Document:

ex10-2.htm

    

     

    EXHIBIT
10.2

    

    REGISTRATION
RIGHTS AGREEMENT

    

    This
Registration Rights Agreement dated as of the date set forth on the signature
page (“Agreement”) is by and between Tidelands Oil and Gas Corporation (the
“Company”), and Impact International LLC (the “Holder”).

    

    WHEREAS,
the Holder was issued 39,890,180 shares of the Company’s common stock pursuant
to that certain General Release, by and among various parties, including the
Company and the Holder, dated of even date herewith (“Release Agreement”);
and

    

    WHEREAS,
the Company desires to grant to the Holder certain registration rights in
respect of the shares issued pursuant to the Release Agreement, as well as the
8,812,980 shares owned prior to such issuance (collectively, the 48,703,160
shares are referred to as the “Shares”);

    

    NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as
follows:

    

    ARTICLE
ONE

    Registration Rights
Agreement

    

    SECTION
1.1        Registration Rights
Available. The Company agrees to provide Holder with respect to the
Shares and any other securities issued or issuable at any time or from time to
time in respect of the Shares upon a stock split, stock dividend,
recapitalization or other similar event involving the Company (collectively, the
“Securities”) rights to “piggyback” on a public offering of Company securities,
subject to the provisions of this Agreement and excluding (i) any registration
statement registering the Company’s common stock on Form S-4 or S-8 and (ii) any
Shares that are not eligible to be resold pursuant to the registration statement
filed by the Company (the piggyback registration rights hereunder being
“Registration Right”).

    

    SECTION
1.2         Piggyback
Registration. With respect to Holder’s right to piggyback on a public
offering of the Company securities pursuant to Section 1.1, the parties agree as
follows:

    

    (a) The amount of Securities that the
Company is required to include on a registration statement filed pursuant to
such Registration Right shall not exceed the number of shares of common stock,
the issuance or resale of which the Company is registering in such registration
statement, which share calculation shall exclude the Shares.

    

    (b)
Pursuant to Section 1.1, the Company will (i) promptly give to Holder written
notice 15 days prior to the filing of any registration relating to a public
offering of the Company securities; and (ii) include in such registration (and
related qualification under blue sky laws or other compliance), and in the
underwriting involved therein, all the Securities specified in Holder’s written
request or requests, mailed in accordance with Section 3.8.

    

    (c) The
right of Holder to participate in registration pursuant to Section 1.1 shall be
conditioned upon Holder’s participation in such offering, if such offering is a
best efforts or firm commitment offering, and the inclusion of the Securities in
the underwriting shall be limited to the extent provided herein. Notwithstanding
any other provision of this Agreement, if the managing underwriter determines
that marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit some or all of the Securities
that may be included in the registration and underwriting as follows: the number
of Securities that may be included in the registration and underwriting by
Holder shall be determined by multiplying the number of shares of Securities of
all selling shareholder of the Company which the managing underwriter is willing
to include in such registration and underwriting, times a fraction, the
numerator of which is the number of Securities requested to be included in such
registration and underwriting by Holder, and the denominator of which is the
total number of Securities which all selling shareholder of the Company have
requested to have included in such registration and underwriting. To facilitate
the allocation of shares in accordance with the above provisions, the Company
may round the number of shares allocable to any such person to the nearest 100
shares. If Holder disapproves of the terms of any such underwriting, it may
elect to withdraw therefrom by written notice to the Company and the managing
underwriter, delivered not less than seven days before the effective date. Any
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration, and shall not be transferred in a public distribution prior
to 120 days after the effective date of the registration statement relating
thereto, or such other shorter period of, time as the underwriters may
require.

     

     

    
 

    
      
        
        

      

      
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    SECTION
1.3         Registration
Procedure. With respect to the Registration Right, the following
provisions shall apply:

    

    (a)
Holder shall be obligated to furnish to the Company and the underwriters (if
any) such information regarding the Securities and the proposed manner of
distribution of the Securities as the Company and the underwriters (if any) may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to herein and shall otherwise cooperate
with the Company and the underwriters (if any) in connection with such
registration, qualification or compliance.

    

    (b) With
a view to making available the benefits of certain rules and regulations of the
Commission which may at any time permit the sale of the Restricted Securities
(used herein as defined in Rule 144 under the Securities Act of 1933, as
amended) to the public without registration, the Company agrees to use its best
lawful efforts to:

    

    (i) Make
and keep public information available, as those terms are understood and defined
in Rule 144 under the Securities Act, at all times during which the Company is
subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”); and

    

    (ii) File
with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act (at all times during which
the Company is subject to such reporting requirements).

