Document:

EXHIBIT 10.2
                                                                    ------------

                        AGREEMENT OF LIMITED PARTNERSHIP

                                       OF

                                REEF VENTURES, LP

THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE BEEN ACQUIRED FOR
INVESTMENT  AND HAVE NOT BEEN  REGISTERED  UNDER THE  SECURITIES ACT OF 1933, AS
AMENDED,  OR THE SECURITIES LAWS OF ANY STATE.  WITHOUT SUCH REGISTRATION,  SUCH
SECURITIES  MAY NOT BE SOLD OR  OTHERWISE  TRANSFERRED  AT ANY TIME  WHATSOEVER,
EXCEPT UPON DELIVERY TO THE PARTNERSHIP OF AN OPINION OF COUNSEL SATISFACTORY TO
THE  PARTNERSHIP  THAT  REGISTRATION  IS NOT REQUIRED  FOR SUCH  TRANSFER OR THE
SUBMISSION TO THE  PARTNERSHIP OF SUCH OTHER EVIDENCE AS MAY BE  SATISFACTORY TO
THE  PARTNERSHIP  TO THE EFFECT  THAT ANY SUCH  TRANSFER  OR SALE WILL NOT BE IN
VIOLATION  OF THE  SECURITIES  ACT OF 1933,  AS  AMENDED,  OR  APPLICABLE  STATE
SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.

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                                TABLE OF CONTENTS

REEF VENTURES, LP..............................................................1

ARTICLE I......................................................................1

   1.1    FORMATION OF THE PARTNERSHIP.........................................1
   1.2    NAME.................................................................1
   1.3    AGENT AND PRINCIPAL OFFICE...........................................1
   --    ----------------------------
   1.4    FILINGS..............................................................2
   1.5.   POWER OF ATTORNEY....................................................2
   1.6    TERM.................................................................3

ARTICLE II.....................................................................3

   2.1    CERTAIN DEFINITIONS..................................................3
   2.2    CONSTRUCTION.........................................................8

ARTICLE III....................................................................8

   3.1    PURPOSE..............................................................8
   3.2    POWERS...............................................................8

ARTICLE IV.....................................................................9

   4.1    UNITS; ORIGINAL CAPITAL CONTRIBUTION.................................9
   4.2    ADDITIONAL CAPITAL CONTRIBUTIONS....................................10
   4.3    NO WITHDRAWAL OR RETURN OF CAPITAL CONTRIBUTIONS....................10
   4.4    CAPITAL ACCOUNT.....................................................11
   4.5    INTEREST............................................................11
   4.6    LOANS BY PARTNERS...................................................11
   4.7    CAPITAL COMMITMENT DRAW DOWNS.......................................12
   4.8    ENFORCEMENT OF CONTRIBUTIONS........................................12

ARTICLE V.....................................................................12

   5.1    ALLOCATIONS AMONG PARTNERS..........................................12
   5.2    ALLOCATION AND DISTRIBUTION PROVISIONS. ............................13
   5.3    GAIN AND LOSS ON SALES..............................................14
   5.4    SPECIAL ALLOCATION RULES............................................14
   5.5    METHOD OF MAKING AGREED ALLOCATIONS.................................16
   5.6    MONTHLY DETERMINATIONS..............................................16
   5.7    INCOME TAX ALLOCATIONS..............................................16
   5.8    DISTRIBUTIONS.......................................................17
   5.9    TRANSFER OF INTEREST................................................17
   5.10   SURVIVAL OF TAX PROVISIONS..........................................17
   5.11   INDEMNIFICATION FOR TAX TERMINATION.................................18
   5.12   TAX ELECTIONS.......................................................18
   5.13   LIMITATION..........................................................18

ARTICLE VI....................................................................18

   6.1    BOOK AND RECORDS....................................................18

                                      -i-

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   6.2    OTHER INFORMATION...................................................18
   6.3    FISCAL YEAR.........................................................18
   6.4    PARTNERSHIP FOR TAX PURPOSES........................................18
   6.5    TAX MATTERS PARTNER.................................................19
   6.6    TAX RETURNS.........................................................19
   6.7    TAX ELECTIONS.......................................................19

ARTICLE VII...................................................................19

   7.1    GENERAL PARTNER.....................................................19
   7.2    REMOVAL OF GENERAL PARTNER..........................................20
   7.3    SPECIFIC LIMITATIONS ON AUTHORITY...................................20
   7.4    DEVOTION OF TIME....................................................20
   7.5    COMPENSATION OF THE GENERAL PARTNER.................................20
   7.6    INDEPENDENT ACTIVITIES OF PARTNERS..................................20

ARTICLE VIII..................................................................21

   8.1    NO PARTICIPATION IN MANAGEMENT......................................21
   8.2    LIMITATION ON LIABILITY.............................................21
   8.3    RIGHTS OF PARTNERS..................................................21

ARTICLE IX....................................................................22

   9.1    PLACE OF MEETINGS...................................................22
   9.2    ANNUAL MEETING......................................................22
   9.3    SPECIAL MEETINGS....................................................22
   9.4    NOTICE OF MEETING...................................................22
   9.5    RECORD DATES........................................................22
   9.6    QUORUM..............................................................23
   9.7    VOTING..............................................................23
   9.8    CONDUCT OF MEETINGS OF PARTNERS.....................................23
   9.9    WRITTEN CONSENT.....................................................23
   9.10   TELEPHONIC MEETINGS.................................................23

ARTICLE X.....................................................................23

   10.1   RESTRICTIONS ON DISPOSITION; PERMITTED DISPOSITIONS.................23
   10.2   RIGHTS OF TRANSFEREE................................................25
   10.3   EFFECTIVE TIME OF TRANSFER..........................................25
   10.4   INVALID TRANSFER....................................................25
   10.5   RIGHT OF FIRST REFUSAL; BONA FIDE OFFER; WRITTEN NOTICE.............25
   10.6   PURCHASE UPON CERTAIN TRIGGERING EVENTS.............................27
   10.7   DISTRIBUTIONS TO THE TRANSFEREE.....................................29
   10.8   ADMISSION OF ADDITIONAL LIMITED PARTNERS; ISSUANCE OF
          ADDITIONAL UNITS....................................................29
   10.9   UNIT CERTIFICATES...................................................30
   10.10  ENDORSEMENT ON UNIT CERTIFICATES....................................30
   10.11  SPECIAL RULES ON DISPOSITIONS BY GENERAL PARTNER....................30

ARTICLE XI....................................................................31

   11.1   DISSOLUTION AND TERMINATION.........................................31
   11.2   WINDING-UP AND TERMINATION..........................................31
   11.3   STATEMENT...........................................................32
   11.4   TERMINATION.........................................................33
   11.5   INDEMNIFICATION.....................................................33

                                       ii
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ARTICLE XII...................................................................33

   12.1   GENERAL PARTNER'S LIABILITY.........................................33
   12.2   INDEMNIFICATION.....................................................33
   12.3   FORCE MAJEURE.......................................................34

ARTICLE XIII..................................................................34

   13.1   EFFECTIVE TIME......................................................34
   13.2   AMENDMENTS..........................................................34
   13.3   NOTICES.............................................................35
   13.4   CONSENTS............................................................35
   13.5   APPLICABLE LAWS.....................................................35
   13.6   BINDING EFFECT......................................................35
   13.7   HEADINGS............................................................35
   13.8   VIOLATION...........................................................35
   13.9   SEVERABILITY........................................................36
   13.10  COUNTERPARTS........................................................36
   13.11  WAIVER OF RIGHT TO PARTITION........................................36
   13.12  SPECIAL AND CONSEQUENTIAL DAMAGES...................................36

EXHIBIT A.....................................................................38

EXHIBIT B.....................................................................44

                                      iii
<PAGE>

                       AGREEMENT OF LIMITED PARTNERSHIP OF
                                REEF VENTURES, LP
                                     PAGE 1

                        AGREEMENT OF LIMITED PARTNERSHIP

                                       OF

                                REEF VENTURES, LP

         This  Agreement  of  Limited  Partnership  of  REEF  VENTURES,  LP (the
"Partnership"),  is signed and entered into effective as of the __ day of April,
2003 at 8:00 A.M.,  Central Daylight Savings Time (the "Effective Time"), by and
among  Coahuila   Pipeline,   L.L.C.,  an  Oklahoma  limited  liability  company
("Coahuila  Pipeline"  or  the  "General  Partner"),   as  the  General  Partner
hereunder;  Impact International,  L.L.C., an Oklahoma limited liability company
("Impact"),  a Limited Partner  hereunder;  Tidelands Oil & Gas  Corporation,  a
Nevada  corporation  ("Tidelands"  ), a  Limited  Partner  hereunder;  Blackrock
Capital  Corporation,  a Virginia corporation  ("Blackrock"),  a Limited Partner
hereunder;  and, any other  Persons  hereafter  admitted to the  Partnership  as
Substitute or Additional Limited Partners.

         In consideration of the mutual covenants and conditions hereinafter set
forth, the Partners hereby agree as follows:

                                   ARTICLE I.
                              ORGANIZATION MATTERS

         1.1  Formation of the  Partnership.  The Partners  desire to enter into
this Agreement in connection with the formation of the  Partnership  pursuant to
the  provisions  of the Texas Revised  Limited  Partnership  Act,  Vernon's Tex.
Revised  Civil Stat.  Art.  6132a-1ss.ss.1.01  et seq., as amended and in effect
from time to time (herein referred to as the "Partnership  Act"). This Agreement
constitutes the partnership  agreement of the  Partnership,  effective as of the
Effective Time. The rights and  obligations of the Partners,  and the affairs of
the Partnership, shall be governed in the following order of priority: first, by
the Mandatory  Provisions of the Partnership Act; second,  by the  Partnership's
Certificate of Limited Partnership;  and third, by this Agreement.  In the event
of any conflict among the foregoing, the conflict shall be resolved in the order
of priority set forth in the preceding sentence.

         1.2 Name.  The name of the  Partnership,  and the name under  which its
business and affairs shall be  conducted,  is "REEF  VENTURES,  LP." The General
Partner shall cause the Partnership to comply with all applicable laws and other
requirements relating to fictitious or assumed names.

         1.3 Agent and Principal Office. The agent and principal office of the
Partnership shall be as stated in the Certificate of Limited Partnership,
subject to change by the General Partner on appropriate filing with the Office
of the Secretary of State of the State of Texas. The Partnership may also
maintain offices at such other place or places as the General Partner deems
advisable.

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         1.4 Filings.  The General Partner shall, or shall cause the Partnership
to, execute,  swear to, acknowledge,  deliver,  file or record in public offices
and publish all such certificates, notices, statements or other instruments, and
take  all such  other  actions,  as may be  required  by law for the  formation,
reformation,  qualification,  registration,  operation  or  continuation  of the
Partnership  in any  jurisdiction,  to  maintain  the limited  liability  of the
Limited Partner, to preserve the Partnership's  status as an entity taxable as a
"partnership"  or otherwise to comply with  applicable  law. Upon request of the
General  Partner,  the remaining  Partners  shall  immediately  execute all such
certificates and other documents as may be necessary, in the reasonable judgment
of the General Partner,  in order for the General Partner to accomplish all such
executions,  swearings to, acknowledgments,  deliveries,  filings, recordings in
public offices, publishings and other acts.

         1.5. Power of Attorney.  Each Limited Partner hereby irrevocably makes,
constitutes  and appoints the General  Partner and any successor  thereto,  with
full power of substitution and re-substitution, as the true and lawful agent and
attorney-in-fact  of the Limited  Partner,  with full power and authority in the
name, place and stead of the Limited Partner to execute,  swear to, acknowledge,
deliver, file or record in public offices and publish, to the extent the General
Partner is otherwise expressly authorized to do so under the other provisions of
this  Agreement:   (i)  all  certificates  and  other   instruments   (including
counterparts  thereof) which the General Partner deems  appropriate to implement
or give  effect to the  organization  of the  Partnership,  and to  reflect  any
amendment or supplement to or modification of this Agreement  validly adopted by
the  Partners  in  accordance  with  the  terms  of  this  Agreement;  (ii)  all
certificates and other instruments and all amendments  thereto which the General
Partner  deems  appropriate  or  necessary  to form,  qualify  or  continue  the
Partnership  in any  jurisdiction,  to  maintain  the limited  liability  of the
Limited Partners, to preserve the Partnership's status as an entity taxable as a
"partnership"  or otherwise to comply with applicable law; (iii) all conveyances
and other  instruments or documents which the General Partner deems  appropriate
or  necessary  to reflect any  transfer or  assignment  of an interest in, to or
under this Agreement or the  Partnership,  or any  dissolution,  liquidation and
termination of the Partnership and any distribution of assets of the Partnership
in connection  therewith,  pursuant to and in accordance  with the terms of this
Agreement;  and (iv) any  certificates or other  documents  required to be filed
pursuant to the  Partnership  Act or applicable  laws.  The  foregoing  power of
attorney shall not,  however,  include the power to vote or grant any consent on
behalf of a Partner on any matter  requiring the approval of the  Partners.  The
power of attorney  granted  herein is hereby  declared  irrevocable  and a power
coupled  with an  interest,  shall  survive the death,  disability,  bankruptcy,
dissolution or other termination of such Limited Partner and shall extend to and
be binding upon such Limited  Partner's  successors,  assigns and vendees.  Each
Limited  Partner  hereby agrees to be bound by any  representations  made by the
General Partner as agent and  attorney-in-fact  acting in good faith pursuant to
such power of  attorney,  and each  Limited  Partner  hereby  waives any and all
defenses  which may be available to contest,  negate or disaffirm  any action of
the agent and attorney-in-fact taken in good faith under such power of attorney.
Each Limited Partner hereby agrees to execute and deliver to the General Partner
within  five (5) days after  receipt of a written  request  therefor  such other
further statements of interest and holdings,  designations,  powers of attorney,
and other  instruments as the General Partner deems necessary to fully implement
the provisions of this Agreement.

                                       2
<PAGE>

         1.6 Term.  The term for which the  Partnership  is to exist is from the
date of first filing of the Certificate of Limited  Partnership  with the office
of the Secretary of State of the State of Texas  through and until  December 31,
2075 or until earlier  termination  of the  Partnership  in accordance  with any
provision of Article X.

                                   ARTICLE II.
                                   DEFINITIONS

         2.1 Certain Definitions. Whenever used in this Agreement, the following
terms shall have the meanings assigned to them herein:

                  Additional  Limited  Partner.  A Person who is admitted to the
         Partnership  as a  Limited  Partner  with all the  rights  of a Limited
         Partner  pursuant  to Section  10.8,  in such  Person's  capacity  as a
         Limited Partner of the Partnership.

                  Adjusted Capital Account.  The Capital Account established and
         maintained  for each  Partner  after  giving  effect  to the  following
         adjustments:

                           (i) Credit to such Partner's  Capital Account for any
                  amounts  (including unpaid Capital  Contributions)  which such
                  Partner is obligated to restore  pursuant to any  provision of
                  this       Agreement       or       Treasury       Regulations
                  ss.1.704-1(b)(2)(ii)(c),  or is deemed  obligated  to  restore
                  pursuant to the penultimate  sentences of Treasury Regulations
                  ss.1.704-2(g)(1) or ss.1.704-2(i)(5); and

                           (ii) Debit to such Partner's  Capital Account for any
                  items described in Treasury Regulations  ss.ss.1.704-1 (b) (2)
                  (ii) (d) (4), (5) and (6).

         The  foregoing  definition of Adjusted  Capital  Account is intended to
         comply    with    the     provisions     of    Treasury     Regulations
         ss.1.704-1(b)(2)(ii)(d)   and   shall   be   interpreted   consistently
         therewith.

                  AFE. An Authorization for Expenditure for the Project pursuant
         to Section 4.9 hereof.

                  Affiliate.  When used with  reference  to a  specific  Person,
         means any other Person who directly or indirectly,  through one or more
         intermediaries,  controls,  or is  controlled  by or  is  under  common
         control with such Person.

                  Agreed   Value.   In  the   case  of  any   contributions   or
         distributions  of property,  the fair market value of such property net
         of any  indebtedness or other liability either assumed or to which such
         property is subject,  as such fair market  value is  determined  by the
         General  Partner  using such  reasonable  method of valuation as it may
         adopt.

                                       3
<PAGE>

                  Agreement.   This   Agreement  of  Limited   Partnership,   as
         originally executed and as amended,  supplemented,  modified or further
         restated from time to time, as the context requires.

