Document:

ex10-4.htm

    EXHIBIT
10.4

    

    RELEASE OF
LIEN

    

    

    STATE OF
TEXAS                                             
§

    §                      KNOW
ALL MEN BY THESE PRESENTS:

    COUNTY OF
MAVERICK                                  §

    

    

    That the
undersigned, IMPACT INTERNATIONAL, L.L.C., an Oklahoma limited liability company
(“Lender”), and
RAMIIILAJ, a Limited Partnership, a Texas limited partnership, the legal and
equitable owners and holders of the following described promissory note,
guaranty, and lien:

    

    (i)           that
certain Promissory Note, and any renewals, extensions, and modifications
thereof, in the original principal amount of Six Million Five Hundred
Twenty-Three Thousand Seven Hundred Seventy-Three and 30/100 Dollars
($6,523,773.30), dated May 25, 2004, executed by Tidelands Oil & Gas
Corporation, a Nevada corporation (“Tidelands”), payable
to the order of Lender (the “Note”),

    

    (ii)           that
certain Guaranty of Reef Ventures, L.P., a Texas limited partnership (“Reef”), in favor of
Lender, dated May 25, 2004 (the “Guaranty”);
and

    

    (iii)          that
certain Deed of Trust, Mortgage, Security Agreement, Financing Statement and
Assignment between Reef and Lender,, dated effective May 25, 2004, recorded in
Volume 809, Pages 195-219 of the Official Public Records of Maverick County,
Texas (the “Deed of
Trust”);

    

    said Note
and Guaranty being secured by the above-described Deed of Trust lien against the
property more particularly described therein (collectively, the “Property”).

    

    For full
and valuable consideration to the undersigned, the receipt of which is hereby
acknowledged, the undersigned have released and discharged, and by these
presents hereby release and discharge, the Property from all liens held by the
undersigned securing the Note and Guaranty.

    

    The
undersigned expressly release any and all rights that the undersigned may now or
hereafter have to establish or enforce said lien or liens as security for the
payment of the Note, the Guaranty, and any other or future
indebtedness.

    

    EXECUTED
this 25th day of March, 2008.

    

    

    IMPACT INTERNATIONAL,
L.L.C.

    

    By:      /s/ James C. Brewer
III                        

    Name: James C. Brewer
III                                                      

    Title:   Manager                                           

     

    THE STATE OF OKLAHOMA                                §

    COUNTY OF
OKLAHOME                                      §

    

    This
instrument was acknowledged before me this 24th day of March, 2008,
by James C. Brewer
III, as Manager of IMPACT
INTERNATIONAL, L.L.C., on behalf of said limited liability company.

    

    /s/ Shelly
Martin                        

    Notary
Public

     

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    RAMIIILAJ,
a Limited Partnership

    

    By:      Hefner
Investment Company, its general partner

    

    By:       /s/ James C. Brewer
III                           

    Name:  James C. Brewer
III                                                      

    Title:    Vice
President                                                      

     

    

    

    THE STATE OF OKLAHOMA               §

    COUNTY OF
OKLAHOME                     §

    

    This
instrument was acknowledged before me this 24th day of March, 2008,
by James C. Brewer
III, as Vice
President of Hefner Investment Company, a Texas corporation, general
partner of RAMIIILAJ, a Limited Partnership, a Texas limited partnership, on
behalf of such corporation and such limited partnership.

    

    

    /s/ Shelly
Martin                       

    Notary
Public

    

    

    AFTER
RECORDING PLEASE RETURN TO:

    

    David J.
Cibrian

    Strasburger
& Price, LLP

    300
Convent Street, Suite 900

    San
Antonio, Texas 78205

     

     

     

     

     

    
      
        
        

      

      
        30ex10-5.htm

    

    EXHIBIT
10.5

    

    NON-COMPETITION
AGREEMENT

    OF TIDELANDS OIL & GAS
CORPORATION

    

    This
Non-competition Agreement (“Non-competition Agreement”) dated March 25, 2008, is
between West Texas Gas, Inc., a Texas corporation (“WTG”), and Tidelands Oil
& Gas Corporation, a Nevada corporation (“Tidelands”).

    

    RECITALS

    

    A. WTG and
Reef Ventures, L.P., a Texas limited partnership (“Reef”), have entered into a
Purchase and Sale Agreement dated March 25, 2008 (the “PSA”).  Terms
with their initial letter capitalized and not otherwise defined herein have the
meanings given them in the PSA.

    

    B. Tidelands,
together with its Affiliates (as defined below), own 98% of Reef.

    

    C. In
connection with consummation of the transactions contemplated by the PSA, WTG
and Tidelands have agreed to enter into this Non-competition
Agreement.

