of the 25th day of May,
2004 at 8:01 a.m. Central Daylight Savings Time, by Guarantor (as hereinafter
defined) for the benefit of Lender (as hereinafter defined).
1. Definitions. As used in this Guaranty, the following terms shall
have the meanings indicated below:
(a) The term "Lender" shall mean IMPACT INTERNATIONAL, L.L.C.,
an Oklahoma limited liability company, whose address for notice
purposes is the following:
000 Xxxx 0xx Xxxxxx
Xxxxx 000
Xxxxx, Xxxxxxxx 00000
(b) The term "Borrower" (whether one or more) shall mean
TIDELANDS OIL & GAS CORPORATION, a Nevada corporation, whose address
for notice purposes is the following:
0000 Xxxx Xxxxxxx
Xxxxxxxx 0
Xxx Xxxxxxx, Xxxxx 00000
(c) The term "Guarantor" shall mean REEF VENTURES, L.P., a
Texas limited partnership, whose address for notice purposes is the
following:
0000 Xxxx Xxxxxxx
Xxxxxxxx 0
Xxx Xxxxxxx, Xxxxx 00000
(d) The term "Guaranteed Indebtedness" shall mean (i) all the
obligations of Borrower to Lender under the Promissory Note dated as of
the date hereof in the original principal amount of $6,523,773.30, (ii)
all accrued but unpaid interest on any of the indebtedness described in
(i) above, (iii) all obligations of Borrower to Lender under any
documents evidencing, securing, governing and/or pertaining to all or
any part of the indebtedness described in (i) and (ii) above including,
without limitation, under the Deed of Trust and Pledge Agreement of
even date herewith and given by Guarantor to lender to secure
Guarantor's obligations hereunder, (iv) all costs and expenses incurred
by Lender in connection with the collection and administration of all
or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization
upon, the collateral securing all or any part of such indebtedness and
obligations, including without limitation all reasonable attorneys'
fees, and (v) all renewals, extensions, modifications and
rearrangements of the indebtedness and obligations described in (i),
(ii), (iii) and (iv) above.
2. Obligations. As an inducement to Lender to extend or continue to
extend credit and other financial accommodations to Borrower, Guarantor, for
value received, does hereby unconditionally and absolutely guarantee the prompt
and full payment and performance of the Guaranteed Indebtedness when due or
declared to be due and at all times thereafter.
3. Character of Obligations. This is an absolute, irrevocable,
continuing and unconditional Guaranty of payment and not of collection and if at
any time or from time to time there is no outstanding Guaranteed Indebtedness,
the obligations of the Guarantor with respect to any and all Guaranteed
Indebtedness of Borrower to Lender incurred thereafter shall not be affected.
All Guaranteed Indebtedness heretofore, concurrently herewith or hereafter made
by Lender to Borrower shall be conclusively presumed to have been made or
acquired in acceptance hereof. Guarantor shall be primarily liable, jointly and
severally, with Borrower and any other guarantor of all or any part of the
Guaranteed Indebtedness.
4. Representations and Warranties. Guarantor hereby represents and
warrants to Lender as follows:
(a) Guarantor is familiar with, and has independently reviewed
the books and records regarding, the financial condition of Borrower
and is familiar with the value of any and all collateral intended to be
security for the payment of all or any part of the Guaranteed
Indebtedness; provided, however, Guarantor is not relying on such
financial condition or collateral as an inducement to enter into this
Guaranty;
(b) Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition of
Borrower and Guarantor is not relying on Lender to provide such
information to Guarantor either now or in the future;
(c) Guarantor has the power and authority to execute, deliver
and perform this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith, and the execution, delivery and
performance of this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith does not and will not violate (i)
any agreement or instrument to which Guarantor is a party, (ii) any
law, rule, regulation or order of any governmental authority to which
Guarantor is subject, or (iii) Guarantor's Articles of Organization or
Operating Agreement if Guarantor is a limited liability company;
(d) Neither Lender nor any other party has made any
representation, warranty or statement to Guarantor in order to induce
Guarantor to execute this Guaranty;
(e) As of the date hereof, and after giving effect to this
Guaranty and the obligations evidenced hereby, (i) Guarantor is and
will be solvent, (ii) the fair saleable value of Guarantor's assets
exceeds and will continue to exceed Guarantor's liabilities (both fixed
and contingent), (iii) Guarantor is and will continue to be able to pay
Guarantor's debts as they mature, and (iv) Guarantor has and will
continue to have sufficient capital to carry on its business and all
businesses in which it is about to engage.
5. Covenants. Guarantor hereby covenants and agrees with Lender as
follows:
(a) Guarantor shall not, so long as Guarantor's obligations
under this Guaranty continue, transfer or pledge any material portion
of Guarantor's assets for less than full and adequate consideration.
(b) Guarantor shall promptly furnish to Lender at any time and
from time to time such financial statements and other financial
information of Guarantor, including Guarantor's documents supporting
its calculations of Net Cash Flow (as defined in the Deed of Trust and
Pledge Agreement of even date herewith), as the Lender may reasonably
require, in form and substance reasonably satisfactory to Lender.
Lender shall take reasonable measures to hold all such information in
confidence until it has been made public, and shall abide by all
applicable securities and other applicable laws, including laws
restricting Lender's trading in securities of Guarantor's affiliates if
it obtains non-public information;
(c) Guarantor shall comply with all terms and provisions of
the instruments and agreements evidencing, governing and securing all
or any part of the Guaranteed Indebtedness that apply to Guarantor; and
(d) Guarantor shall promptly furnish to Lender a copy of any
current or periodic report filed by Borrower with the Securities and
Exchange Commission that contains information about the Guarantor.
6. Consent and Waiver.
(a) Guarantor waives (i) promptness, diligence and notice of
acceptance of this Guaranty and notice of the incurring of any
obligation, indebtedness or liability to which this Guaranty applies or
may apply and waives presentment for payment, notice of nonpayment,
protest, demand, notice of protest, notice of intent to accelerate,
notice of acceleration, notice of dishonor, diligence in enforcement
and indulgences of every kind, and (ii) the taking of any other action
of Lender, including without limitation giving any notice of default or
any other notice to, or making any demand on, Borrower, any other
guarantor of all or any part of the Guaranteed Indebtedness or any
other party.
(b) Lender may at any time, without the consent of or notice
to Guarantor, without incurring responsibility to Guarantor and without
impairing, releasing, reducing or affecting the obligations of
Guarantor hereunder: (i) change the manner, place or terms of payment
of all or any part of the Guaranteed Indebtedness, or renew, extend,
modify, rearrange or alter all or any part of the Guaranteed
Indebtedness; (ii) sell, exchange, release, surrender, subordinate,
realize upon or otherwise deal with in any commercially reasonable
manner and in any order any collateral for all or any part of the
Guaranteed Indebtedness or this Guaranty or setoff against all or any
part of the Guaranteed Indebtedness; (iii) neglect, delay, omit, fail
or refuse to take or prosecute any action for the collection of all or
any part of the Guaranteed Indebtedness or this Guaranty or to take or
prosecute any action in connection with any instrument or agreement
evidencing, governing or securing all or any part of the Guaranteed
Indebtedness or this Guaranty; (iv) exercise or refrain from exercising
any rights against Borrower or others, or otherwise act or refrain from
acting; (v) settle or compromise all or any part of the Guaranteed
Indebtedness and subordinate the payment of all or any part of the
Guaranteed Indebtedness to the payment of any obligations, indebtedness
or liabilities which may be due or become due to Lender or others; (vi)
apply any deposit balance, fund, payment, collections through process
of law or otherwise or other collateral of Borrower to the satisfaction
and liquidation of the indebtedness or obligations of Borrower to
Lender not guaranteed under this Guaranty pursuant to paragraph 4
herein; and (vii) apply any sums paid to Lender by Guarantor, Borrower
or others to the Guaranteed Indebtedness in such order and manner as
Lender, in its sole discretion, may determine.
(c) Should Lender seek to enforce the obligations of Guarantor
hereunder by action in any court or otherwise, Guarantor waives any
requirement, substantive or procedural, that (i) Lender first enforce
any rights or remedies against Borrower or any other person or entity
liable to Lender for all or any part of the Guaranteed Indebtedness,
including without limitation that a judgment first be rendered against
Borrower or any other person or entity, or that Borrower or any other
person or entity should be joined in such cause, or (ii) Lender shall
first enforce rights against any collateral which shall ever have been
given to secure all or any part of the Guaranteed Indebtedness or this
Guaranty. Such waiver shall be without prejudice to Lender's right, at
its option, to proceed against Borrower or any other person or entity,
whether by separate action or by joinder.
7. Obligations Not Impaired.
(a) Guarantor agrees that Guarantor's obligations hereunder
shall not be released, diminished, impaired, reduced or affected by the
occurrence of any one or more of the following events: (i) the death,
disability or lack of corporate power of Borrower, Guarantor or any
other guarantor of all or any part of the Guaranteed Indebtedness, (ii)
any receivership, insolvency, bankruptcy or other proceedings affecting
Borrower, Guarantor or any other guarantor of all or any part of the
Guaranteed Indebtedness, or any of their respective property; (iii) the
partial or total release or discharge of Borrower or any other
guarantor of all or any part of the Guaranteed Indebtedness, or any
other person or entity from the performance of any obligation contained
in any instrument or agreement evidencing, governing or securing all or
any part of the Guaranteed Indebtedness, whether occurring by reason of
law or otherwise, except by the payment in full (including by offset)
of all Guaranteed Indebtedness; (iv) the taking or accepting of any
collateral for all or any part of the Guaranteed Indebtedness or this
Guaranty; (v) the taking or accepting of any other guaranty for all or
any part of the Guaranteed Indebtedness; (vi) any failure by Lender to
acquire, perfect or continue any lien or security interest on
collateral securing all or any part of the Guaranteed Indebtedness or
this Guaranty; or (vii) any merely technical invalidity or
unenforceability of or defect or deficiency in any instrument or
agreement evidencing, governing or securing all or any part of the
Guaranteed Indebtedness or this Guaranty.
