ex10-1.htm


    Exhibit 10.1


     

    EQUITY
      PURCHASE AGREEMENT

    
 

     

    among

     

    


     

    TIDELANDS
      OIL & GAS CORPORATION,

     

    


     

    FRONTERA
      PIPELINE, LLC,

     

    


     

    and

     

    


     

    GRAND
      CHENIERE PIPELINE LLC

     

    


     

    and

     

    


     

    TERRANOVA
      ENERGIA, S. DE R.L. DE C.V. (as joinder party)

    


     

    


     

    


     

    Dated
      as
      of September 28, 2007

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    


    TABLE
      OF CONTENTS

     

    
      
        	 	
                Page

              
	 	 
	
                Article
                  I DEFINITIONS  

              	
                5

              
	 	
                1.1

              	
                Certain
                  Definitions

              	
                5

              
	 	
                1.2

              	
                Interpretation

              	
                10

              
	 	 	 	 
	
                Article
                  II PURCHASE AND SALE OF LLC INTERESTS, CONSIDERATION AND
                  CLOSING  

              	
                10

              
	 	
                2.1

              	
                Purchase
                  and Sale of Equity Interests

              	
                10

              
	 	
                2.2

              	
                Consideration

              	
                10

              
	 	
                2.3

              	
                Use
                  of Purchase Price Proceeds

              	
                10

              
	 	
                2.4

              	
                Closing

              	
                10

              
	 	
                2.5

              	
                Purchase
                  Price Adjustments

              	
                10

              
	 	
                2.6

              	
                Assignment
                  of Project Documents

              	
                10

              
	 	
                2.7

              	
                Cheniere
                  Deliveries

              	
                11

              
	 	
                2.8

              	
                Deliveries
                  of TOG and the Company

              	
                11

              
	 	 	 	 
	
                Article
                  III REPRESENTATIONS AND WARRANTIES RELATING TO TOG  

              	
                13

              
	 	
                3.1

              	
                Due
                  Organization and Power of TOG

              	
                13

              
	 	
                3.2

              	
                Authorization
                  and Validity of Agreement

              	
                13

              
	 	
                3.3

              	
                Non-Contravention.

              	
                13

              
	 	
                3.4

              	
                Governmental
                  Approvals; Consents and Actions

              	
                13

              
	 	
                3.5

              	
                Litigation

              	
                13

              
	 	
                3.6

              	
                LLC
                  Interests

              	
                13

              
	 	
                3.7

              	
                Finders;
                  Brokers

              	
                13

              
	 	
                3.8

              	
                Bankruptcy

              	
                13

              
	 	 
	
                Article
                  IV REPRESENTATIONS AND WARRANTIES RELATING TO THE ACQUIRED
                  COMPANIES  

              	
                14

              
	 	
                4.1

              	
                Due
                  Organization and Power of the Acquired Companies

              	
                14

              
	 	
                4.2

              	
                Authorization
                  and Validity of Agreement

              	
                14

              
	 	
                4.3

              	
                Non-Contravention

              	
                14

              
	 	
                4.4

              	
                Governmental
                  Approvals

              	
                14

              
	 	
                4.5

              	
                Capitalization

              	
                14

              
	 	
                4.6

              	
                Financial
                  Statements

              	
                14

              
	 	
                4.7

              	
                Absence
                  of Undisclosed Liabilities, Absence of Changes

              	
                15

              
	 	
                4.8

              	
                Litigation

              	
                15

              
	 	
                4.9

              	
                Labor
                  Relations

              	
                15

              
	 	
                4.10

              	
                Books
                  of Accounts

              	
                15

              
	 	
                4.11

              	
                Bank
                  Accounts

              	
                15

              
	 	
                4.12

              	
                Corporate
                  Records

              	
                15

              
	 	
                4.13

              	
                Insurance

              	
                15

              
	 	
                4.14

              	
                Ethical
                  Practices

              	
                16

              
	 	
                4.15

              	
                No
                  Other Representations or Warranties

              	
                16

              
	 	