    

    (c) The
Company agrees that it will furnish to Holder such number of prospectuses,
offering circulars or other documents incident to any registration,
qualification or compliance referred to herein as provided or, if not otherwise
provided, as the Holder from time to time may reasonably request.

    

    (d) All
expenses (except for the costs of any underwriting and selling discounts and
commissions and legal fees for Holder’s attorneys) of any registrations
permitted pursuant to this Agreement and of all other offerings by the Company
(including, but not limited to, the expenses of any qualifications under the
blue-sky or other state securities laws and compliance with governmental
requirements of preparing and filing any post-effective amendments required for
the lawful distribution of the Securities to the public in connection with such
registration, of supplying prospectuses, offering circulars or other documents)
will be paid by the Company.

    

    (e) The
Registration Rights of this Agreement, subject to the terms and conditions
hereof, shall be available to any subsequent holder of the Securities owned by
Holder. Each subsequent holder entitled to the Registration Rights under this
Agreement shall be bound by the terms and subject to the obligations of this
Agreement as though it were an original signatory hereto.

    

    SECTION
1.3.        OBLIGATIONS OF THE
COMPANY. In connection with the Company's registration obligations
hereunder, the Company shall, as expeditiously as practicable:

    

    (a)           (i)
furnish to each Holder copies of all documents filed with the United States
Securities and Exchange Commission (“SEC”) prior to there being filed with the
SEC, (ii) use commercially reasonable best efforts to cause its officers and
directors, counsel and certified public accountants to respond to such inquiries
as shall be necessary, in the reasonable opinion of such Holder, to conduct a
reasonable investigation within the meaning of the Securities Act, and (iii)
notify the Holder of any stop order issued or threatened by the SEC and use best
efforts to prevent the entry of such stop order or to remove it if
entered.

    

    (b)           (i)
prepare and file with the SEC (electronically on EDGAR) such amendments and
supplements, including post-effective amendments, to each registration statement
filed pursuant to the this Agreement (the “Registration Statement”) and the
prospectus used in connection therewith (the “Prospectus”) as may be necessary
to comply with the Securities Act and to keep the Registration Statement
continuously effective as required herein, and prepare and file with the SEC
such additional Registration Statements as necessary to register for resale
under the Securities Act all of the shares registered (including naming any
permitted transferees of shares registered as selling stockholder in such
Registration Statement); (ii) cause any related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424; (iii) respond as promptly as possible
to any comments received from the SEC with respect to each Registration
Statement or any amendment thereto and as promptly as possible provide the
Holder true and complete copies of all correspondence from and to the SEC
relating to the Registration Statement (other than correspondence containing
material nonpublic information); and (iv) comply with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
registered shares covered by such Registration Statement as so amended or in
such Prospectus as so supplemented.

     

    
 

    
      
        
        

      

      
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    (c)           Notify
the Holder as promptly as possible:

    

    (i) when the SEC notifies the Company
whether there will be a “review” of a Registration Statement and whenever the
SEC comments in writing on such Registration Statement; and (ii) when a
Registration Statement, or any post-effective amendment or supplement thereto,
has become effective, and after the effectiveness thereof: (A) of any request by
the SEC or any other federal or state governmental authority for amendments or
supplements to the Registration Statement or Prospectus or for additional
information; (B) of the issuance by the SEC or any state securities commission
of any stop order suspending the effectiveness of the Registration Statement
covering any or all of the shares registered or the initiation of any
proceedings for that purpose; (C ) of a pending proceeding against the Company
under Section 8A of the Securities Act in connection with the offering of the
shares registered; and (D) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of any of the shares registered for sale in any jurisdiction, or
the initiation or threatening of any proceeding for such purpose.  If
any of the events described in Section 1.3 (c)(ii)(A), 1.3 (c)(ii)(B), and 1.3
(c)(ii)(C) occur, the Company shall use best efforts to respond to and correct
the event.

    

    (d)           Notify
the Holder and their counsel as promptly as possible of the happening of any
event as a result of which the Prospectus included in or relating to a
Registration Statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading; and,
thereafter, the Company will as promptly as possible prepare (and, when
completed, give notice to each Holder) a supplement or amendment to such
Prospectus so that, as thereafter delivered to the purchasers of such shares
registered, such Prospectus will not contain an untrue statement of a material
fact or omit to state any fact necessary to make the statements therein not
misleading; provided that upon such notification by the Company, the Holder will
not offer or sell the shares registered pursuant to such Prospectus until the
Company has notified the Holder that it has prepared a supplement or amendment
to such Prospectus and delivered copies of such supplement or amendment to the
Holder (it being understood and agreed by the Company that the foregoing proviso
shall in no way diminish or otherwise impair the Company's obligation to as
promptly as possible prepare a Prospectus amendment or supplement as above
provided in this Section 1.3 (d).

