INDEPENDENT CONSULTING AGREEMENT
This
Independent Consulting Agreement (this “
Agreement ”) is effective the 28 th day
of September, 2007 (“Effective Date”), between
Tidelands Oil & Gas Corporation, a corporation formed
under the laws of the State of Nevada (“
Consultant ”), and Frontera Pipeline, LLC., a
limited liability company formed under the laws of the State
of Delaware (the “ Company ”).
WHEREAS,
the Company is engaged in the development and construction of
an integrated pipeline project traversing the United States of
America and Mexico border and the construction of a related
storage facility in Mexico (the “ Project
”);
WHEREAS,
the Consultant has the experience to advise and assist the
Company and its Affiliates in the development and construction
of the Project; and
WHEREAS,
For purposes of this Agreement, the
term “ Affiliate ” shall mean with respect
to the Company any entity that directly or indirectly,
through one or more intermediaries, controls, is controlled
by, or is under common control with, the
Company.
NOW,
THEREFORE, in consideration of the mutual covenants and
obligations set forth in this Agreement, and of other good and
valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto, intending legally to be
bound, hereby agree as follows:
1.
Performance Obligations and Scope of Services .
1.1
Scope of Services . Consultant agrees to provide the
services below (the “Services”) on an independent
contractor basis. The Services shall not be
subcontracted or assigned out by Consultant without prior written
approval from the Company. Consultant shall comply with
all applicable federal state and local laws, codes and regulations
in effect and use its best efforts in the performance of the
Services. The Services shall be as
follows:
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(i)
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To
provide advice and counsel to the Company and its subsidiaries
pertaining to local customs and business conditions which would
affect the Project.
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(ii)
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To
assist in the Company’s development, ownership and operation
of the Project.
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(iii)
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To
provide advice and counsel to the Company and its subsidiaries with
respect to communications and relationships with all governmental
entities (including regulatory bodies) having jurisdiction over any
phase of the Project.
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(iv)
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Generally,
to perform all other services that are reasonably inferable from
the services delineated in this Section 1.1
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1.2
Term . Subject to the provisions of Section 2 hereof
(including all sub-parts), the term of this Agreement shall be for
the period September 28, 2007 through September 28, 2009 (the
“ Term ”). Any extension of this
Agreement shall be subject to mutually acceptable terms and
conditions between the parties, and shall be set forth in a
written, separately signed document.
1.3
Designation of Individuals To Perform the Services
. During the Term, Consultant agrees to offer employment
and to make available Julio Bastarrachea on a full time basis, and
Robert W. Dowies, James B. Smith, and any other necessary personnel
of Consultant on an as-needed basis, to provide the Services;
provided that Julio Bastarrachea, Robert W. Dowies and James B.
Smith remain employees of the Consultant. Consultant
agrees to enter into and/or maintain agreements with such
individuals containing covenants that are at least as protective to
the Company as those set forth in Sections 9 and 11 hereto, and to
enforce such agreements at its own expense to the fullest extent
permitted by law. Consultant shall provide copies of all
such agreements to the Company upon its request. This
Agreement is expressly conditioned upon the continuing direct
involvement and participation of Julio Bastarrachea, James B. Smith
and Robert W. Dowies (collectively. the “ Key
Personnel ”) in the rendering of the Services under this
Agreement. In the event of the unavailability,
death or incapacity of any one or two but not all three of Julio
Bastarrachea, James B. Smith and Robert W. Dowies, then the Company
shall have the right to modify this Agreement as set forth in
Section 3.1 or in the event of the unavailability, death or
incapacity of all three Key Personnel, then the Company shall have
the right to terminate this Agreement for Cause (as defined
below).
1.4
Payment for Services . Unless this Agreement is
terminated by the Company as provided herein, the Company agrees to
pay Consultant for its provision of the Services at a rate equal to
Twenty Five Thousand United States Dollars (USD $25,000) per month
during the Term, prorated for any partial
months. Payment shall be made via wire transfer on
the 3rd day of each calendar month for the Services provided for
the previous month. Consultant will issue invoices to
the Company for any expenses reimbursable pursuant to Section 1.5,
incurred in conjunction with the previous month’s
Services. Invoices are due to the Company on or before
the 30th day of each month. The Company will pay
Consultant for the prior month’s reimbursable expenses within
the first ten (10) business days of receipt of the
Consultant’s invoice.