                  Assignee.  A  Person  to whom  one or  more  Units  have  been
         transferred in a manner  expressly  permitted  under this Agreement and
         who thereby  shall have an interest in the  Partnership  equivalent  to
         that  of  a  Limited  Partner,  but  (i)  limited  to  the  rights  and
         obligations  appurtenant  to  such  Unit  or  Units  to  share  in  the
         allocations and distributions,  including liquidating distributions, of
         the Partnership,  and (ii) otherwise  subject to the limitations  under
         this Agreement and the Partnership Act on the rights of an Assignee who
         has not become a  Substituted  Limited  Partner.  As used  herein,  the
         phrase "Limited Partners or their Assignees" means Limited Partners or,
         if and to the extent that any  Assignees  shall have  succeeded  to the
         interest  of  any  Limited  Partners  in  the  Partnership,  then  such
         Assignees in lieu of such predecessor Limited Partner.

                  Authorized  Representative.  In the case of Coahuila Pipeline,
         any Person  designated  as an  Authorized  Representative  of  Coahuila
         Pipeline.  In the case of any Limited Partner, any Person designated by
         such Limited  Partner as an Authorized  Representative  of such Limited
         Partner.  In the case of any Additional  Limited  Partner or Substitute
         Limited  Partner,  the Person or Persons  designated by such Additional
         Limited  Partner  or  Substitute  Limited  Partner  at the  time of its
         admission or any other Person  hereafter  designated  by the  governing
         body of such Additional  Limited Partner or Substitute  Limited Partner
         as an Authorized Representative.

                  Built-In Gain. With respect to any Partnership  property,  (i)
         the excess of the Agreed  Value of any  Contributed  Property  over its
         adjusted  basis  for  federal  income  tax  purposes  as of the time of
         contribution  and (ii) in the case of any  adjustment  to the  Carrying
         Value  of  any  Partnership  property  subject  to  depreciation,  cost
         recovery or  amortization  pursuant to Section  4.4(b) as a result of a
         contribution of cash for Units in the Partnership,  the Unrealized Gain
         with respect to such property.

                  Built-In Loss. With respect to any Partnership  property,  (i)
         the excess of its adjusted basis for federal income tax purposes of any
         Contributed   Property  over  its  Agreed  Value  as  of  the  time  of
         contribution  and (ii) in the case of any  adjustment  to the  Carrying
         Value  of  any  Partnership  property  subject  to  depreciation,  cost
         recovery or  amortization  pursuant to Section  4.4(b) as a result of a
         contribution of cash for Units in the Partnership,  the Unrealized Loss
         with respect to such property.

                  Capital  Account.  The account  established  for each  Partner
         pursuant to Section 4.4(a). --------------

                  Capital Contribution. The Agreed Value of any property and the
         amount of cash contributed to the Partnership.

                  Capital  Proceeds.  Means the gross  receipts  received by the
         Partnership from a Capital Transaction.

                                       4
<PAGE>

                  Capital Transaction. Means any transaction not in the ordinary
         course of business which results in the  Partnership's  receipt of cash
         or other  consideration  other than Capital  Contributions,  including,
         without   limitation,   proceeds  of  sales  or   exchanges   or  other
         dispositions  of  property  not in the  ordinary  course  of  business,
         financings, refinancings,  condemnations,  recoveries of damage awards,
         and insurance proceeds.

                  Carrying Value. With respect to any Capital Contribution,  the
         Agreed Value of such property  reduced as of the time of  determination
         by all depreciation,  cost recovery and amortization deductions charged
         to  the  Capital   Accounts  with  respect  to  such  property  and  an
         appropriate   amount  to  reflect  any  sales,   retirements  or  other
         dispositions  of assets  included in such property and, with respect to
         any other Partnership property, the adjusted basis of such property for
         federal  income  tax  purposes  as of the  time of  determination.  The
         Carrying Value shall be further adjusted as provided in Section 4.4(b).

                  Cash  Available  for   Distribution.   As  of  any  date,  all
         Partnership  cash and cash  equivalents on hand as of such date,  after
         paying  operating costs of the  Partnership,  less such reserves as are
         deemed  necessary by the General  Partner to provide for the  operation
         and funding of the  Partnership's  business.  The General Partner shall
         act reasonably in determining amounts to retain in order to provide for
         the operation and funding of the Partnership's business.

                  Certificate of Limited Partnership. The Certificate of Limited
         Partnership as originally  filed by the Partnership  with the Secretary
         of State of the  State of  Texas  on  April 9,  2003,  and as  amended,
         supplemented, modified or restated from time to time in accordance with
         this Agreement and applicable law.

                  Code. The Internal Revenue Code of 1986.

                  Contributed  Property.  Any Capital  Contribution  of property
         other than cash.

                  Control.  The term  "control" (and  correlative  terms such as
         "controls,"  "controlled by" and "under common control with") means (i)
         with  respect  to a  corporation,  the  ownership  or other  control of
         securities  to which are  attached  more than ten percent  (10%) of the
         voting interest of all securities issued by the corporation,  (ii) with
         respect to a  partnership  (general or  limited)  or limited  liability
         company,  the ownership or other control of more than ten percent (10%)
         of the  partnership  or  membership  interests  in the  partnership  or
         limited liability company,  and (iii) with respect to any other Person,
         the possession,  direct or indirect, of the power to direct or exercise
         a  controlling  influence  over the  direction  of the  management  and
         policies of such Person, by contract or otherwise.

                                       5
<PAGE>

                  Disposition.  Any sale, exchange, gift, distribution,  pledge,
         assignment, transfer or other disposition by a Partner of all or any of
         its Units.

                  Draw Down  Request.  The request made  pursuant to Section 4.7
         below.

                  General  Partner.  Coahuila  Pipeline  or its  duly  appointed
         successor or successors as provided herein.

                  Limited  Partner.  Each  of the  Limited  Partners  listed  on
         Exhibit A, unless it ceases to be a Limited Partner hereunder or sells,
         transfers  or  otherwise  disposes  of a  portion  of its  Units and is
         replaced  in  whole or in part,  as the case may be,  by a  Substituted
         Limited  Partner in accordance  with this Agreement and the Partnership
         Act, and each Person that becomes a Substituted  Limited  Partner or an
         Additional  Limited  Partner,  if any, of the  Partnership  as provided
         herein,  in  such  Person's  capacity  as  a  Limited  Partner  of  the
         Partnership.

                  Majority  Vote of the  Partners.  The vote,  at a  regular  or
         special  meeting of holders of greater than fifty  percent (50%) of the
         Units or a written consent of such holders in lieu of a meeting.

                  Mandatory Provisions.  Those provisions of the Partnership Act
         which may not be waived by the Partners (whether acting  unanimously or
         otherwise).

                  Overhead  Contributions.  The  amounts  described  in  Section
         4.1(c)(ii).

                  Partners.  The  General  Partner  and  the  Limited  Partners,
         collectively, unless otherwise indicated.

                  Partnership. REEF VENTURES, LP, a Texas limited partnership.

                  Permits. The following permits necessary, in whole or in part,
         for the  Project  and its  implementation:  all  permits  set  forth on
         Exhibits B-1 and B-2 to the Purchase Agreement.

                  Person.  Any  individual,   general  or  limited  partnership,
         corporation,  limited  liability  company,  executor,  administrator or
         estate, association, trustee or trust, government or agency thereof, or
         other entity.

                  Priority  Return.  Shall mean an amount  equal to  one-hundred
         fifty  percent  (150%) of the Capital  Contributions  made by Impact or
         Eagle,  as the case  may  apply as set  forth in  Section  4.1 and 4.9,
         including without  limitation,  the Project  Contributions and Overhead
         Contributions and the Agreed Value of their contributions under Section
         4.1(b).

                                       6
<PAGE>

                  Project. The project by which the Partnership will install and
         operate a twelve-inch  pipeline for transporting natural gas from Eagle
         Pass, Texas to Piedras Negras,  Mexico.  Project Budget. Shall have the
         meaning given such term in Section 4.11.

                  Project   Contribution.   The  amount   described  in  Section
         4.1(c)(i).

                  Purchase Agreement.  The Purchase Agreement dated of even date
         herewith by and between Eagle, Impact and Tidelands,  whereby Eagle and
         Impact agree to purchase from  Tidelands and Ti delands  agrees to sell
         to Impact and Eagle in the  proportions  ninety-nine  percent (99%) and
         one percent (1%), respectively, an undivided seventy-five percent (75%)
         membership interest in each of the Reef LLCs.

                  Reef LLCs.  Reef  International,  L.L.C.  and Reef  Marketing,
         L.L.C.

                  Reef Purchase Price.  The amount  described in Section 4.1(a).

                  Representative. With respect to any Partner or any liquidating
         trustee  of the  Partnership  (as  provided  in  Section  11.2)  or any
         Affiliate  of any of the  foregoing,  any of its  officers,  directors,
         shareholders, partners, employees, representatives, agents or attorneys
         acting within the scope of his or her authority.

                  Sharing Ratio.  As to any Partner,  the  percentage  resulting
         from  dividing  such  Partner's  Units  by the  total  number  of Units
         outstanding.

                  Substituted  Limited  Partner.  A Person who is  admitted as a
         Limited  Partner to the Partnership in place of and with all the rights
         of a  Limited  Partner  pursuant  to  Section  10.2,  in such  Person's
         capacity as a Limited Partner of the Partnership.

                  Treasury Regulations.  The income tax regulations  promulgated
         by the Department of the Treasury. Income tax regulations include final
         and temporary, but not proposed regulations.

                  Unit.  All  references   herein  to  "Units"  means  units  of
         Partnership  interest  which  have been  duly  issued  and are  validly
         outstanding.

                  Unpaid Priority Return. Shall mean the excess of any amount of
         the Priority Return over all amounts  previously paid in respect of the
         Priority Return as of the date in question.

                  Unrealized Gain. With respect to a Partnership  property,  the
         excess  of the fair  market  value of such  property  as of any date of
         determination  over the Carrying Value of such property as of such date
         of determination.

                                       7
<PAGE>

                  Unrealized Loss. With respect to a Partnership property, the
         excess of the Carrying Value of such property as of any date of
         determination over the fair market value of such property as of such
         date of determination.

         2.2 Construction.  For purposes of this Agreement,  the following rules
of construction  shall apply,  unless  elsewhere  specifically  indicated to the
contrary: (a) all terms defined herein in the singular shall include the plural,
as the context  requires,  and  vice-versa;  (b)  pronouns  stated in the neuter
gender shall include the masculine, the feminine and the neuter genders; (c) the
term "or" is not exclusive; (d) the term "including" (or any form thereof) shall
not be limiting or exclusive;  (e) references to designated Sections or Articles
are  references  to Sections or Articles  of this  Agreement,  unless  otherwise
indicated;  and (f) any reference made in this Agreement to a statute, law, code
or regulation of any governmental authority is a reference to such statute, law,
code or regulation as amended and in effect on the relevant date.

                                  ARTICLE III.
                              PURPOSE AND BUSINESS

         3.1 Purpose.  The purposes and businesses of the Partnership  shall be:
(i) to pursue, develop, construct and operate the Project; (ii) to engage in any
and  all  activities  incidental  or  related  to the  Project  that  a  limited
partnership  organized  under the Partnership Act may carry on or engage in; and
(iii) to  engage  in any  other  lawful  business  or  activity  that a  limited
partnership organized under the Partnership Act may carry on or engage in.

         3.2 Powers. Subject to the limitations set forth in this Agreement, the
Partnership  will have all such powers as are necessary or  appropriate to carry
out the Partnership's purposes, including, but not limited to, the power to:

                  (a) sue, be sued, complain and defend in all courts;

                  (b) transact its business, carry on its operation and have and
         exercise  the  powers  herein  in any  state,  territory,  district  or
         possession of the United States, and in any foreign country;

                  (c) make contracts, incur liabilities, and borrow money;

                  (d) sell, convey, lease, exchange, transfer, mortgage, pledge,
         and otherwise dispose of all or any part of its property and assets;

                  (e)  purchase,  take,  receive,  subscribe  for  or  otherwise
         acquire, own, hold, vote, use, employ, sell, mortgage,  loan, pledge or
         otherwise  dispose  of and  otherwise  use and deal in and with  stock,
         bonds or other interests,  including taking short or long positions, in
         and  obligations  of domestic and foreign  corporations,  associations,
         general or limited partnerships,  limited liability companies, business
         trusts, and individuals.

                                       8
<PAGE>

                  (f) invest its surplus funds,  lend money from time to time in
         any  manner  which  may be  appropriate  to  enable  it to carry on the
         operations  or fulfill the  purposes  set forth in its  Certificate  of
         Limited  Partnership  or herein,  and take and hold real  property  and
         personal  property  as  security  for the payment of funds so loaned or
         invested;

                  (g) elect or appoint  agents and define  their  duties and fix
         their compensation;

                  (h) be a stockholder,  partner, member, associate, or agent of
         any corporation, partnership, limited liability company, joint venture,
         trust or other enterprise;

                  (i)  indemnify  and  hold  harmless  any  Partner,  agent,  or
         employee  from and against  any and all claims and demands  whatsoever,
         subject to the standards and restrictions set forth in this Agreement;

                  (j) cease its activities and dissolve in accordance  with this
         Agreement; and

                  (k) do every  other  act not  inconsistent  with law  which is
         appropriate   to  promote  and  attain  the  purposes  set  forth  this
         Agreement.

                                   ARTICLE IV.
                              CAPITAL CONTRIBUTIONS

         4.1 Units; Original Capital  Contribution.  There shall initially be an
aggregate of One Thousand (1,000) Units in the  Partnership.  The Units shall be
owned by the Partners in the number set forth  opposite each  Partner's  name on
Exhibit A hereto.  Each  Partner  shall  contribute  the  property  (pursuant to
appropriate conveyance documents) or cash described herein and shall receive the
Units set forth next to its name on Exhibit A.

                  (a)  Pursuant to the terms of the Purchase  Agreement,  Impact
         and Eagle will purchase from Tidelands,  in the proportions ninety-nine
         percent  (99%)  and  one  percent  (1%),  respectively,   an  undivided
         seventy-five percent (75%) membership interest in the Reef LLCs for the
         sum  of  One  Million  Nine  Hundred  Sixty   Thousand   Eight  Hundred
         Sixty-Seven  and 23/100  Dollars  ($1,960,867.23)  (the "Reef  Purchase
         Price").

                  (b) Impact,  Eagle and Tidelands agree that upon the execution
         hereof,  which has occurred  contemporaneously  with the closing of the
         Purchase  Agreement,  they each have sold,  assigned,  transferred  and
         conveyed to the Partnership their collective one hundred percent (100%)
         membership  interests in the Reef LLCs. For purposes hereof, the Agreed
         Value of the  membership  interests  in the Reef LLC's  contributed  by
         Impact and Eagle shall equal the Reef Purchase Price.

                  (c)  Subject to the  satisfaction  of all the  conditions  set
         forth herein and in the Purchase  Agreement and provided that there has
         been no  default  by any other  party  hereto at the time,  Impact  and

                                       9
<PAGE>

         Eagle,  in the  proportion  that each of their Units bears to all Units
         owned by Impact and Eagle,  agrees to make the following  contributions
         of capital to the Partnership:

                           (i) A contribution (the "Project Contribution") equal
                  to the amount  necessary  to fund the Project  (excluding  any
                  Overhead  Contribution)  on an as-needed basis pursuant to the
                  draw down  procedures  set forth in Section  4.7.  The Project
                  Contribution shall be equal to the Reef Purchase Price plus an
                  amount  equal to the sum of one hundred ten percent  (110%) of
                  the amounts set forth in the AFE's for the Project provided by
                  Section 4.10 below. The Project  Contribution shall not exceed
                  the  sum  of  $5,276,773.95(inclusive  of  the  Reef  Purchase
                  Price); and

                           (ii) Contributions (the "Overhead  Contributions") to
                  the  Partnership  for the  payment  of  Partnership  operating
                  expenses,  including  reimbursement to the General Partner for
                  its direct and  indirect,  general and  administrative  costs,
                  technical,  engineering,  accounting and similar expenses. The
                  amount of the Overhead Contribution shall be $10,000 per month
                  until December 31, 2004, and thereafter may be increased by up
                  to ten percent (10%) per year without consent of the Partners.
                  Overhead  Contributions  shall not include  variable  expenses
                  incurred by a Partner in connection with the Project and which
                  have been approved in advance by the General  Partner and with
                  respect  to which  such  Partner  shall be  reimbursed  by the
                  Partnership upon presentation of proper receipts.

                  (d)  Subject to the  satisfaction  of all the  conditions  set
         forth herein and  provided  that there has been no default by any other
         party hereto at the time, Blackrock and Tidelands respectively agree to
         make contributions of capital to the Partnership in accordance with the
         Project Budget and the draw down  procedures of Section 4.7 below,  and
         based upon their Sharing  Ratios,  once Impact and Eagle have recovered
         their respective Priority Returns from Cash Available for Distribution.

                  (e) The foregoing  shall be deemed the Capital  Commitments of
         the Partners to the Partnership.