(b) This Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of all or
any part of the Guaranteed Indebtedness is rescinded or must otherwise
be returned by Lender upon the insolvency, bankruptcy or reorganization
of Borrower, Guarantor, any other guarantor of all or any part of the
Guaranteed Indebtedness, or otherwise, all as though such payment had
not been made.
(c) In the event Borrower is a corporation, joint stock
association, limited liability company or partnership, or is hereafter
incorporated, none of the following shall affect Guarantor's liability
hereunder: (i) the unenforceability of all or any part of the
Guaranteed Indebtedness against Borrower by reason of the fact that the
Guaranteed Indebtedness exceeds the amount permitted by law; (ii) the
act of creating all or any part of the Guaranteed Indebtedness is ultra
xxxxx; or (iii) the officers, members or partners creating all or any
part of the Guaranteed Indebtedness acted in excess of their authority.
Guarantor hereby acknowledges that withdrawal from, or termination of,
any ownership interest in Borrower now or hereafter owned or held by
Guarantor shall not alter, affect or in any way limit the obligations
of Guarantor hereunder.
8. Actions Against Guarantor. In the event of a default in the payment
or performance of all or any part of the Guaranteed Indebtedness when such
Guaranteed Indebtedness becomes due, whether by its terms, by acceleration or
otherwise, Guarantor shall, upon notice, promptly pay the amount due thereon to
Lender, in lawful money of the United States, at Lender's address set forth
hereinabove. One or more successive or concurrent actions may be brought against
Guarantor, either in the same action in which Borrower is sued or in separate
actions, as often as Lender deems advisable. The exercise by Lender of any right
or remedy under this Guaranty or under any other agreement or instrument, at
law, in equity or otherwise, shall not preclude concurrent or subsequent
exercise of any other right or remedy. The books and records of Lender shall be
admissible in evidence in any action or proceeding involving this Guaranty and
shall be prima facie evidence of the payments made on, and the outstanding
balance of, the Guaranteed Indebtedness.
9. Notice of Sale. In the event that Guarantor is entitled to receive
any notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any collateral
securing all or any part of the Guaranteed Indebtedness or this Guaranty,
reasonable notice shall be deemed given when such notice is deposited in the
United States mail, postage prepaid, at the address for Guarantor set forth in
subparagraph 1(c) above, ten (10) days prior to the date of a public sale, or
after which any private sale, of any such collateral is to be held; provided,
however, that notice given in any other reasonable manner or at any other
reasonable time shall be sufficient.
10. Waiver of Lender. No delay on the part of Lender in exercising any
right hereunder or failure to exercise the same shall operate as a waiver of
such right. In no event shall any waiver of the provisions of this Guaranty be
effective unless the same be in writing and signed by an officer of Lender, and
then only in the specific instance and for the purpose given.
11. Successors and Assigns. This Guaranty is for the benefit of Lender,
its successors and assigns. This Guaranty is binding upon Guarantor's heirs,
executors, administrators, personal representatives and successors, including
without limitation any person or entity obligated by operation of law upon the
reorganization, merger, consolidation or other change in the organizational
structure of Guarantor. Either party may assign its interest in this Guaranty
with the other party's prior written consent. In the event that 51% of the
assets or voting stock of either party is acquired, then this Guaranty may be
assigned to the acquiring party without the other party's written consent.
12. Costs and Expenses. Guarantor shall pay on demand by Lender all
costs and expenses (including without limitation all reasonable attorneys' fees)
incurred by Lender in connection with the preparation, administration,
enforcement and/or collection of this Guaranty. This covenant shall survive the
payment of the Guaranteed Indebtedness.
13. Severability. If any provision of this Guaranty is held by a court
of competent jurisdiction to be illegal, invalid or enforceable under present or
future laws, such provision shall be fully severable, shall not impair or
invalidate the remainder of this Guaranty and the effect thereof shall be
confined to the provision held to be illegal, invalid or unenforceable.
14. No Obligation. Nothing contained herein shall be construed as an
obligation on the part of Lender to extend or continue to extend credit to
Borrower.
15. Amendment. No modification or amendment of any provision of this
Guaranty, nor consent to any departure by Guarantor therefrom, shall be
effective unless the same shall be in writing and signed by an officer of
Lender, and then shall be effective only in the specific instance and for the
purpose for which given.
16. Cumulative Rights. All rights and remedies of Lender hereunder are
cumulative of each other and of every other right or remedy which Lender may
otherwise have at law or in equity or under any instrument or agreement, and the
exercise of one or more of such rights or remedies shall not prejudice or impair
the concurrent or subsequent exercise of any other rights or remedies.
17. Compliance with Applicable Usury Laws. Notwithstanding any other
provision of this Guaranty or of any instrument or agreement evidencing,
governing or securing all or any part of the Guaranteed Indebtedness, Guarantor
and Lender by its acceptance hereof agree that Guarantor shall never be required
or obligated to pay interest in excess of the maximum nonusurious interest rate
as may be authorized by applicable law for the written contracts which
constitute the Guaranteed Indebtedness. It is the intention of Guarantor and
Lender to conform strictly to the applicable laws which limit interest rates,
and any of the aforesaid contracts for interest, if and to the extent payable by
Guarantor, shall be held to be subject to reduction to the maximum nonusurious
interest rate allowed under said law.
18. Descriptive Headings. The captions in this Guaranty are for
convenience only and shall not define or limit the provisions hereof.
19. Gender. Within this Guaranty, words of any gender shall be held and
construed to include the other gender.
20. Construction. Each of the parties hereto acknowledges that each of
the parties was actively involved in the negotiation and drafting hereof and
that no law or rule of construction shall be used by which any provision hereof
is construed in favor of or against any party solely because one is deemed to be
the author thereof.
21. Entire Agreement. This Guaranty contains the entire agreement
between Guarantor and Lender regarding the subject matter hereof and supersedes
all prior written and oral agreements and understandings, if any, regarding
same; provided, however, this Guaranty is in addition to and does not replace,
cancel, modify or affect any other guaranty of Guarantor now or hereafter held
by Lender that relates to Borrower or any other person or entity.
22. Counterpart Execution. This Agreement may be executed in
counterparts, all of which are identical and all of which constitute one and the
same instrument. It shall not be necessary for Guarantor and Lender to sign the
same counterpart.
EXECUTED as of the date first above written.
GUARANTOR:
REEF VENTURES, L.P.
By: Arrecefe Management LLC, General Partner
By:_________________________________________
Xxxxxxx X. Xxxx, Manager
AGREED AND ACKNOWLEDGED:
IMPACT INTERNATIONAL, L.L.C.
By: Impact Energy Services, L.L.C., Manager
By:______________________________________
Xxx Xxxxxxxx, Manager
EXHIBIT D
---------
Pledge Agreement
PLEDGE AGREEMENT
----------------
This Pledge Agreement (the "Agreement") is entered into as of the 25th
day of May, 2004 at 8:01 a.m. central daylight savings time, by and between Reef
Ventures, L.P., a Texas limited partnership ("Pledgor"), and Impact
International, L.L.C., an Oklahoma limited liability company ("Secured Party").
RECITALS:
WHEREAS, Secured Party, Tidelands Oil and Gas Corporation
("Tidelands"), Coahuila Pipeline, LLC ("Coahuila"), and Arrecefe Management, LLC
("Arrecefe") are parties to a Purchase and Sale Agreement (the "Purchase and
Sale Agreement") of even date herewith; and
WHEREAS, pursuant to the Purchase and Sale Agreement, Tidelands is
purchasing from Secured Party all of Secured Party's right, title and interest
in Pledgor and Arrecefe is purchasing from Coahuila all of the right, title and
interest of Coahuila in the Pledgor; and
WHEREAS, pursuant to the Purchase and Sale Agreement, Tidelands has
issued to Secured Party a promissory note dated of even date herewith to Secured
Party in the original principal amount of $6,523,773.30 (the "Note"); and
WHEREAS, the obligations of Tidelands pursuant to the Note are secured
by a guaranty of payment and performance from the Partnership; and
WHEREAS, in order to induce the Secured Party to accept the Note
pursuant to the Purchase and Sale Agreement and to accept the Guaranty of
Pledgor in connection therewith ("Pledgor's Guaranty"), Pledgor desires to
pledge, as security for its obligations under the Pledgor's Guaranty, all of the
Pledgor's membership interest in Reef International on the terms and conditions
set forth herein (the "Membership Interest").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereby agree as follows:
1. Grant of Security Interest.
(a) Pledgor hereby grants to Secured Party a security interest
in the Membership Interest owned by Pledgor, which represents 100% of
the entire membership interest in Reef International. Pledgor shall
deliver herewith a separate assignment of the certificate, if any such
certificate shall exist, evidencing the Membership Interest, or a
membership interest power, in blank executed by Pledgor, to be held in
accordance with the terms hereof. Secured Party shall hold the
certificate or power as security for the payment of the obligations
contained in the Note and Pledgor's Guaranty and shall not encumber,
dispose of or transfer the Membership Interest represented thereby,
except in accordance with the provisions of this Pledge Agreement. If
required by Secured Party, Pledgor will execute appropriate filing
instruments with regard to the security interest herein granted.
