Exhibit 10.1


    Exhibit
      10.1

    
 

    EMPLOYMENT
      AGREEMENT

     

    THIS
      EMPLOYMENT AGREEMENT,
      dated
      as of  March 15, 2007 (the Effective Date) is entered into by and between
      TIDELANDS OIL & GAS CORPORATION, a Nevada limited liability company (the
“Company”),
      and
      JAMES B. SMITH (“Executive”).

     

     

    RECITAL

     

    The
      Company desires to employ Executive, and Executive desires to be employed by
      the
      Company, in accordance with and subject to the terms and conditions set forth
      herein.

     

     

    AGREEMENT

     

    Accordingly,
      the parties hereby agree as follows:

     

    1.  Term.
      Subject
      to Section 4,
      the
      Company hereby employs Executive, and Executive hereby accepts employment by
      the
      Company, to render services on behalf of the Company in the position and with
      the duties and responsibilities described in Section 2
      for the
      period commencing on the date of this Agreement and continuing in effect for
      a
      period of five (5) years (the “Term”).
      The
      Company and Executive may extend the Term of this Agreement by mutual written
      agreement.

     

    2.  Position,
      Duties, Responsibilities.
      Executive shall be employed by the Company as the Chief Executive Officer and
      President reporting directly to the Board of Directors. Executive shall devote
      Executive’s best efforts and Executive’s full time and attention to the
      performance of the services customarily incident to such offices (collectively,
      the “Services”).
      Executive acknowledges that the Services may include services for other
      entities, as directed by the Board of Directors. Executive shall be based at
      the
      Company’s headquarters in Texas or such other place(s) as mutually agreed
      between the Company and Executive.

     

    3.  Compensation,
      Benefits, Expenses.

     

    3.1.  Salary.
      In
      consideration of the Services to be rendered hereunder, Executive shall receive
      an annual salary in the amount of Three Hundred Thousand Dollars ($300,000),
      payable in accordance with the Company’s standard payroll policies including
      compliance with applicable withholding requirements. The first and last payment
      by the Company to Executive will be adjusted, if necessary, to reflect a
      commencement or termination date other than the first or last working day of
      a
      pay period.

     

    3.2.  Equity
      Compensation.
      Each
      year during the term of this Agreement, the Company will issue Executive shares
      of common stock with a value of One Million Dollars ($1,000,000), valued on
      the
      date of each annual grant. The Executive may also be eligible to receive stock
      option grants from time to time in the sole discretion of the Board of
      Directors.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.3.  Benefits.
      The
      Company shall provide Executive with the right to participate in and to receive
      benefits from all present and future life, accident, disability, medical,
      pension, stock and savings plans and all similar benefits made available
      generally to all employees of the Company. Executive shall be entitled to the
      twenty (20) days of vacation annually, which shall accrue in equal monthly
      installments. During the Term of this Agreement, the Company shall at its
      expense procure and keep in effect term life insurance on the life of Executive
      payable to the Executive's heirs in the aggregate amount of $2,000,000 and
      long-term disability insurance payable to the Executive with a minimum monthly
      disability income benefit amount equal to $15,000 per month.

     

    3.4.  Expenses.
      The
      Company shall reimburse Executive for reasonable and properly documented travel,
      entertainment and other business expenses incurred by Executive in the
      performance of his duties hereunder in accordance with the Company’s general
      policies, as they may be amended from time to time during the course of this
      Agreement.

     

    3.5.  Automobile
      Allowance.
      During
      the term of this Agreement, the Company shall provide Executive with an
      automobile allowance of $12,000 annually, which allowance shall be payable
      monthly in increments of $1,000.

     

    4.  Termination
      of Employment.

     

    4.1.  By
      Death.
      The
      Term shall terminate automatically upon the death of Executive. The Company
      shall pay to Executive’s beneficiaries or estate, as appropriate, the
      compensation to which Executive is entitled pursuant to Section 3.1(a)
      (including
      any accrued vacation), and reimburse Executive for any expenses properly
      incurred by Executive pursuant to Section 3.4.
      Thereafter, the Company’s obligations hereunder shall terminate. Nothing in this
Section 4.1
      shall
      affect any entitlement of Executive’s heirs to any vested benefits of Executive
      or to the benefits of any life insurance plan.

     

    4.2.  By
      Disability.
      If, in
      the sole and reasonable opinion of the Board of Directors, Executive shall
      be
      prevented from properly performing his duties hereunder by reason of any
      physical or mental incapacity for a period of more than ninety (90) days in
      the aggregate in any twelve-month (12-month) period, then, to the extent
      permitted by law, the Term shall terminate on, and the Company shall pay to
      Executive the compensation to which Executive is entitled pursuant to
Section 3.1(a)
      (including any accrued vacation), and reimburse Executive for any expenses
      properly incurred by Executive pursuant to Section 3.4,
      in each
      case through the last day of the month in which the 90th day of incapacity
      occurs. Thereafter the Company’s obligations hereunder shall terminate. Nothing
      in this Section 4.2
      shall
      affect Executive’s rights to any vested benefits of Executive or under any
      disability plan in which he is a participant.