         4.2   Additional   Capital   Contributions.   No   additional   Capital
Contributions  beyond those described in Sections 4.1 and 4.9 may be required of
the Partners without their consent.  Capital  Contributions in addition to those
specified in Sections  4.1 and 4.9 may be accepted on such terms and  conditions
as may be  determined  by the  General  Partner  in  its  sole  discretionor  as
otherwise permitted pursuant to Section 10.8 in connection with the admission of
any Additional Limited Partner.

         4.3 No Withdrawal or Return of Capital Contributions.  No Partner shall
be entitled to voluntarily  resign or otherwise withdraw from the Partnership or
to have its Capital Contribution returned,  except with the prior consent of the
Partners or as otherwise expressly provided in this Agreement.

                                       10
<PAGE>

         4.4 Capital Accounts.

                  (a) A separate  capital  account  ("Capital  Account") will be
         established for each Partner.  Each Partner's  Capital Account shall be
         determined  and  maintained  in accordance  with  Treasury  Regulations
         ss.1.704-1(b)(2)(iv)  as  interpreted  from time to time by the General
         Partner.  A transferee of a Unit will succeed to the Capital Account of
         the transferor  relating to the Unit  transferred  and thereafter  such
         transferee's  Capital Account balance will be determined without regard
         to any  election  under  Section 754 of the Code.  The General  Partner
         shall  have  discretion  to  make  those  determinations,   valuations,
         adjustments  and  allocations  with respect to each  Partner's  Capital
         Account as it deems  appropriate so that the allocations  made pursuant
         to this Agreement will have "substantial  economic effect" as such term
         is used in Treasury Regulations ss. 1.704-1(b).

                  (b) If any additional  Units are to be issued in consideration
         for a contribution of property or cash or if any  Partnership  property
         is to be distributed  in  liquidation of the  Partnership or any Units,
         the  Capital  Accounts  of the  Partners  (and the amounts at which all
         Partnership  property are carried on its books and records  utilized to
         maintain  the  Capital  Accounts)  shall,  immediately  prior  to  such
         issuance or distribution,  as the case may be, be adjusted  (consistent
         with the  provisions  of  Section  704(b) of the Code and the  Treasury
         Regulations  promulgated  thereunder) upward or downward to reflect any
         Unrealized  Gain or Unrealized  Loss  attributable  to all  Partnership
         properties  (as if such  Unrealized  Gain or  Unrealized  Loss had been
         recognized  upon actual sale of such  properties  upon a liquidation of
         the  Partnership  immediately  prior to such  issuance).  If the Agreed
         Value of any property of the  Partnership is properly  reflected on the
         books of the  Partnership at a value that differs from the adjusted tax
         basis of such  property,  this  Section  4.4(b)  shall be applied  with
         reference to such value.

         4.5  Interest.  No  interest  shall  be  paid  by the  Partners  or the
Partnership on any capital contributed to the Partnership by the Partners.

         4.6 Loans by Partners.  Any loan or advance of funds to the Partnership
by a Partner or an Affiliate of a Partner,  including the terms of such loan and
the payment schedule,  shall require the prior consent of a Majority Vote of the
Partners.  Any  loan or  advance  made to the  Partnership  by a  Partner  or an
Affiliate of a Partner shall not be deemed or treated as a Capital Contribution.
In the event that a Partner  or  Affiliate  of a Partner  shall make any loan or
advance to the  Partnership  in  accordance  with the  preceding  sentence,  the
Partner or Affiliate  making such loan or advance  shall  receive  interest at a
rate equal to the rate of interest  being  charged to such  Partner or Affiliate
with respect to such loan or advance (if such Partner or Affiliate  has directly
borrowed the funds loaned or advanced to the  Partnership) or at a floating rate
equal to the rate of  interest  announced  from time to time by the Wall  Street
Journal as the average  prime  rate,  as such rate may change from time to time,
plus one percent (1%) (if such Partner or  Affiliate  has not directly  borrowed
the funds  loaned or advanced to the  Partnership).  Any such  approved  loan or
advance to the  Partnership  by a Partner or an Affiliate of a Partner  shall be

                                       11
<PAGE>

serviced by the  Partnership in accordance  with the approved  payment  schedule
(unless the Partners shall otherwise agree), and each quarterly determination of
Cash Available for  Distribution  shall include a deduction for any amounts then
due and owing on any such loans or advances.  Notwithstanding the foregoing, all
such approved loans and advances,  together with interest thereon, shall be paid
in full before any  distributions are made to the Partners in liquidation of the
Partnership  pursuant  to  Section  11.2(b),  unless  otherwise  agreed  by  the
Partners.

         4.7 Capital  Commitment Draw Downs. The General Partner shall determine
in its sole discretion,  subject always to the limitations on the amount of such
contributions  set forth in this  Agreement  and the other terms and  conditions
hereof,  the  dates on which  Project  Contributions  shall be due  pursuant  to
Section  4.1(c)(i),  Overhead  Contributions  shall be due  pursuant  to Section
4.1(c)(ii) and any Capital  Contributions  to be made under Section 4.9 shall be
due, and the amounts  thereof which are to be paid and shall give written notice
thereof to the  Partners  from whom such  Capital  Contributions  are to be made
pursuant  to a draw  down  request  ("Draw  Down  Request").  Provided  that all
conditions  precedent to such  obligation  have been satisfied and no default by
the  Partnership  or any  Partners has occurred as of the time of such Draw Down
Request, the Partners from whom such Capital Contributions are due shall pay the
amount  of the Draw Down  Request  upon not less than  fifteen  (15) days  prior
written notice  thereof,  which notice shall specify the date such payment shall
be due.

         4.8  Enforcement  of  Contributions.  The  Partnership  is  entitled to
enforce the  obligations  of each Partner to make the  contributions  to capital
specified  in this  Agreement.  The  Partnership  has all  rights  and  remedies
available at law or equity if any such contribution is not so made.

         4.9 AFE Procedures. The Partners approve the AFE for the Project in the
form  attached  hereto as Exhibit B.  Impact  and Eagle  acknowledge  that their
respective  obligations  under  Section  4.1(c)(i)  above  to fund  the  Project
Contribution is based upon an amount equal to the sum of one hundred ten percent
(110%) of the amount set forth in the AFE attached  hereto as Exhibit B . Should
the General Partner determine that capital expenditures required for the Project
will exceed one hundred ten percent  (110%) of the costs  projected  in the AFE,
each Partner shall be deemed to have agreed to make a Capital Contribution based
upon  its  Sharing  Ratio  as  necessary  to fund the  Project,  subject  to the
limitations  set forth in  Section  4.1 (c)(i) to the  extent  required  capital
expenditures  exceed one  hundred  ten percent  (110%) of the  combined  amounts
reflected  in the AFE. If any Partner  fails to fund its  proportionate  part of
such additional  Capital  Contribution as contemplated in this Section 4.9 after
receiving an invoice  therefor from the General  Partner,  Impact shall have the
right to fund such  amount on behalf of the  defaulting  Partner,  in which case
Impact's  Priority  Return for such funded amount will increase to three hundred
percent (300%).

                                   ARTICLE V.
                          ALLOCATIONS AND DISTRIBUTIONS

         5.1 Allocations Among Partners. Except as otherwise agreed from time to
time  by  the  Partners  or  as  otherwise  provided  herein,  for  purposes  of
maintaining the Capital Accounts,  all items of Partnership income,  gain, loss,

                                       12
<PAGE>

deduction and credit shall be allocated  among the Partners in  accordance  with
Section 5.2 below.  For purposes of computing the amount of each item of income,
gain,  deduction or loss to be charged or credited to the Capital Accounts,  the
determination,  recognition and classification of such item shall be the same as
its  determination,  recognition  and  classification  for  federal  income  tax
purposes, provided that:

                  (a)  Any  deductions  for  depreciation,   cost  recovery,  or
         amortization   attributable  to  any  Partnership   property  shall  be
         determined as if the adjusted  basis of such property were equal to the
         Carrying  Value of such  property.  Upon an  adjustment to the Carrying
         Value  of  any  Partnership  property  subject  to  depreciation,  cost
         recovery,  or  amortization  pursuant  to Section  4.4(b),  any further
         deductions  for  such  depreciation,  cost  recovery,  or  amortization
         attributable  to such  property  shall be determined as if the adjusted
         basis  of such  property  were  equal  to the  Carrying  Value  of such
         property immediately following such adjustment.

                  (b)  Any  income,  gain or loss  attributable  to the  taxable
         disposition  of any  Partnership  property  shall be  determined by the
         Partnership  as if the adjusted  basis of such property as of such date
         of  disposition  were  equal in  amount to the  Carrying  Value of such
         property as of such date.

                  (c) All fees and other expenses incurred by the Partnership to
         promote  the  sale of any  Units  that  can  neither  be  deducted  nor
         amortized  under Section 709 of the Code shall be treated as an item of
         deduction.

                  (d)  Computation  of all  items  of  income,  gain,  loss  and
         deduction  shall be made without  regard to any election  under Section
         754 of the Code which may be made by the  Partnership  and, as to those
         items described in the Section  705(a)(1)(B) or Section 705(a)(2)(B) of
         the Code, without regard to the fact that such items are not includable
         in gross income or are neither  currently  deductible nor capitalizable
         for federal income tax purposes.

         5.2 Allocation and Distribution Provisions.

                  (a) For any taxable year of the Partnership, the Partnership's
         Cash  Available  for  Distribution  and any Capital  Proceeds  shall be
         distributed to the Partners as follows:

                           (i) first,  to Impact and Eagle,  pari  passu,  until
                  they have each received in distributions  from the Partnership
                  an amount such that their respective Unpaid Priority Return is
                  zero; and

                           (ii) then, to the Partners in  accordance  with their
                  respective Sharing Ratios then in effect.

                  (b) For any taxable  year of the  Partnership,  all income and
         Capital Proceeds, and losses shall be allocated as follows:

                                       13
<PAGE>

                           (i) to the  extent  that  such  income is equal to or
                  less  than  the  Cash  Available  for  Distribution   actually
                  distributed  pursuant to Section 5.2(a),  such income shall be
                  allocated in the same manner as in Section 5.2(a);

                           (ii) to the extent that such  income is greater  than
                  the  Cash  Available  for  Distribution  actually  distributed
                  pursuant to Section 5.2(a),  such excess shall be allocated to
                  Impact and Eagle until such time as its Unpaid Priority Return
                  is equal to zero; and

                           (iii) the  remainder  of any income,  if any, and all
                  losses shall be allocated to the Partners in  accordance  with
                  their Sharing Ratios.

         5.3 Gain and Loss on Sales. Upon the sale or other taxable  disposition
of all, or  substantially  all, of the  Partnership's  assets,  the gain or loss
resulting therefrom shall be allocated in the manner set forth in Section 5.2.

         5.4 Special  Allocation Rules.  Notwithstanding  the general allocation
rules set forth in Section 5.1 and 5.2, the following  special  allocation rules
shall apply under the following circumstances described, in the following order:

                  (a)  Limitation  on Losses  and  Deductions.  The  losses  and
         deductions  allocated  to any Partner  with  respect to any fiscal year
         shall not exceed the maximum amount of losses and  deductions  that can
         be  allocated  without  causing  such  Partner to have a deficit in its
         adjusted capital account at the end of such fiscal year. All losses and
         deductions  in excess  of the  limitation  set  forth in the  preceding
         sentence  shall be allocated (i) first on a Partner by Partner basis so
         as to allocate the maximum  permissible  losses and  deductions to each
         Partner under Treasury  Regulations  ss.1.704-1(b)(2)(ii)(d),  and (ii)
         second,  any remaining  losses and deductions shall be allocated to the
         Partners pro rata in accordance with their Sharing Ratios.

                  (b)  Partnership  Minimum Gain  Chargeback.  If there is a net
         decrease  in  "Partnership   Minimum  Gain"  (as  defined  in  Treasury
         Regulations  ss.1.704-2(d)(1))  during any fiscal  year,  each  Partner
         shall be allocated  items of income and gain for such fiscal year (and,
         if necessary, for subsequent fiscal years) in proportion to, and to the
         extent of, an amount  equal to the portion of such  Partner's  share of
         the net decrease in  Partnership  Minimum Gain during such fiscal year,
         subject  to  the   exceptions   set  forth  in   Treasury   Regulations
         ss.ss.1.704-2(f)(2),  (3) and (5).  The Tax Matters  Partner  (with the
         consent of the  Partners)  shall,  if the  application  of this Section
         5.4(b) would cause a distortion in the economic  arrangement  among the
         Partners,  ask the  Commissioner  of  Internal  Revenue  to  waive  the
         Partnership Minimum Gain Chargeback  requirements  pursuant to Treasury
         Regulations  ss.  1.704-2(f)(4).  To the extent this Section  5.4(b) is
         inconsistent  with Treasury  Regulations  ss.  1.704-2(f) or incomplete
         with  respect  to  such  Sections  of  the  Treasury  Regulations,  the
         Partnership  Minimum  Gain  chargeback  provided  for  herein  shall be
         applied  and  interpreted  in  accordance  with  such  Sections  of the
         Treasury Regulations.

                                       14
<PAGE>

                  (c)  Partner  Minimum  Gain  Chargeback.  If  there  is a  net
         decrease in "Partner Minimum Gain" (as defined in Treasury  Regulations
         ss.1.704-2(i))  during any fiscal year, each Partner shall be allocated
         items of income and gain for such fiscal year (and, if  necessary,  for
         subsequent  fiscal year) in an amount equal to such Partner's  share of
         the net  decrease in Partner  Minimum  Gain  during  such fiscal  year,
         subject  to  the   exceptions   set  forth  in   Treasury   Regulations
         ss.1.704-2(i)(4).  The Tax  Matters  Partner  (with the  consent of the
         Partners)  shall, if the application of this Section 5.4(c) would cause
         a distortion in the economic  arrangement  among the Partners,  ask the
         Commissioner of Internal Revenue to waive the Partnership  Minimum Gain
         chargeback    requirements    pursuant    to    Treasury    Regulations
         ss.1.704-2(i)(4).  To the extent this  Section  5.4(c) is  inconsistent
         with Treasury  Regulations  ss.1.704-2(1)(4) or incomplete with respect
         to such Sections of the Treasury  Regulations,  the Partnership Minimum
         Gain chargeback provided for herein shall be applied and interpreted in
         accordance with such Sections of the Treasury Regulations.

                  (d) Qualified  Income Offset.  If in any fiscal year a Partner
         unexpectedly   receives  an  adjustment,   allocation  or  distribution
         described in Treasury Regulations ss.ss.1.704-1(b)(2)(ii)(d)(4), (5) or
         (6),  and  such  adjustment,   allocation  or  distribution  causes  or
         increases  a capital  account  deficit  for such  Partner,  then,  such
         Partner shall be allocated  items of income and gain  (consisting  of a
         pro rata portion of each item of Partnership  income,  including  gross
         income and gain) in an amount and manner  sufficient to eliminate  such
         capital  account  deficit  as  quickly as  possible,  provided  that an
         allocation pursuant to this Section 5.4(d) shall be made only if and to
         the extent that a Partner  would have a capital  account  deficit after
         all  other  allocations  provided  for in  this  Article  V  have  been
         tentatively made as if this Section 5.4(d) were not in the Agreement.

                  (e) Gross  Income  Allocation.  In the event any Partner has a
         deficit in its Adjusted  Capital Account at the end of any fiscal year,
         each  such  Partner  shall  be  allocated  items  of  income  and  gain
         (consisting of a pro rata portion of each item of  Partnership  income,
         including gross income and gain) in an amount and manner  sufficient to
         eliminate  such an  Adjusted  Capital  Account  deficit  as  quickly as
         possible,  provided that an allocation  pursuant to this Section 5.4(e)
         shall be made only if and to the  extent  that a Partner  would have an
         Adjusted  Capital  Account  deficit  after  all the  other  allocations
         provided for in this Article V have been tentatively made as if Section
         5.4(e) were not in the Agreement.

                  (f) Nonrecourse Deductions. Nonrecourse deductions (as defined
         in  Treasury  Regulations  ss.1.704-2(b))  for any fiscal year shall be
         allocated to the Partners in accordance with their Sharing Ratios.

                  (g)  Partner  Nonrecourse  Deductions.   "Partner  Nonrecourse
         Deductions" (as defined in Treasury Regulations ss.1.704-2(i)(2)) shall
         be allocated  among the Partners in accordance with the ratios in which
         the  Partners   share  the  economic  risk  of  loss  for  the  Partner
         Nonrecourse Debt that gave rise to those deductions as determined under
         Treasury Regulations ss.1.752-2.  This allocation is intended to comply
         with the requirements of Treasury  Regulations  ss.1.704-2(i) and shall
         be interpreted and applied consistent therewith.

