ex10-3.htm


    
      
        Exhibit
          10.3

         

         

      

      INDEPENDENT
        CONSULTING AGREEMENT

      


      This
        Independent Consulting Agreement (this “Agreement”) is effective the
        28th 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:

       

       

      
        	
                 

              	
                (i)

              	
                To
                  provide advice and counsel to the Company and its subsidiaries
                  pertaining
                  to local customs and business conditions which would affect the
                  Project.

              


      

       

       

      
        	
                 

              	
                (ii)

              	
                To
                  assist in the Company’s development, ownership and operation of the
                  Project.

              


      

       

       

      
        	
                 

              	
                (iii)

              	
                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.

              


      

       

       

      
        	
                 

              	
                (iv)

              	
                Generally,
                  to perform all other services that are reasonably inferable from
                  the
                  services delineated in this Section
                  1.1

              


      

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      


      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.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      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.  Consultant shall not misapply proprietary rights of
        others that the Company has no right to use.

       

      9.  Ownership
        of Consultant Developments.

       

      9.1  Existing
        Proprietary Rights.  Consultant agrees that neither Consultant nor
        its employees own any pre-existing intellectual property rights related to
        the
        Project.

       

      9.2  Ownership
        of Work Product.

       

       

      
        	
                 

              	
                (a)

              	
                
                  The
                    Company shall own all Work Product (as defined below).  All Work
                    Product shall be considered work made for hire by Consultant
                    and owned by
                    the Company in accordance with applicable law (including Article
                    83 of the
                    Mexican Ley Federal del Derecho de Autor if the Work Product is
                    information prepared or developed in Mexico or otherwise protected
                    under
                    such law).

                

              


      

       

       

      
        	
                 

              	
                (b)

              	
                If
                  any of the Work Product may not, by operation of law, be considered
                  work
                  made for hire by Consultant for the Company (or if ownership of
                  all right,
                  title and interest of the intellectual property rights therein
                  shall not
                  otherwise vest exclusively in the Company), Consultant agrees to
                  assign,
                  and upon creation thereof automatically assigns, without further
                  consideration, the ownership of all Trade Secrets (as defined below),
                  U.S.
                  and international copyrights, patentable inventions, and other
                  intellectual property rights therein to the Company, its successors
                  and
                  assigns.

              


      

       

       

      
        	
                 

              	
                (c)

              	
                The
                  Company and its successors and assigns shall have the right to
                  obtain and
                  hold in its or their own name copyrights, registrations, patents,
                  and any
                  other protection available in the
                  foregoing.

              


      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

       

      
        	
                 

              	
                (d)

              	
                Consultant
                  agrees to perform, upon the reasonable request of the Company,
                  during or
                  after Consultant’s provision of the Services for the Company, such further
                  acts as may be necessary or desirable to transfer, perfect and
                  defend the
                  Company’s ownership of the Work Product.  When requested,
                  Consultant shall:

              


      

       

      
        	
                 

              	
                (i)

              	
                Execute,
                  acknowledge and deliver any requested affidavits and documents
                  of
                  assignment and conveyance;

              


      

       

      
        	
                 

              	
                (ii)

              	
                Obtain
                  and aid in the enforcement of copyrights (and, if applicable, patents)
                  with respect to the Work Product in any
                  countries;

              


      

       

      
        	
                 

              	
                (iii)

              	
                Provide
                  testimony in connection with any proceeding affecting the right,
                  title or
                  interest of the Company in any Work Product;
                  and

              


      

       

      
        	
                 

              	
                (iv)

              	
                Perform
                  any other acts deemed necessary or desirable to carry out the purposes
                  of
                  this Agreement.

              


      

       

      The
        Company shall reimburse all
        reasonable out-of-pocket expenses incurred by Consultant at the Company’s
        request in connection with the foregoing, including (unless Consultant is
        otherwise being compensated at the time) a reasonable per diem or hourly
        fee for
        services rendered if Consultant is no longer providing the Services to the
        Company.