                4.16

              	
                Compliance
                  with Laws

              	
                16

              
	 	
                4.17

              	
                Taxes

              	
                16

              
	 	
                4.18

              	
                Environmental

              	
                17

              
	 	
                4.19

              	
                Material
                  Contracts

              	
                18

              
	 	
                4.20

              	
                Real
                  Property

              	
                18

              
	 	
                4.21

              	
                Subsidiaries
                  and Investments

              	
                18

              
	 	
                4.22

              	
                Related
                  Party Transactions

              	
                18

              


      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      
        	 	 
	
                Article
                  V REPRESENTATIONS OF BUYER  

              	
                19

              
	 	
                5.1

              	
                Due
                  Organization and Power of Cheniere

              	
                19

              
	 	
                5.2

              	
                Authorization
                  and Validity of Agreement

              	
                19

              
	 	
                5.3

              	
                Non-Contravention

              	
                19

              
	 	
                5.4

              	
                Governmental
                  Approvals; Consents and Action

              	
                19

              
	 	
                5.5

              	
                Litigation

              	
                19

              
	 	
                5.6

              	
                Independent
                  Decision

              	
                19

              
	 	
                5.7

              	
                Purchase
                  for Investment

              	
                19

              
	 	
                5.8

              	
                Financial
                  Capacity; No Financing Condition

              	
                19

              
	 	
                5.9

              	
                Finders;
                  Brokers

              	
                20

              
	 	
                5.10

              	
                No
                  Other Representations or Warranties

              	
                20

              
	 	 
	
                Article
                  VI AGREEMENTS OF THE COMPANY, TOG AND
                  Cheniere

              	
                20

              
	 	
                6.1

              	
                Transfer
                  of the Mexican Project Entities

              	
                20

              
	 	
                6.2

              	
                Operation
                  of the Business

              	
                20

              
	 	
                6.3

              	
                Pre-Mexican
                  Project Closing Date Investigation

              	
                22

              
	 	
                6.4

              	
                Confidentiality.

              	
                22

              
	 	
                6.5

              	
                Efforts;
                  Cooperation; No Inconsistent Action

              	
                23

              
	 	
                6.6

              	
                Public
                  Disclosures

              	
                23

              
	 	
                6.7

              	
                Exclusivity

              	
                23

              
	 	
                6.8

              	
                Tax
                  Treatment of Transaction.

              	
                23

              
	 	 
	
                Article
                  VII INDEMNIFICATION  

              	
                23

              
	 	
                7.1

              	
                Survival
                  of Representations and Warranties

              	
                23

              
	 	
                7.2

              	
                Indemnification

              	
                24

              
	 	
                7.3

              	
                Indemnification
                  Procedures

              	
                25

              
	 	 
	
                Article
                  VIII MISCELLANEOUS  

              	
                26

              
	 	
                8.1

              	
                Notices

              	
                27

              
	 	
                8.2

              	
                Expenses

              	
                27

              
	 	
                8.3

              	
                Assignability

              	
                27

              
	 	
                8.4

              	
                Amendment;
                  Waiver

              	
                27

              
	 	
                8.5

              	
                No
                  Third Party Beneficiaries

              	
                27

              
	 	
                8.6

              	
                Governing
                  Law

              	
                27

              
	 	
                8.7

              	
                Consent
                  to Jurisdiction

              	
                27

              
	 	
                8.8

              	
                Entire
                  Agreement

              	
                27

              
	 	
                8.9

              	
                Severability

              	
                27

              
	 	
                8.10

              	
                Counterparts

              	
                27

              
	 	
                8.11

              	
                Further
                  Assurances

              	
                28

              
	 	
                8.12

              	
                Schedules,
                  Annexes and Exhibits

              	
                28

              
	 	
                8.13

              	
                Specific
                  Performance; Limitation on Damages

              	
                28

              
	 	
                8.14

              	
                Waiver
                  of Jury Trial

              	
                28

              
	 	
                8.15

              	
                Time

              	
                28

              
	 	
                8.16

              	
                Attorneys
                  Fees

              	
                28

              


      