                                       15
<PAGE>

                  (h) Section 754  Adjustments.  To the extent an  adjustment to
         the "Adjusted Basis of any Partnership  Asset" pursuant to Code Section
         734(b)  or  743(b)  is  required   pursuant  to  Treasury   Regulations
         ss.1.704-1(b)(2)(iv)(m)(2)   or  (4)  to  be  taken  into   account  in
         determining  capital  accounts  as the  result of a  distribution  to a
         Partner in complete  liquidation  of its  interest,  the amount of such
         adjustment to capital  accounts shall be treated as an item of gain (if
         the  adjustment  increases  the  basis  of the  asset)  or loss (if the
         adjustment  decreases  the  basis)  and  such  gain  or loss  shall  be
         allocated  to the Partners in  proportion  to their ratios set forth in
         Section     5.4     in     the     event      Treasury      Regulations
         ss.1.704-1(b)(2)(iv)(m)(2)  applies,  or to the  Partner  to whom  such
         distribution    was   made   in   the   event   Treasury    Regulations
         ss.1.704-1(b)(2)(iv)(m)(4) applies.

         The  special  rules  set  forth in this  Section  5.4 (the  "Regulatory
Allocations")  shall  be  applied  only to the  extent  required  by  applicable
Treasury  Regulations for the resulting  allocations provided for in Section 5.1
and 5.2,  taking into account such Regulatory  Allocations,  to be respected for
federal income tax purposes.  The Regulatory  Allocations are intended to comply
with the  requirements  of Treasury  Regulations  ss.ss.1.704-1(b),  1.704-2 and
1.752-1  through  1.752-5  and shall be  interpreted  and  applied  consistently
therewith.

         5.5  Method of Making  Agreed  Allocations.  Notwithstanding  any other
provision  of  this  Article  V  other  than  the  Regulatory  Allocations,  the
Regulatory  Allocations  shall be taken into  account in making the  allocations
under  Sections  5.1, 5.2 and 5.3 (the  "Agreed  Allocations")  so that,  to the
extent  possible,  the net amount of items of income,  gain,  loss and deduction
allocated to each Partner pursuant to the Regulatory  Allocations and the Agreed
Allocations, together, shall be equal to the net amount of such items that would
have been  allocated  to each  Partner  under  the  Agreed  Allocations  had the
Regulatory  Allocations  and this curative not  otherwise  been provided in this
Article V.

         5.6 Monthly Determinations.  The allocations in this Article V shall be
made each calendar month to each of the Partners or their  Assignees on the last
day of such  calendar  month with respect to the Units owned by such Partners or
their Assignees on that day;  provided,  however,  that in the event any Unit is
transferred  during  a  month,  the  allocations  in  respect  thereof  shall be
apportioned  between the  transferor  and the  transferee as provided in Section
5.9. The distributions provided for by Section 5.8 shall be deemed to be paid to
the Partners or their  Assignees on the last day of the calendar month preceding
the date of the distribution.

         5.7 Income Tax Allocations.

                  (a) The Partnership  shall,  except to the extent such item is
         subject to allocation  pursuant to subsection (b) below,  allocate each
         item of income,  gain,  loss,  deduction and credit,  as determined for
         federal and other income tax purposes,  in the same manner as such item
         was allocated for Capital Account purposes.

                                       16
<PAGE>

                  (b) The Partnership, for federal and other income tax purposes
         shall, in the case of Contributed Properties, allocate items of income,
         gain, loss,  depreciation and cost recovery deductions  attributable to
         those  properties  with a Built-In  Gain or Built-In  Loss  pursuant to
         Section  704(c)  of the Code and  Treasury  Regulations  ss.1.704-3(d).
         Similar  allocations shall be made in the event that the Carrying Value
         of Partnership  properties  subject to  depreciation,  cost recovery or
         amortization are adjusted  pursuant to Section 4.4(b) upon the issuance
         of Units for cash. If an existing  Partner acquires  additional  Units,
         such  allocations  shall  apply  only to the  extent of its  additional
         Units. No allocation  under Section 704(c) of the Code shall be charged
         or credited to a Partner's Capital Account.

                  (c) To the  extent  consistent  with  the  allocation  of gain
         provided for this  Article V, any items of  recapture of  amortization,
         depreciation  or cost  recovery  deductions  shall be  allocated to the
         Partners and Assignees to whom (or to whose  predecessors  in interest)
         the  amortization,   depreciation  or  cost  recovery  deduction  being
         recaptured was originally allocated.

         5.8  Distributions.  Within thirty (30) days after the last day of each
calendar  quarter,  the  General  Partner  shall  determine  the  amount of Cash
Available  for  Distribution  with  respect to such  period,  if any.  After the
determination  of the  amount of Cash  Available  for  Distribution,  except for
distributions  made in liquidation of the Partnership  pursuant to Section 11.2,
the General Partner shall  distribute the Cash Available for Distribution to the
Partners. The General Partner may, with the prior consent of the Partners,  also
make  distributions of Cash Available for Distribution at any other time. Except
as  otherwise  unanimously  agreed  from  time  to  time  by the  Partners,  all
distributions  of Cash  Available for  Distribution  shall be made in accordance
with Section 5.2 and 5.3.

         5.9 Transfer of Interest. Each item of income, gain, loss, deduction or
credit  allocable to any Unit  transferred  during any  calendar  month shall be
allocated  during such calendar month in proportion to the number of days during
such calendar month for which each holder was recognized by the General  Partner
as the owner of the Unit  during  such  calendar  month,  without  regard to the
results of Partnership  operations  during the portion of such calendar month in
which such holders were  recognized as the owners  thereof and without regard to
the date, amount or receipt of any  distributions  which may have been made with
respect to such Unit.

         5.10  Survival of Tax  Provisions.  The  provisions  of this  Agreement
relating to tax matters shall survive the  termination  of the Agreement and the
termination  of any  Partner's  interest  in the  Partnership  and shall  remain
binding on that  Partner for the period of time  necessary  to resolve  with any
federal,   state  and  local  tax  authority  any  tax  matters   regarding  the
Partnership.

                                       17
<PAGE>

         5.11  Indemnification for Tax Termination.  Any Partner whose action or
inaction   causes  a  termination  of  the   Partnership   pursuant  to  Section
708(b)(1)(B)  of the Code prior to the time  provided  in this  Agreement  shall
indemnify  and hold  harmless the other  Partners  from any and all  incremental
federal,  state and local tax  liability  incurred  by such other  Partners as a
result of the  termination  unless each Partner so affected agrees to waive this
provision.

         5.12 Tax Elections. The General Partner shall make such elections as it
deems advisable under the Code and Treasury Regulations and any similar state or
local statute,  including,  but not limited to,  utilization of an agreed method
under  the  Modified  Accelerated  Cost  Recovery  System  or  other  applicable
depreciation  system,  subject  in the case of each such  election  to the prior
consent of the Partners.

         5.13 Limitation.  Notwithstanding any provision hereof, the Partnership
shall not make any  distribution to Partners to the extent such is not permitted
under the Partnership Act.

                                   ARTICLE VI.
                        ACCOUNTING AND FINANCIAL MATTERS

         6.1  Books  and  Records.  At  all  times  until  the  dissolution  and
termination of the Partnership,  the Partnership will maintain separate books of
account  which  show a true  and  accurate  record  of all  costs  and  expenses
incurred, all charges made, all credits made and received and all income derived
in connection  with the conduct of the business of the Partnership in accordance
with this Agreement.  In addition, the Partnership will keep and maintain in its
principal  office all the information  required to be kept and maintained  under
the Mandatory  Provisions of the Partnership Act and will make such  information
available to any Partner  reasonably  requesting the same during normal business
hours.  For each  fiscal year  during the term of the  Partnership,  the General
Partner  shall  cause the  Partnership  to  prepare a balance  sheet and  income
statement of the  Partnership  which shall be audited by an  independent  public
accounting firm of its choosing and the audited  financial  statements  shall be
distributed  to all Partners  within ninety (90) days  following the end of each
fiscal year.  Additionally,  the General  Partner shall cause the Partnership to
prepare an  unaudited  quarterly  income  statement  and  balance  sheet for the
Partnership  for  each of its  first  three  fiscal  quarters,  which  shall  be
distributed to all Partners no later than the 25th day following the last day of
such fiscal quarter.

         6.2 Other  Information.  The  Partnership  will use its reasonable best
efforts to cause to be delivered to any Partner such other  information  as such
Partner  may  reasonably  request  for the purpose of enabling it to comply in a
timely manner with any reporting or filing requirements  imposed by any statute,
rule, regulation or otherwise by any governmental agency or authority.

         6.3 Fiscal  Year.  The  Partnership's  fiscal year will be the calendar
year.

         6.4 Partnership  for Tax Purposes.  The Partners agree that it is their
intention that the Partnership  will be treated as a partnership for purposes of
United States federal, state and local income tax laws, and further agree not to
take  any  position  or  make  any  election,  in a  tax  return  or  otherwise,
inconsistent  herewith.  In furtherance of the foregoing,  the Partnership  will
file as a partnership for United States federal income tax purposes.

                                       18
<PAGE>

         6.5 Tax Matters  Partner.  The General Partner is hereby  designated as
the "Tax Matters Partner" of the Partnership for purposes of Section  6231(a)(7)
of the Internal  Revenue Code and will have the power to manage and control,  on
behalf of the  Partnership,  any  administrative  proceeding at the  Partnership
level with the Internal  Revenue Service  relating to the  determination  of any
item of Partnership income,  gain, loss,  deduction or credit for federal income
tax purposes.  The Partners will take whatever  steps the General  Partner deems
necessary or desirable to perfect such  designation,  including filing any forms
or documents with the Internal  Revenue  Service and taking such other action as
may from time to time be required under Treasury Regulations.

         6.6 Tax Returns. All matters relating to tax returns (including amended
returns) filed by the Partnership,  including tax audits and related matters and
controversies,  will be determined and conducted by the Tax Matters Partner. The
Tax Matters  Partner will prepare and file or cause to be prepared and filed all
tax returns (including amended returns) filed by the Partnership.  Copies of all
federal  income tax returns and all other  material tax returns will be provided
to each of the  Partners.  As  promptly  as  practicable,  and in any  event  in
sufficient  time to permit timely  preparation and filing by each Partner of its
respective  state and Federal tax returns,  the Partnership will deliver to each
Partner a copy of each state and Federal  tax return or tax report  filed by the
Partnership  and such other  information  as may be  necessary  in order for the
Partner to prepare such Partner's federal and state tax returns.

         6.7 Tax  Elections.  All elections for federal income tax purposes (and
corresponding  elections  for  state,  local  and  foreign  purposes)  which are
required or permitted to be made by the Partnership,  and all material decisions
with respect to the calculation of its income or loss for tax purposes,  will be
made in such  manner  as the Tax  Matters  Partner  will  determine  in his sole
discretion.

                                  ARTICLE VII.
                      MANAGEMENT AND OPERATION OF BUSINESS

         7.1 General Partner.  Management of the Partnership  shall be vested in
the General Partner,  or its duly appointed  successor or successors as provided
herein.  The General  Partner may exercise all of the powers of the  Partnership
whether  derived  from law,  the  Certificate  of  Limited  Partnership  or this
Agreement,  except  as  otherwise  specifically  set  forth  in this  Agreement,
including Section 7.3. Persons dealing with the Partnership are entitled to rely
conclusively  on the power and authority of the General  Partner as set forth in
this  Agreement.  In no event shall any Person dealing with the General  Partner
with  respect to any  business or property of the  Partnership  be  obligated to
ascertain  that the terms of this  Agreement  have  been  complied  with,  or be
obligated to inquire into the necessity or expedience of any joint act or action
of the General Partner, and every contract,  agreement, deed, mortgage, security
agreement,  promissory  note or other  instrument  or  document  executed by the
General  Partner  with  respect to any  business or property of the  Partnership
shall be conclusive evidence in favor of any and every Person relying thereon or
claiming  thereunder  that  (i) at the  time of the  execution  and/or  delivery

                                       19
<PAGE>

thereof,  this  Agreement was in full force and effect,  (ii) the  instrument or
document was duly executed in accordance  with the terms and  provisions of this
Agreement and is binding upon the Partnership, and (iii) the General Partner was
duly  authorized  and  empowered  to  execute  and  deliver  any and every  such
instrument or document for and on behalf of the Partnership.

         7.2  Removal of General  Partner.  The General  Partner  shall have the
duties,  rights,  powers and  authorities to do on behalf of the Partnership all
things which are authorized  hereunder.  The General  Partner may be removed and
replaced as General Partner hereunder only if and to the extent that the General
Partner is removed  and  replaced  pursuant to a written  consent  signed by all
Partners.

         7.3 Specific  Limitations  on Authority.  Anything in this Agreement to
the contrary contained herein  notwithstanding,  the General Partner represents,
covenants,  warrants and agrees with the other  Partners and the  Partnership as
follows:

                  (a) The General Partner shall not commingle the  Partnership's
         funds or assets with those of the General  Partner or any other  Person
         or employ  or permit  another  to  employ  such  funds or assets in any
         manner except for the benefit of the Partnership.

                  (b)  The  General  Partner  shall  not  bind or  obligate  the
         Partnership  with regard to any matter outside the scope of the purpose
         of the Partnership.

                  (c) The General Partner shall not use or permit the use of the
         Partnership's credit or property for other than Partnership purposes.

                  (d)  The   General   Partner   shall   not  (i)  sell  all  or
         substantially  all of the  assets  of the  Partnership,  (ii)  merge or
         combine  the  Partnership  with  another  entity or (iii)  dissolve  or
         liquidate the Partnership without the Majority Vote of the Partners.

                  (e) The General  Partner  shall not cause the  Partnership  to
         expend funds in excess of  $5,276,773.95  for purposes set forth on the
         AFE without the written consent of all Partners.

         7.4 Devotion of Time. The General Partner shall devote such time to the
Partnership's business as it, in the exercise of its reasonable judgment,  shall
deem necessary to manage and supervise the Partnership's business and affairs.

         7.5 Compensation of the General Partner.  The General Partner shall not
receive  any  compensation  for the  performance  of its duties and  obligations
hereunder,  but shall be entitled to  reimbursement  or recoupment for direct or
indirect charges incurred by it in the performance of its duties and obligations
hereunder.

         7.6  Independent  Activities of Partners.  Provided a Partner  complies
with  all   confidentiality   provisions   of  this   Agreement  and  any  other
confidentiality  agreements  between the Partnership  and such Partners,  to the

                                       20
<PAGE>

extent permitted by applicable law, such Partner (acting on his, her, or its own
behalf)  may,  notwithstanding  this  Agreement,  engage  in  whatever  business
activities,  ventures  or  commercial  dealings  of every kind and  description,
independently or with others,  that he, she or it chooses,  whether the same are
competitive  with the Partnership or otherwise,  without having or incurring any
obligation to offer any interest in such  activities to the  Partnership  or any
Partner.  Neither this  Agreement nor any activity  undertaken  pursuant  hereto
shall  prevent any Partner  from  engaging in the  activities  mentioned  in the
preceding  sentence,  or require any Partner to permit the  Partnership,  or any
Partner, to participate in or acquire any interest in any such activities.  As a
material part of the  consideration  for the execution of this  Agreement by the
Partners, each Partner hereby waives, relinquishes, and renounces any such right
or claim of participation.

                                  ARTICLE VIII.
                       RIGHTS AND OBLIGATIONS OF PARTNERS

         8.1 No Participation in Management.  The Limited Partner shall not take
part in the management or control of the  Partnership's  business,  transact any
business in the  Partnership's  name, or have the power to bind the Partnership.
The Limited  Partner shall not be deemed to have  participated in the management
or control of the Partnership by virtue of approving or disapproving, by vote or
otherwise, any matter submitted to the Partners hereunder.

         8.2  Limitation  on Liability.  No Limited  Partner shall be personally
liable for losses or debts of the  Partnership  beyond  such  Limited  Partner's
Capital   Contribution  and  any  other  contributions   actually  paid  to  the
Partnership  plus such Limited  Partner's share of the assets and  undistributed
net profits of the Partnership.

         8.3 Rights of Partners.  In addition to other  rights  provided by this
Agreement, or by applicable law, a Partner shall have the right on demand and at
such Partner's own expense:

                  (a) Promptly after becoming available, to obtain a copy of the
         Partnership's  federal,  state and local  income tax  returns  for each
         year;

                  (b) To obtain information  regarding the Capital Contributions
         made by each Partner;

                  (c) To receive a copy of this  Agreement,  the  Certificate of
         Limited  Partnership and any amendments or  modifications to any of the
         foregoing;

                  (d) To  receive  a copy of any  other  contract  or  agreement
         regarding Capital Contributions of the Partners or distributions to the
         Partners,  including any amendments or modifications  thereto,  entered
         into by the Partnership; and

                                       21
<PAGE>

                  (e) To  inspect  and copy any of the  Partnership's  books and
         records  and  obtain  such  information  regarding  the  affairs of the
         Partnership during normal business hours.

A Partner shall maintain the confidentiality of any information contained in the
Partnership's  books and  records or  otherwise  provided to it pursuant to this
Section 8.3.

