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Edgar Filing: TIDELANDS OIL & GAS CORP/WA - Form 10-K - page 79 / 83

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Edgar Filing: TIDELANDS OIL & GAS CORP/WA - Form 10-K

and owing

Northern by Sheerin and ZG.

Northern also claims that it is

entitled

to

pipeline

that

foreclosure of was the subject

a lien

on the gas

of the

promissory

gathering system notes in question.

and

On March

6, 2006,

against

Northern

Tidelands won a and the court has

summary

judgment

motion it filed

now

dismissed

Northern's

claims

against Tidelands.

On November 28, 2005,

ZG

Gathering,

Ltd. and ZG Pipeline

Management

("ZG") filed counter-claim

its answer to

Northern's

against

Northern,

and

its

Fifth answer

Amended Petition, its and cross claim against

Tidelands. Sheerin to

ZG

contends Northern

that were

the

promissory

procured

by

notes

given by ZG and

Northern's

fraudulent

misrepresentations and it claims unspecified amounts of damages

Northern.

ZG's

cross

action

against

Tidelands

claims

Tidelands

against entered

into an agreement to purchase the Zavala

Gathering

System from ZG

that,

as part of that

agreement,

$3,700,914

Northern

indebtedness

of

Tidelands

ZG,

and

agreed to satisfy to defend, indemnify,

and the and

  • -

    28-

TIDELANDS OIL & GAS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2005, 2004 (RESTATED) AND 2003

NOTE 14 - LITIGATION (CONTINUED)

-------

----------------------

hold

ZG and

Sheerin

harmless

from

such

indebtedness

to pay off a

Sheerin

loan of $300,000,

and to issue 1 million

shares of Tidelands

stock,

of

which

500,000

was

to

be

free-trading

shares.

ZG

claims

that

Tidelands

breached

this

agreement by failing to satisfy

failing

to

pay off the

$300,000

note, failing to

issue the

shares

in

Tidelands,

and by

placing

a

stop

transfer

indebtedness,

failing

to defend

and

indemnify

it from

the Northern such debt, free-trading order on the

restricted performance

stock of the

that was

issued

by

agreement,

recovery

Tidelands.

ZG seek

of

an

unspecified

s

specific amount of

damages, and its attorney's fees.

Much of the

discovery

has

been

investigation,

and

discovery

t

o

completed

at this

date,

Tidelands

time. appears

number of

potential

defenses to the claims of Sheerin

and

Based on to have a Northern.

Tidelands int of the issues of this kind Tidelands' li

ends to aggressivel

in this prevent

case and t

a

more

de

ability

exposure.

y defend these lawsuits. The he inherent uncertainties in

finitive

evaluation

of

the

complexity litigation extent of

During April against Sont subsidiary of developers a use fees as a Distribution claim made by for the curre three actions itself. Liti early stages, determined at

and May, 2005, thre erra Energy Corp the Company. Two gainst Sonterra for result of their Company on Novembe a builder that Son nt use of certain p filed are without gation regarding therefore, potenti this time.

e separate oration ( of the acti

legal actions were initiated

Sonterra),

a

wholly-owned

ons

concern

claims made by

their fail

ure to

asset pu

rchase

pay rent and

easement

from

Oneok

Propane

r 1, 2004.

The

third

action

involves

a

terra

does

roperty.

T

not have a proper he Company believes

easement that the

merit and these three al financia

intend

to

vigorously

defend

actions are still in their l impacts, if any, cannot be

In accordance "Accounting f

that

there

with Statement of

or is

Contingencies,"

a

remote

po

Financial

Accounting

Standards No. 5,

management has

reached the conclusion

ssibility

that

any

or

all

of

the

79

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