    

    (e)           Upon
the occurrence of any event described in Section 1.3 (d) hereof, as promptly as
possible, prepare a supplement or amendment, including a post-effective
amendment, to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, neither the Registration Statement nor such Prospectus will contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading.

    

    (f)      
     Use best efforts to avoid the issuance of or, if
issued, obtain the withdrawal of, (i) any order suspending the effectiveness of
any Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the shares registered for sale in any
jurisdiction.

    

    (g)           Furnish
to the Holder, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, and all exhibits to the extent requested
by such Holder as promptly as possible after the filing of such documents with
the SEC.

    

    (h)           As
promptly as possible furnish to each selling Holder, without charge, such number
of copies of a Prospectus, including a preliminary Prospectus, in conformity
with the requirements of the Securities Act, and such other documents
(including, without limitation, Prospectus amendments and supplements) as each
such selling Holder may reasonably request in order to facilitate the
disposition of the registered shares covered by such Prospectus and any
amendment or supplement thereto. The Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holder in connection with the offering and sale of the shares registered covered
by such Prospectus and any amendment or supplement thereto to the extent
permitted by federal and state securities laws and regulations.

    

    (i)           Use
best efforts to register and qualify (or obtain an exemption from such
registration and qualification) the shares registered under such other
securities or blue sky laws of the states of residence of each Holder and such
other jurisdictions as each Holder shall reasonably request, to keep such
registration or qualification (or exemption therefrom) effective during the
periods each Registration Statement is effective, and do any and all other acts
or things which may be reasonably necessary or advisable to enable each Holder
to consummate the public sale or other disposition of registered shares in such
jurisdiction, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions where
it is not then qualified or subject to process.

    

    (j)           Cooperate
with the Holder to facilitate the timely preparation and delivery of
certificates representing the shares registered to be delivered to a transferee
pursuant to a Registration Statement, which certificates shall be free, to the
extent permitted by the Release Agreement and applicable law, of all restrictive
legends, and to enable such registered shares to be in such denominations and
registered in such names as such Holder may request.

    

    (k)           Cooperate
with any reasonable due diligence investigation undertaken by the Holder, any
managing underwriter participating in any disposition pursuant to a Registration
Statement, Holder' Counsel and any attorney, accountant or other agent retained
by Holder or any managing underwriter, in connection with the sale of the shares
registered, including, without limitation, making available any documents and
information; provided, however, that the Company will not deliver or make
available to any Holder material, nonpublic information unless such Holder
specifically requests and consents in advance in writing to receive such
material, nonpublic information and, if requested by the Company, such Holder
agrees in writing to treat such information as confidential.

    

    (l)           Comply
with all applicable rules and regulations of the SEC in all material
respects.

     

     

    
      
        
        

      

      
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    ARTICLE
TWO

    Indemnification

    

    SECTION
2.1         Indemnification by the
Company. In the event of any registration of the Securities of the
Company under the Securities Act, the Company agrees to indemnity and hold
harmless Holder and each other person who participates as an underwriter in the
offering or sale of such securities against any and all claims, demands, losses,
costs, expenses, obligations, liabilities, joint or several, damages, recoveries
and deficiencies, including interest, penalties and attorneys' fees
(collectively, “Claims”), to which Holder or underwriter may become subject
under the Securities Act or otherwise, insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based on any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which Holder’s Securities
were registered under-the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company will reimburse Holder and each such
underwriter for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such Claim (or action or
proceeding in respect thereof); provided that the Company shall not be liable in
any such case to the extent that any such Claim (or action or proceeding in
respect thereof) or expense arises out of or is based on an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance on and in conformity
with written information furnished to the Company through an instrument duly
executed by Holder specifically stating that it is for use in the preparation
thereof. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of Holder or any such underwriter and shall
survive the transfer of the Securities by Holder.

    

    SECTION
2.2         Indemnification by
Holder. The Company may require, as a condition to including the
Securities in any registration statement filed pursuant to this Agreement, that
the Company shall have received an undertaking satisfactory to it from Holder,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 2.1) the Company, each director of the Company, each officer of
the Company and each other person, if any, who controls the Company, within the
meaning of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus contained therein, or any amendment or supplement
thereto, if such statement or alleged statement or omission or alleged omission
was made in reliance on and in conformity with written information furnished to
the Company through an instrument duly executed by Holder specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement.  Notwithstanding the foregoing, the maximum liability
hereunder which any holder shall be required to suffer shall be limited to the
net proceeds to such Holder from the Shares sold by such Holder in the offering.
Such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director, officer
or controlling person and shall survive the transfer of the Securities by
Holder.