                                  ARTICLE IX.
                              MEETINGS OF PARTNERS

         9.1 Place of Meetings.  Meetings of Partners will be held either at the
General Partner's principal place of business in Tulsa, Oklahoma or otherwise as
may be  designated  by the  General  Partner  and  stated  in the  notice of the
meeting.

         9.2 Annual  Meeting.  Annual  meetings of the Partners  will be held on
such date and at such time as will be  designated  by the  General  Partner,  at
which  meeting  the  Partners  will  transact  such  business as may be properly
brought before the meeting. The failure to conduct an annual meeting of Partners
shall not  create any  inference  of lack of  authority  or  otherwise  act as a
disability of the Partnership.

         9.3 Special Meetings. Special meetings of the Partners may be called by
the General  Partner on its own or at the  request of  Partners  owning at least
twenty-five  percent  (25%) of the Units.  Only  business  within the purpose or
purposes  described  in the  notice of  meeting  delivered  to the  Partners  in
accordance with Section 9.4 may be conducted at a special meeting of Partners.

         9.4 Notice of Meeting. Written or printed notice of all meetings of the
Partners entitled to vote,  stating the place, date and time of the meeting and,
in the case of a special meeting,  the purpose or purposes for which the meeting
is  called,  will be  delivered  not less than ten (10) nor more than sixty (60)
days  before the date of the  meeting to each  Partner  entitled to vote at such
meeting.

         9.5 Record Dates. For the purpose of determining  Partners  entitled to
notice of or to vote at any meeting of Partners or any adjournment  thereof, the
General  Partner may fix in advance a record  date,  which date will not be less
than ten (10) nor more than sixty (60) days prior to the date of the meeting. In
addition,  whenever  action by  Partners  is  proposed to be taken by consent in
writing without a meeting of Partners, the General Partner may fix a record date
for the purpose of  determining  Partners  entitled  to consent to that  action,
which  record  date  will not  precede,  and will not be more than ten (10) days
after,  the date upon which the resolution  fixing the record date is adopted by
the General Partner. If no record date has been fixed by the General Partner for
the  purpose  of  determining  Partners  entitled  to  consent in writing to any
action,  the record date for  determining  Partners  entitled to consent to that
action will be the first date on which a signed  written  consent  setting forth
the action taken or proposed to be taken is delivered to the Partnership.

                                       22
<PAGE>

         9.6  Quorum.  The  presence  of the holders of a majority of the voting
power of the Units  entitled to vote on any matter will  constitute a quorum for
the  purpose  of  considering  such  matter at a meeting of the  Partners.  If a
meeting of the Partners cannot be organized because a quorum will not be present
or represented,  the Partners  entitled to vote thereat,  will have the power to
adjourn  the  meeting  from  time to time  until a  quorum  will be  present  or
represented.  When a meeting is adjourned to another time or place,  notice need
not be  given  of the  adjourned  meeting  if the time  and  place  thereof  are
announced at the meeting at which the  adjournment  is taken.  At the  adjourned
meeting at which a quorum  will be  present or  represented,  the  Partners  may
transact any business which might have been transacted at the original meeting.

         9.7  Voting.  Except as required by law,  any matter  brought  before a
meeting of the Partners  will be decided by the Majority  Vote of the  Partners.
Each  holder of Units  will  have one vote for each Unit held by such  holder on
each matter submitted to a vote of the Partners.

         9.8 Conduct of Meetings of Partners. At each meeting of the Partners, a
chairman  chosen by a majority of the voting power of the Units entitled to vote
thereat will preside and act as chairman of the  meeting.  A secretary  whom the
chairman of such meeting will appoint, will act as secretary of such meeting and
keep the  minutes  thereof.  The  General  Partner  may  adopt  such  rules  and
regulations  as  it  determines  are  reasonably  necessary  or  appropriate  in
connection with the organization and conduct of any meeting of the Partners.

         9.9 Written  Consent.  Any action  required or permitted to be taken at
any  annual or  special  meeting  of  Partners  may be taken  without a meeting,
without prior  notice,  and without a vote, if a consent or consents in writing,
setting  forth the  action so taken,  will be signed by  Partners  owning  Units
having not less than the minimum  voting  power that would be  necessary to take
such action at a meeting at which all  Partners  entitled to vote  thereat  were
present and voted. Every written consent will bear the date of signature of each
Partner  that  signs  the  consent.  Delivery  will be by hand or  certified  or
registered  mail,  return  receipt  requested,  to the  principal  office of the
Partnership.  Upon  adoption  of an action  taken  under  this  Section  9.9 the
Partnership shall give prompt notice of such action to all Partners.

         9.10  Telephonic  Meetings.  Partners  may  participate  in and  hold a
meeting by means of conference telephone or similar communications  equipment by
means of which all  Partners  participating  in the meeting can hear each other,
and  participation  in such meeting will  constitute  attendance and presence in
person at such meeting.

                                   ARTICLE X.
                               TRANSFER OF UNITS;
             ADMISSION OF SUBSTITUTE AND ADDITIONAL LIMITED PARTNERS

         10.1 Restrictions on Disposition; Permitted Dispositions.

                  (a) Transfers to Affiliates. Any Partner shall be permitted at
         any  time  and  from  time to  time to  effect  a  Disposition  of such
         Partner's  Units to any  Affiliate of the disposing  Partner,  provided
         that (i) the disposing Partner owns and controls at least a majority of

                                       23
<PAGE>

         the equity interest in such Affiliate, and (ii) in the case of any such
         Disposition by the General Partner,  the General Partner shall continue
         to be the General  Partner and shall be responsible to the  Partnership
         and the other Partners for its obligations as General Partner. It shall
         be a condition to any permitted  Disposition  of Units pursuant to this
         Section 10.1(a) that any Affiliate of a Limited Partner receiving Units
         shall  agree to become a Limited  Partner  under and to be bound by the
         terms  of this  Agreement  and  that  all  other  requirements  of this
         Agreement  relating to the admission of  Substituted  Limited  Partners
         shall have been satisfied.

                  (b) No Dispositions.  No Partner may make a disposition of its
         Units without first complying with Section 10.5 unless such transfer is
         allowed under Section 10.1(a).

                  (c) Restrictions on Dispositions. Except as otherwise provided
         in Subsection  (a) of this Section 10.1,  without first  complying with
         Section 10.5, no Partner may effect a Disposition of all or any part of
         its Units,  unless and until (i) the transferee  executes an instrument
         reasonably  satisfactory to the General Partner  accepting and adopting
         the provisions,  representations  and agreements of a Partner set forth
         in this Agreement and  representing  such facts (which  representations
         shall be true) as the General  Partner may deem  necessary or advisable
         to assure that  neither the  Partnership,  the General  Partner nor any
         Partner or Assignee or any Affiliate thereof would be liable or subject
         to any  requirement to make any  registration of any security under the
         Securities Act of 1933, as amended  ("Securities  Act"),  or applicable
         state securities laws or any rule or regulation promulgated thereunder;
         (ii) the  transferor  or  transferee  delivers an opinion of counsel in
         form and content satisfactory to the General Partner to the effect that
         such  Disposition is exempt from the  registration  requirements of the
         Securities  Act,  applicable  state  securities  laws  or any  rule  or
         regulation promulgated thereunder;  and (iii) the General Partner shall
         be  satisfied  that  (A)  such  Disposition  would  not  result  in the
         termination of the Partnership  within the meaning of Section 708(b) of
         the Code, (B) such Disposition would not adversely affect the status of
         the  Partnership as an entity taxable as a partnership  under the Code,
         nor would it cause the  Partnership  to be deemed to be an  "investment
         company" under the Investment Company Act of 1940, (C) such Disposition
         would not cause the  Partnership  to be treated as a  "publicly  traded
         partnership"  within the  meaning of Section  7704(b) of the Code,  (D)
         such  Disposition  would not cause the Partnership or any Partner to be
         in violation of any applicable state or federal securities law, and (E)
         neither  the  proposed  transferor  nor  the  transferee  is,  or  upon
         consummation  of the  Disposition  would be, in default in the full and
         punctual  payment and  performance of any obligations or liabilities to
         the  Partnership.  The  General  Partner  may,  with the consent of the
         Partners,  waive  the  conditions  in  clause  (ii)  and  (iii)  of the
         preceding  sentence in connection  with an offer made on  substantially
         equivalent terms to all Partners or Assignees. A transferee pursuant to
         a Disposition permitted by this Article X shall be an Assignee,  unless
         and  until  admitted  as a  Substituted  Limited  Partner  as  provided
         elsewhere herein.

                                       24
<PAGE>

         10.2 Rights of Transferee. No transferee shall have the right to become
a  Substituted  Limited  Partner  unless:  (i) the Majority Vote of the Partners
consent to such substitution (such consent not to be withheld unreasonably), and
(ii) such  transferee  executes an  instrument  reasonably  satisfactory  to the
General Partner  accepting the terms and provisions of this  Agreement,  obtains
such consents and opinions of counsel as the General  Partner deem necessary and
pays any reasonable  expenses in connection with such admission as a Substituted
Limited Partner  (including legal and accounting  expenses).  No General Partner
shall ever incur any liability in connection  with the giving or  withholding of
consent to the admission of a transferee as a Substitute Limited Partner if such
General Partner acts in good faith and in a manner reasonably believed to be in,
or not opposed to, the best interests of the Partnership.

         10.3  Effective  Date  of  Transfer.   Each  Disposition  shall  become
effective as of the first day of the calendar month following the calendar month
during which the Partners approve such Disposition (if such approval is required
under  the  terms  hereof)  and  the  General  Partner  receives  a copy  of the
instrument  of  assignment  and  all  such  certificates  and  documents  of the
character described in Section 10.1(c) which the General Partner may request.

         10.4 Invalid Transfer. No Disposition of Units which is in violation of
this  Article  X shall be valid or  effective,  and the  Partnership  shall  not
recognize the same for the purposes of making any  allocation  or  distribution.
The  Partnership may enforce the provisions of this Article X either directly or
indirectly   or  through  its   Representatives   by  entering  an   appropriate
stop-transfer  order on its books or otherwise  refusing to register or transfer
or permit the registration or transfer on its books of any proposed Dispositions
not in accordance with this Article X.

         10.5 Right of First Refusal;  Bona Fide Offer;  Written Notice.  In the
event a Partner  receives  and  desires to accept a bona fide offer from a third
party for the  purchase for cash of all or a portion of the Units (or any rights
or interests therein) owned by that Partner,  such Partner (hereinafter referred
to as the "Selling  Partner") shall give written notice (the "Selling  Partner's
Notice") of such offer to the Partnership and to all other Partners.  The notice
must  set  forth  the name  and  description  of the  identity  of the  proposed
transferee  (the  "Transferee"),  the number of Units proposed to be transferred
(hereinafter referred to as the "Offered Units"), and the cash price per Unit.

         (a)  Partnership's  Option  to  Purchase.  On  receipt  of the  Selling
         Partner's  Notice,  the  Partnership  shall  have the right and  option
         exercisable  at any time  during a period  of sixty  (60) days from the
         date of receipt of said  notice  ("Partnership  Exercise  Period"),  to
         purchase all, or a portion,  of the Offered Units at the price per Unit
         stated in the Selling  Partner's  Notice.  If  exercised,  the purchase
         shall be made on such further  terms and  conditions  as set out in the
         Selling Partner's  Notice. If the Partnership  decides to exercise this
         option, it shall,  prior to the expiration of the Partnership  Exercise
         Period, give written notice of its intention to purchase to the Selling
         Partner.  The sale and  purchase of all of the  Offered  Units shall be
         closed  within  sixty  (60)  days  from the  date of the  Partnership's
         written notice to the Selling  Partner  exercising the purchase  rights
         set forth herein.  At such closing,  the Selling Partner shall take all
         necessary steps to Dispose of the Offered Units to the Partnership. The
         right of the  Partnership  to exercise its option to purchase  shall be
         subject to the Partnership Act governing the rights of a partnership to
         purchase its own Units.

                                       25
<PAGE>

         (b) Other Partners' Option to Purchase.  If the Partnership does not or
         cannot  elect to  exercise  its option to  purchase  all of the Offered
         Units, in whole or in part during the Partnership Exercise Period, then
         prior  to  the  expiration  of the  Partnership  Exercise  Period,  the
         Partnership  shall send  written  notice to all of the  Partners of the
         Partnership who are not Selling  Partners (the  "Partnership  Notice").
         The Partners of the Partnership,  other than the Selling Partner, shall
         be  given an  opportunity  to  purchase  the  Offered  Units or so much
         thereof as is not purchased by the Partnership for sixty (60) days from
         the date of mailing  the  Partnership  Notice  (the  "Partner  Exercise
         Period").  Partners who desire to purchase  Offered Units  (hereinafter
         referred to as  "Purchasing  Partners")  shall be entitled to purchase,
         all, but not less than all, of the Offered Units remaining that are not
         purchased by the Partnership. The Selling Partner shall not be required
         to sell any of the Offered Units to the Purchasing Partners, unless the
         Purchasing  Partners  are  willing,  as  a  group,  together  with  the
         Partnership,  to purchase all of the Offered Units.  Such purchase must
         be made at the price per Unit stated in the Selling  Partner's  Notice.
         The purchase must also be made on such further terms and  conditions as
         are set out in the Selling Partner's Notice. If the Purchasing Partners
         desire to purchase the Offered  Units made  available  hereunder,  they
         must give written  notice to the  Partnership  and the Selling  Partner
         prior to the expiration of the Partner  Exercise  Period.  The sale and
         purchase of the Offered  Units shall be closed  within thirty (30) days
         after the Partner Exercise  Period.  The Selling Partner shall take all
         necessary  steps  to  transfer  the  Offered  Units  to the  Purchasing
         Partners.  Unless the Purchasing  Partners agree that the Offered Units
         shall be purchased by them in some other  proportion,  each  Purchasing
         Partner shall be entitled to purchase that portion of the Offered Units
         that the number of Units held by that  Purchasing  Partner bears to the
         number  of  Units  held by  Partners  electing  to  participate  in the
         purchase of the Offered Units.

         (c) Right to Sell Unpurchased Units; No Termination of Restrictions. In
         the event  that the  Partnership  and the  Purchasing  Partners  do not
         purchase all of the Offered Units,  the Selling  Partner shall have the
         right, during a period of thirty (30) days after the termination of the
         Partner  Exercise  Period,  to transfer all of the Offered Units to the
         third party from whom the Selling Partner  received the bona fide offer
         of  purchase on the same terms and  conditions  and at a price equal to
         the price specified in the Selling Partner's Notice to the Partnership.
         Notwithstanding  anything  herein to the  contrary,  the Units shall be
         transferred subject to all restrictions  against Disposition created by
         this Agreement,  and prior to any such Disposition being effected,  the
         Transferee  must  comply with all of the terms and  conditions  of this
         Agreement,  including, but not limited to an agreement in writing to be
         bound by the terms and  conditions  of this  Agreement  as set forth in
         Section  10.1(c).  If a sale to the  prospective  purchaser is not made
         within the thirty (30) day period provided for herein, the restrictions
         contained in this Agreement shall begin again and continue in effect.

                                       26
<PAGE>

         (d) Termination of Rights. Any Partner, other than the General Partner,
         whose Units are  purchased  in their  entirety by the  Partnership,  by
         other  Partners or by a bona fide offeror in accordance  with the terms
         of this Section 10.5 shall cease to be a party to this  Agreement,  and
         shall have no further rights and obligations hereunder.

         10.6 Purchase Upon Certain  Triggering Events. (i) Upon any involuntary
Disposition of the Units held by any Partner through  foreclosure,  deed-in-lieu
of  foreclosure,   bankruptcy,  levy,  attachment  or  other  Disposition  under
operation  of law,  or (ii) if there shall be filed by or against any Partner in
any  court  pursuant  to any  statute  of the  United  States or of any state or
foreign country, a petition in bankruptcy or insolvency,  or for reorganization,
or for the  appointment  of a receiver  or trustee of all or any portion of such
Partner's property, or (iii) if a Partner makes an assignment for the benefit of
creditors or avails itself of any form of insolvency proceedings, or (iv) if any
proceedings  are instituted to attach,  garnish or otherwise levy and execute on
any Units or  ownership  interest  of a Partner  in the  Partnership,  or (v) if
Tidelands  shall  be in  material  default  of any of  its  representations  and
warranties under Section 3(a) of the Purchase Agreement and Tidelands shall have
failed to cure the same within thirty (30) days after  receiving  written notice
thereof from Impact,  (hereinafter,  the "Exit", and the Partner departing,  the
"Exiting  Partner"),  all of the Units owned by the Exiting Partner,  legally or
beneficially,  including  any Units held in a trust of which such Partner is the
grantor,  or in a bankruptcy estate in which such Partner is the debtor,  and to
which the Exiting Partner or the personal  representatives of that Partner shall
be entitled, shall be sold and purchased as herein provided.