       

      
        	
                 

              	
                (e)

              	
                For
                  purposes hereof, “Work Product” shall mean all intellectual property
                  rights, including, without limitation, all U.S. and international
                  copyrights, patentable inventions, Trade Secrets (as defined herein),
                  discoveries and improvements, and other intellectual property rights,
                  in
                  any programming, documentation, technology, strategic plans, information,
                  ideas, concepts or other work product that relates to the business
                  and
                  interests of the Company and that Consultant creates, invents,
                  conceives
                  or develops as a result of its performance of the Services during
                  the Term
                  of this Agreement.  Consultant hereby irrevocably relinquishes
                  and waives for the benefit of the Company and its assigns any economic
                  and
                  moral rights and any other rights or claims in the Work Product
                  recognized
                  by applicable law.  To the extent any of Consultant’s moral
                  rights in the Work Product are not assignable or waivable, Consultant
                  hereby grants the Company a perpetual, irrevocable, exclusive license
                  to
                  use and exercise such rights in any manner whatsoever and/or to
                  the extent
                  the Work Product is protected by the Mexican Ley Federal del Derecho
                  de Autor, agrees to exercise such non-assignable rights consistently
                  with the Company’s business and
                  interests.

              


      

       

      10.  Confidentiality.

       

      10.1  Consequences
        of Entrustment with Sensitive Information.  Consultant should
        recognizes that Consultant’s relationship with the Company requires considerable
        responsibility and trust. The Company agrees to and expects to entrust
        Consultant with highly sensitive confidential, restricted, and proprietary
        information involving Trade Secrets and Confidential Information (as defined
        herein).  Consultant acknowledges and agrees that Consultant is
        legally and ethically responsible for protecting and preserving the Company’s
        proprietary rights for use only for the Company’s benefit, and these
        responsibilities may impose unavoidable limitations on Consultant’s ability to
        pursue some kinds of business opportunities that might interest Consultant
        during or after Consultant’s relationship with the Company.

       

      10.2  Definition
        of “Trade Secret.”  For purposes of this Agreement, a “Trade
        Secret” is any information, including, but not limited to, technical or
        non-technical data, a formula, a pattern, a compilation, a program, a device,
        a
        method, a technique, a drawing, a process, financial data, financial plans,
        product plans, or a list of actual or potential customers or suppliers which
        qualifies as a trade secret under applicable law (including Article
        82 of the
Mexican Ley de la Propiedad Industrial in case of information developed
        in Mexico or otherwise subject or protected by such law).  A “Trade
        Secret” generally: (i) derives economic value, actual or potential, from not
        being generally known to, and not being readily ascertainable by proper means
        by, other persons who can obtain economic value from its disclosure or use;
        and
        (ii) is the subject of efforts that are reasonable under the circumstances
        to
        maintain its secrecy.

       