    

    SECTION
2.3         Notices of Claims,
etc. Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a Claim referred to in this
Article Two, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified
party to give
notice as provided herein shall not relieve the indemnifying party of its
obligations under this Article Two, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice.  In case
any such action is brought against an indemnifying party, unless in such
indemnified party reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such Claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation.  No indemnifying party shall, without the consent of
the indemnified party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such Claim.

    

    SECTION
2.4         Indemnification
Payments. The indemnification required by this Article shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or expense, loss, damage or liability
is incurred. The indemnity and contribution agreements contained in this Article
2 are in addition to any other remedy that any indemnified party may have
against any indemnifying party.

    

    SECTION
2.5         If any indemnified
party shall have reasonably concluded that there may be one or more legal
defenses available to such indemnified party which are different from or
additional to those available to the indemnifying party, or that such claim or
litigation involves or could have an effect upon matters beyond the scope of the
indemnity agreement provided in this Article 2, the indemnifying party shall not
have the right to assume the defense of such action on behalf of such
indemnified party, and such indemnifying party shall reimburse such indemnified
party and any person controlling such indemnified party for the fees and
expenses of counsel retained by the indemnified party which are reasonably
related to the matters covered by the indemnity agreement provided in this
Article 2. Subject to the foregoing, an indemnified party shall have the right
to employ separate counsel in any such action and to participate in the defense
thereof but the fees and expenses of such counsel shall not be at the expense of
the Company.

    

    

    SECTION
2.6         If the indemnification
provided for in this Article 2 from the indemnifying party is applicable by its
terms but unavailable to an indemnified party hereunder in respect of any
losses, claims, damages, liabilities or expenses then the indemnifying party, in
lieu of indemnifying such indemnified party, shall, subject to the maximum
aggregate liability of any Holder as set forth in Section 2.2, contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and indemnified party in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative faults of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
Section 2, any legal or other fees, charges or expenses reasonably incurred by
such party in connection with any investigation or proceeding. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person. The parties
hereto agree that it would not be just and equitable if contribution pursuant to
this Section 2.6 were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph.

     

    
      
        
        

      

      
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    ARTICLE
THREE

    Miscellaneous

    

    SECTION
3.1         Consent to
Amendments. Except as otherwise expressly provided herein, the provisions
of this Agreement may be amended or waived only by the written agreement of the
Company and the Majority Purchasers (as defined in the Release Agreement) and
shall be effective only to the extent specifically set forth in such
writing.

    

    SECTION
3.2          Term of the
Agreement. This Agreement shall terminate with respect to Holder on the
earlier to occur of (i) all of the Securities having been registered as provided
in Article One or (ii) March 31, 2010.

    

    SECTION
3.3          Successors and
Assigns. Except as otherwise expressly provided herein, all covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto are transferable and will bind and inure to the benefit of the respective
successors and assigns of the parties hereto, but only if so expressed in
writing.

    

    SECTION
3.4          Severability.
Whenever possible, each provision of this Agreement will be interpreted in such
a manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under applicable law,
such provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.

    

    SECTION
3.5          Delays or Omissions.
No failure to exercise or delay in the exercise of any right, power or remedy
accruing to Holder on any breach or default of the Company under this Agreement
shall impair any such right, power or remedy nor shall it be construed to be a
waiver of any such breach or default.

    

    SECTION
3.6           Remedies Cumulative.
All remedies under
this Agreement, or by law or otherwise afforded to any party hereto shall be
cumulative and not alterative.

    

    SECTION
3.7           Descriptive Headings.
The descriptive headings of this Agreement are inserted for convenience only and
do not constitute a part of this Agreement. Unless clearly denoted otherwise,
any reference to Articles or Sections contained herein shall be to the Articles
or Sections of this Agreement.

    

    SECTION
3.8            Notices. Any notices
required or permitted to be sent hereunder shall be delivered pursuant to the
terms of the Release Agreement.

    

    SECTION
3.9            Governing Law. The
validity, meaning and effect of this Agreement shall be determined in accordance
with the laws of the State of Texas applicable to contracts made and to be
performed in that state.

    

    SECTION
3.10          Final Agreement. This
Agreement, together with those documents expressly referred to herein,
constitutes the final agreement of the parties concerning the matters referred
to herein, and supersedes all prior agreements and understandings.

    

    SECTION
3.11          Execution in
Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute one
instrument.

    

    SECTION
3.12           Replacement.  This
Agreement replaces in its entirety the registration rights agreement that was
executed by the Company on March 25, 2008 in favor of Holder.

    

    The
parties hereto have executed this Agreement as of March 25, 2008.