         (a) Option of Partnership  to Purchase.  The  Partnership  may purchase
         from the Exiting  Partner or the personal  representatives  thereof and
         the Exiting Partner or the personal  representatives  thereof shall, if
         the Partnership  elects in a written notice sent to the Exiting Partner
         or the applicable  representative of the Exiting Partner not later than
         ninety (90) days  following  the date of the event which  creates  such
         right,  sell to the  Partnership  all the  Units  owned by the  Exiting
         Partner   and  to  which   the   Exiting   Partner   or  the   personal
         representatives shall be entitled, at the price per Unit as of the date
         of the Exit determined according to Section 10.6(e) hereof.

         (b) Other Partners' Option to Purchase.  If the Partnership does not or
         cannot  elect to  exercise  its option to  purchase  all of the Exiting
         Partner's  Units,  in whole or in part  during  the period set forth in
         Section  10.6(a),  then prior to the  expiration  of such  period,  the
         Partnership  shall send  written  notice to all of the  Partners of the
         Partnership who are not Exiting  Partners (the  "Partnership  Notice").
         The Partners of the Partnership,  other than the Exiting Partner, shall
         be,  unless such Partner is then in default of any  obligation  to make
         Capital Contributions  hereunder,  given an opportunity to purchase the
         Units of the Exiting  Partner or so much thereof as is not purchased by
         the  Partnership  for  sixty  (60) days  from the date of  mailing  the
         Partnership Notice (the "Partner Exercise Period"). Partners who desire
         to purchase  any such Units  (hereinafter  referred  to as  "Purchasing
         Partners")  shall be entitled to purchase,  all, but not less than all,
         of such Units remaining that are not purchased by the  Partnership.  If
         the  Purchasing  Partners  desire to purchase  the  Offered  Units made
         available  hereunder,  they must give written notice to the Partnership
         and the Exiting Partner prior to the expiration of the Partner Exercise

                                       27
<PAGE>

         Period.  The sale and purchase of the Exiting  Partner's Units shall be
         closed  within  thirty  (30) days after the  Partner  Exercise  Period.
         Unless the  Purchasing  Partners  agree that the Units being  purchased
         shall be purchased by them in some other  proportion,  each  Purchasing
         Partner  shall be  entitled  to  purchase  that  portion of the Exiting
         Partner's  Units that are not  purchased  by the  Partnership  that the
         number of Units held by that Purchasing  Partner bears to the number of
         Units held by Partners  electing to participate in the purchase of such
         Units.

         (c) Closing.  The closing of such purchase and sale upon the Exit shall
         take place at the office of the Partnership at a date designated by the
         Partnership,  which  shall be not more than  ninety (90) nor fewer than
         ten (10) days following the date that the  Partnership has given notice
         that it will purchase the Exiting  Partner's  Units, or such later date
         as  established by the General  Partner to facilitate any  transactions
         set forth under Section 10.6(b).

         (d) Delivery of Units.  At the closing  described in this Section 10.6,
         upon the payment of the  purchase  price to the Exiting  Partner or the
         estate  of the  Exiting  Partner,  the  Exiting  Partner  or the  legal
         representatives  thereof  shall  assign  and  deliver  the Units of the
         Exiting Partner to the Partnership or the Purchasing  Partners,  as the
         case may be.

         (e) Purchase Price and Terms. For the purposes of this Section 10.6, if
         the Partnership (or Purchasing Partners) elects to purchase the Exiting
         Partner's Units, the purchase price shall be determined by an appraisal
         of the  fair  market  value  of such  Units.  The  appraisal  shall  be
         conducted as follows:  The Exiting Partner and the purchaser shall each
         appoint,  at  their  own  cost,  a  qualified   appraiser   ("Qualified
         Appraiser"),  who shall be a professional appraiser or certified public
         accountant  qualified by experience  and ability to appraise the Units.
         If both  Qualified  Appraisers  agree on the fair  market  value of the
         Units,  their  opinion,  which shall be submitted in writing,  shall be
         conclusive  and binding on both the Exiting  Partner and the purchaser.
         If  only  one of the  parties  appoints  a  Qualified  Appraiser,  that
         appraiser's  written  opinion on the fair market  value of the Units in
         question  shall be conclusive  and binding on both the Exiting  Partner
         and the purchaser. If the two Qualified Appraisers disagree on the fair
         market  value  of the  Units,  they  shall  appoint  a third  Qualified
         Appraiser  mutually  acceptable to them, and the written opinion of the
         third  Qualified  Appraiser,  whose fees and expenses  shall be divided
         equally  between  the  Exiting  Partner  and the  purchaser,  shall  be
         conclusive  and binding as to the fair market  value of the Units to be
         purchased.  Provided,  however,  that  if the  value  of the  Units  in
         question  found by the third  Qualified  Appraiser  is greater than the
         highest  of the  first two  appraisals,  the  highest  of the first two
         appraisals  shall  constitute the fair market value of the Units and if
         their value as found by the third  appraiser is less than the lowest of
         the first two appraisals,  the lower of the first two appraisals  shall
         constitute the fair market value of the Units.  The appraisal  shall be
         conducted as soon as reasonably  practical and the results given to all
         Partners. To the extent permitted by applicable law, the purchase price
         shall  be  payable  by  the  issuance  of  a  promissory  note  by  the
         Partnership (or Purchasing  Partners) in the original  principal amount

                                       28
<PAGE>

         of the purchase price as determined hereby,  that bears interest at the
         prime rate of  interest as set by Bank One N.A.,  as of such date,  and
         principal  payable  in equal  quarterly  installments  over a period of
         twelve (12) months or such other period as may be agreed upon.

         (f)  Assurances.  In order to  provide  the  Partners  with  reasonable
         assurances  regarding  the financial  condition of the  Partners,  each
         Partner agrees to provide the General Partner with quarterly  financial
         information regarding such Partner which shall include, at a minimum, a
         quarterly  un-audited balance sheet and income statement for such month
         not later  than the 45th day  following  the end of each such  quarter.
         With respect to Tidelands,  Tidelands shall provide the General Partner
         with all  reports  and  documents  that it is required to file with the
         Securities  and  Exchange  Commission  as soon as  possible  after such
         filing.  Additionally,  each Partner agrees to give  immediate  written
         notice to the General Partner if it becomes  insolvent or unable to pay
         its  obligations as they come due or any other Exit event occurs or any
         event  occurs  which is a material  adverse  event with respect to that
         Partner.

         10.7 Distributions to the Transferee.  The Partnership shall, after the
effective date of any permitted  Disposition  pursuant to the provisions of this
Article  X,  thereafter  pay  all  further  distribution  of  profits  or  other
compensation by way of income, or return of capital,  on account of the Units so
transferred,  to the transferee  from such time as such Units are transferred to
the name of the  transferee on the  Partnership's  books in accordance  with the
above provisions. In the absence of written notice to the General Partner of the
Disposition of any Units, the General Partner may assume that no Disposition has
occurred.

         10.8 Admission of Additional  Limited Partners;  Issuance of Additional
Units.  Additional  Units may be  authorized  and issued by the  Partnership  to
existing  Partners  upon such terms and  conditions  as may be  approved  by the
Majority Vote of the Partners.  Additional Units may be authorized and issued by
the Partnership to any Additional Limited Partner in connection with the receipt
of new Capital Contributions from, and the admission to the Partnership of, such
Additional  Limited Partner upon such terms and conditions as may be approved by
the Majority Vote of the Partners. In addition, no new Person may be admitted as
an Additional  Limited Partner in connection with new Capital  Contributions  or
issuance of additional  Units unless the applicable  requirements of clauses (i)
through  (iii) of  Section  10.1(c)  relating  to  transfers  of Units have been
satisfied in connection  with the issuance and  acquisition of the new Units and
the admission of the Additional Limited Partner.  The admission of an Additional
Limited  Partner  shall be effective  as of the first day of the calendar  month
following  the  calendar  month  during  which  (a) the  Partners  approve  such
admission,  (b) the Additional Limited Partner executes an instrument reasonably
satisfactory to the General  Partner  accepting the terms and provisions of this
Agreement,  (c) the  Additional  Limited  Partner pays all expenses  incurred in
connection with its admission as an Additional  Limited Partner (including legal
and  accounting  expenses),  and  (d) the  General  Partner  receives  consents,
opinions of counsel and other  documents  required as provided  above and all of
the other conditions set forth above have been satisfied.

                                       29
<PAGE>

         10.9     Unit Certificates.

                  (a) Issuance of Unit  Certificates.  The  Partnership  may but
         shall not be required to issue one or more  certificates in the name of
         applicable  Partners  evidencing  the number of Units issued.  Upon the
         Disposition  of a Unit in  accordance  with Article X, the  Partnership
         shall,   if   certificates   have  been   issued,   issue   replacement
         certificates.  All certificates  shall contain legends required by this
         Agreement or otherwise required by law.

                  (b)  Lost,   Stolen  or  Destroyed  Unit   Certificates.   The
         Partnership  shall issue a new  certificate in place of any certificate
         previously  issued if the record Partner holding the  certificate:  (i)
         makes proof by affidavit that a previously issued  certificate has been
         lost,  stolen  or  destroyed;  (ii)  requests  the  issuance  of a  new
         certificate  before the Partnership has notice that the Units evidenced
         by such certificate have been acquired by a purchaser for value in good
         faith and without notice of an adverse claim;  and (iii) if required by
         the  Partnership,  delivers  to the  Partnership  a bond with surety or
         sureties  acceptable to the  Partnership,  to indemnify the Partnership
         against  any claim  that may be made on account  of the  alleged  loss,
         destruction or theft of the certificate.

         10.10  Endorsement on Unit  Certificates.  Any  certificate  evidencing
Units now or hereafter  issued by the  Partnership  shall bear a legend  reading
substantially as follows:

           Any sale,  assignment,  transfer or other  disposition  of the
           Units  represented  by this  certificate  is restricted by and
           subject to the terms and provisions of an Agreement of Limited
           Partnership  dated effective APRIL _____,  2003.A copy of such
           Agreement  is  on  file  with  the  General   Partner  of  the
           Partnership.  By  acceptance of this  certificate,  the holder
           thereof agrees to be bound by the terms of such Agreement.

A legend reading substantially as above shall be endorsed on any certificate for
Units hereafter issued by the Partnership to any Partner or transferee thereof.

         10.11 Special Rules on  Dispositions by General  Partner.  Whenever any
Disposition of Units by the General Partner is made under Sections 10.1(a), 10.5
or 10.6,  unless such is made in a manner that the Transferee of such Units also
becomes a general  partner,  the General Partner shall not transfer Units unless
it retains, after such Disposition,  Units equal to at least one percent (1%) of
the  Units  and any  Units  which  it so  transfers  will be  Units  of  limited
partnership  interest in the hands of the  Transferee.  If the  General  Partner
ceases to be a general partner as permitted hereunder, its Units shall be deemed
Units of limited partnership interest.

         10.12 Special Rules Relating to Pledge of Units. The parties agree that
they shall not pledge or encumber, by mortgage or otherwise,  any of their Units
or any rights of ownership in the Partnership  without the prior written consent
of the General Partner, which consent shall not be unreasonably withheld. In the

                                       30
<PAGE>

event any such  pledge  or  encumbrance  is made,  the  holder  of any  security
interest so created shall have no rights to become a Substitute  Partner and the
Partnership  shall have no  obligation  to  recognize  any transfer of ownership
interest, either before or after foreclosure.

                                   ARTICLE XI.
                    DISSOLUTION, LIQUIDATION AND TERMINATION

         11.1  Dissolution  and  Termination.  The  bankruptcy,   insolvency  or
dissolution  of a  Limited  Partner  shall not  dissolve  the  Partnership.  The
Partnership  shall be dissolved  upon the  happening of any one of the following
events:

                  (a) the disposition of all or substantially  all assets of the
         Partnership;

                  (b) the expiration of the fixed term of the Partnership;

                  (c)  the  conduct  of  the  Partnership's   business  becoming
         unlawful;

                  (d) all  Partners  have  agreed in  writing to  terminate  the
         Partnership; or

                  (e) any other event which under the  Mandatory  Provisions  of
         the Partnership Act causes the dissolution of a limited partnership.

         11.2     Winding-up and Termination.

                  (a) Unless otherwise provided herein,  upon the dissolution of
         the Partnership no further business shall be conducted, except for such
         action as shall be necessary  for the  winding-up of the affairs of the
         Partnership  and the  distribution  of its assets to the  Partners  and
         Assignees  pursuant to the provisions of this Section 11.2. The General
         Partner shall act as liquidating  trustee,  or the General  Partner may
         appoint in  writing  one or more  other  Persons to act as  liquidating
         trustee  or  trustees,  and such  trustee or  trustees  shall have full
         authority to wind up the affairs of the  Partnership  and to make final
         distribution as provided herein.

                  (b)  Upon  dissolution  of the  Partnership,  the  liquidating
         trustee or trustees shall sell or distribute in kind all of Partnership
         property  as  determined  in the  sole  discretion  of the  liquidating
         trustee  or  trustees.   The  liquidating  trustee  or  trustees  shall
         ascertain the fair market value by appraisal or other  reasonable means
         of all  Partnership  property not sold, and upon  distribution  of such
         property each  Partner's  capital  account shall be adjusted as if such
         property  had been sold at such fair market  value and gains and losses
         realized  thereby had been allocated to the Partners in accordance with
         Article V hereof.  Subject to any  applicable  provisions of Article V,
         the  liquidating  trustee or trustees  shall apply and  distribute  the
         proceeds of liquidation and remaining  non-cash assets in the following
         order:

                                       31
<PAGE>

                           (i) First,  to the payment of the debts,  obligations
                  and  liabilities  of the  Partnership  (including  all  debts,
                  obligations  and liabilities to the Partners) and the costs of
                  dissolution;

                           (ii) Then to Impact and Eagle, pari passu,  until the
                  amount of their respective unpaid Priority Return is zero; and

                           (iii) Then,  unless otherwise agreed to by all of the
                  Partners, any balance remaining shall be distributed among the
                  Partners in proportion to their  respective  positive  Capital
                  Account balances (after taking into account all adjustments to
                  the Capital  Accounts  for the  Partnership's  taxable year in
                  which liquidation  occurs) pursuant to the timing  requirement
                  set forth in Treasury Regulations  ss.1.704-1(b)(2)(ii)(b)(2).
                  Upon a liquidation within the meaning of Treasury  Regulations
                  ss.1.704-1(b)(2)(ii)(g),  if any Partner has a deficit Capital
                  Account   (after   giving   effect   to   all   contributions,
                  distributions,   allocations   and   other   Capital   Account
                  adjustments for all taxable years, including the year in which
                  the liquidation  occurs), the Partner shall have no obligation
                  to make any  contribution  to the capital of the  Partnership,
                  and the  negative  balance of the  Partner's  Capital  Account
                  shall  not  be  considered  a  debt  of  the  Partner  to  the
                  Partnership  or to any other  Person.  Any  property  which is
                  distributed  in kind shall  reduce the Capital  Account of the
                  distributee by the Agreed Value of such property as determined
                  above.

                  (c)  Notwithstanding  the  foregoing,  if any Partner shall be
         indebted  to the  Partnership,  then  until  payment  in  full  of such
         indebtedness,  regardless of the stated maturity or maturities thereof,
         the  liquidating  trustee  or  trustees  shall  retain  such  Partner's
         distributive  share of Partnership  property and apply such sums to the
         liquidating  of such  indebtedness  and the cost of  operation  of such
         Partnership property during the period of such liquidation.

                  (d) The liquidating trustee or trustees shall comply with this
         Agreement  and  all  requirements  of the  Partnership  Act  and  other
         applicable law pertaining to the winding-up of a limited partnership.

                  (e) The  Partners  shall  look  solely  to the  assets  of the
         Partnership  for the return of their Capital  Contribution,  and if the
         Partnership  property  remaining  after the payment or discharge of the
         debts and  liabilities of the Partnership is insufficient to return its
         Capital Contribution,  it shall have no recourse against any Partner or
         any other Person for that purpose.

         11.3  Statement.  Within a reasonable  time following the completion of
the liquidation of the  Partnership's  business,  the liquidating  trustee shall
supply to each of the Partners or Assignees a statement  audited by  independent
auditors which shall set forth the assets and the liabilities of the Partnership
as of the date of complete  liquidation,  and each  Partner's or Assignee's  pro
rata portion of distributions pursuant to Section 11.2.

                                       32
<PAGE>

         11.4  Termination.  Upon  the  completion  of  the  liquidation  of the
Partnership and the distribution of all Partnership funds, the Partnership shall
terminate and the General Partner (or the liquidating  trustees, as the case may
be) shall execute and record,  and are hereby given the authority to execute and
record,  all documents required to effectuate the dissolution and termination of
the Partnership.