     

    4.3.  By
      the
      Company with Cause.
      The
      Company may terminate, without liability, the Term with Cause (as defined below)
      solely pursuant to this Section 4.3.
      In the
      event the Company intends to terminate Executive with Cause, the Company may
      thereupon terminate Executive’s employment with Cause immediately upon notice to
      Executive. In such event, the Company shall (i) pay Executive the compensation
      to which Executive is entitled pursuant to Section 3.1(a)
      (including any accrued vacation); and (ii) reimburse Executive for any expenses
      properly incurred by Executive pursuant to Section 3.4,
      in each
      case through the end of the day on which the Company terminates Executive.
      Thereafter the Company’s obligations hereunder shall terminate. Nothing in this
Section 4.3
      shall
      affect Executive’s rights to any benefits vested as of the date of
      termination.

     

    Termination
      shall be with “Cause”
      if:

     

    (a)  Executive
      willfully engages in conduct that is in bad faith and materially injurious
      to
      the Company, including but not limited to, misappropriation of trade secrets,
      fraud, or embezzlement;

     

    (b)  Executive
      engages in malfeasance demonstrated by a pattern of failure to perform job
      duties diligently and professionally;

     

    (c)  Executive
      willfully refuses to implement or follow a reasonable and lawful policy or
      directive of the Company, which breach is not cured within thirty (30) days
      after written notice to Executive from the Company; or

     

    (d)  Executive
      materially breaches any term of this Agreement which breach is not cured within
      thirty (30) days after written notice to Executive from the
      Company.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.4.  Without
      Cause.
      At any
      time, either the Company or Executive may terminate the Term for any reason,
      without Cause, by giving fifteen (15) days’ advance written notice to the
      other party. In the event that Executive’s employment is terminated by either
      party pursuant to this Section 4.4,
      the
      Company shall: (i) pay Executive the compensation to which Executive is
      entitled pursuant to Section 3.1(a)
      (including any accrued vacation) through the end of the day on which Executive’s
      employment is terminated; and (ii) reimburse Executive for any expenses
      properly incurred by Executive pursuant to Section 3.4
      through
      the end of the day on which Executive’s employment is terminated. In the event
      that Executive’s employment is terminated by the Company without Cause pursuant
      to this Section 4.4,
      the
      Company shall also pay Executive the severance payment as set forth in
Section 5.
      Thereafter the Company’s obligations hereunder shall terminate. Nothing in this
      Section shall affect Executive’s rights to any benefits vested as of the date of
      termination (including, without limitation, stock options that have vested).
      

     

    5.  Severance.
      In the
      event Executive’s employment with the Company is terminated by the Company
      without Cause, the Company shall continue to pay Executive (i) his base salary
      on a semi-monthly basis plus (ii) the annual equity grant of shares as set
      froth
      in Section 3.2 for the remainder of the Term (or the remainder of any written
      extension of the Term) as severance in return for a written release of any
      and
      all claims against the Company. Executive shall be under no obligation to
      mitigate severance and any income or future employment of Executive with another
      company shall not offset or reduce the severance payments due under this Section
      5. 

     

    6.  Assignment;
      Successors and Assigns.
      Each
      party agrees that such party will not assign, sell, transfer, delegate or
      otherwise dispose of, whether voluntarily or involuntarily, or by operation
      of
      law, any rights or obligations under this Agreement, nor shall such party’s
      rights be subject to encumbrance or the claims of creditors. Any purported
      assignment, transfer, or delegation thereof shall be null and void. Nothing
      in
      this Agreement shall prevent the consolidation of the Company with, or its
      merger into, any other corporation, or the sale by the Company of all or
      substantially all of its properties or assets, or the assignment by the Company
      of this Agreement and the performance of its obligations hereunder to any
      successor in interest. Subject to the foregoing, this Agreement shall be binding
      upon and shall inure to the benefit of the parties and their respective heirs,
      legal representatives, successors, and permitted assigns, and shall not benefit
      any person or entity other than those enumerated above. 

     

    7.  Notices.
      Unless
      otherwise agreed to, all notices, requests, instructions or other documents
      to
      be given hereunder shall be in writing or by written telecommunication, and
      shall be deemed to have been duly given if: (a) delivered personally (effective
      upon delivery); (b) mailed by certified mail, return receipt requested, postage
      prepaid (effective five (5) business days after dispatch); (c) sent by a
      reputable, established courier service that guarantees next business day
      delivery (effective the next business day); or (d) sent by facsimile (effective
      upon electronic confirmation of valid transmission of the
      facsimile).