      10.3  Restrictions
        on Use and Disclosure of Trade Secrets.  Consultant agrees not to
        use or disclose any Trade Secrets of the Company for so long as Consultant
        provides the Services to the Company and for so long afterwards as the pertinent
        item or information remains a Trade Secret, whether or not the Trade Secret
        is
        in written or tangible form, except as required to perform Consultant’s duties
        for the Company.  This prohibition is in addition to any rights of the
        Company existing under common law or applicable statutes for the protection
        of
        Trade Secrets and/or Confidential Information.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      10.4  Confidential
        Information.  In addition, and without any intention of limiting
        Consultant’s other obligations under this Agreement in any way, (including any
        confidentiality obligations with respect to Trade Secrets) Consultant agrees,
        for so long as Consultant provides the Services to the Company and for a
        period
        of three (3) years following the cessation of the Services for any reason
        (with
        or without cause), not to disclose or reveal any Confidential Information
        concerning the Company.  As used herein, “Confidential Information”
shall include all data or information, whether or not marked "confidential"
        (other than Trade Secrets, as defined herein), that is valuable to the Company
        (or, if owned by someone else, is valuable to that third party) and not
        generally known to the public or to competitors in the industry, whether
        (i)
        disclosed by the Company or developed by Consultant as part of Consultant’s
        duties hereunder, or (ii) disclosed to the Company or to Consultant as part
        of
        Consultant’s duties hereunder, by third parties subject to obligations of
        confidentiality.  Confidential Information shall include, but is not
        limited to, the Company’s business, markets, strategic plans, or any information
        pertaining to the technologies and proprietary products, services the Work
        Product and processes of the Company (particularly technology under current
        development or improvement) or any confidential information received from
        a
        customer or business partner of the Company, unless Consultant has obtained
        express approval to use or disclose such information from the Company in
        advance. In that connection, Consultant shall submit to the Company for review
        any proposed articles and the text of any public speeches relating to work
        done
        for the Company before they are released or delivered.  The Company
        has the right to disapprove and prohibit, or delete any parts of, such articles
        or speeches that might disclose the Company’s Trade Secrets or Confidential
        Information or otherwise be contrary to the Company’s business
        interests.  Notwithstanding the foregoing, the term “Confidential
        Information” shall not include information which is shown by clear and
        convincing evidence to be (i) publicly available without breach by Consultant
        of
        its obligations to the Company under this Agreement; (ii) disclosed by the
        Company to a third party free of any duty of confidentiality on the third
        party;
        (iii) disclosed under operation of law provided Consultant gives the Company
        reasonable notice prior to such disclosure and cooperates with the Company
        in
        its efforts to keep the Confidential Information confidential; or (iv) disclosed
        by Consultant with the prior written approval of the Company.

       

      11.  Return
        of Materials.

       

      Upon
        the request of the Company and, in
        any event, upon the cessation of the Services, Consultant must return to
        the
        Company and leave at its disposal all memoranda, notes, records, drawings,
        manuals, computer programs, documentation, diskettes, computer tapes, and
        other
        documents or media pertaining to the business of the Company or Consultant’s
        specific duties for the Company (including all copies of such
        materials).  Consultant must also return to the Company and leave at
        its disposal all materials involving any Trade Secrets and Confidential
        Information of the Company.  This Section 11 is intended to apply to
        all materials made or compiled by Consultant, as well as to all materials
        furnished to Consultant relating to the provision of the Services.

       

      12.  Partial
        Restraint on Post-Termination Competition.

       

      12.1  Factual
        Background.  Consultant acknowledges that (i) the Company’s
        customer and/or client contacts and relations are established and maintained
        at
        great expense and that Consultant, by virtue of Consultant’s relationship with
        the Company, has had (or will have in the future) unique and extensive exposure
        to and personal contact with the Company’s customers and/or clients such that
        Consultant has been (or will be) able to establish a unique relationship
        with
        those customers and/or clients; and/or (ii) during the course of Consultant’s
        provision of the Services for the Company, the Company has agreed to provide
        Consultant with access to Confidential Information and Trade Secrets of the
        Company, which Consultant agrees would be inevitably used or disclosed if
        Consultant establishes a competing business or is employed with a competitor
        of
        the Company.

       

      