    

    For and
in consideration of the premises and mutual covenants contained herein and
intending to be legally bound hereby, WTG and Tidelands agree as
follows:

    

    
      	
              1.  

            	
              Non-compete
      Covenants. As an inducement for WTG to execute the PSA and all
      documents executed pursuant thereto with Reef, and in consideration of
      consummation of the purchase and the other transactions contemplated by
      the PSA, Tidelands agrees that for a period of five years after the date
      of this Non-competition Agreement, it will not: (i) directly or
      indirectly, as an owner, partner, officer, director or shareholder or in
      any other capacity whatsoever, or through any Affiliate, engage in any
      activity that is in Competition (as defined below) in any manner
      whatsoever with the business of WTG in the Specified Geographical Area (as
      defined below); or (ii) derive any benefits whatever from such Competition
      in the Specified Geographical Area. Tidelands further agrees that neither
      it nor any Affiliate of it will render assistance or advice to any person,
      firm or enterprise which is so engaged. For purposes of this
      paragraph:

            

    

    

    
      	
              a.  

            	
              “Competition”
      means the sale, marketing, distribution or transportation of natural
      gas.

            

    

     

    
      	
              b.  

            	
              “Specified
      Geographical Area” means a fifty (50) mile radius of Piedras Negras,
      Coahuila, Mexico.

            

    

     

    
      	
              c.  

            	
              “Affiliate”
      means and includes any entity that, directly or indirectly, through one or
      more intermediaries, is owned or controlled by Tidelands. Control means
      the possession, direct or indirect, of the power to direct or cause the
      direction of the management and policies of such entity, whether through
      the ownership of voting securities, by contract or
    otherwise.

            

    

     

    
      	
              2.  

            	
              Exception to
      Non-compete Covenants.  Tidelands will not be engaging in
      Competition by the mere legal or beneficial ownership of not more than 5%
      of any class of stock or other securities which are publicly traded on a
      national securities exchange or in a recognized over-the-counter
      market.

            

    

    

    
      	
              3.  

            	
              Soliciting
      Prohibited.  Tidelands further agrees not solicit,
      divert, or attempt to solicit or divert any of the customers served by the
      assets transferred under the PSA, whether directly or indirectly or
      through any person, partnership, corporation or other entity as described
      in Section 1.

            

    

    

    
      	
              4.  

            	
              Customers.  Tidelands
      agrees it will not impede WTG’s efforts to retain existing customers or
      obtain potential customers who are physically and economically capable of
      receiving gas deliveries directly from the assets conveyed to WTG under
      the PSA.

            

    

    

    
      	
              5.  

            	
              Injunctive
      Relief.  WTG and Tidelands acknowledge and agree that WTG
      will be irreparably damaged if the provisions of this Non-competition
      Agreement are not specifically enforced.  Accordingly, WTG will
      be entitled to an injunction restraining any violation of this
      Non-competition Agreement by Tidelands or its Affiliates, without any bond
      or other security being required, or any other appropriate decree of
      specific performance.  Such remedies will not be exclusive and
      will be in addition to any other remedy that WTG may have at law or in
      equity.

            

    

     

     

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    
 

    
      	
              6.  

            	
              Legal
      Construction.  If any court of competent jurisdiction
      should determine that any term or terms of the covenants of Tidelands in
      this Non-competition Agreement are too broad in terms of time, geographic
      area, lines of commerce or otherwise, such court shall modify and revise
      any such term or terms so that they comply with applicable law. If any one
      or more of the provisions contained in this Non-competition Agreement is,
      for any reason, held to be invalid, illegal or unenforceable in any
      respect, any provision will be fully severable, such invalidity,
      illegality or unenforceability will not affect any other provision hereof,
      and this Non-competition Agreement will be construed and enforced as if
      such invalid, illegal or unenforceable provision had never been contained
      herein, and the remaining provisions of this Non-competition Agreement
      will remain in full force and effect and will not be affected by the
      illegal, invalid or unenforceable provision or by its severance from this
      Non-competition Agreement.  Furthermore, in lieu of such
      illegal, invalid or unenforceable provision, there will be added
      automatically as a part of this Non-competition Agreement, a provision as
      similar in terms to such illegal, invalid or unenforceable provision as
      may be possible and be valid and
enforceable.

            

    

    

    
      	
              7.  