(b) The security interest granted hereby is granted to secure
the complete and punctual payment of all of Tideland's obligations due
under the Note, Pledgor's obligations under the Deed of Trust dated of
even date herewith (the "Deed of Trust"), and Pledgor's obligations
under Pledgor's Guaranty.
(c) This security interest shall also secure the payment of
all costs and expenses of the Secured Party for taking, holding,
preparing for sale, selling and/or otherwise disposing of the
Membership Interest upon default, and any and all sums expended by the
Secured Party in securing compliance by Pledgor with the terms and
provisions hereof.
2. Rights of Pledgor as Member. During the term of this Agreement, as
long as the Pledgor is not in default hereunder, Pledgor shall be entitled to
all rights of a member in Reef International associated with the Membership
Interest including all rights to vote the Membership Interest with respect to
all matters, receive all payments, distributions and transfers of funds,
property or cash made to Pledgor or any other party with respect to the
Membership Interest and receive all other rights to which a member of Reef
International is entitled.
3. Covenants of Pledgor. So long as any obligation under this Agreement
remains unsatisfied or until the security interest granted herein is released or
cancelled as to the Membership Interest, whichever is earlier, Pledgor agrees
that Pledgor shall not sell, transfer, assign, encumber or grant any other
security interests in the Membership Interest nor allow any lien or encumbrance
to attach to the Membership Interest.
4. Representations and Warranties. Pledgor hereby represents and
warrants to Secured Party that Pledgor has the right to pledge the Membership
Interest to Secured Party as security for payment of the obligations under the
Note and the Guaranty and to enter into and perform this Pledge Agreement; this
Pledge Agreement and the pledge of the Membership Interest hereunder does not
and will not violate any agreement or instrument to which Pledgor is a party or
may be bound; Pledgor has not granted any security interest in and there exist
no liens or encumbrances relating to the Membership Interest; the Membership
Interest represents 100% of all membership interest in Reef International; and,
this Pledge Agreement, when executed and delivered by Pledgor, will constitute a
valid and binding obligation of Pledgor.
5. Release of Pledged Interest. The Membership Interest being held by
Secured Party hereunder shall be delivered to Pledgor and the security interest
in such Membership Interest shall be released and dissolved upon performance of
all of Tideland's obligations under the Note, Pledgor's obligations under the
Deed of Trust, and Pledgor's obligations under Pledgor's Guaranty. Said Release
and delivery of the Membership Interest and release of the security interest
shall be accomplished by written notice to Secured Party that all of the
provisions herein regarding the release of the security interest in such
Membership Interest have been complied with and that it is the desire of Pledgor
to effectuate such release. Secured Party will thereupon forthwith deliver the
Membership Interest being held as security hereunder to Pledgor.
6. Events of Default. The occurrence of any of the following events
that continues without being cured for a period of ten (10) days from the date
upon which Pledgor first receives notice of such breach or default from secured
Party shall constitute a default (an "Event of Default") under this Pledge
Agreement:
(a) Default by Tidelands under the Note;
(b) Default by Pledgor under Pledgor's Guaranty;
(c) Default by Pledgor under the Deed of Trust; or
(d) The material breach of or default under any covenant,
agreement, representation or warranty contained herein which continues
without being cured for a period of ten (10) days from the date upon
which Pledgor first receives notice of such breach or default from
Secured Party.
If any Event of Default occurs, then Secured Party may, at its option,
declare all obligations secured hereby immediately due and payable and without
further notice or default, presentment or demand for payment or other notice or
demands of any kind or character, proceed to enforce payment of the same and/or
exercise any and all rights and remedies provided by the Uniform Commercial
Code, including, without limitation, the right of a secured party to sell the
Membership Interest pledged hereunder, pursuant to which sale the Secured Party
may become the owner thereof, as well as any and all other rights or remedies
possessed by Secured Party at law or in equity except as limited herein. No
delay, omission or failure by Secured Party to exercise any remedy or right
hereunder shall impair any such remedy or right or be construed as a waiver of
any default nor shall it affect any subsequent default of the same or different
nature.
7. Rights Cumulative. Pledgor agrees that the rights, powers and
remedies given to Secured Party under the Note, Pledgor's Guaranty, the Deed of
Trust and this Pledge Agreement and any of the instruments and agreements
referred to in such agreement, are cumulative.
8. Counterpart Execution. This Agreement may be executed in
counterparts, all of which are identical and all of which constitute one and the
same instrument. It shall not be necessary for Secured Party and Pledgor to sign
the same counterpart.
9. Successors and Assigns. This Pledge Agreement shall inure to the
benefit of and be binding upon each of the Parties hereto and their respective
heirs, personal representatives, successors and assigns, provided that this
Agreement and all benefits, rights and remedies hereunder shall be assignable
only with the written consent of the other party.
10. Waiver. Pledgor shall not be discharged by any extension of time,
additional advances and notes, renewals and extensions of the Note or the
Guaranty, taking of further security, release of a part or all of the Membership
Interest, extinguishment of the security interest as to all or any part of the
Membership Interest, or any other act except a release and discharge of the
security interest upon the full payment of all obligations secured by this
Pledge Agreement, including principal, charges, expenses, fees, costs and
interest.
11. Term. The term of this Agreement shall commence with the date
hereof and shall continue in full force and effect and be binding upon Pledgor
until all of the obligations secured hereunder have been fully paid and
performed and such payment and performance has been acknowledged in writing by
Secured Party, whereupon this Pledge Agreement shall terminate.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
Secured Party:
--------------
IMPACT INTERNATIONAL, L.L.C.
By: Impact Energy Services, L.L.C., Manager
By_________________________________________
Xxx Xxxxxxxx, Manager
Pledgor:
REEF VENTURES, L.P.
By: Arrecefe Management, LLC,
its General Partner
By:________________________________________
Xxxxxxx X. Xxxx, Manager
MEMBERSHIP INTEREST POWER
FOR VALUE RECEIVED, Reef Ventures, L.P. hereby sells, assigns and
transfers unto Impact International, L.L.C., 100% of the membership interest in
Reef International, L.L.C. (the "Company"), and does hereby constitute and
appoint _____________________________, as attorney, to transfer such shares on
the books of the Company with full power of substitution.
DATED the ____ day of _______________, 20____.
REEF VENTURES, L.P.
By: Arrecefe Management, LLC,
its General Partner
By:__________________________
Xxxxxxx X. Xxxx, Manager
WITNESSED BY:
_______________________________________________
Name: ________________________________________
Title: ______________________________________
EXHIBIT E
---------
Partnership Financial Statements
--------------------------------
[to be supplemented under Item 7 of Form 8-K]
EXHIBIT F-1
Assignment of GP Units
----------------------
ASSIGNMENT OF PARTNERSHIP INTEREST
IN
REEF VENTURES, L.P.
For and in consideration of the sum of Ten Dollars ($10.00), the receipt of
which is hereby acknowledged, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned
General Partner (the "Transferor") of Reef Ventures, L.P. (the "Partnership")
does, pursuant to that Agreement of Limited Partnership dated and effective
April 16, 2003 at 8:00 a.m. Central Daylight Savings Time (the "Partnership
Agreement"), hereby transfer, convey, set over and assign to Arrecefe Management
LLC(the "Transferee"), all of the Transferor's right, title and interest in and
to the Partnership, including ten (10) Units, as such term is defined in the
Partnership Agreement (the "Transferred Interest"). Except as expressly provided
herein, each capitalized term shall have the meaning set forth in the
Partnership Agreement. This assignment is made pursuant to the Purchase and Sale
Agreement dated effective as of 8:00 a.m. central daylight savings time on May
25, 2004, by and among Transferor, Transferee , Tidelands Oil and Gas
Corporation and Impact International, LLC (the "Purchase Agreement"). This
assignment is made subject to the execution by the Transferee of an Acceptance
of Assignment, Election to Become General Partner and Adoption Agreement (the
"Acceptance Agreement") by Transferee and a Unanimous Consent and First
Amendment to Agreement of Limited Partnership, as attached hereto and made a
part hereof.
The Transferor represents and warrants to the Transferee that the Transferred
Interest is free and clear of all liens, prior assignments, claims and
encumbrances whatsoever. This transfer is made with the intention of the
Transferee becoming the General Partner of the Partnership under the Partnership
Agreement. The foregoing Transfer is made subject to all of the terms and
conditions, provisions, and requirements of the Partnership Agreement and the
Certificate of Limited Partnership for the Partnership, as the same may be
amended from time to time and the Purchase Agreement. Finally, this transfer is
made with the intention that Transferee shall receive with the Transferred
Interest the capital account of Transferor in the Partnership as of the
Effective Time.
IN WITNESS WHEREOF, this Assignment is executed and delivered effective
as of 8:00 a.m. central daylight savings time on the 25th day of May, 2004 (the
"Effective Time").
