Exhibit 10.5
EXHIBIT D
to Subscription Agreement
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REGISTRATION RIGHTS AGREEMENT
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AGREEMENT dated as of November 18, 2004, between MERCATOR MOMENTUM
FUND, L.P., MERCATOR MOMENTUM FUND III, L.P, MONARCH POINTE FUND, LTD.
(collectively, the "Funds") and MERCATOR ADVISORY GROUP, LLC ("MAG") (the Funds
and MAG are referred to individually as a "Holder" and collectively as the
"Holders"), and Tidelands Oil & Gas Corporation, a Nevada corporation (the
"Company").
WHEREAS, the Funds have purchased, for an aggregate of $5,000,000,
Convertible Debentures (the "Debentures") from the Company, and have the right
to cause their Debentures to be converted into shares of Common Stock, $.001 par
value (the "Common Stock"), of the Company, pursuant to the conversion formula
set forth in its Debenture;
WHEREAS, each Fund and MAG have acquired Warrants (together, the
"Warrants") from the Company, pursuant to which the Holders have the right to
purchase in the aggregate up to 6,578,948 shares of the Common Stock through the
exercise of the Warrants;
WHEREAS, the Company desires to grant to the Holders the registration
rights set forth herein with respect to the shares of Common Stock issuable upon
the conversion of the Debentures and the exercise of the Warrants.
NOW, THEREFORE, the parties hereto mutually agree as follows:
1. Registrable Securities. As used herein the terms "Registrable
Security" means each of the shares of Common Stock (i) issued upon the
conversion of the Debentures (the "Conversion Shares") or (ii) upon exercise of
the Warrants (the "Warrant Shares"), provided, however, that with respect to any
particular Registrable Security, such security shall cease to be a Registrable
Security when, as of the date of determination that (a) it has been effectively
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and disposed of pursuant thereto, or (b) registration under the Securities Act
is no longer required for the immediate public distribution of such security.
The term "Registrable Securities" means any and/or all of the securities falling
within the foregoing definition of a "Registrable Security." In the event of any
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be made in
the definition of "Registrable Security" as is appropriate in order to prevent
any dilution or enlargement of the rights granted pursuant to this Section 1.
2. Registration.
(a) The Company shall file a registration statement (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") within thirty (30) days after the date of this Agreement in order to
register the resale of the Registrable Securities under the Securities Act. Once
effective, the Company shall maintain the effectiveness of the Registration
Statement until the earlier of (i) the date that all of the Registrable
Securities have been sold, or (ii) the date that the Company receives an opinion
of counsel to the Company that all of the Registrable Securities may be freely
traded without registration under the Securities Act, under Rule 144 promulgated
under the Securities Act or otherwise.
(b) The Company will initially include in the Registration
Statement as Registrable Securities Seventeen Million Six Hundred Ninety
Thousand Fifty-Nine (17,690,059) shares of Common Stock, being the maximum
number of shares of Common Stock issuable by the Company upon conversion of the
Debentures and exercise of the Warrants.
3. Covenants of the Company with Respect to Registration.
The Company covenants and agrees as follows:
(a) The Company shall use best efforts to cause the
Registration Statement to become effective with the SEC as promptly as possible
and in no event more than 90 days after the Registration Statement is filed with
the SEC. If any stop order shall be issued by the SEC in connection therewith,
the Company shall use best efforts to obtain promptly the removal of such order.
Following the effective date of the Registration Statement, the Company shall,
upon the request of any Holder, forthwith supply such reasonable number of
copies of the Registration Statement, preliminary prospectus and prospectus
meeting the requirements of the Securities Act, and any other documents
necessary or incidental to the public offering of the Registrable Securities, as
shall be reasonably requested by the Holder to permit the Holder to make a
public distribution of the Holder's Registrable Securities. The obligations of
the Company hereunder with respect to the Holder's Registrable Securities are
subject to the Holder's furnishing to the Company such appropriate information
concerning the Holder, the Holder's Registrable Securities and the terms of the
Holder's offering of such Registrable Securities as the Company may reasonably
request in writing.