    

    COMPANY:

    

    Tidelands
Oil and Gas Corporation

     

    By: /s/ James. B.
Smith                                         

    Name: James B.
Smith                                                                

    Title:    President
& Chief Executive Officer

     

     

    HOLDER:

     

     

    
      Impact
International LLC

    

     

    

    By: /s/ James C. Brewer
III                                      

    Name: James C. Brewer
III                                                      

    Title:  Manager                                           

     

    
      
        
        

      

      
        23ex10-3.htm

     

    EXHIBIT
10.3

    

    GENERAL
RELEASE

    

    This
GENERAL RELEASE (the “Release”) is made as
of March 25, 2008, by and among Impact International, L.L.C., an Oklahoma
limited liability company (“Impact”), Ramiiilaj,
a Limited Partnership, a Texas limited partnership (“Ramiiilaj”), Reef
Ventures, L.P., a Texas limited partnership (“Reef Ventures”),
Arrecefe Management, LLC, a Texas limited liability company (“Arrecefe”), and
Tidelands Oil & Gas Corporation, a Nevada corporation (“Tidelands”).  Each
of Impact, Ramiiilaj, Reef Ventures, Arrecefe and Tidelands are sometimes
referred to in this Release as a “Party” and
collectively as the “Parties”.  Tidelands,
Reef Ventures, and Arrecefe are collectively referred to in this Release as the
“Tidelands
Parties”.  Impact and Ramiiilaj are collectively referred to in
this Release as the “Impact
Parties”.

    

    WHEREAS, Tidelands made a Promissory
Note in the original principal amount of Six Million Five Hundred Twenty-Three
Thousand Seven Hundred Seventy-Three and 30/100 Dollars ($6,523,773.30), dated
May 25, 2004 (the “Closing Date”),
payable to the order of Impact (the “Note”) in connection
with the purchase by Tidelands of all of the right, title, and interest of
Impact in Reef Ventures and the purchase by Arrecefe, a subsidiary of Tidelands,
of all of the right, title, and interest of Coahuila Pipeline, LLC, a Texas
limited liability company and affiliate of Impact (“Coahuila”), in Reef
Ventures, pursuant to a Purchase and Sale Agreement dated the Closing Date by
and among Impact, Tidelands, Arrecefe, and Coahuila (the “Purchase
Agreement”);

     

    WHEREAS, as security for Tidelands’
obligations under the Note, Tidelands caused Arrecefe, as general partner of
Reef Ventures, (a) to cause Reef Ventures to issue a Guaranty to Impact dated
the Closing Date in which Reef Ventures guaranteed Tidelands’ payment and
performance under the Note (the “Guaranty”), and (b)
to enter into a Deed of Trust, Mortgage, Security Agreement, Financing Statement
and Assignment with Impact dated the Closing Date in which Reef Ventures granted
a lien on certain of its properties to Impact (the “Deed of
Trust”);

     

    WHEREAS, as security for Reef Ventures’
obligations under the Guaranty, Tidelands caused Arrecefe, as general partner of
Reef Ventures, (a) to cause Reef Ventures to enter into a Pledge Agreement with
Impact dated the Closing Date in which Reef Ventures pledged 100% of the
membership interests of Reef International, LLC, a Texas limited liability
company (“Reef
International”), to Impact (the “Pledge Agreement”),
and (b) to issue a Membership Interest Power to Impact dated the Closing Date in
which Reef Ventures granted Impact the right to appoint a person as attorney to
transfer such membership interests to Impact (the “Power”);

     

    WHEREAS, in connection with the
Purchase Agreement, Tidelands and Impact entered into a First Amendment to Stock
Purchase Warrant dated the Closing Date (the “First Amendment to
Warrant”) in which Tidelands and Impact amended certain terms of the
Stock Purchase Warrant between Tidelands and Impact dated April 16, 2003 (the
“Original
Warrant”), and a First Amendment to Registration Rights Agreement dated
the Closing Date (the “First Amendment to
Registration Rights Agreement”) in which Tidelands and Impact amended
certain terms of the Registration Rights Agreement between Tidelands and Impact
dated April 16, 2003 (the “Original
Agreement”);

     

    WHEREAS, as provided herein, the Impact
Parties desire to terminate the obligations and liabilities of the Tidelands
Released Persons (as defined below), if any such obligations or liabilities
exist, under the Purchase Agreement, the Guaranty, the Deed of Trust, the Pledge
Agreement, the Power, the First Amendment to Warrant, the Original Warrant, the
First Amendment to Registration Rights Agreement, the Original Agreement, and
all other agreements, documents and instruments executed or delivered by any of
the Impact Released Persons (as defined below) or the Tidelands Released Persons
in connection therewith (collectively, the “Transaction
Documents”) and each Party desires to release each of the other Parties
and their Affiliates (as defined below) and Representatives (as defined below)
from all obligations and liability whatsoever related to the Transaction
Documents.