"TRANSFEROR"
Coahuila Pipeline, LLC
By: Impact Energy Services, LLC, Manager
By:_____________________________________
Xxx Xxxxxxxx, Manager
ACCEPTANCE OF ASSIGNMENT,
ELECTION TO BECOME A GENERAL PARTNER
AND ADOPTION AGREEMENT
The undersigned, as the transferee ("Transferee") of all of Coahuila
Pipeline, LLC's right, title and interest in and to Reef Ventures, L.P., a Texas
limited partnership, including ten (10) Partnership Units which comprise one
percent (1%) of all issued and outstanding Partnership Units (the "Transferred
Interest") pursuant to an Assignment of Partnership Interest (the "Assignment")
dated effective as of 8:00 a.m. Central Daylight Savings Time on the 25th day of
May, 2004, does hereby certify, elect, attest, represent, warrant and agree as
follows:
1. All terms used herein shall have the meaning given to them in
the Assignment.
2. The undersigned hereby accepts the assignment from the
Transferor of the Transferred Interest in the Partnership, all
pursuant to the Assignment and agrees to accept, adopt and be
bound by all of the provisions, representations, agreements,
terms and conditions of the Partnership Agreement as the
general partner as of the Effective Time.
3. The undersigned hereby elects to become the General Partner of
the Partnership and expressly assumes all obligations of
General Partner arising under the Partnership Agreement from
and after the Effective Time.
4. The undersigned states that his, her or its address for notice
purposes under the Partnership Agreement shall be as set forth
beneath the undersigned's signature unless and until changed
in accordance with the provision of the Partnership Agreement.
IN WITNESS WHEREOF, this Acceptance is executed and delivered on effective as of
8:00 a.m. central daylight savings time on the 25th day of May, 2004.
ARRECEFE MANAGEMENT LLC
By:__________________________
Xxxxxxx X. Xxxx, Manager
Address for Notice Purposes:
0000 Xxxx Xxxxxxx, Xxxxxxxx 0
Xxx Xxxxxxx, Xxxxx 00000
EXHIBIT F-2
Assignment of Impact Units
--------------------------
ASSIGNMENT OF PARTNERSHIP INTEREST
IN
REEF VENTURES, L.P.
-------------------
For and in consideration of the sum of Ten Dollars ($10.00), the receipt of
which is hereby acknowledged, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned
Limited Partner (the "Transferor") of Reef Ventures, L.P. (the "Partnership")
does, pursuant to that Agreement of Limited Partnership dated and effective
April 16, 2003 at 8:00 a.m. Central Daylight Savings Time (the "Partnership
Agreement"), hereby transfer, convey, set over and assign to Tidelands Oil & Gas
Corporation (the "Transferee"), all of the Transferor's right, title and
interest in and to the Partnership, including seven hundred twenty (720) Units,
as such term is defined in the Partnership Agreement (the "Transferred
Interest"). Except as expressly provided herein, each capitalized term shall
have the meaning set forth in the Partnership Agreement. This assignment is made
pursuant to the Purchase and Sale Agreement dated effective as of May 25, 2004,
at 8:00 a.m. central daylight savings time, by and among Transferor, Transferee,
Coahuila Pipeline, LLC and Arrecefe Management LLC (the "Purchase Agreement").
This assignment is made subject to the execution by the Transferee of an
Acceptance of Assignment, Election to Become Limited Partner and Adoption
Agreement (the "Acceptance Agreement") by Transferee and a Unanimous Consent and
First Amendment to Agreement of Limited Partnership, as attached hereto and made
a part hereof.
The Transferor represents and warrants to the Transferee that the Transferred
Interest is free and clear of all liens, prior assignments, claims and
encumbrances whatsoever. The foregoing Transfer is made subject to all of the
terms and conditions, provisions, and requirements of the Partnership Agreement
and the Certificate of Limited Partnership for the Partnership, as the same may
be amended from time to time and the Purchase Agreement. Finally, this transfer
is made with the intention that Transferee shall receive with the Transferred
Interest the capital account of Transferor in the Partnership as of the
Effective Time.
IN WITNESS WHEREOF, this Assignment is executed and delivered effective as of
8:00 a.m. on the 25th day of May, 2004 (the "Effective Time").
"TRANSFEROR"
Impact International, L.L.C.
By: Impact Energy Services, LLC, Manager
By:______________________________________
Xxx Xxxxxxxx, Manager
ACCEPTANCE OF ASSIGNMENT
AND ADOPTION AGREEMENT
----------------------
The undersigned, as the transferee ("Transferee") of all of Impact
International, L.L.C.'s right, title and interest in and to Reef Ventures, L.P.,
a Texas limited partnership, including seven hundred twenty (720) Partnership
Units which comprise seventy-two percent (72%) of all issued and outstanding
Partnership Units (the "Transferred Interest") pursuant to an Assignment of
Partnership Interest (the "Assignment") dated effective as of 8:00 a.m. on the
25th day of May, 2004, does hereby certify, elect, attest, represent, warrant
and agree as follows:
5. All terms used herein shall have the meaning given to them in
the Assignment.
6. The undersigned hereby accepts the assignment from the
Transferor of the Transferred Interest in the Partnership, all
pursuant to the Assignment and agrees to accept, adopt and be
bound by all of the provisions, representations, agreements,
terms and conditions of the Partnership Agreement as a
Substitute Limited Partner as of the Effective Time.
7. The undersigned states that his, her or its address for notice
purposes under the Partnership Agreement shall be as set forth
beneath the undersigned's signature unless and until changed
in accordance with the provision of the Partnership Agreement.
IN WITNESS WHEREOF, this Acceptance is executed and delivered on effective as of
8:00 a.m. central daylight savings time on the 25th day of May, 2004.
TIDELANDS OIL & GAS CORPORATION
By:____________________________
Xxxxxxx X. Xxxx, President
Address for Notice Purposes:
0000 Xxxx Xxxxxxx, Xxxxxxxx 0
Xxx Xxxxxxx, Xxxxx 00000
EXHIBIT F-3
Assignment of 2003 LOI
----------------------
ASSIGNMENT OF
LETTER OF INTENT
THIS ASSIGNMENT OF LETTER OF INTENT is dated and effective as of the
25th day of May, 2004 at 8:00 a.m. Central Daylight Savings Time, by and between
IMPACT ENERGY SERVICES, L.L.C., an Oklahoma limited liability company, 000 Xxxx
0xx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxxx 00000 ("Impact") and TIDELANDS OIL & GAS
CORPORATION, a Nevada corporation, 0000 Xxxx Xxxxxxx, Xxxxxxxx 0, Xxx Xxxxxxx,
Xxxxx 00000 ("Tidelands").
RECITALS
A. By Purchase and Sale Agreement of even date herewith to which
Tidelands and Seller (hereinafter defined) are parties (the "2004 Agreement"),
Impact's affiliates, Impact International, L.L.C. and Coahuila Pipeline, L.L.C.
(jointly "Seller") agreed to sell to Assignee and its affiliate, Arrecefe
Management LLC (jointly "Buyer") and Buyer agreed to purchase from Seller all of
Seller's right, title and interest in Reef Ventures, L.P., a Texas limited
partnership ("Reef").
B. A material consideration in the 2004 Agreement is the assignment by
Impact and the assumption by Tidelands of Impact's rights and obligations under
that Letter of Intent respecting the Formation of a Joint Venture for
Construction of an International Pipeline Crossing at Eagle Pass, Texas and
Piedras Negras, Mexico dated February 5, 2003, and amended April 3, 2003 (the
"Letter of Intent").
NOW, THEREFORE, for and in consideration of the sum of Ten and no/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
adequacy of which are mutually acknowledged, Impact and Tidelands hereby agree
as follows:
1. Assignment. Impact hereby sells and assigns to Tidelands all of
Impact's rights and obligations in and under the Letter of Intent. Impact
represents and warrants to Tidelands that Impact has neither sold, assigned,
encumbered nor otherwise transferred to any other party any of the interests it
obtained under the Letter of Intent, except the rights it assigned to Seller to
allow it to become a party to the 2003 Purchase and Sale Agreement and
partner(s) in Reef Ventures, L.P.
2. Assumption: Tidelands hereby expressly assumes all rights and
obligations of Impact in and under the Letter of Intent.
3. Effect on 2004 Agreement. Impact and Tidelands mutually acknowledge
that this Assignment is made pursuant to and a part of the transaction
contemplated under the 2004 Agreement. Notwithstanding anything contained herein
to the contrary, Impact and Tidelands agree that the assignment and assumption
undertaken herein with respect to the Letter of Intent shall in no manner alter,
diminish or adversely affect the rights of the parties to rely upon and enforce
the terms and provisions of the 2004 Agreement.
4. Counterpart Execution. This Assignment may be executed in
counterparts, all of which are identical and all of which constitute one and the
same instrument. It shall not be necessary for the undersigned parties to sign
the same counterpart.
"Impact" "Tidelands"
IMPACT ENERGY SERVICES, TIDELANDS OIL & GAS
L.L.C. CORPORATION
By:___________________________ By:_____________________________
Xxx Xxxxxxxx, Manager Xxxxxxx X. Xxxx, President
EXHIBIT F-4
Assignment of 2003 P&S
----------------------
ASSIGNMENT OF
PURCHASE AND SALE AGREEMENT
THIS ASSIGNMENT OF PURCHASE AND SALE AGREEMENT is dated and effective
as of the 25th day of May, 2004 at 8:00 a.m. Central Daylight Savings Time, by
and between IMPACT INTERNATIONAL, L.L.C., an Oklahoma limited liability company,
000 Xxxx 0xx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxxx 00000 ("Impact") and COAHUILA
PIPELINE, L.L.C., an Oklahoma limited liability company, 000 Xxxx 0xx Xxxxxx,
Xxxxx 000, Xxxxx, Xxxxxxxx 00000 ("Coahuila"), together with Impact being
jointly called "Assignor," and TIDELANDS OIL & GAS CORPORATION, a Nevada
corporation, 0000 Xxxx Xxxxxxx, Xxxxxxxx 0, Xxx Xxxxxxx, Xxxxx 00000
("Tidelands") and Arrecefe Management LLC, a Texas limited liability company,
0000 Xxxx Xxxxxxx, Xxxxxxxx 0, Xxx Xxxxxxx, Xxxxx 00000 ("Arrecefe"), together
with Tidelands being jointly called "Assignee."