         11.5  Indemnification.  The  liquidating  trustee or trustees (and each
Representative,  contractor, adviser or appraiser thereof) shall be indemnified,
released  and held  harmless by the  Partnership  from and against all  demands,
liabilities  and causes of action.  Costs and  damages of any nature  whatsoever
arising out of or incidental to the taking of any action  authorized  under this
Article XI whether  or not  arising  out of the  negligence  of the  liquidating
trustee or trustees  (or any  Representative,  contractor,  adviser or appraiser
thereof);  provided,  however,  that the liquidating trustee or trustees (or any
Representative,  contractor, adviser or appraiser thereof) shall not be entitled
to indemnification  hereunder where the claim or issue arose out of (i) a matter
entirely  unrelated  to  acting  under  the  provisions  hereof,  (ii) the gross
negligence,  bad faith or  willful  misconduct  of the  liquidating  trustee  or
trustees  (or any  Representative,  contractor,  adviser  or  appraiser  thereof
seeking  indemnity  hereunder),  or (iii) the willful and repeated breach by the
liquidating  trustee or  trustees  of  obligations  under this  Article  XI. The
indemnification  rights herein contained shall be cumulative of, and in addition
to, any and all other rights,  remedies and  resources to which the  liquidating
trustee or trustees  (or any  Representative,  contractor,  adviser or appraiser
thereof) shall be entitled at law or in equity.

                                  ARTICLE XII.
                    LIMITATION OF LIABILITY; INDEMNIFICATION

         12.1 General Partner's  Liability.  Neither the General Partner and its
respective  Affiliates,  nor any of their respective  Representatives,  shall be
liable to the Partnership or any Limited Partner for any loss or damage suffered
by the Partnership or any Limited Partner  resulting from the performance of the
General Partner's duties and responsibilities under this Agreement,  except when
and to the extent that such loss or damage results from the gross  negligence or
willful misconduct of such General Partner or its Affiliates or their respective
Representatives  or from the willful and  repeated  breach of this  Agreement by
such  General  Partner;  provided  that,  where such loss or damage  arises as a
result of a General  Partner's  performance  or omission in accordance  with the
instructions  of the  Partners  given  specifically  with respect to the precise
manner in which the General  Partner is to perform the specified  task, it shall
be deemed  that such loss or damage  was not the result of gross  negligence  or
willful  misconduct of the General Partner or its Affiliates or their respective
Representatives.

         12.2     Indemnification.

                  (a) Partnership Indemnity.  To the maximum extent permitted by
         law, the  Partnership  shall  indemnify  and hold  harmless the General
         Partner, its respective Affiliates,  and the respective Representatives
         of the foregoing (each, an  "Indemnitee")  from and against any and all
         losses,  claims,  demands,  costs,  damages,  liabilities,   joint  and
         several,   expenses  of  any  nature  (including  attorneys'  fees  and
         disbursements),  judgments,  fines,  settlements,  penalties  and other

                                       33
<PAGE>

         expenses  actually  and  reasonably   incurred  by  the  Indemnitee  in
         connection  with  any and  all  claims,  demands,  actions,  suits,  or
         proceedings, civil, criminal, administrative or investigative, in which
         the  Indemnitee  may be involved,  or threatened  to be involved,  as a
         party or otherwise, by reason of the fact that the Indemnitee is or was
         a General Partner of the Partnership or is or was a Representative of a
         General Partner or any of its Affiliates,  arising out of or incidental
         to the business of the Partnership, provided that (i) the action is not
         based on  willful  and  repeated  breach  of this  Agreement,  (ii) the
         Indemnitee acted in good faith and in a manner he, she or it reasonably
         believed  to be in,  or not  opposed  to,  the  best  interests  of the
         Partnership  and within  the scope of the  Indemnitee's  authority  and
         (iii) with respect to a criminal  action or proceeding,  the Indemnitee
         had no  reasonable  cause to believe  its  conduct  was  unlawful.  The
         termination  of any action,  suit, or  proceeding  by judgment,  order,
         settlement,  conviction,  or  upon a plea  of  nolo  contendre,  or its
         equivalent,  shall  not,  in and of  itself,  create a  presumption  or
         otherwise  constitute  evidence that the  Indemnitee  acted in a manner
         contrary to that specified above.

                  (b)   Advancement  of  Expenses.   Expenses   incurred  by  an
         Indemnitee in defending any claim,  demand,  action, suit or proceeding
         subject to this Section 12.2 (other than a claim  asserted  against any
         Indemnitee  by the  Partnership  or by any one or more of the Partners)
         may,  from time to time,  be advanced by the  Partnership  prior to the
         final  disposition of such claim,  demand,  action,  suit or proceeding
         upon receipt by the  Partnership  of an  undertaking by or on behalf of
         the  Indemnitee  to  repay  such  amount  if  it  shall  ultimately  be
         determined  that  such  Person is not  entitled  to be  indemnified  as
         authorized in this Section 12.2.

                  (c)  Non-Exclusivity.  The  indemnification  provided  by this
         Section  12.2  shall be in  addition  to any other  rights to which the
         Indemnitee may be entitled  under any agreement,  as a matter of law or
         equity, or otherwise, and shall inure to the benefit of the successors,
         assignees,  heirs,  personal  representatives and administrators of the
         Indemnitee.

         12.3 Force  Majeure.  The General  Partner  shall not be liable for any
loss or damage to Partnership property caused by strikes, labor troubles, riots,
fires, tornadoes,  floods, acts of a public enemy,  insurrections,  acts of God,
failure to carry out the provisions  hereof due to provisions of law or rules or
regulations  promulgated by any governmental agency or any demand or requisition
of any  government,  or from any other  cause  beyond the control of the General
Partner.

                                  ARTICLE XIII.
                      EFFECTIVE TIME AND GENERAL PROVISIONS

         13.1  Effective  Time.  This  Agreement  shall be  effective  as of the
Effective Time.

         13.2  Amendments.  This  Agreement  shall not be  amended  without  the
consent of all Partners.

                                       34
<PAGE>

         13.3 Notices. All notices,  offers or other communications  required or
permitted to be given pursuant to this  Agreement  shall be in writing and shall
be delivered in person or sent by certified mail, postage prepaid,  by overnight
courier  or by  facsimile.  Such  notices,  offers  and  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.  All
notices,  offers and communications shall be addressed as follows: (x) if to the
Partnership,  to the General  Partner;  (y) if to a Partner,  to the address set
forth on Exhibit A hereto;  and (z) if to an  Assignee,  to the  address of such
Assignee  given to the General  Partner in  accordance  with the  provisions  of
Article X. Any Partner or Assignee  may change the address to which notice is to
be given to such Partner or Assignee by giving such a notice in writing  stating
such newly designated  address shall be such Partner's or Assignee's address for
purpose of all notices, offers or communications and payments,  distributions or
deliveries required or permitted to be given pursuant to this Agreement.

         13.4 Consents.  No consent or approval given  hereunder by or on behalf
of any Limited Partner shall be effective  unless given in a writing,  signed by
one or more of its Authorized  Representatives  and delivered in accordance with
the provisions of Section 13.3.  The signature of any Authorized  Representative
appearing  on any  consent or  approval  sent by  facsimile  shall be deemed the
original signature of such Authorized Representative.

         13.5  Applicable  Laws.  This  Agreement  is  governed  by and shall be
construed and enforced in accordance with the laws of the State of Texas.

         13.6 Binding  Effect.  This  Agreement  shall be binding upon and shall
inure to the benefit of the Partners,  their heirs,  executors,  administrators,
legal representatives, successors and assigns.

         13.7  Headings.  The  headings  in  this  Agreement  are  intended  for
convenience  and  identification  only,  are in no  way  intended  to  describe,
interpret, define, or limit the scope, extent or intent of this Agreement or any
provision hereof and shall be disregarded in the construction and enforcement of
this Agreement.

         13.8 Violation.  The failure of any party to seek redress for violation
of or to insist upon the strict performance of any covenant or condition of this
Agreement  shall not  prevent a  subsequent  act,  which  would have  originally
constituted a violation,  from having the effect of an original  violation.  The
rights and remedies provided by this Agreement are cumulative and the use of any
one right or remedy by any party  shall not  preclude  or waive its right to use
any or all other remedies. Said rights and remedies are given in addition to any
other  rights or remedies  the parties may have by law,  statute,  ordinance  or
otherwise.

                                       35
<PAGE>

         13.9 Severability.  If and to the extent that any court or governmental
agency of competent  jurisdiction  holds any part or provision of this Agreement
to be invalid or  unenforceable,  the  Partners  shall  agree upon an  equitable
adjustment of the provisions of this Agreement with a view toward  effecting its
purpose.  Such holding shall in no way affect the validity or  effectiveness  of
the other  provisions  of this  Agreement,  which shall remain in full force and
effect.

         13.10  Counterparts.  This  Agreement  or any  amendment  hereto may be
executed  in any number of  counterparts  with the same effect as if all parties
hereto had all signed the same  document.  All  counterparts  shall be construed
together and shall constitute one (1) agreement. This Agreement or any amendment
hereto may, in addition and without implied limitation, be executed by a Limited
Partner  (including  a  Substituted  Limited  Partner) by such  Limited  Partner
executing a power of attorney  satisfactory in scope,  form and substance to the
General  Partner  authorizing  the General  Partner to execute a counterpart  on
behalf of such  Partner,  provided  such power of  attorney  is  accepted by the
General Partner and provided,  further,  that the General Partner  executes this
Agreement or any  amendment  hereto on behalf of such Limited  Partner (any such
execution by the General Partner to evidence  conclusively the acceptance by the
General Partner of such power of attorney).

         13.11 Waiver of Right to Partition. Each Person who now or hereafter is
a party  hereto or who has any  right  herein or  hereunder  irrevocably  waives
during  the  term of the  Partnership  any  right to  maintain  any  action  for
partition with respect to the properties and assets of the Partnership.

         13.12 Special and  Consequential  Damages.  Neither the General Partner
nor  any  Limited  Partner  shall  be  liable  to any  other  Partner  or to the
Partnership  for any  exemplary  or  punitive  damages  or for loss of  profits,
consequential  losses or business  loss,  injury or damage arising in connection
with this Agreement.

                                       36
<PAGE>

         IN WITNESS WHEREOF,  the undersigned have executed this Agreement as of
the date first above written.

                                                 GENERAL PARTNER:
                                                 COAHUILA PIPELINE, L.L.C.

                                                 By:
                                                    ----------------------------
                                                 Name:
                                                      --------------------------
                                                 Title:
                                                       -------------------------

                                                 LIMITED PARTNERS:

                                                 IMPACT INTERNATIONAL, L.L.C.

                                                 By:
                                                    ----------------------------
                                                 Name:
                                                      --------------------------
                                                 Title:
                                                       -------------------------

                                                 TIDELANDS OIL & GAS CORPORATION

                                                 By:
                                                    ----------------------------

                                                 Name:
                                                      --------------------------
                                                 Title:
                                                       -------------------------

                                                 BLACKROCK CAPITAL CORPORATION

                                                 By:
                                                    ----------------------------
                                                 Name: Matthew J. Diedzic, Jr.
                                                 Title: President

                                       37
<PAGE>

                                    EXHIBIT A
                                 UNIT OWNERSHIP

                       Name and Address         Number of Units
                       ----------------         ---------------

                       Coahuila Pipeline              10
                             Impact                  720
                           Tidelands                 250
                           Blackrock                  20THIS STOCK  PURCHASE  WARRANT AND THE SHARES  ISSUABLE  HEREUNDER  HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR THE SECURITIES LAWS
OF ANY STATE, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE  TRANSFERRED WITHOUT AN
EFFECTIVE  REGISTRATION  THEREOF UNDER SUCH ACT AND APPLICALBE  STATE SECURITIES
LAWS OR PURSUANT TO APPLICABLE EXEMPTIONS FROM SUCH LAWS.

                             STOCK PURCHASE WARRANT

         THIS STOCK PURCHASE WARRANT ("Warrant")  CERTIFIES THAT, for the agreed
upon  value of $1.00  and for  other  good and  valuable  consideration,  Impact
International,  L.L.C.,  an Oklahoma  limited  liability  company  ("Impact"  or
"Holder")  is entitled to  purchase  the number of fully paid and  nonassessable
shares (the  "Shares") of common stock  ("Common  Stock") of Tidelands Oil & Gas
Corporation  (the  "Company")  at the  Exercise  Price per Share  (the  "Warrant
Price") as defined  below,  all as set forth herein and as adjusted  pursuant to
Article 2 of this  Warrant,  subject  to the  provisions  and upon the terms and
conditions  set forth in this  Warrant.  This Warrant is issued  pursuant to the
terms of the Purchase and Sale Agreement (the "Purchase Agreement"), dated as of
the date  hereof,  between  the  Company  and  Impact.  The  amount  and kind of
securities  receivable  pursuant to the rights granted  hereunder are subject to
adjustment pursuant to the provisions contained in this Warrant.

         This Warrant is subject to the following provisions:

                                   ARTICLE 1.
                                    EXERCISE
                                    --------

         1.1 Method of Exercise. Holder may exercise this Warrant in whole or in
part at any time and from time to time after the date hereof up to and including
April ____,  2005(the  "Expiration  Date").  Holder may exercise this Warrant by
delivering a duly executed Notice of Exercise in substantially the form attached
as  Appendix 1 to the  principal  office of the  Company.  Holder  shall pay, in
consideration  for exercise of the Warrants an amount equal to the Warrant Price
in effect on the date of such  exercise  multiplied by the number of Shares with
respect to which the Warrant is being exercised payable by certified funds or as
permitted in Section 1.2.

         1.2 Net Issue Exercise.  Notwithstanding  any provisions  herein to the
contrary,  if the Market  Value of one share of Common Stock is greater than the
Warrant  Price  (at the date of  calculation  as set  forth  below),  in lieu of
exercising  this Warrant for cash,  the Holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender  of this Warrant at the  principal  office of the Company
together  with the  properly  endorsed  Notice of  Exercise  and  notice of such
election in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:

                                       1
<PAGE>

                                  X = Y (A - B)
                                      ---------
                                           A

         Where    X        = the net  number of  shares  of  Common  Stock to be
                           issued to the Holder.

                  Y        = the  number of shares of Common  Stock  purchasable
                           under  the  Warrant  or,  if  only a  portion  of the
                           Warrant  is  being  exercised,  the  portion  of  the
                           Warrant   being   canceled   (at  the  date  of  such
                           calculation)

                  A        = the  Market  Value of one  share  of the  Company's
                           Common Stock (at the date of such calculation)

                  B        =  Warrant  Price  (as  adjusted  to the date of such
                           calculation)

         1.3 Share Coverage and Exercise  Price.  The number of Shares for which
this Warrant may be exercised,  subject to adjustment herein, initially shall be
6,830,000,  representing  19% of the issued and outstanding  Common Stock of the
Company on the date  hereof.  The  initial  Warrant  Price shall be equal to the
average of the closing price of the Common Stock on the over the counter market,
averaged over a period of the ten (10)  business days  following the date of the
execution  of this  Warrant;  provided  that for any  date on  which no  trading
occurred, the closing price shall be deemed to be the closing price for the most
recent previous date on which trading  occurred,  and further  provided that the
purchase price shall not exceed $0.35 per share.

         1.4 Market  Value.  The  Market  Value of any  security  shall mean the
average  of the  closing  prices  of such  security's  sales  on all  securities
exchanges on which such  security  may at the time be listed,  or, if there have
been no sales on any such  exchange  on any day,  the average of the highest bid
and lowest asked prices on all such  exchanges at the end of such day, or, if on
any day such security is not so listed,  the average of the  representative  bid
and asked prices quoted in the NASDAQ System as of 4:00 p.m., New York time, or,
if on any day such security is not quoted in the NASDAQ  System,  the average of
the  highest  bid  and  lowest   asked  prices  on  such  day  in  the  domestic
over-the-counter   market  as  reported  by  the  National   Quotation   Bureau,
Incorporated,  or any similar successor organization, in each such case averaged
over a period of 21 days  consisting  of the day as of which  "Market  Value" is
being  determined and the 20 consecutive  business days prior to such day. If at
any time such security is not listed on any securities exchange or quoted in the
NASDAQ System or the  over-the-counter  market,  the "Market  Price" will be the
fair market value thereof determined by an experienced and qualified independent
appraiser, selected by the Company with the approval of the Holder.

         1.5  Delivery of  Certificate  and New Warrant.  Promptly  after Holder
exercises this Warrant, the Company shall deliver to Holder certificates for the
Shares  acquired  and, if this Warrant has not been fully  exercised and has not
expired, a new Warrant representing the Shares not so acquired.