(b) The Company shall pay all costs, fees and expenses in
connection with the Registration Statement filed pursuant to Section 2 hereof
including, without limitation, the Company's legal and accounting fees, printing
expenses, and blue sky fees and expenses; provided, however, that each Holder
shall be solely responsible for the fees of any counsel retained by the Holder
in connection with such registration and any transfer taxes or underwriting
discounts, commissions or fees applicable to the Registrable Securities sold by
the Holder pursuant thereto.
(c) The Company will take all actions which may be required to
qualify or register the Registrable Securities included in the Registration
Statement for the offer and sale under the securities or blue sky laws of such
states as are reasonably requested by each Holder of such securities, provided
that the Company shall not be obligated to execute or file any general consent
to service of process or to qualify as a foreign corporation to do business
under the laws of any such jurisdiction.
4. Additional Terms.
(a) The Company shall indemnify and hold harmless the Holders
and each underwriter, within the meaning of the Securities Act, who may purchase
from or sell for any Holder, any Registrable Securities, from and against any
and all losses, claims, damages and liabilities caused by any untrue statement
of a material fact contained in the Registration Statement, any other
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registration statement filed by the Company under the Securities Act with
respect to the registration of the Registrable Securities, any post-effective
amendment to such registration statements, or any prospectus included therein or
caused by any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission based upon information furnished or required to be
furnished in writing to the Company by the Holders or underwriter expressly for
use therein, which indemnification shall include each person, if any, who
controls any Holder or underwriter within the meaning of the Securities Act and
each officer, director, employee and agent of each Holder and underwriter;
provided, however, that the indemnification in this Section 4(a) with respect to
any prospectus shall not inure to the benefit of any Holder or underwriter (or
to the benefit of any person controlling any Holder or underwriter) on account
of any such loss, claim, damage or liability arising from the sale of
Registrable Securities by the Holder or underwriter, if a copy of a subsequent
prospectus correcting the untrue statement or omission in such earlier
prospectus was provided to such Holder or underwriter by the Company prior to
the subject sale and the subsequent prospectus was not delivered or sent by the
Holder or underwriter to the purchaser prior to such sale and provided further,
that the Company shall not be obligated to so indemnify any Holder or any such
underwriter or other person referred to above unless the Holder or underwriter
or other person, as the case may be, shall at the same time indemnify the
Company, its directors, each officer signing the Registration Statement and each
person, if any, who controls the Company within the meaning of the Securities
Act, from and against any and all losses, claims, damages and liabilities caused
by any untrue statement of a material fact contained in the Registration
Statement, any registration statement or any prospectus required to be filed or
furnished by reason of this Agreement or caused by any omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission based upon
information furnished in writing to the Company by the Holder or underwriter
expressly for use therein.
(b) If for any reason the indemnification provided for in the
preceding section is held by a court of competent jurisdiction to be unavailable
to an indemnified party with respect to any loss, claim, damage, liability or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect the relative fault
of the indemnified party and the indemnifying party, as well as any other
relevant equitable considerations.
(c) Neither the filing of a Registration Statement by the
Company pursuant to this Agreement nor the making of any request for
prospectuses by the Holder shall impose upon any Holder any obligation to sell
the Holder's Registrable Securities.
(d) Each Holder, upon receipt of notice from the Company that
an event has occurred which requires a Post-Effective Amendment to the
Registration Statement or a supplement to the prospectus included therein, shall
promptly discontinue the sale of Registrable Securities until the Holder
receives a copy of a supplemented or amended prospectus from the Company, which
the Company shall provide as soon as practicable after such notice.
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(e) If the Company fails to keep the Registration Statement
referred to above continuously effective during the requisite period, then the
Company shall, promptly upon the request of any Holder, use best efforts to
update the Registration Statement or file a new registration statement covering
the Registrable Securities remaining unsold, subject to the terms and provisions
hereof.