1.5
Reimbursement for Approved Expenses . During the
Term, the Company or its Affiliates shall reimburse Consultant for
properly documented reasonable expenses relating directly to the
Project, including travel, lodging, meals, facsimile, telephone,
translating, administrative or other similar
expenses. Travel and other reimbursable expenses that
individually exceed $1,000 must be approved in writing in advance
by an officer or other person as the Company may
designate. Such reimbursement shall be by invoice
submitted to the Company by the Consultant with all supporting
documents reasonably requested by the Company, and in the manner
and format reasonably requested by the
Company. All other expenses (including, without
limitation, living, office, insurance and medical expenses for its
employees) shall be solely the responsibility of
Consultant.
1.6
Right to Audit . Consultant agrees that expense
reimbursements, whether as a result of specific prior Company
approval or otherwise, are subject to audit by the
Company. Without limitation, the Company may generally
audit the Consultant’s expenses and invoices not more than
once per year upon fifteen (15) days prior written notice, taking
into consideration, without limitation (i) the amount paid in
relation to the total payments under this Agreement; (ii) the
nature of the expense; and (iii) the Consultant’s Services
rendered for the period. Consultant understands that all
services and expenditures must be described in detail; and, upon
notice of audit, the Consultant will make available to the Company
all invoices, supportive receipts and detailed substantiation, and
original entry records for all charges invoiced to the
Company.
2.
Termination and Liquidated Damages .
2.1
Termination . In the event Consultant terminates
this Agreement without cause, or this Agreement is terminated by
the Company for Cause, Consultant shall immediately forfeit all of
its Member Units in the Company.
2.2
Cause . For purposes of this Agreement, “
Cause ” shall mean the Company has made a good faith
determination that Consultant, or any Key Personnel: (i) has been
convicted of a misdemeanor involving moral turpitude or any felony;
(ii) has committed an act of fraud upon the Company; (iii) has
misappropriated funds or property of the Company; (iv) has failed
to comply in any material way with written policies of the Company
and such written policies have been provided to Consultant such
that Consultant has received reasonable notice of such policies;
(v) has failed to use its commercially reasonable efforts in
performing its responsibilities under this Agreement; (vi) has
materially breached this Agreement; (vii) without limitation of the
foregoing, engaged in any action which would constitute a breach of
Section 5 hereof; (viii) files a petition in bankruptcy, becomes
insolvent, or ceases to do business for any reason or (xi) has sold
all of its Member Units in the Company.
3.
Modification of Payment for Services
3.1
In
the event of (i) the death of, or unavailability or incapacity for
more than thirty(30) consecutive days during the Term, of one or
two but not all three of Julio Bastarrachea, James B. Smith and
Robert W. Dowies, the monthly payment for services rate shall be
reduced by Fifteen Thousand United States Dollars (USD $15,000) in
the case of Julio Bastarrachea, Five Thousand United States Dollars
(USD $5,000) in the case of James B. Smith and Five Thousand United
States Dollars (USD $5,000) in the case of Robert W.
Dowies. In the event of the death of, or unavailability
or incapacity of all three of the Key Personnel, this Agreement
shall terminate for Cause pursuant to the terms of Section
2.1.
4.
Independent Contractor .
4.1
Status of Consultant . It is expressly understood
and agreed that Consultant is an independent contractor and is not
an employee, agent, venturer, or partner of the Company or any
Affiliate. Unless expressly provided herein or granted
in a separate written instrument, Consultant shall not have the
authority, nor act, represent or hold itself out as having
authority, to act as an agent or partner of the Company or any
Affiliate, or in any way bind or commit the Company or any
Affiliate to any obligation, contract, agreement, or other legal
commitment, or to pledge or extend credit in the name of the
Company or any Affiliate. The rights, duties,
obligations and liabilities of the parties shall be several and not
joint or collective, and nothing contained in this Agreement shall
be construed as creating a partnership, joint venture, agency,
trust or other association of any kind, each party being
individually responsible only for its obligations and actions as
set forth in this Agreement.
4.2
Contracts for the Benefit of the Company and Affiliates
. Any contract entered into by the Company or its
Affiliates as a result of the Consultant’s efforts shall be
for the sole benefit of the Company or its Affiliates and the
Consultant shall have no interest therein.
4.3
Performance of the Services . Consultant shall act
as an independent contractor at all times. Subject only
to the general needs and requirements of the Company,
Consultant shall determine Consultant’s own days, hours, and
places of work. Except as set forth in Section 1.5,
Consultant shall be responsible for providing for
Consultant’s own expenses, overhead, transportation and other
items or services required to carry out the
Services. Consultant will, in Consultant’s
discretion, and subject only to the general needs and requirements
of the Company, determine the means and manner by which Consultant
performs the Services.