     

    NOW,
THEREFORE, in consideration of the mutual agreements, covenants, representations
and warranties contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows:

    1. Termination.  The
Impact Parties agree that all of the obligations and liabilities of any and all
of the Tidelands Parties and each of their Affiliates and Representatives
(collectively, the “Tidelands Released
Persons”) under the Transaction Documents, if any such obligations or
liabilities exist, are hereby terminated for all purposes, and that all duties
and obligations of the Tidelands Released Persons set forth in the Transaction
Documents, if any such duties or obligations exist, are of no further force or
effect.

     

    2. Release and Covenant Not to
Sue.  Each Party releases and forever discharges, for itself
and for each of its past, present and future parents, subsidiaries and
affiliates (collectively, “Affiliates”) and each
of its and its Affiliates’ past, present, and future officers, directors,
shareholders, limited liability company membership interest holders, limited
partners, general partners, members, managers, employees, agents,
representatives, successors, and assigns and all other persons acting on behalf
of such Party or its Affiliates (collectively, “Representatives”),
each of the other Parties, and each of the other Parties’ Affiliates and
Representatives from any and all actions, causes of action, obligations, costs,
expenses (including costs of investigation and attorneys fees), controversies,
damages (including incidental and consequential damages), losses, claims,
liabilities, suits, and demands, of whatever character, in law or in equity,
known or unknown (including acts of God), statutory or at common law, federal or
state, suspected or unsuspected, contingent or realized, from the beginning of
time (collectively, “Obligations and
Claims”, or individually, an “Obligation” or “Claim”), specifically
including, but not limited to, all Obligations and Claims arising out of or
related in any manner to the Transaction Documents or the performance,
non-performance, acts or omissions of any of the Parties and their Affiliates
and Representatives thereunder. The foregoing notwithstanding, the Parties
acknowledge and agree that this Release in no way waives any rights any of the
Parties might possess in connection with the enforcement of this
Release.  Each of the Parties hereby covenants not to, and to cause
all of its Affiliates and Representatives not to, bring any action, cause of
action, suit or other proceeding of any kind, which has accrued or which may
ever accrue, whether based in the United States Constitution, any state
constitution, common law or statute, contract, tort, or in equity, for actual or
punitive damages or other relief, against any of the other Parties or their
Affiliates or Representatives arising out of, resulting from, or in any manner
related to the matters released in this Section
2.

     

     

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    3. Specific
Matters.  Without limiting the provisions of Sections 1 and 2 of this Release,
this Release shall effectively terminate and release, but is not limited to, all
Obligations and Claims arising out of, resulting from, or in any manner related
to, any of the following:

     

    (a) All
rights of any of the Impact Parties and each of their Affiliates and
Representatives (collectively, the “Impact Released
Persons”) to receive, and any obligations of any of the Tidelands
Released Persons to deliver, any amount of money set forth in the Note, the Deed
of Trust, or the Guaranty;

     

    (b) All
rights of any of the Impact Released Persons related to Tidelands’ stock set
forth in the Original Warrant, the First Amendment to Warrant, the Original
Agreement, or the First Amendment to Registration Rights Agreement, and all
rights of any of the Impact Released Persons related to the membership interests
of Reef International set forth in the Pledge or the Power;

     

    (c) All
rights of any of the Impact Released Persons to require the performance of any
actions of any kind by any of the Tidelands Released Persons contemplated in any
of the Transaction Documents;

     

    (d) Any
and all representations or warranties given by any of the Tidelands Released
Persons in any of the Transaction Documents; and

    

    (e)  Any
and all obligations of any of the Tidelands Released Persons to indemnify any of
the Impact Released Persons or any other person for any losses, claims, damages,
liabilities or expenses or any other matter arising under or in connection with
any of the Transaction Documents.