RECITALS
A. By Purchase and Sale Agreement of even date herewith between
Assignor and Assignee (the "2004 Agreement"), Assignor has agreed to sell to
Assignee and Assignee has agreed to purchase from Assignor all of Assignor's
right, title and interest in Reef Ventures, L.P., a Texas limited partnership
("Reef").
B. A material consideration for both parties in the sale by Assignor of
its interest in Reef to Assignee is the assignment by Assignor and the
assumption by Assignee of Assignor's rights and obligations under that Purchase
and Sale Agreement dated April 16, 2003, by and among Tidelands, Impact and
Coahuila (the "2003 Agreement").
NOW, THEREFORE, for and in consideration of the sum of Ten and no/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Assignor and Assignee agree as
follows:
1. Assignment. Impact hereby sells and assigns to Tidelands all of its
rights and obligations in and under the 2003 Agreement. Coahuila hereby sells
and assigns to Arrecefe all of its rights and obligations in and under the 2003
Agreement. Impact and Coahuila, respectively, represent and warrant to Tidelands
and Arrecefe, respectively, that they have neither sold, assigned, encumbered
nor otherwise transferred to any other party any of the interests they obtained
under the 2003 Agreement.
2. Assumption. Tidelands expressly assumes all rights and obligations
of Impact in and under the 2003 Agreement. Arrecefe hereby expressly assumes all
rights and obligations of Coahuila in and under the 2003 Agreement.
3. Effect on 2004 Agreement. Assignor and Assignee mutually acknowledge
that this Assignment is made pursuant to and a part of the transaction
contemplated under the 2004 Agreement. Notwithstanding anything contained herein
to the contrary, Assignor and Assignee agree that the assignment and assumption
undertaken herein with respect to the 2003 Agreement shall in no manner alter,
diminish or adversely affect the rights of the parties to rely upon and enforce
the terms and provisions of the 2004 Agreement.
4. Counterpart Execution. This Assignment may be executed in
counterparts, all of which are identical and all of which constitute one and the
same instrument. It shall not be necessary for the undersigned parties to sign
the same counterpart.
"Assignor" "Assignee"
IMPACT INTERNATIONAL, L.L.C. TIDELANDS OIL & GAS
by its Managing Member, CORPORATION
Impact Energy Services, LLC
By:___________________________ By:_____________________________
Xxx Xxxxxxxx, Manager Xxxxxxx X. Xxxx, President
COAHUILA PIPELINE, L.L.C. ARRECEFE MANAGEMENT LLC
by its Sole Member,
Impact Energy Services, LLC
By:___________________________ By:_____________________________
Xxx Xxxxxxxx, Manager Xxxxxxx X. Xxxx, Manager
EXHIBIT F-5
-----------
Assignment of Gas Purchase Contract
ASSIGNMENT OF GAS PURCHASE CONTRACT
FOR VALUE RECEIVED, the receipt and sufficiency of which are hereby
acknowledged, Reef Marketing, L.L.C. hereby sells, assigns, transfers and
conveys to Reef Ventures, L.P. its rights and obligations under that Gas
Purchase Contract dated May 20, 2003, by and between Maverick Gas Marketing,
Ltd., as "Seller," and Reef Marketing, L.L.C., as "Buyer," a copy of which is
attached hereto as Exhibit A. This Assignment is dated and effective as of the
25th of May, 2004 at 8:00 a.m. Central Daylight Savings Time.
ASSIGNOR
REEF MARKETING, L.L.C.,
By its General Partner,
Reef Ventures, L.P.
__________________________
Xxx Xxxxxxxx, Manager
EXHIBIT F-6
-----------
Amendment to Certificate of Limited Partnership
-----------------------------------------------
CERTIFICATE OF AMENDMENT
OF
REEF VENTURES, L.P.
Pursuant to the provisions of Article 2 of the Texas Revised Limited
Partnership Act, the undersigned hereby represents the following:
1. The name of the limited partnership is Reef Ventures, L.P. (the
"Company").
AMENDMENTS
2. The street address of the registered office of the Company is1862 X.
Xxxxxxx Xx., Xxxx. #0, Xxx Xxxxxxx, XX 00000, and the name of its registered
agent at such address is Xxxxx X. Xxxxx.
3. The address of the principal office of the Company where records are
kept is1862 X. Xxxxxxx Xx., Xxxx. #0, Xxx Xxxxxxx, XX 00000.
4. Coahuila Pipeline, L.L.C. has withdrawn as general partner, and
Arrecefe Management LLC, a Texas limited liability company, has been admitted by
all partners as the new sole general partner.
5. The name, mailing address, and business address of the general
partner is:
Arrecefe Management LLC
0000 X. Xxxxxxx Xx., Xxxx. #0
Xxx Xxxxxxx, XX 00000
EXECUTED May __, 2004.
Arrecefe Management LLC,
a Texas limited liability company,
General Partner
By:_______________________________
Xxxxxxx X. Xxxx, Manager
EXHIBIT F-7
-----------
Amendment to Agreement of Limited Partnership
---------------------------------------------
UNANIMOUS CONSENT
AND
FIRST AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP
OF
REEF VENTURES, L.P.
A TEXAS LIMITED PARTNERSHIP
--------------------------------------------------------------------------------
This Unanimous Consent and First Amendment to the Agreement of Limited
Partnership dated as of April 16, 2003 (the "Partnership Agreement") of Reef
Ventures, L.P. (the "Partnership") is made as of the 25th day of May, 2004 at
8:01 a.m. central daylight savings time by and among the undersigned General
Partner of the Partnership and the undersigned Limited Partners of the
Partnership (collectively, the "Partners"). All terms used in this Amendment
shall have the meaning given those terms in the Partnership Agreement unless
otherwise defined herein or the context otherwise requires.
R E C I T A L S
---------------
A. The Partnership Agreement was entered into as of the 16th day
of April, 2003, among Coahuila, Impact International,
Tidelnads and Blackrock Capital Corporation ("Blackrock"), and
the Partnership;
B. Coahuila Pipeline, L.L.C., an Oklahoma limited liability
company ("Coahuila"), is the current General Partner of the
Partnership and will be selling all its right, title and
interest in the Partnership to Arrecefe Management, LLC, a
Texas limited liability company ("Arrecefe") and will withdraw
as General Partner;
C. Impact International, L.L.C., an Oklahoma limited liability
company ("Impact International"), is a Limited Partner in the
Partnership, and will be selling all its right, title and
interest in the Partnership to Tidelands Oil & Gas Corporation
("Tidelands");
D. In connection with the foregoing transactions, Arrecefe will
become the sole General Partner of the Partnership.
E. The Partners therefore wish to consent to the foregoing
transfers, the withdrawal of Coahuila as General Partner of
the Partnership, the appointment of Arrecefe as the sole
General Partner of the Partnership and the withdrawal of
Impact International as a Limited Partner of the Partnership;
F. In addition, the parties wish to amend the Partnership
Agreement to change all references to Coahuila as the General
Partner to Arrecefe as the General Partner.
NOW THEREFORE, the Parties agree as follows.
1. Approval of Limited Partner Transfer. As of the date hereof,
Coahuila, as General Partner and Tidelands, Impact International and Blackrock
as Limited Partners consent to the sale by Impact International of its seven
hundred twenty (720) Units in the Partnership to Tidelands, and agree that no
opinion of counsel shall be required as set forth in Section 10.1(c)(ii) and the
parties hereby waive such requirement.
2. Approval of General Partner Transfer. As of the date hereof,
Coahuila, Arrecefe, Tidelands, Impact International and Blackrock consent to the
sale by Coahuila of its ten (10) Units in the Partnership to Arrecefe, and agree
that no opinion of counsel shall be required as set forth in Section 10.1(c)(ii)
and the parties hereby waive such requirement.
3. Approval of Withdrawal of General Partner. As of the date hereof and
in accordance with Section 10.11 of the Partnership Agreement, the parties
consent to the withdrawal of Coahuila as General Partner in the Partnership.
4. Approval of Substituted General Partner. As of the date hereof and
in accordance with Section 10.11 of the Partnership Agreement, the parties
consent to the admission of Arrecefe as the General Partner in the Partnership.
5. Effective Date of Transfers. The parties hereby waive the
restrictions on the effective date of transfers contained in Section 10.3 of the
Partnership Agreement, and the transfers contemplated by this Unanimous Consent
and Amendment shall be effective on the date hereof.
6. Waiver of First Right of Refusal. The parties hereby waive any right
of first refusal they may have under Section 10.5 or any other provision of the
Partnership Agreement pursuant to which any Partner may have the option to
purchase the Units sold by each of Coahuila and Impact International.