                                       2
<PAGE>

         1.6  Replacement  of  Warrants.   On  receipt  of  evidence  reasonably
satisfactory  to the Company of the loss,  theft,  destruction  or mutilation of
this Warrant and, in the case of loss,  theft or destruction,  on delivery of an
indemnity  agreement  reasonably  satisfactory in form and amount to the Company
or, in the case of mutilation,  on surrender and  cancellation  of this Warrant,
the Company at its expense shall execute and deliver in lieu of this Warrant,  a
new warrant of like tenor.

         1.7 Repurchase on Sale, Merger, or Consolidation of the Company.

                  1.7.1   Acquisition.   For  the   purpose  of  this   Warrant,
"Acquisition"   means  any  sale,  license,  or  other  disposition  of  all  or
substantially  all  of  the  assets  of  the  Company,  or  any  reorganization,
consolidation,  or merger of the  Company  where the  holders  of the  Company's
securities  before  the  transaction  beneficially  own  less  than  50%  of the
outstanding voting securities of the surviving entity after the transaction.

                  1.7.2   Assumption  of  Warrant.   Upon  the  closing  of  any
Acquisition,  the successor entity shall assume the obligations of this Warrant,
and  this  Warrant  shall be  exercisable  for the same  securities,  cash,  and
property  as would be  payable  for the Shares  issuable  upon  exercise  of the
unexercised  portion of this Warrant as if such Shares were  outstanding  on the
record date for the Acquisition and subsequent closing.  The Warrant Price shall
be adjusted accordingly.

                  1.7.3 Purchase Right.  Notwithstanding  the foregoing,  at the
election of Holder,  the Company shall purchase the unexercised  portion of this
Warrant for cash upon the closing of any  Acquisition for an amount equal to (a)
the fair  market  value of any  consideration  that would have been  received by
Holder in  consideration  of the  Shares had Holder  exercised  the  unexercised
portion of this Warrant  immediately  before the record date for determining the
shareholders  entitled to participate in the proceeds of the  Acquisition,  less
(b) the aggregate Warrant Price of the Shares, but in no event less than zero.

         1.8  Reservation of Shares.  The Company shall reserve,  for so long as
any Warrant remains  outstanding,  a number of authorized and unissued shares of
Common Stock  sufficient to provide for the exercise in full of any and all such
Warrants, and the transfer agent for the Common Stock (the "Transfer Agent"), is
hereby irrevocable  authorized and directed at all times until all such Warrants
have been exercised in full or otherwise surrendered for cancellation to reserve
such number of authorized and unissued shares as necessary for such purpose. The
Company  covenants  and agrees that upon exercise of the Warrants and payment of
the Warrant Price therefor, all shares issuable upon such exercise shall be duly
and validly issued, fully paid and non-assessable, not subject to the preemptive
rights of any shareholder,  and free from all taxes, liens,  security interests,
charges, and other encumbrances with respect to the issuance thereof.

                                   ARTICLE 2.
                            ADJUSTMENT TO THE SHARES
                            ------------------------

                                       3
<PAGE>

         2.1 Stock  Dividends,  Splits,  etc.  If the  Company  declares or pays
dividend on its Common Stock (or the Shares if the Shares are  securities  other
than common stock) payable in Common Stock, or other  securities,  or subdivides
the  outstanding  Common Stock into a greater amount of Common Stock,  then upon
exercise of this Warrant, for each Share acquired, Holder shall receive, without
cost to Holder,  the total number and kind of  securities  to which Holder would
have been  entitled  had  Holder  owned the  Shares of record as of the date the
dividend or subdivision occurred.

         2.2    Reclassification,    Exchange   or   Substitution.    Upon   any
reclassification,  exchange,  substitution,  or other  event  that  results in a
change of the number  and/or class of the  securities  issuable upon exercise of
this  Warrant,  Holder  shall be  entitled  to  receive,  upon  exercise of this
Warrant,  the number and kind of securities  and property that Holder would have
received for the Shares if this Warrant had been  exercised  immediately  before
such reclassification,  exchange,  substitution,  or other event. The Company or
its  successor  shall  promptly  issue  to  Holder  a new  Warrant  for such new
securities or other  property.  The new Warrant  shall  provide for  adjustments
which shall be as nearly  equivalent as may be  practicable  to the  adjustments
provided for in this Article 2 including, without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable upon exercise
of the new Warrant.  The provisions of this Section 2.2 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.

         2.3 Adjustments for Combinations,  Etc. If the outstanding Common Stock
is combined or consolidated,  by  reclassification  or otherwise,  into a lesser
number of shares, the Warrant Price shall be proportionately increased.

         2.4 Stock  Issued For Debt.  If,  after the date  hereof,  the  Company
should  issue  any  shares  of  Common  Stock  in  payment  or  satisfaction  of
indebtedness  existing on the date hereof,  the number of shares of Common Stock
issuable  hereunder  shall be  increased  so that the number of shares  issuable
hereunder is equal to nineteen  percent  (19%) of the  outstanding  Common Stock
after giving effect to such issuances,  and the Warrant Price per share shall be
decreased  to an amount  such that the  aggregate  consideration  payable if the
Warrant were fully  exercised  (after giving  effect to the increased  number of
shares) would equal the aggregate consideration which would have been payable if
the Warrant were fully exercised prior to such adjustments.

         2.5 Common Stock Issued at Less Than Warrant Price. If and whenever, on
or after the date of this Warrant,  the Company issues or sells, or is deemed to
have issued or sold,  any shares of its Common  Stock or Options or Warrants for
Shares of Common Stock or rights of conversion for Shares of Common Stock (other
than   Excluded   Stock  and  other  than  as  described  in  Section  2.4)  for
consideration per share less than the Warrant Price in effect  immediately prior
to the time of such issue or sale, then immediately upon such issue or sale, the
Warrant  Price  shall be  reduced to the price  determined  by  multiplying  the
Warrant Price in effect immediately prior to such time by a fraction:

                  (1) the  numerator  of which shall be (x) the number of shares
         of Common  Stock  outstanding  immediately  prior to such issue or sale
         (assuming the exercise of all Options (as defined  below) that are then

                                       4
<PAGE>

         exercisable  and  the  conversion  of all  Convertible  Securities  (as
         defined  below)  that are then  convertible),  plus (y) the  number  of
         shares of Common Stock which the  aggregate  consideration  received by
         the Company for the total number of  additional  shares of Common Stock
         so  issued  or sold  would  purchase  at the  Warrant  Price in  effect
         immediately prior to such issuance; and

                  (2) the  denominator of which shall be the number of shares of
         Common Stock outstanding immediately after such issue or sale (assuming
         the  exercise  of  all  Options  that  are  then  exercisable  and  the
         conversion of all Convertible Securities that are then convertible).

         For  purposes of this  Section 2.4  "Excluded  Stock"  means  shares of
Common Stock (in each case as adjusted for any stock  splits,  stock  dividends,
recapitalizations,  combinations or similar  transactions) issued under existing
stock option plans approved by the shareholders of the Company.

         2.6  No  Impairment.  The  Company  shall  not,  by  amendment  of  its
Certificate of  Incorporation or through a  reorganization,  transfer of assets,
consolidation,  merger,  dissolution,  issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed  under this  Warrant by the  Company,  but
shall at all times in good faith assist in carrying out all of the provisions of
this Article 2 and in taking all such action as may be necessary or  appropriate
to protect Holder's rights under this Article against impairment. If the Company
takes  any  action  affecting  the  Shares or its  Common  Stock  other  than as
described above that adversely  affects Holder's rights under this Warrant,  the
Warrant Price shall be adjusted  downward and the number of Shares issuable upon
exercise  of this  Warrant  shall be  adjusted  upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.

         2.7  Fractional  Shares.  No  fractional  Shares shall be issuable upon
exercise  or  conversion  of the  Warrant  and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any  exercise  or  conversion  of the  Warrant,  the  Company  shall
eliminate such fractional  share interest by paying Holder an amount computed by
multiplying the fractional interest by the fair market value of a full Share.

         2.8 Certificate as to Adjustments.  Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly  compute such  adjustment,  and
furnish Holder with a certificate of its Chief  Financial  Officer setting forth
such adjustment and the facts upon which such  adjustment is based.  The Company
shall,  upon written  request,  furnish  Holder a certificate  setting forth the
Warrant  Price in effect  upon the date  thereof  and the series of  adjustments
leading to such Warrant Price.

         2.9 Certain Events. If any event occurs of the type contemplated by the
provisions of this Article 2 but not expressly  provided for by such  provisions
(including,  without  limitation,  the  granting of stock  appreciation  rights,
phantom stock rights or other rights with equity  features),  then the Company's
board of directors shall make an appropriate  adjustment in the number of Shares
obtainable  upon  exercise of this  Warrant  and in the  Warrant  Price so as to
protect  the  rights  of the  holders  of the  Warrants;  provided  that no such
adjustment  shall  decrease  the  number  of  Shares   obtainable  as  otherwise
determined pursuant to this Section 2.

                                       5
<PAGE>

         2.10  Purchase  Rights.  If at any time the Company  grants,  issues or
sells any rights to purchase stock,  warrants,  securities or other property pro
rata to the record  holders of any class of Stock (the  "Purchase  Rights") then
the Holder of this Warrant  shall be entitled to obtain,  upon the same terms on
which holders of Common stock are to receive such Purchase Rights, the aggregate
Purchase  Rights which such holder  could have  acquired if such holder had held
the  number of Shares of  acquirable  upon  complete  exercise  of this  Warrant
immediately  before the date on which a record is taken for the grant,  issuance
or sale of such Purchase Rights,  or, if no such record is taken, the date as of
which the record  holders of Common  Stock are to be  determined  for the grant,
issue or sale of such Purchase Rights.

                                   ARTICLE 3.
                  REPRESENTATIONS AND COVENANTS OF THE COMPANY
                  --------------------------------------------

         3.1 Representations  and Warranties.  The Company hereby represents and
warrants to the Holder that all Shares  which may be issued upon the exercise of
the purchase right  represented  by this Warrant,  and all  securities,  if any,
issuable upon conversion of the Shares, shall, upon issuance be duly authorized,
validly  issued,  fully  paid  and  nonassessable,  and  free of any  liens  and
encumbrances  except for  restrictions on transfer  provided for herein or under
applicable federal and state securities laws.

         3.2 Notice of Certain  Events.  If the Company  proposes at any time to
(a) declare any dividend or distribution upon its Common Stock, whether in cash,
property,  stock or other securities and whether or not a regular cash dividend;
(b) offer for  subscription  pro rata to the  holders  of any class or series of
stock any additional shares of stock of any class or series or other rights; (c)
effect any  reclassification  or  recapitalization of Common Stock; (d) merge or
consolidate with or into any other  corporation,  or sell,  lease,  license,  or
convey all or substantially all of its assets, or to liquidate, dissolve or wind
up; or (e) offer holders of  registration  rights the opportunity to participate
in an underwritten  public offering of the Company's  securities for cash, then,
in connection  with each such event,  the Company shall give Holder (1) at least
20 days  prior  written  notice of the date on which a record  will be taken for
such dividend,  distribution, or subscription rights (and specifying the date on
which the holders of Common Stock will be entitled  thereto) or for  determining
rights to vote,  if any,  in respect of the  matters  referred to in (c) and (d)
above;  (2) in the case of the matters referred to in (c) and (d) above at least
20 days  prior  written  notice of the date when the same will take  place  (and
specifying  the date on which the  holders of Common  Stock will be  entitled to
exchange their Common Stock for securities or other  property  deliverable  upon
the occurrence of such event;  and (3) in the case of the matter  referred to in
(e)  above,  the same  notice as is given to the  holders  of such  registration
rights.

         3.3 Registration Under Securities Act of 1933, as amended.  The Company
agrees that the Shares shall be entitled to the  registration  rights granted in
the  Registration  Agreement  dated the same date as this Warrant.  In the event
that the  shares are  unable to be  registered  in  response  to a request  made

                                       6
<PAGE>

pursuant to the Registration  Agreement,  the Company shall notify the Holder of
such inability in writing and,  without any further action,  the Expiration Date
of the Warrant  will be extended to the fifth (5th)  anniversary  of the date of
original  issuance  of this  Warrant  (or the  Company  shall  have the right to
repurchase  the Warrant for an amount  equal to the excess of Fair Market  Value
over the Warrant Price,  which right shall be exercisable for a period of thirty
(30) days  following such notice given by the Company in which to give notice of
its intention).

                                   ARTICLE 4.
                                 MISCELLANEOUS.
                                 --------------

         4.1 Term; Notice of Expiration.  This Warrant is exercisable,  in whole
or in part, at any time and from time to time on or before the  Expiration  Date
set forth above.  The Company shall give Holder written notice of Holder's right
to exercise  this Warrant not more than 90 days and not less than 30 days before
the Expiration  Date. If the notice is not so given,  the Expiration  Date shall
automatically  be extended until 30 days after the date the Company delivers the
notice to Holder.

         4.2 Legends.  This Warrant and the Shares (and the securities issuable,
directly  or  indirectly,  upon  conversion  of the  Shares,  if any)  shall  be
imprinted with a legend in substantially the following form:

          THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
          OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
          TRANSFERRED  WITHOUT AN EFFECTIVE  REGISTRATION  THEREOF UNDER
          SUCH ACT OR  PURSUANT  TO RULE 144 OR AN  OPINION  OF  COUNSEL
          REASONABLY  SATISFACTORY  TO THE  CORPORATION  AND ITS COUNSEL
          THAT SUCH REGISTRATION IS NOT REQUIRED.

         4.3 Compliance with  Securities Laws on Transfer.  This Warrant and the
Shares  issuable  upon  exercise of this Warrant (and the  securities  issuable,
directly  or  indirectly,  upon  conversion  of the  Shares,  if any) may not be
transferred or assigned in whole or in part without  compliance  with applicable
federal  and  state  securities  laws  by  the  transferor  and  the  transferee
(including,  without  limitation,  the  delivery  of  investment  representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company).

         4.4  Transfer  Procedure.  Subject to the  provisions  of Section  4.3,
Holder may  transfer  all or part of this  Warrant or the Shares  issuable  upon
exercise of this Warrant (or the  securities  issuable,  directly or indirectly,
upon conversion of the Shares, if any).

         4.5 Notices.  All notices and other  communications from the Company to
the Holder,  or vice versa,  shall be deemed  delivered and effective when given
personally  or mailed by  first-class  registered  or  certified  mail,  postage
prepaid,  at such address set forth in the LOI or as may have been  furnished to
the Company or the Holder, as the case may be, in writing by the Company or such
holder from time to time.

                                       7
<PAGE>

         4.6 Waiver.  This  Warrant and any term hereof may be changed,  waived,
discharged  or terminated  only by an instrument in writing  signed by the party
against which  enforcement of such change,  waiver,  discharge or termination is
sought.

         4.7  Attorneys  Fees.  In the event of any dispute  between the parties
concerning  the terms and  provisions of this Warrant,  the party  prevailing in
such  dispute  shall be  entitled  to  collect  from the  other  party all costs
incurred in such dispute, including reasonable attorney's fees.

         4.8  Governing  Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Oklahoma,  without giving effect to its
principles regarding conflicts of law.

         DATED  April _____, 2003.

                                           "COMPANY"

                                           TIDELANDS OIL & GAS CORPORATION

                                           By:__________________________________
                                                    NAME:_______________________
                                                    TITLE:______________________

                                       8
<PAGE>

                                   APPENDIX 1

                               NOTICE OF EXERCISE

         1. The undersigned hereby elects to purchase ____________ shares of the
Common/Preferred  Series  _________  [Strike one] Stock of  TIDELANDS  OIL & GAS
CORPORATION. pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price of such shares in full.

         1. The undersigned  hereby elects to convert the attached  Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is  exercised  with  respect to  ________________  of the Shares  covered by the
Warrant.

         2. Please issue a certificate or certificates  representing said shares
in the name of the undersigned or in such other name as is specified below:

                  ___________________________________
                  (Name)

                  ___________________________________

                  ___________________________________
                  (Address)

         3. The undersigned represents it is acquiring the shares solely for its
own  account and not as a nominee for any other party and not with a view toward
the  resale  or  distribution  thereof  except  in  compliance  with  applicable
securities laws.

                                             ___________________________________
                                             (Signature)

___________________________________
(Date)

                                       9
<PAGE>

                                   APPENDIX 2

                     NOTICE THAT WARRANT IS ABOUT TO EXPIRE

                            _________________, _______

(Name of Holder)

(Address of Holder)

Attn:  Chief Financial Officer

Dear ____________________:

         This is to advise you that the Warrant  issued to you  described  below
will expire on _______________________, 20____.

         Issuer:

         Issue Date:

         Class of Security Issuable:

         Exercise Price per Share:

         Number of Shares Issuable:

         Procedure for Exercise:

         Please  contact  [name of  contact  person at (phone  number)  with any
questions  you may have  concerning  exercise of the Warrant.  This is your only
notice of pending expiration.

                                         _______________________________________
                                         (Name of Issuer)

                                         By:____________________________________

                                         Its:___________________________________

                                       10

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