4.4
Insurance, Taxes and Benefits . Consultant shall be
fully and solely responsible for all applicable insurance and taxes
(including the filing of all applicable tax forms) in the United
States, Mexico, or any other country. As a result, the
Company shall not withhold or pay any payroll or employment taxes
of any kind with respect to any payments made to Consultant
hereunder during the time covered by this Agreement, and Consultant
shall indemnify and hold the Company and its Affiliates harmless
therefrom. Neither Consultant nor its employees are
eligible for, nor may they participate in, any employment benefits
or benefit plans provided to Company
employees. Consultant will not assert a claim of
employment against the Company nor claim any entitlement to
participation in its employee benefit programs. If,
however, Consultant is deemed to be eligible for participation in
such benefits or plans, Consultant hereby waives and releases any
such rights, on behalf of itself and its employees.
5.
Business Conduct and Compliance With Law . In the
conduct of the Services contemplated under this Agreement, the
Consultant agrees to comply fully with the letter and spirit of all
applicable laws of any jurisdiction in which the Services are
performed, including but not limited to, the U.S. Foreign Corrupt
Practices Act, and to conduct itself in keeping with the highest
ethical standards. In addition, the parties represent,
acknowledge and agree as follows:
5.1
The
Consultant represents that no part of its compensation will be used
by the Consultant for any purpose, nor has the Consultant taken,
nor will the Consultant take any action, which would constitute a
violation of any law of Mexico, the United States or of any other
jurisdiction in which it performs the Services
hereunder. For its part, the Company represents that it
does not desire and will not request any service or action by the
Consultant which would or might constitute any such
violation. Further, the Consultant has not previously
and agrees prospectively not to pay or promise to pay or give or
promise to give anything of value, either directly or indirectly,
to an official of the Government of Mexico or of any other
government for the purpose of influencing an act or decision in his
or her official capacity, inducing him or her to use his or her
influence with a foreign government, assisting Company in obtaining
or retaining business for or with, or directing business to, any
person or as a political contribution of any kind.
5.2
Should
the Consultant ever receive, directly or indirectly, from any
Company or Affiliate representative, a request which the Consultant
believes will or might constitute a breach of this Section 4, the
Consultant represents that it will immediately notify the
Company’s General Counsel of the request.
6.
Disclosure . The Consultant agrees that full
disclosure of the existence and terms of this Agreement, including
the compensation provisions, may be made at any time and for any
reason to whomever the Company’s General Counsel determines
has a legitimate need to know such terms, including, without
limitation, the government of any country where the Services are
being performed and the United States
Government. Without limiting any right or ability
the Company has regarding disclosure of this Agreement under
applicable law, Consultant further agrees that the Company or its
Affiliates shall have the right to fully disclose this Agreement
and the identity of the Consultant’s shareholders, directors,
officers and/or owners if such disclosure is required by legal
authority or necessary to satisfy lender(s) information
requests.
7.
Restriction on Drug Use and Possession of Weapons on Company
Business . The Consultant agrees to advise its
employees, subcontractors and agents that it is the policy of the
Company that (i) the use, possession and/or distribution of illegal
or unauthorized drugs, drug related paraphernalia or weapons on the
Company’s or its Affiliates’ premises is prohibited and
the use or possession of alcoholic beverages, except where
authorized by the Company’s or its Affiliates’
management, is also prohibited; (ii) entry onto or presence on the
Company’s or its Affiliates’ premises by any person,
including the Consultant’s employees, subcontractors,
subcontractor’s employees, contract personnel, temporary
employees and visitors, constitutes consent to the Company or an
Affiliate to conduct searches, whether announced or unannounced, on
the Company’s or its Affiliates’ premises of the person
and his or her personal effects for such prohibited items; and
(iii) any person who violates this provision or who refuses to
permit a search may be removed and barred from the Company’s
or its Affiliates’ premises at the sole discretion of the
Company or an Affiliate.
8.
Noninterference with Third-Party Rights . The
Company is retaining Consultant with the understanding that (i)
Consultant is free to provide services to the Company and (ii) only
the Company is entitled to the benefit of Consultant’s
work. The Company has no interest in using any other
person’s patents, copyrights, trade secrets, or other
intellectual property rights in an unlawful manner