      12.2  Covenant
        Not to Compete.  Accordingly, in order to protect the Company from
        unfair competition, Consultant covenants and agrees that Consultant will
        not,
        for so long as Consultant provides the Services to the Company and for 36
        months
        following the cessation of the Services for any reason (with or without Cause)
        (the “Noncompetition Period”), directly or indirectly (whether as owner,
        partner, stockholder, investor, officer, director, agent, independent
        contractor, associate, employee, consultant or licensor), within the United
        States of America and/or the metropolitan region of Central Mexico comprised
        by
        the State of Mexico, Mexico City, Morelos, Puebla, and Queretaro, and
        Northeastern Mexico comprised by the State of Tamaulipas and Nuevo Leon,
        on
        behalf of any corporation, partnership, venture or other business entity
        which
        competes with the Company: (i) direct, advise, counsel or otherwise assist
        any
        customer or supplier of the Company which, in any manner, would have, or
        is
        likely to have, an adverse effect upon the Project; (ii) consult, advise,
        counsel or otherwise assist any government agency on any matter or in a
        proceeding which, in any manner, would have, or is likely to have, an adverse
        effect upon the Project; and/or (iii) consult, advise, counsel or otherwise
        assist any third party relating to the Project.  Notwithstanding the
        foregoing, should Consultant elect to exercise its call right pursuant to
        Section 4.8 of that certain Limited Liability Company Agreement of the Company
        dated as of September 26, 2007, the provisions of this Section 12.2 shall
        not
        apply.

       

      12.3  Nonsolicitation
        of Employees and Independent Consultants.  Consultant acknowledges
        the substantial amount of time, money, and effort that the Company has spent
        and
        will spend in recruitment of competent employees and independent contractors,
        and agrees that Consultant will not, for so long as Consultant provides the
        Services to the Company and for a period of  twelve (12) months after
        the cessation of the Services for any reason (with or without cause), solicit
        for employment, attempt to employ or actively assist any other entity in
        employing or soliciting for employment any employee, agent or independent
        contractor of the Company or its Affiliates, with whom Consultant had regular
        contact in the course of providing the Services during the eighteen (18)
        months
        (or less) prior to the cessation of the Services.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      12.4  Specific
        Performance and Consent to Injunctive Relief.  Consultant agrees
        that the Company will suffer irreparable harm if Consultant breaches any
        covenant in this Agreement, and that damages would be very difficult to
        ascertain if Consultant breached any covenant in this Agreement.  The
        faithful observance of all covenants in this Agreement is an essential condition
        to Consultant’s continuing relationship with the Company, and the Company is
        depending upon material compliance.  This Agreement is intended to
        protect the proprietary rights of the Company in many important
        ways.  Even the threat of any misuse of the Trade Secrets or
        Confidential Information of the Company would be extremely harmful, since
        they
        are essential to the business of the Company.  Consultant agrees that
        any court of competent jurisdiction should immediately enjoin any breach
        of this
        Agreement upon the request of the Company, and Consultant specifically releases
        the Company from the requirement of posting any bond in connection with
        temporary or interlocutory injunctive relief, to the extent permitted by
        law.

       

      13.  Indemnification
        and Limitation of Liability.  To the maximum extent allowed by
        law, Consultant shall defend, indemnify, and hold harmless the Company and
        its  directors, officers, employees, independent contractors, and
        agents, from and against any and all claims, losses, damages, suits, fees,
        judgments, costs and expenses (including attorneys’ fees) which the Company may
        suffer or incur arising out of or in connection with (a) the Services performed
        hereunder; (b) this Agreement; (c) the presence of the Consultant or its
        employees, contractors or agents on the Company’s premises; or (d) the act or
        omission of the Consultant or the Consultant’s employees, contractors or
        agents.

       

      14.  Limitation
        of Liability.  Neither party will be liable to the other party for
        any indirect, incidental, delay, special, punitive, or consequential damages,
        including damages for lost opportunities, lost profits, loss of use, cost
        of
        capital, from this Agreement or any other transaction, or lost savings, whether
        arising in contract, tort or otherwise, even if such damages were foreseeable
        or
        result from a breach of this Agreement.  In no event will the
        aggregate liability of the Company to Consultant exceed the amount of the
        fees
        and reimbursable expenses paid or owed by the Company to Consultant during
        the
        12 month period immediately preceding the date the relevant claim first
        arose.   The parties specifically acknowledge that the pricing
        provisions of this Agreement reflect such allocation of risk and limitation
        of
        liabilities.