7. Amendment of Partnership Agreement. As of the date hereof, the
Partners agree to amend all references found in the Partnership Agreement to
Coahuila as the General Partner of the Partnership to reflect Arrecefe as the
General Partner in the Partnership.
8. Authorization to File Amended Documents. The Partners hereby
authorize Arrecefe, as the newly appointed General Partner, to file all such
documents with the Secretary of State of the State of Texas as it deems
necessary to facilitate the transactions contemplated hereby, including, but not
limited to, an Amended Certificate of Limited Partnership to change the name of
the General Partner, appoint a new registered service agent and address, and to
change the principal office address of the Partnership.
9. Incorporation by Reference. All of the terms and provisions of the
Partnership Agreement are incorporated herein by reference as though fully set
forth herein.
10. Limited Effect. This Unanimous Consent and Amendment shall only
amend those provisions of the Partnership Agreement as specified and shall in no
other way affect the remaining provisions of the Partnership Agreement, which
shall continue in full force and effect from and after the date of this
Amendment.
11. Effect. This Unanimous Consent and Amendment shall not take effect
until all parties have given their written consent to the same.
12. Counterparts. This Unanimous Consent and Amendment may be executed
in any number of counterparts, each signed by different persons and all of said
counterparts together shall constitute one and the same instrument, and such
instrument shall be deemed to have been made, executed and delivered effective
as of the date first hereinabove written, irrespective of the time or times when
the same or any counterparts thereof actually may have been executed and
delivered.
13. Headings. The section headings throughout this Unanimous Consent
and Amendment are for convenience and reference only, and the headings shall not
be held to expand, modify, amplify or aid in the interpretation, construction or
meaning of this Unanimous Consent and Amendment.
14. Severability. If any provision of this Unanimous Consent and
Amendment shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions shall continue to be fully effective.
15. Law Governing. This Unanimous Consent and Amendment shall be
construed and interpreted in accordance with and governed and enforced in all
respects by the laws of the State of Texas.
16. Entireties; Modification. This Unanimous Consent and Amendment
contains the entire agreement between the Parties with respect to the subject
matter of the Unanimous Consent and Amendment and no modification of the
provisions of the same shall be effective unless reduced to writing and executed
by each Partner.
IN WITNESS WHEREOF, the parties have executed this Unanimous Consent
and Amendment effective as of the 25th day of May, 2004.
GENERAL PARTNER:
---------------
Arrecefe Management, LLC
By: ___________________________________________
Xxxxxxx X. Xxxx, Manager
LIMITED PARTNERS:
----------------
Tidelands Oil & Gas Corporation
By:____________________________________________
Xxxxxxx X. Xxxx, President
Blackrock Capital Corporation
By:____________________________________________
Xxxxxxx X. Xxxxxxx, Xx., President
AGREED AND ACKNOWLEDGED:
------------------------
Coahuila Pipeline, L.L.C.
By: Impact Energy Services, L.L.C., its Manager
By:____________________________________________
Xxx Xxxxxxxx, Manager
Impact International, L.L.C.
By: Impact Energy Services, L.L.C., its Manager
By:____________________________________________
Xxx Xxxxxxxx, Manager
EXHIBIT G-1
First Amendment to Stock Purchase Warrant
-----------------------------------------
FIRST AMENDMENT TO
STOCK PURCHASE WARRANT
THIS FIRST AMENDMENT TO STOCK PURCHASE WARRANT (the "Amendment")is made
and entered into as of the 25th day of May, 2004, by and between, Impact
International, L.L.C., an Oklahoma limited liability company ("Impact" or
"Holder") and Tidelands Oil & Gas Corporation (the "Company") and relates to
that certain Stock Purchase Warrant (the "Warrant") issued by the Company to
Impact on April 16, 2003. All terms used herein shall have the meaning given to
those terms in the Warrant unless such term is otherwise defined herein. This
Amendment is made as part of the transactions set forth in the Purchase and Sale
Agreement of the same date as this Amendment by and among Impact, the Company,
Coahuila Pipeline, LLC, and Arrecefe Management, LLC, (the "Purchase and Sale
Agreement"). The Warrant is amended as set forth below effective May 25, 2004.
1. Stipulation of Number of Shares and Exercise Price. The
parties hereby agree and stipulate that the number of shares
which the Holder is entitled to receive under the Warrant is
Ten Million (10,000,000) Shares of Common Stock of the
Company, plus such additional Shares of Common Stock which may
be issued under the terms of this Amendment, but less the five
hundred thousand Shares issued by the Company to the Holder on
April 13, 2004. The Exercise Price is stipulated and agreed to
be $0.335 per Share. Section 1.3 of the Warrant is hereby
amended consistent with the foregoing. Additionally, the
Expiration Date of the Warrant is extended to April 16, 2006.
2. Waiver of Further Adjustments. The parties agree that the
provisions of Sections 2.4 and 2.5 of Article 2 of the Warrant
are hereby deleted such that no further adjustments shall be
made to the number of Shares to which the Warrant relates or
the Exercise Price thereof except as set forth in this
Amendment.
3. Plan of Issuance; Registration; Cashless Exercise.
(a) The Company hereby agrees to use its best efforts to
file a registration statement ("Registration
Statement") with the Securities and Exchange
Commission ("SEC") under the Registration Rights
Agreement between the Company and Impact dated April
16, 2003, as amended contemporaneously herewith (the
"Registration Agreement") relating to the Shares
acquired by the Holder under the Warrant. The
Registration Statement shall be filed on Form S-3 if
the Company is eligible to use such form ("Form S-3")
or, if the Company is not eligible to use Form S-3,
then such Registration Statement shall be filed on
Form SB-2 ("Form SB-2"). If, for any reason, the
Company is not eligible to file on either Form S-3 or
Form SB-2, the Company shall file a Registration
Statement on the Form that counsel for the Company
and counsel for the Holder agree is appropriate. The
Company shall use its best efforts to cause the
Registration Statement to become effective (i) within
ninety (90) days following May 25, 2004 if the
registration is on Form S-3, or (ii) within one
hundred eighty (180) days following May 25, 2004 if
the registration is on Form SB-2 or any other
registration form. The Company agrees that is shall
use its best efforts to keep the Registration
Statement effective for so long as necessary to
effect the sale or disposition of all Shares which
may be issued under the Warrant and, without limiting
the foregoing, shall file such amendments and
supplements to the Registration Statement as
necessary and otherwise comply with the Registration
Agreement. The Company shall pay all Registration
Expenses (as defined in the Registration Agreement)
relating to such registration which are incurred in
filing the Registration Statement and keeping the
Registration Statement effective for a period of
twenty-four (24) months from the date the
Registration Statement is first declared effective by
the SEC and all Registration Expenses (as defined in
the Registration Agreement) incident to keeping the
Registration Agreement effective after such
twenty-four (24) month period shall be paid by the
Holder.
(b) If the Registration Statement shall be declared
effective (i) by April 7, 2005 if the registration is
on Form S-3, or (ii) July 7, 2005 if the registration
is on Form SB-2 or any other registration form, such
Registration Statement shall be deemed, for purposes
hereof, to have been timely (a "Timely
Registration"). In the event of a Timely
Registration, the Holder shall exercise the Warrant
for all remaining Shares under the Warrant, on a cash
basis (not pursuant to Section 1.2 of the Warrant) as
of the effective date of such Registration Statement.
In the event that the Company does not accomplish a
Timely Registration, then the Holder may exercise the
Warrant at any time after the date which is the last
date for a Timely Registration, at its option on a
cash basis or pursuant to Section 1.2 of the Warrant
on a net exercise (i.e. cashless) basis for all
remaining Shares available under the Warrant; it
being understood however that the Company will remain
obligated to use its best efforts to cause all Shares
issuable to the Holder to be registered on a
Registration Statement with the SEC.
(c) In the event that a delay occurs in the filing or
effectiveness of a Registration Statement of the
Company due to a force majeure event, as defined in
the Amended Registration Rights Agreement, the period
of such delay actually caused by such force majeure
event shall be added to the time period set forth in
(b) in determining whether a Timely Registration has
occurred.
(d) In the event that the Holder exercises the Warrant on
a cash basis, the purchase price payable to the
Company shall be paid, at the Holder's option, either
in cash or by the execution and delivery to the
Company of the Holder's promissory note ("Impact
Note"). The Impact Note shall be in the form attached
to this Amendment as Exhibit "A". The obligations
under the Impact Note will be immediately cancelled
in exchange for an amendment to that certain
promissory note (the "Tidelands Note") given by the
Company to Impact pursuant to the Purchase and Sale
Agreement whereby the principal sum owed under the
Tidelands Note shall be reduced and offset by the
dollar amount owed under the Impact Note.
(e) If the Company's Registration Statement relating to
the Shares of the Holder has not been declared
effective on or before July 14, 2004, the Holder will
be deemed to have exercised the Warrant on a net
issue basis for a number of Shares such that the
Company will issue on July 14, 2004 five hundred
thousand (500,000) Shares to the Holder. This process
will continue every ninety (90) days thereafter in
blocks of shares of five hundred thousand (500,000)
until the expiration of the last day on which the
Company could make a Timely Registration. This
process shall occur without the need for the Holder
to execute or deliver a notice of exercise under the
Warrant.
