NON-COMPETITION AGREEMENT OF TIDELANDS OIL & GAS CORPORATION
EXHIBIT
10.5
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:
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1.
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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:
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a.
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“Competition”
means the sale, marketing, distribution or transportation of natural
gas.
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b.
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“Specified
Geographical Area” means a fifty (50) mile radius of Piedras Negras,
Coahuila, Mexico.
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c.
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“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.
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2.
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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.
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3.
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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.
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4.
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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.
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5.
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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.
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6.
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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.
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7.
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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.
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8.
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Miscellaneous.
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a.
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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.
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b.
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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.
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c.
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d.
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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.
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e.
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Modification. No
amendment hereof shall be effective unless contained in a written
instrument signed by the parties
hereto.
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f.
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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.
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g.
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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:
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If to
Reef:
Tidelands
Oil & Gas Corporation
0000 X.
Xxxxxxx, Xxxx. 0
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxxx Xxxxx
Facsimile:
(000) 000-0000
With a
copy, which will not constitute notice, to:
Xxxxxxxxxxx
& Price, LLP
000
Xxxxxxx Xxxxxx, Xxxxx 000
Xxx
Xxxxxxx, XX 00000
Attention: Xxxxx
X. Xxxxxxx
Facsimile:
(000) 000-0000
If to
WTG:
West
Texas Gas, Inc.
000 Xxxxx
Xxxxxxxx
Xxxxxxx,
XX 00000
Attention:
X. X. Xxxxx
Facsimile:
(000) 000-0000
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h.
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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.
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EXECUTED
and effective as of the date first above written:
WEST
TEXAS GAS,
INC. TIDELANDS
OIL & GAS CORPORATION
By: /s/ X.X.
Xxxxx By:
/s/ Xxxxx X.
Xxxxx
Name:
X.X.
Xxxxx
Name: Xxxxx X. Xxxxx
Title: President
Title: President and Chief Executive Officer
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