       

      15.  Warranties.  Consultant
        warrants that: (i) Consultant is financially solvent and has the financial
        ability to perform Consultant’s obligations hereunder; (ii) Consultant has not
        and will not enter into any other agreements that conflict with this Agreement;
        and (iii) Consultant shall perform all services under this Agreement on a
        commercially reasonable basis in a workmanlike and expeditious
        manner.

       

      16.  Insurance.  Prior
        to commencing Services for the Company, the Consultant shall procure and
        shall
        maintain while completing the Services, at the Consultant’s sole expense,
        insurance coverage with limits not less than One Million Dollars ($1,000,000)
        general liability insurance and One Million Dollars ($1,000,000) automobile
        insurance.  The Consultant shall procure and maintain such other
        insurance coverage as the Company or its Affiliate reasonably requires from
        time
        to time.  Simultaneously with the execution of this Agreement, the
        Consultant shall furnish to the Company evidence that all of the foregoing
        policies have been obtained in accordance with the terms hereof.  The
        Consultant shall furthermore require its insurance carrier(s) to give the
        Company thirty (30) days’ written notice prior to the cancellation of any
        policies required hereunder.  Finally, all policies shall contain
        provisions whereby underwriters agree to name the Company as an additional
        insured and waive their rights of subrogation against the Company and any
        of the
        Company’s parent, subsidiaries, Affiliates  and related
        companies.

       

      17.  Use
        of
        Name and Publicity.  Consultant agrees that Consultant shall not,
        without prior written consent of the Company in each instance: (i) use in
        advertising, publicity or otherwise the name of the Company or any partner,
        independent contractor or employee of the Company, nor any trade name,
        trademark, trade device or simulation thereof owned by the Company; or (ii)
        represent, directly or indirectly, that any product or any service provided
        by
        Consultant has been approved or endorsed by the Company.

       

      18.  Use
        of
        Courts.  Any claim or controversy in connection with this
        Agreement shall be submitted to the exclusive jurisdiction of the State and
        Federal courts sitting in Houston, Texas county of Harris.

       

      19.  Registration
        of Agreement.  The Consultant shall be responsible for proper
        registration of this Agreement with any governmental agency with which
        registration is required.  The Company agrees to pay any registration
        fees and the Consultant will provide the Company with documentation of the
        registration.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      20.  Implementation.

       

      20.1  Severability.  Each
        of the provisions included in this Agreement is separate, distinct and severable
        from the other and remaining provisions of this Agreement, and the invalidity
        or
        unenforceability of any provision shall not affect the validity or
        enforceability of any other provision or provisions.  Further, if any
        provision is ruled invalid or unenforceable by a court of competent jurisdiction
        because of a conflict between such provision and any applicable law or public
        policy, such provision shall be redrawn to be valid and enforceable to the
        extent required for such provision to be consistent with such law or public
        policy.

       

      20.2  Assignment.  Neither
        this Agreement nor any interest of the Consultant herein (including any interest
        in moneys belonging to or which may accrue to the Consultant) may be assigned,
        subcontracted, pledged, transferred, or hypothecated without the prior written
        consent of the Company.  Any attempted assignment in violation hereof
        shall be null and void. The Company may assign this Agreement to any Affiliate
        without the consent of the Consultant.  This Agreement shall bind, and
        shall inure to the benefit of, the parties and their respective successors
        and
        assigns.

       

      20.3  Waiver.  The
        waiver by the Company of any breach of this Agreement by Consultant shall
        not be
        effective unless in writing, signed by an authorized official and referencing
        the specific breach, and no such waiver shall operate or be construed as
        a
        waiver of the same or another breach on a subsequent occasion.

       

      20.4  Entire
        Agreement.  This document supersedes any previous written or oral
        agreements relating to this subject which Consultant may have made with the
        Company.  It may not be changed orally, but only in a separate written
        agreement signed by parties that references this Agreement and the specific
        section being changed.  Notwithstanding the foregoing, this Agreement
        is not intended to modify or impair the effectiveness of the general rules
        and
        policies the Company may announce from time to time.