    

    4. Consideration.  As
a portion of the consideration for this Release and for the Impact Parties’
agreement to cancel the Note, terminate the Pledge Agreement, release and
terminate the Deed of Trust, and perform each and all of the other covenants set
forth in this Release, Tidelands will cause Reef Ventures to direct West Texas
Gas, Inc., acting on behalf of Tidelands and Reef Ventures, to (a) pay Impact
the amount of $2,436,825 (the “Release
Consideration”) by wire transfer to the following bank account of
Impact:

    

    Stillwater National Bank

    ABA # 103101437

    For Further credit to Impact
International, LLC

    Account No: 6327688;

    

    and (b)
Tidelands will issue 39,890,180 shares of Tidelands restricted common stock (the
“Restricted
Stock”) to Impact.  The Impact Parties agree that the payment
of the Release Consideration to the foregoing bank account of Impact and the
issuance of the Restricted Stock to Impact, in addition the mutual promises set
forth in this Release, constitute full and adequate consideration for this
Release, the receipt of which is hereby acknowledged by each of the Impact
Parties.  The Impact Parties agree to indemnify and hold the Tidelands
Released Persons harmless from any Obligations and Claims which might arise as a
result of (i) West Texas Gas, Inc., acting on behalf of Tidelands and Reef
Ventures, sending the Release Consideration to be received by any of the Impact
Parties to the above-referenced bank account or (ii) Tidelands issuing the
Restricted Stock to be received by any of the Impact Parties to
Impact.

    

    5. No Previous Assignment of
Rights.  The Impact Parties represent and warrant that they
have not assigned or transferred, or purported to assign or transfer, to any
person or entity, all or any portion of any Obligation or Claim released under
Section 2 of
this Release.

     

    6. Voluntary
Release.  Each of the Impact Parties acknowledges that it has
carefully read and fully understands the provisions of this Release, including,
specifically, the release of Obligations and Claims set forth in Section 2 of this
Release, and that each of the Impact Parties is knowingly and voluntarily
entering into this Release.  Each of the Impact Parties acknowledges
that it has had a reasonable opportunity to consult with its legal counsel prior
to executing this Release.

     

    7. Complete
Defense.  The Impact Parties acknowledge and agree that this
Release shall be a complete defense to any Obligation or Claim released under
the terms of Section
2 of this Release, and each of the Impact Parties hereby consents to the
entry of a temporary or permanent injunction to end the assertion of any such
Obligation or Claim.

     

    8. Indemnification.  The
Impact Parties shall, jointly and severally, and shall cause the other Impact
Released Persons to, indemnify the Tidelands Released Persons, and hold the
Tidelands Released Persons harmless against any and all damages (including
incidental and consequential damages), liabilities, losses, costs, and expenses
(including costs of investigation and attorneys’ fees) of every kind and
description, whether or not involving third party claims, arising directly or
indirectly from or in connection with (i) the assertion by or on behalf of any
Impact Released Person of any Obligation, Claim, or other matter purported to be
released pursuant to this Release; (ii) the assertion by any third party of any
claim or demand against any Tidelands Released Person, which claim or demand
arises directly or indirectly from, or in connection with, any assertion by or
on behalf of any Impact Released Person against such third party of any Claims,
Obligations, or other matters purported to be released pursuant to this Release;
(iii) the breach by any Impact Party of any representation, warranty, or
covenant contained in this Release; and (iv) the defense by any Tidelands
Released Person of, or the pursuit or obtainment by any Tidelands Released
Person of, any injunction to terminate the assertion of any Obligation or Claim
released under this Release.

    

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    9. Survival.  All
covenants, representations, warranties, and agreements of the Impact Parties
shall survive execution and delivery of this Release and shall continue until
such time as all the obligations of the Impact Parties in this Release shall
have lapsed in accordance with their respective terms or shall have been
discharged in full.

     

    10. Further Assurances.
The Impact Parties agree (a) to furnish upon request to the Tidelands Parties
such further information, (b) to execute and deliver to the Tidelands Parties
such other documents, and (c) to do such other acts and things, all as any of
the Tidelands Parties may request, for the purpose of carrying out the intent of
this Release.

     

    11. Authority.  By
their signatures below, each of the Impact Parties represents and warrants to
each of the Tidelands Parties that it has all necessary authority to enter into
this Release.  Each of the Impact Parties represents and warrants that
it is entering into this Release solely for the purposes and consideration set
forth herein, and further warrants that this Release is being executed without
reliance on any representation of any kind or character not expressly set forth
herein.  Each of the Impact Parties warrants that it has read this
Release and that it has had the opportunity to consult with its legal counsel as
to its effect.

     

    12. Separability.   If
any provision of this Release is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Release will remain in full
force and effect.  Any provision of this Release held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.

     

    13. Amendments,
Waiver.  No amendment, modification, termination or waiver of
any provision of this Release shall be effective unless the same shall be in
writing and signed by the Parties, and then such waiver or consent shall be
effective only in the specific instance and the specific purpose for which
given.

     

    14. Governing Law. This
Release shall be governed and construed in accordance with the applicable laws
of the State of Texas, without regard to its conflicts of law
principles.