(f) Each Holder agrees to provide the Company with any
information or undertakings reasonably requested by the Company in order for the
Company to include any appropriate information concerning the Holder in the
Registration Statement or in order to promote compliance by the Company or the
Holder with the Securities Act.
(g) The Company agrees that it shall cause each of its
directors, officers and shareholders owning ten percent (10%) or more of the
Company's outstanding Common Stock to refrain from selling any shares of the
Company's Common Stock, except under Rule 144, until the Registration Statement
has been declared effective.
(h) Each Holder, on behalf of itself and its affiliates,
hereby covenants and agrees not to, directly or indirectly, offer to "short
sell", contract to "short sell" or otherwise "short sell" any securities of the
Company, including, without limitation, shares of Common Stock that will be
received as a result of the conversion of the Debentures or the exercise of the
Warrants.
5. Governing Law. The Registrable Securities will be, if and when
issued, delivered in California. This Agreement shall be deemed to have been
made and delivered in the State of California and shall be governed as to
validity, interpretation, construction, effect and in all other respects by the
internal substantive laws of the State of California, without giving effect to
the choice of law rules thereof.
6. Amendment. This Agreement may only be amended by a written
instrument executed by the Company and the Holders.
7. Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
8. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
9. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed duly given when delivered by
hand or mailed by registered or certified mail, postage prepaid, return receipt
requested, as follows:
If to the Holders, Mercator Advisory Group, LLC
Mercator Momentum Fund, L.P.
Mercator Momentum Fund III, L.P.
Monarch Pointe Fund, Ltd.
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Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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With a copy to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Hampton LLP
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Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
If to the Company, Tidelands Oil & Gas Corporation
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Phone ____________
Fax ▇▇▇-▇▇▇-▇▇▇▇
Attention: _________________
With a copy to ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: __________________
10. Binding Effect; Benefits. Any Holder may assign its rights
hereunder. This Agreement shall inure to the benefit of, and be binding upon,
the parties hereto and their respective heirs, legal representatives, successors
and assigns. Nothing herein contained, express or implied, is intended to confer
upon any person other than the parties hereto and their respective heirs, legal
representatives and successors, any rights or remedies under or by reason of
this Agreement.
11. Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
12. Severability. Any provision of this Agreement which is held by a
court of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
13. Jurisdiction. Each of the parties irrevocably agrees that any and
all suits or proceedings based on or arising under this Agreement may be brought
only in and shall be resolved in the federal or state courts located in the City
of Los Angeles, California and consents to the jurisdiction of such courts for
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such purpose. Each of the parties irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding in any such
court. Each of the parties further agrees that service of process upon such
party mailed by first class mail to the address set forth in Section 9 shall be
deemed in every respect effective service of process upon such party in any such
suit or proceeding. Nothing herein shall affect the right of either party to
serve process in any other manner permitted by law. Each of the parties agrees
that a final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such judgment
or in any other lawful manner.
14. Attorneys' Fees and Disbursements. If any action at law or in
equity is necessary to enforce or interpret the terms of this Agreement, the
prevailing party or parties shall be entitled to receive from the other party or
parties reasonable attorneys' fees and disbursements in addition to any other
relief to which the prevailing party or parties may be entitled.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto as of the date first above written.
TIDELANDS OIL & GAS CORPORATION
By:_______________________________
Name:_____________________________
Its: President
HOLDERS:
MERCATOR MOMENTUM FUND, L.P.
BY: MERCATOR ADVISORY GROUP, LLC,
GENERAL PARTNER
By:_______________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: Managing Member
MERCATOR MOMENTUM FUND III, L.P.
BY MERCATOR ADVISORY GROUP, LLC
GENERAL PARTNER
By:_______________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: Managing Member
MONARCH POINTE FUND, LTD.
By:_______________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: President
MERCATOR ADVISORY GROUP, LLC
By:_______________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: Managing Member