     

    All
      notices and other documents hereunder shall be given to the Company
      at:

    


    Tidelands
      Oil & Gas Corporation 

    1862
      W.
      Bitters Rd.

    San
      Antonio, TX 78248

    


    and
      to
      the Executive at the address of record on file with the Company. 

    


    Notice
      of
      change of address shall be effective only when done in accordance with this
      Section 7.

     

    8.  Governing
      Law.
      The
      validity, interpretation, enforceability, and performance of this Agreement
      shall be governed by and construed in accordance with the law of the State
      of
      Texas, without giving effect to its conflict of laws rules.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    9.  Outside
      Activities of Executive.
      The
      Company acknowledges that Executive has commitments and business activities
      not
      related to the Company and that certain of these commitments and business
      affairs involve activities in the oil, gas and real estate industries. There
      shall be no restriction on Executive’s ability to fulfill such commitments or
      engage in such business activities.

     

    10.  Confidentiality.
      Executive agrees that all confidential and proprietary information relating
      to
      the business of the Company shall be kept and treated as confidential both
      during and after the term of this Agreement, except as may be permitted in
      writing by a Company's Board of Directors or as such information is within
      the
      public domain or comes within the public domain without any breach of this
      Agreement.

     

    11.  Indemnification.
      In
      addition to any rights to indemnification to which Executive is entitled to
      under the Company's Articles of Incorporation and Bylaws, the Company shall
      indemnify Executive at all times during and after the term of this Agreement
      to
      the maximum extent permitted under Nevada Revised Statutes or any successor
      provision thereof and any other applicable state law, and shall pay Executive's
      expenses in defending any civil action, suit, or proceeding in advance of the
      final disposition of such action, suit or proceeding, to the maximum extent
      permitted under such applicable state laws.

     

    12.  Entire
      Agreement.
      The
      terms of this Agreement are intended by the parties to be the final expression
      of their agreement with respect to the employment of Executive by the Company
      and may not be contradicted by evidence of any prior or contemporaneous
      agreement. The parties further intend that this Agreement shall constitute
      the
      complete and exclusive statement of its terms and that no extrinsic evidence
      whatsoever may be introduced in any judicial, administrative, or other legal
      proceeding involving this Agreement.

     

    13.  Amendments;
      Waivers.
      This
      Agreement may not be modified, amended, or terminated except by an instrument
      in
      writing, signed by Executive and by a duly authorized representative of the
      Company other than Executive. By an instrument in writing similarly executed,
      either party may waive compliance by the other party with any provision of
      this
      Agreement that such other party was or is obligated to comply with or perform;
      provided,
      however,
      that
      such waiver shall not operate as a waiver of, or estoppel with respect to,
      any
      other or subsequent failure. No failure to exercise and no delay in exercising
      any right, remedy, or power hereunder shall operate as a waiver thereof, nor
      shall any single or partial exercise of any right, remedy, or power hereunder
      preclude any other or further exercise thereof or the exercise of any other
      right, remedy, or power provided herein or by law or in equity.

     

    14.  Severability;
      Enforcement.
      If any
      provision of this Agreement, or the application thereof to any person, place,
      or
      circumstance, shall be held by a court of competent jurisdiction or by
      arbitrator(s) to be invalid, unenforceable, or void, the remainder of this
      Agreement and such provisions as applied to other persons, places, and
      circumstances shall remain in full force and effect. 

     

    15.  Executive
      Acknowledgment.
      Executive acknowledges (i) that Executive has consulted with or has had the
      opportunity to consult with independent counsel of his own choice concerning
      this Agreement and has been advised to do so by the Company, and (ii) that
      Executive has read and understands the Agreement, is fully aware of its legal
      effect, and has entered into it freely based on Executive’s own
      judgment.

     

    16.  Counterparts.
      This
      Agreement may be signed in multiple counterparts, each of which shall be deemed
      an original but all of which together shall be deemed one and the same
      instrument. Facsimile signatures shall create a valid and binding obligation
      of
      the party executing this Agreement with the same force and effect as if such
      facsimile signature page were an original thereof.

     

     

    IN
      WITNESS WHEREOF,
      the
      parties hereto have duly executed this Employment Agreement as of the date
      first
      written above.

     

    TIDELANDS
      OIL & GAS CORPORATION, a Nevada limited liability company

     

    
/s/
      Ahmed
      Karim                                                      


    Name:
      Ahmed
      Karim                                                

    Title:   Secretary                                                        

    


    


    EXECUTIVE:

    


    /s/
      James B.
      Smith                                                     
James
      B. Smith, an individual