      
 

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBITS
      AND SCHEDULES

     

    
      
        	
                Exhibit
                  A

              	
                Form
                  Consulting Agreement

              
	
                Exhibit
                  B

              	
                Form
                  Operating Agreement

              
	
                Schedule
                  1.1(a)

              	
                Excluded
                  Assets

              
	
                Schedule
                  1.1(b)

              	
                Knowledge
                  Parties

              
	
                Schedule
                  1.1(c)

              	
                Reorganization

              
	
                Schedule
                  2.3

              	
                Use
                  of Purchase Price Proceeds

              
	
                Schedule
                  2.8(f)

              	
                TOG’s
                  Governmental Approval

              
	
                Schedule
                  3.3

              	
                TOG’s
                  Non-Contravention; Permits and Third-Party Approvals

              
	
                Schedule
                  3.4

              	
                TOG’s
                  Governmental Approvals; Consents and Actions

              
	
                Schedule
                  3.5

              	
                TOG’s
                  Litigation

              
	
                Schedule
                  3.6

              	
                Permitted
                  LLC Interests Liens

              
	
                Schedule
                  4.3

              	
                Company’s
                  Non-Contravention; Permits and Third Party Approvals

              
	
                Schedule
                  4.4

              	
                Company’s
                  Actions and Orders

              
	
                Schedule
                  4.5

              	
                Company
                  Interests

              
	
                Schedule
                  4.6

              	
                Company’s
                  Financial Statements

              
	
                Schedule
                  4.7(a)

              	
                Certain
                  Liabilities

              
	
                Schedule
                  4.7(b)

              	
                Company’s
                  Non-Ordinary Course of Business

              
	
                Schedule
                  4.8

              	
                TOG’s
                  and the Company’s Litigation

              
	
                Schedule
                  4.9

              	
                Labor
                  Relations

              
	
                Schedule
                  4.11

              	
                Company’s
                  Bank Accounts

              
	
                Schedule
                  4.13

              	
                Company’s
                  Insurance

              
	
                Schedule
                  4.16

              	
                Company’s
                  Compliance with Laws; Permits

              
	
                Schedule
                  4.17(a)

              	
                Tax
                  Returns

              
	
                Schedule
                  4.17(h)

              	
                Partnership
                  Treatment

              
	
                Schedule
                  4.18

              	
                Company’s
                  Environmental

              
	
                Schedule
                  4.19(a)

              	
                Company’s
                  Material Contracts

              
	
                Schedule
                  4.19(b)

              	
                Affected
                  Material Contracts

              
	
                Schedule
                  4.20(a)

              	
                Company’s
                  Real Property Leases

              
	
                Schedule
                  5.3

              	
                Cheniere’s
                  Non-Contravention; Permits and Third Party Consents

              
	
                Schedule
                  5.5

              	
                Cheniere’s
                  Litigation

              
	
                Schedule
                  6.2

              	
                Operation
                  of the Business

              
	
                Schedule
                  6.2(k)

              	
                Capital
                  Expenditure

              


      

       

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    


    EQUITY
      PURCHASE AGREEMENT

     

     

    This
      Equity Purchase Agreement, dated
      as of September 28, 2007 (hereinafter this “Agreement”), is made by and
      among Tidelands Oil & Gas Corporation, a Nevada corporation (“TOG”),
      Frontera Pipeline, LLC, a Delaware limited liability company (the
“Company”) and Grand Cheniere Pipeline LLC, a Delaware limited liability
      company (“Cheniere”), and the joinder of Terranova Energia. S. de R.L. de
      C.V., a Mexican sociedad de responsabilidad limitada for purposes of
      Sections 2.8(k) and 6.5 (“Terranova”).  TOG, the Company,
      Cheniere, and Terranova are sometimes referred to herein as a “Party” and
      collectively as the “Parties”.