(f) By way of example, if the Company accomplishes a
Timely Registration within one hundred (100) days of
the date of this Amendment, the Company would have
issued five hundred thousand (500,000) shares to the
Holder under paragraph (e). Assuming that the number
of Shares which are deemed to have been exercised
under Section 1.2 of the Warrant for such issuance
was 568,228 in order to arrive at the issuance of
500,000 shares, then the number of shares which would
be remaining as available for issuance under the
Warrant would then be 8,863,554 after giving effect
to the exercise of 568,228 shares on April 14, 2004
and this exercise (i.e. 10,000,000 less 568,228 on
April 14, 2004 and 568,228 exercised in this
example); except that pursuant to paragraph (h),
below, the number of shares which would be available
for issuance under the Warrant will then
automatically be increased by 136,456 shares such
that, as a final result, the number of shares still
available for issuance would be 9,000,000. In this
example, the Holder would then be deemed to exercise
the Warrant on a cash basis for 9,000,000 shares at
$0.335 per share on the date of the Timely
Registration for a purchase price of $3,015,000 which
would be payable by the issuance of the Impact Note.
(g) The Company agrees to instruct its transfer agent to
rely upon the opinion of McAfee & Xxxx in connection
with any sale of Shares by the Holder under Rule 144.
(h) The parties agree that the number of Shares available
for issuance under the Warrant, regardless of whether
issued for cash or on a net exercise basis under the
Warrant, as of April 7, 2004 and before giving effect
to the issuance on April 14, 2004 was 10,000,000
shares. Therefore, in the event of exercises on a net
issue basis under the Warrant, any number of shares
which are deemed exercised in order to obtain Shares
under the Warrant and that exceeds the number of net
shares issued on such exercise shall be added as
additional shares available for issuance under the
Warrant such that on a net basis, the Holder would be
issued a total of 10,000,000 shares. An example of
the foregoing is as set forth in paragraph (f) above.
4. Cooperation. The Company agrees that it will cooperate with
the Holder in order to fully implement the provisions of this
Amendment, including without limitation, the taking of all
actions, execution of all instruments and the giving of all
instructions as may be useful in connection with the
implementation of the intentions of the parties under this
Amendment.
DATED May __, 2004.
"COMPANY"
TIDELANDS OIL & GAS CORPORATION
By:_________________________________
Xxxxxxx X. Xxxx, President
HOLDER"
IMPACT INTERNATIONAL, LLC
By its Managing Member Impact Energy
Services, LLC
By:_________________________________
Xxx Xxxxxxxx, Manager
EXHIBIT G-2
First Amendment to Registration Rights Agreement
------------------------------------------------
FIRST AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
THIS FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this
"Amendment"), is made as of May 25, 2004, by and among Tidelands Oil & Gas
Corporation, a Texas corporation (the "Company") and Impact International,
L.L.C., an Oklahoma limited liability company ("Impact") and relates to the
Registration Rights Agreement dated as of April 16, 2003 between the Company and
Impact (the "Original Agreement"). This Amendment is made as part of the
transactions set forth in the Purchase and Sale Agreement of the same date as
this Amendment by and among Impact, the Company, Coahuila Pipeline, LLC, and
Arrecefe Management, LLC (the "Purchase and Sale Agreement"). The Original
Agreement is hereby amended as follows as of May 25, 2004.
Whereas, Impact and the Company are parties to the Original Agreement;
and
WHEREAS, the Company has issued to Impact a Stock Purchase Warrant
dated April 16, 2003, as amended by the First Amendment to Stock Purchase
Warrant of the same date as this Amendment (the "Warrant"); and
WHEREAS, the Warrant requires the Company to use its best efforts to
file a registration statement relating to the shares of Common Stock issuable to
Impact under the Warrant and to keep the registration statement effective as set
forth in the Warrant; and
WHEREAS, Impact and the Company wish to make certain amendments to the
Original Agreement in keeping with the changes made to the Warrant.
Now, therefore, the Original Agreement is hereby modified in the
following respects.
1. Registration under Warrant. Regardless of any other provision set
forth in the Original Agreement, the Company agrees to use its best efforts to
register the shares of Common Stock issuable under the Warrant in the manner set
forth in the Warrant. To the extent any conflict exists between the provisions
hereof and the Original Agreement on the one hand and the Warrant on the other
hand, the provisions of the Warrant shall control. To the extent possible, the
Company shall comply with the provisions of Section 6 of the Original Agreement
in performing its registration obligations under the Warrant.
2. Registration Expenses. Section 7 of the Original Agreement is hereby
modified to read as follows:
Section 7. Registration Expenses. All reasonable fees and
expenses incident to the performance of or compliance with this
Agreement by the Company (including, without limitation, (i) all
registration and filing fees (including, without limitation, fees and
expenses (A) with respect to filings required to be made with the
National Association of Securities Dealers, Inc. and (B) of compliance
with securities or Blue Sky laws, including, without limitation, any
fees and disbursements of counsel for the underwriters in connection
with Blue Sky qualifications of the Registrable Securities pursuant to
Section 6(h)), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities in a form
eligible for deposit with The Depository Trust Company and of printing
prospectuses if the printing of prospectuses is requested by the
managing underwriters, if any, or by the holders of a majority of the
Registrable Securities included in any Registration Statement), (iii)
messenger, telephone and delivery expenses of the Company, (iv) fees
and disbursements of counsel for the Company, (v) expenses of the
Company incurred in connection with any road show, and (vi) fees and
disbursements of all independent certified public accountants referred
to in Section 6(o)(iii) hereof (including, without limitation, the
expenses of any "cold comfort" letters required by this Agreement) and
any other persons, including special experts retained by the Company,
("Registration Expenses"), incurred in connection with filing the
Registration Statement and keeping such Registration Statement
effective for a period of twenty four months from the date such
Registration Statement is first declared effective shall be borne by
the Company whether or not any of the Registration Statements is filed
or becomes effective and any such Registration Expenses incurred as a
result of keeping the Registration Statement effective after the
expiration of such twenty four month period shall be borne by Impact.
In any event, the Company always shall pay its internal expenses
(including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the
expense of any annual audit, the fees and expenses incurred in
connection with the listing of the securities to be registered on any
securities exchange on which similar securities issued by the Company
are then listed and rating agency fees and the fees and expenses of any
Person, including special experts, retained by the Company. To the
extent that the Securities and Exchange Commission staff or other
Governmental Authorities raise issues regarding the nature of the
warrants, their exercise, or the underlying common shares relating to
registration matters which require the various agreements to be altered
or modified, Impact and, or the Holder will be responsible for all
associated fees and costs of such alteration or modification.
The Company shall not be required to pay in any Registration
(i) fees and disbursements of any counsel retained by any Holder of
Registrable Securities or by any underwriter (except as set forth in
clauses 7(i)(B), (ii) any underwriter's fees (including discounts,
commissions or fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals) relating to the
distribution of the Registrable Securities, or (iii) any other expenses
of the Holders of Registrable Securities not specifically required to
be paid by the Company pursuant to the first paragraph of this Section
7.
3. Notice. Section 12 (b) of the Original Agreement is hereby modified
to read as follows:
(b) Notices. All notices required to be given hereunder shall
be in writing and shall be deemed to be duly given if personally
delivered, telecopied and confirmed, or mailed by certified mail,
return receipt requested, or overnight delivery service with proof of
receipt maintained, at the following address (or any other address that
any such party may designate by written notice to the other parties):
If to Impact:
Impact International, LLC
000 Xxxx 0xx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attn: Xxx Xxxxxxxx
Fax: (000) 000-0000
If to the Company:
Tidelands Oil & Gas Corporation
0000 Xxxx Xxxxxxx, Xxxxxxxx 0
Xxx Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxx
Fax: (000) 000-0000
Any such notice shall, if delivered personally, be deemed received upon
delivery; shall, if delivered by telecopy, be deemed received on the
first business day following confirmation; shall, if delivered by
overnight delivery service, be deemed received the first business day
after being sent; and shall, if delivered by mail, be deemed received
upon the earlier of actual receipt thereof or five business days after
the date of deposit in the United States mail.
4. Cooperation. The Company agrees that it will cooperate with Impact
in order to fully implement the provisions of the Warrant, including without
limitation, the taking of all actions, execution of all instruments and the
giving of all instructions as may be useful in connection with the
implementation of the intentions of the parties under the Warrant.
5. Force Majeure. In the event of a delay in the filing or
effectiveness of a Registration Statement of the Company due to a force majeure
event as defined below, the period of such delay actually caused by such force
majeure event will be added to the time period set forth in this Agreement.
Force majeure means: fire, flood, typhoon, earthquake, explosion, strikes,
unavoidable accidents, war (declared or undeclared), acts of terrorism,
sabotage, embargoes, acts or failure to act of Governmental Authorities,
including, but not limited to, the Securities and Exchange Commission's or a
state securities agency's failure to respond to the Company's registration
statement or amended registration statement within thirty (30) calendar days;
provided that the Company promptly notifies Impact or the Holder of the
occurrence of the force majeure and takes all reasonable steps necessary to
resume performance of its obligations so interfered with.
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed as of the date first above written.
TIDELANDS OIL & GAS CORPORATION
By:___________________________________________
Name: Xxxxxxx X. Xxxx
Title: President
IMPACT INTERNATIONAL, L.L.C.