       

      20.5  Controlling
        Law, Jurisdiction and Venue.  This Agreement is deemed to be
        entered into, finally accepted and performed in the State of Texas, United
        States of America.  Consultant agrees that the laws of the State of
        Texas shall be applicable to the contract, its construction, interpretation,
        effect, performance and non–performance and consequences thereof, but not
        regarding conflict of laws.

       

      20.6  Survival
        of Consultant’s Obligations.  Notwithstanding the termination of
        this Agreement, the cessation of the Services, or the termination of
        Consultant’s relationship with the Company for any reason (with or without
        cause), the obligations of Consultant set forth in Sections 8-13, 16, 18
        and 19
        of this Agreement, including all sub-parts, and any other provision of this
        Agreement which in accordance with its terms is intended to survive the
        termination of this Agreement, shall survive shall survive and remain in
        full
        force and effect.

       

      20.7  Section
        Headings. The headings contained in this Agreement are
        for reference purposes only and shall not in any way affect the meaning or
        interpretation thereof.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      20.8  Notices.  All
        notices or other communications required or permitted to be given hereunder
        shall be (as elected by the party giving such notice) (a) personally delivered
        with written confirmation of receipt, (b) transmitted by postage prepaid
        registered mail (airmail if international), or (c) by first class U.S. mail
        delivery within written confirmation of receipt to the parties as
        follows:

       

      


      If
        to
        Company:                      Frontera
        Pipeline, LLC

      c/o.
        its Managing Member

      700
        Milam, Suite 803

      Houston,
        Texas  77002

      Attention:  Chief
        Financial
        Officer                                                                           

      Facsimile:
        713-325-6000

      


      with
        a
        copy (which shall not itself constitute notice) to:

      


      King
        & Spalding LLP

      1100
        Louisiana Street

      Suite
        4000

      Houston,
        Texas 77002

      Attention:
        Carlos Treistman, Esquire

      Facsimile:  713-751-3290

      


      If
        to
        Consultant:

      Tidelands
        Oil & Gas Corporation.

      1862
        W
        Bitters Bldg 1

      San
        Antonio, Texas 78248

      Attention:
        James B. Smith

      


      with
        a
        copy (which shall not itself constitute notice) to:

      


      Strasburger
        & Price, LLP

      300
        Convent St., Suite 900

      San
        Antonio, Texas 78205

      Attention:
        David J. Cibrian, Esquire

      Facsimile:
        210.258.2716 

      


      Except
        as otherwise specified herein,
        all notices and other communications shall be deemed to have been given on
        the
        date of the receipt if delivered personally or by mail.  Any party
        hereto may change its address for purposes hereof by written notice to the
        other
        party(s) in accordance with this Section.

      


      20.9  Related
        Parties.  This Agreement shall inure to the benefit of, and be
        binding upon, (i) the Company, together with its successors and assigns;
        and
        (ii) Consultant, together with Consultant’s successors, executors,
        administrators, personal representatives, heirs, and legatees.  This
        Agreement is not intended to provide third-party beneficiary status to any
        other
        party (including as to individuals identified in Section 1.3 hereof), except
        as
        specifically provided in this Section 20.9.

       

      IN
        WITNESS WHEREOF, the parties have
        executed this Agreement as of the day and year first above written.

      


      Company:                                                      FRONTERA
        PIPELINE, LLC

      


      


      By:                                                           

      Name:                                                                                                              

      Title:                                                                                                                 

      


      


      Consultant:                                                  
        TIDELANDS OIL & GAS CORPORATION

       

      
        By:                                                           

        Name:                                                                                                              

        Title:                                                                                                                 

      

                                                     

                                                              

       

      
        
          
          

        

        
          9