     

    15. Venue.  Any
Party bringing a legal action or proceeding against another Party for the
resolution of any dispute arising in connection with the interpretation,
construction, or enforcement of this Release shall bring such legal action or
proceeding in any court of the State of Texas sitting in Bexar County, Texas or
any federal court having jurisdiction over Bexar County, Texas. Each Party
hereto agrees to submit to the exclusive personal jurisdiction and venue of the
state and federal courts having jurisdiction over Bexar County, Texas, for the
resolution of all disputes arising in connection with the interpretation,
construction, and enforcement of this Release, and hereby waives the claim or
defense therein that such courts constitute an inconvenient forum. Each Party
waives, to the fullest extent permitted by law, any objection that it may now or
later have to the laying of venue of any legal action or proceeding arising out
of or relating to this Release brought in any such courts.

     

    16. Expenses. Each Party
shall be responsible for its own expenses and costs, including but not limited
to reasonable attorney’s fees and costs, incurred, or that may in the future be
incurred, in connection with the preparation, execution, delivery and
performance of this Release.

     

    17. Notices.  Any
notice or other communication required or permitted hereunder shall be in
writing and shall be delivered personally, sent by facsimile transmission or
sent by certified, registered or express mail, postage prepaid to the Parties at
their respective addresses set forth below or to such other address as a Party
may hereafter specify in writing and deliver in accordance with this Section
17.  Any such notice shall be deemed given when so delivered
personally or sent (with confirmation of transmission) by facsimile or, if
mailed, three (3) days after the date of deposit in the United States mail,
to:

     

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

     

    
      
        	If to any of the Tidelands
      Parties:     	
                Tidelands
      Oil & Gas Corporation

              
	
                   

              	
                1862
      W. Bitters, Bldg. 1

              
	 
      	
                San
      Antonio, Texas 78248

              
	
                   

              	
                Attention:
      James B. Smith

              
	
              	
                Fax:
      (210) 764-2809

              
	 
      	 
      
	
                 

              	 
      
	
                
                   

                

              	
                 

              
	
                with
      a copy (which shall not constitute notice) to:

              	
                Strasburger
      & Price, LLP

              
	 
      	
                300
      Convent Street, Suite 900

              
	 
      	
                San
      Antonio, Texas 78205

              
	 	Attn:
      David J. Cibrian
	
                 

              	
                Fax:
      (210) 250-6008

              
	 
      	 
      
	
                If
      to any of the Impact Parties:

              	
                
                  Impact
      International, L.L.C.

                

              
	 
      	
                
                  6305
      Waterford Blvd.

                

              
	 
      	
                
                  Suite
      300

                

              
	 
      	
                
                  Attn.:  Jim
      Brewer

                

              

      

    

     

    18. Entire
Agreement.  This Release, when fully executed, supersedes all
previous negotiations, representations, and discussions by the Parties hereto
concerning the subject matter hereof and integrates the whole of all of their
agreements and understandings concerning the subject matter hereof. No oral
representations or undertakings concerning the subject matter hereof shall
operate to amend, supersede, or replace any of the terms or conditions set forth
herein.

     

    19. Counterparts.  This
Release may be executed in one or more counterparts, each of which will be
deemed to be an original copy of this Release and all of which, when taken
together, will be deemed to constitute one and the same
agreement.  The exchange of copies of this Release and of signature
pages by facsimile transmission or by email with attachment in portable document
format (.pdf) or other comparable format shall constitute effective execution
and delivery of this Release as to the Parties and may be used in lieu of the
original Release for all purposes.  Signatures of the parties
transmitted by facsimile shall be deemed to be their original signatures for any
purposes whatsoever.

     

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    This
Release has been executed as of the date first written above.

     

    REEF
VENTURES, L.P.

    

    By: Arrecefe Management, LLC, its
general partner

     

    By:      /s/
James. B.
Smith                                                      

    Name: James
B.
Smith                                                                

    Title:   Manager                                                                

     

    ARRECEFE MANAGEMENT,
LLC

     

    By:      /s/ James. B.
Smith                                                      

    Name: James B.
Smith                                                                

    Title:   Manager                                                                

     

    TIDELANDS
OIL & GAS CORPORATION

     

    By:      /s/ James. B.
Smith                          

    Name: James B.
Smith                                                                

    Title:   President
& Chief Executive Officer

     

    IMPACT
INTERNATIONAL, L.L.C.

     

    By:      /s/ James C. Brewer
III                                                      

    Name: James C. Brewer
III                                                      

    Title:   Manager                                           

     

    RAMIIILAJ,
a Limited Partnership

     

    By:      Hefner
Investment Company, its general partner

     

    By:      /s/ James C. Brewer
III                    

    Name: James C. Brewer
III                                                      

    Title:   Vice
President                                                      

    

     

    
      
        
        

      

      
        28

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