By Impact Energy Services, L.L.C., its Manager
By:___________________________________________
Name: Xxx Xxxxxxxx
Title: Manager
EXHIBIT H
Termination Agreement
---------------------
TERMINATION AGREEMENT
THIS AGREEMENT is dated and effective as of the 25th day of May, 2004
at 8:00 a.m. Central Daylight Savings Time, by and among IMPACT INTERNATIONAL,
L.L.C., an Oklahoma limited liability company, 000 Xxxx 0xx Xxxxxx, Xxxxx 000,
Xxxxx, Xxxxxxxx 00000 ("Impact"), COAHUILA PIPELINE, L.L.C., an Oklahoma limited
liability company, 000 Xxxx 0xx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxxx 00000
("Coahuila"), and TIDELANDS OIL & GAS CORPORATION, a Nevada corporation, 0000
Xxxx Xxxxxxx, Xxxxxxxx 0, Xxx Xxxxxxx, Xxxxx 00000 ("Tidelands").
RECITALS
A. By Purchase and Sale Agreement of even date herewith between Impact,
Coahuila, Tidelands and Arrecefe Management LLC ("Arrecefe") (the "2004
Agreement"), Impact and Coahuila have agreed to sell to Tidelands and Arrecefe,
and Tidelands and Arrecefe have agreed to purchase from Impact and Coahuila all
of their right, title and interest in Reef Ventures, L.P., a Texas limited
partnership ("Reef").
B. A material consideration in the 2004 Agreement is (i) a mutual
termination by Impact and Tidelands of that Letter Agreement dated April 16,
2003, a copy of which is attached hereto as Exhibit A, and (ii) a termination of
that Agreement to Fund Balance of Purchase Price dated April 16, 2003, by and
among Impact, Coahuila and Tidelands, a copy of which is attached hereto as
Exhibit B (jointly, the "Letter Agreements").
NOW, THEREFORE, for and in consideration of the sum of Ten and no/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Termination. Impact and Tidelands hereby agree to terminate that
Letter Agreement dated April 16, 2003, a copy of which is attached hereto as
Exhibit A, and agree that such Letter Agreement shall be of no further force or
effect. Further, Impact, Coahuila and Tidelands hereby agree to terminate that
Agreement to Fund Balance of Purchase Price dated April 16, 2003, a copy of
which is attached hereto as Exhibit B, and agree (i) that the conditions set
forth therein were satisfied and the balance of the Purchase Price was funded,
and (ii) that such Letter Agreement shall be of no further force or effect.
2. Effect on 2004 Agreement. The signatory parties hereto mutually
acknowledge that this Assignment is made pursuant to and a part of the
transaction contemplated under the 2004 Agreement. Notwithstanding anything
contained herein to the contrary, the parties agree that the mutual termination
of the Letter Agreements undertaken herein shall in no manner alter, diminish or
adversely affect the rights of the parties to rely upon and enforce the terms
and provisions of the 2004 Agreement.
3. Counterpart Execution. This Agreement may be executed in
counterparts, all of which are identical and all of which constitute one and the
same instrument. It shall not be necessary for the undersigned parties to sign
the same counterpart.
"Impact" "Tidelands"
IMPACT INTERNATIONAL, L.L.C. TIDELANDS OIL & GAS
by its Managing Member, CORPORATION
Impact Energy Services, LLC
By:___________________________ By:___________________________
Xxx Xxxxxxxx, Manager Xxxxxxx X. Xxxx, President
"Coahuila"
COAHUILA PIPELINE, L.L.C.
by its Sole Member,
Impact Energy Services, LLC
By:___________________________
Xxx Xxxxxxxx, Manager
EXHIBIT I
Mutual Release
--------------
MUTUAL RELEASE
OF CLAIMS
THIS MUTUAL RELEASE OF CLAIMS is dated and effective as of the 25th day
of May, 2004 at 8:00 a.m. Central Daylight Savings Time, by and among IMPACT
INTERNATIONAL, L.L.C., an Oklahoma limited liability company, 000 Xxxx 0xx
Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxxx 00000 ("Impact"), COAHUILA PIPELINE, L.L.C.,
an Oklahoma limited liability company, 000 Xxxx 0xx Xxxxxx, Xxxxx 000, Xxxxx,
Xxxxxxxx 00000 ("Coahuila"), IMPACT ENERGY SERVICES, L.L.C., an Oklahoma limited
liability company, 000 Xxxx 0xx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxxx 00000
("Services"), and TIDELANDS OIL & GAS CORPORATION, a Nevada corporation, 0000
Xxxx Xxxxxxx, Xxxxxxxx 0, Xxx Xxxxxxx 00000 ("Tidelands").
RECITALS
A. By that Letter of Intent dated February 5, 2003, and amended April
3, 2003 (the "2003 Letter of Intent"), Services and Tidelands agreed to form a
joint venture for the purposes of pursuing an international pipeline crossing
from Eagle Pass, Texas to Piedras Negras, Mexico (the "Project"), consisting of
(i) a 12-inch pipeline for transporting natural gas (the "Gas Project"), and
(ii) a 6-inch pipeline for transporting natural gas liquids, together with the
construction of loading and unloading facilities (the "Liquids Project").
B. Pursuant to the 2003 Letter of Intent, Tidelands, as seller, and
Impact and Coahuila, as buyer, entered a Purchase and Sale Agreement dated April
16, 2003 (the "2003 Purchase Agreement"), (i) whereby Tidelands sold to Impact
and Coahuila (in the proportions 99% and 1%, respectively) an undivided 75%
membership interest in each Reef International, L.L.C. ("Reef International")
and Reef Marketing, L.L.C. ("Reef Marketing"), and (ii) whereunder Tidelands
made certain representations, warranties and covenants with respect to the
Project.
C. For purposes of effectuating the Gas Project, Impact, Coahuila,
Tidelands and Blackrock Capital Corporation ("Blackrock") entered an Agreement
of Limited Partnership dated April 16, 2003 (the "Partnership Agreement"),
forming Reef Ventures, L.P. as a Texas limited partnership (the "Partnership").
D. Impact, Coahuila and Services, on the one hand, and Tidelands, on
the other, now wish to "unwind" their joint venture as evidenced by the 2003
Letter of Intent, the 2003 Purchase Agreement, the Partnership Agreement and
other legal documents entered among them with respect to the Project on or
before April 16, 2003 (the "2003 Transaction").
E. As a material part of the intended "unwind" of the 2003 Transaction,
the parties have executed (i) a letter agreement dated April 7, 2004, by and
between Impact and Tidelands (the "2004 Letter of Intent"), (ii) a Purchase and
Sale Agreement by and between Impact and Coahuila, as seller, and Tidelands and
Arrecefe Management LLC, as buyer (the "2004 Purchase Agreement"), and (iii)
various other legal documents including, without limitation, an amendment to the
Partnership Agreement, a First Amendment to Stock Purchase Warrant and a First
Amendment to Registration Rights Agreement (the 2004 Letter of Intent, the 2004
Purchase Agreement, and all other legal documents entered among the parties on
even date herewith being collectively referred to as constituting the "2004
Transaction").
F. The parties wish to mutually release one another from all claims,
demands and obligations arising from or attendant to the 2003 Transaction
without in any manner altering, impairing or otherwise adversely affecting their
respective rights and obligations under the 2004 Transaction.
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Mutual Release. Impact, Coahuila and Services, for themselves and
their respective officers, directors, owners, partners, members, managers,
shareholders, employees, affiliates, agents, legal representatives,
administrators, successors and assigns (collectively, the "Impact Group") agree
to remise, release and forever discharge Tidelands, Reef International, Reef
Marketing, the Partnership, and their respective officers, directors, owners,
partners, members, managers, shareholders, employees, affiliates, agents, legal
representatives, administrators, successors and assigns (the "Tidelands Group")
of and from any and all actions, causes of action (whether legal or equitable),
claims, liens and demands, whether based in contract, tort or statute and
whether compensatory or punitive, including claims for attorney's fees and legal
costs (collectively, "Claims"), to the extent such Claims are based in or upon
the 2003 Transaction and/or the legal documents entered among the parties with
respect to the Project and dated on or before April 16, 2003. Likewise, the
Tidelands Group agrees to remise, release and forever discharge the Impact Group
of and from any and all Claims based in or upon the 2003 Transaction and/or the
legal documents entered among the parties with respect to the Project on or
before April 16, 2003.
2. Effect on 2004 Transaction. The parties mutually acknowledge and
agree that nothing contained in this Mutual Release shall modify, alter, amend,
diminish or otherwise adversely affect their respective rights and obligations
arising in the context of the 2004 Transaction and/or under the legal documents
entered among them on even date herewith, or release any claim covered by any
indemnity or other obligation under such legal documents even if such legal
documents are amendments to legal documents entered into and made a part of the
2003 Transaction.
3. Counterpart Execution. This Agreement may be executed in
counterparts, all of which are identical and all of which constitute one and the
same instrument. It shall not be necessary for the undersigned parties to sign
the same counterpart.
"Impact"
IMPACT INTERNATIONAL, L.L.C.
By its Managing Member, Impact Energy
Services, L.L.C.
By:____________________________________________
Xxx Xxxxxxxx, Manager
"Coahuila"
COAHUILA PIPELINE, L.L.C.
By its Sole Member, Impact Energy
Services, L.L.C.
By:_____________________________________________
Xxx Xxxxxxxx, Manager
"Services"
IMPACT ENERGY SERVICES, L.L.C.
By:_____________________________________________
Xxx Xxxxxxxx, Manager
"Tidelands"
TIDELANDS OIL & GAS
CORPORATION
By:_____________________________________________
Xxxxxxx X. Xxxx, President
Schedule 3.1(a)(vii)
--------------------
APPROVED AFEs