            	
              Disputes –
      Litigation. All disputes in any way relating to, arising under,
      connected with, or incident to, this Non-competition Agreement, and over
      which the federal courts have subject matter jurisdiction, must be
      litigated, if at all, exclusively in the United States District Court for
      the Western District of Texas, Midland-Odessa Division, and, if necessary,
      the corresponding appellate courts.  All disputes in any way
      relating to, arising under, connected with, or incident to this
      Non-Competition Agreement, and over which federal courts do not have
      subject matter jurisdiction, must be litigated, if at all, exclusively in
      the courts of the State of Texas, in Midland County, and, if necessary,
      the corresponding appellate courts.

            

    

    

    
      	
              8.  

            	
              Miscellaneous.

            

    

    

    
      	
              a.  

            	
              Assignment.  This
      Non-competition Agreement may not be assigned by either party without the
      prior written consent of the other party, which consent shall not be
      unreasonably withheld.

            

    

     

    
      	
              b.  

            	
              Entire
      Agreement.  This Non-competition Agreement constitutes
      the full and entire understanding and agreement between the parties with
      regard to the subject matter hereof and and supersedes, merges and renders
      void every other prior written and/or oral understanding or agreement
      between the parties hereto related to the subject matter. No party hereto
      has relied on any verbal statement of any other party or their agents,
      employees, or representatives, and each covenants and agrees that this
      Non-competition Agreement and any other written agreements or statements
      form the sole and exclusive basis for the agreements and transactions
      contained herein and contemplated
hereby.

            

    

     

    
      	
              c.  

            	
              Texas Law to
      Apply.  This Non-competition Agreement will be construed
      under and in accordance with the laws of the State of Texas excluding any
      choice of law rules which may direct the application of the laws of
      another jurisdiction.

            

    

     

    
      	
              d.  

            	
              No Delay, Waiver,
      Etc.  No delay on the part of the parties hereto in
      exercising any power or right hereunder will operate as a waiver thereof;
      nor shall any single or partial exercise of any power or right hereunder
      preclude other or further exercise thereof or the exercise of any other
      power or right.

            

    

     

    
      	
              e.  

            	
              Modification.  No
      amendment hereof shall be effective unless contained in a written
      instrument signed by the parties
hereto.

            

    

     

    
      	
              f.  

            	
              Parties
      Bound.  This Non-competition Agreement is binding upon
      and inures to the benefit of the parties hereto and their respective legal
      representatives, successors and assigns, except as otherwise expressly
      provided herein.

            

    

     

    
      	
              g.  

            	
              Notices. Unless
      otherwise provided herein, all notices, requests, instructions and other
      communications required or permitted to be given under this
      Non-competition Agreement by a party to the other party may be delivered
      personally or by nationally recognized overnight courier service or sent
      by mail, at the respective addresses set forth below and will be effective
      (a) in the case of personal delivery, when received; (b) in the case of
      mail, upon the earlier of actual receipt or five business days after
      deposit in the United States Postal Service, first class certified mail,
      postage prepaid, return receipt requested; and (c) in the case of
      nationally-recognized overnight courier service, one business day after
      delivery to such courier service together with all appropriate fees or
      charges and instructions for overnight delivery.  The parties
      may change their respective addresses by written notice to all other
      parties, sent as provided in this Section 8.g.  All
      communications must be in writing and addressed as
  follows:

            

    

     

     

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    If to
Reef:

    Tidelands
Oil & Gas Corporation

    1862 W.
Bitters, Bldg. 1

    San
Antonio, TX 78248

    Attention:
James Smith

    Facsimile:
(210) 764-2809

    

    With a
copy, which will not constitute notice, to:

    

    Strasburger
& Price, LLP

    300
Convent Street, Suite 900

    San
Antonio, TX 78205

    Attention:  David
J. Cibrian

    Facsimile:
(210) 250-6100

    

     

    If to
WTG:

    West
Texas Gas, Inc.

    211 North
Colorado

    Midland,
TX 79701

    Attention:
J. L. Davis

    Facsimile:
(432) 682-4024

    

     

    
      	
              h.  

            	
              Counterparts.  This
      Non-competition Agreement may be executed in any number of counterparts,
      each of which will be an original, but all of which together will
      constitute one instrument. This Non-competition Agreement may be executed
      by facsimile or other electronic signatures, which such signatures are
      hereby deemed to constitute valid, legally binding, signatures to such
      documents.

            

    

     

    EXECUTED
and effective as of the date first above written:

    

    WEST
TEXAS GAS,
INC.                                               TIDELANDS
OIL & GAS CORPORATION

    

    By: /s/ J.L.
Davis                                                                By:
/s/ James B.
Smith                         

     

    Name:
J.L.
Davis                                                                
Name: James B. Smith

     

    Title:  President                                                                 
Title: President and Chief Executive Officer

     

    

    
      
        
        

      

      
        33

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