    


    WITNESSETH:

    WHEREAS,
      TOG owns one-hundred percent (100%) of all of the issued and outstanding limited
      liability company interests in the Company;

    


    WHEREAS,
      the Company, thorough the Subsidiaries (as defined below), 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, such project as more specifically set forth on
      Exhibit B of the Operating Agreement (the “Project”);
      and

    


    WHEREAS,
      subject to the terms and conditions of this Agreement, Cheniere desires to
      purchase from TOG, and TOG desires to sell to Cheniere, eighty percent (80%)
      of
      the total issued and outstanding equity interests in the Company (the “LLC
      Interests”).

    


    NOW,
      THEREFORE, in consideration of the premises and the mutual covenants
      and agreements contained herein and for other good and valuable consideration,
      the receipt and sufficiency of which are hereby acknowledged, intending to
      be
      legally bound, the Parties hereby agree as follows:

     

    Article
      I

    DEFINITIONS

     

     

    1.1  Certain
      Definitions.  As used in this Agreement, the following terms will
      have the respective meanings set forth below:

     

    “Acquired
      Companies” means the Company and the Subsidiaries.

     

    “Acquired
      Company Interests” shall have the meaning specified in Section
4.5.

     

    “Acquisition
      Transaction” means any offer or proposal for, or any indication of interest
      in, the direct or indirect purchase, lease or other acquisition or assumption
      of
      the LLC Interests or any membership interest in the Acquired Companies, or
      a
      sale of all or substantially all of the stock in TOG, a sale of all or
      substantially all of the assets of TOG or the Acquired Companies, or the sale
      of
      any of the Company Permits.

     

    “Action”
      means claim, action, litigation, suit, arbitration, proceeding, mediation,
      investigation or other legal or administrative proceeding.

     

    “Adjusted
      Purchase Price” shall have the meaning specified in Section
2.5.

     

    “Affiliate”
      of a Person shall mean any other Person that directly or indirectly, through
      one
      or more intermediaries, Controls, is Controlled by, or is under common Control
      with, such Person.

     

    “Agreement”
      shall have the meaning specified in the Preamble hereto.

     

    “Business
      Day” shall mean any day other than a Saturday, a Sunday or a day banks in
      Houston, Texas are authorized or required to be closed.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    “Cheniere”
      shall have the meaning specified in the Preamble hereto.

     

    “Cheniere
      Indemnified Parties” shall have the meaning specified in Section
7.2(a).

     

    “Cheniere
      Material Adverse Effect” shall mean any change or event that would
      materially and adversely impair or impact Cheniere’s ability to perform its
      obligations hereunder.

     

    “Closing”
      shall have the meaning specified in Section 2.4.

     

    “Code”
      shall mean the Internal Revenue Code of 1986, as amended, and any successor
      law.

     

    “Company
      Permits” shall have the meaning specified in Section
4.16

     

    “Control,”
      and its derivative expressions, shall mean the possession, directly or
      indirectly, of the power to direct or cause the direction of the management
      and
      policies of a Person, whether through the ownership of voting securities, by
      contract or otherwise.

     

    “Confidentiality
      Agreement” shall mean that certain confidentiality agreement entered into by
      and between TOG and Cheniere Pipeline Company, dated as of June 15,
      2007.

     

    “Consulting
      Agreement” shall mean a consulting agreement between the Company and TOG for
      the services of Robert W. Dowies, James B. Smith and Julio Bastarrachea in
      form
      and substance as attached hereto as Exhibit A.

     

    “Contract”
      shall mean any contract, agreement, indenture, note, bond, mortgage, loan,
      instrument, lease, license, commitment or other arrangement, understanding,
      undertaking, commitment or obligation, whether written or oral.

     

    “Corporate
      Records” means, with respect to each of the Acquired Companies, (i) the
      original corporate company books signed by its corporate officers and directors,
      including the members’ meeting minutes book, members registry book (Libro de
      Registro de Socios), capital variation registry book (Registro de
      Variaciones de Capital) and the board of managers’ meeting minutes book;
      (ii) minutes of members’ meetings duly signed by the applicable members,
      corporate officers and managers, with all the corresponding documents, including
      duly executed proxies and published calls; (iii) the public deeds (if
      applicable); and (iv) all documents and correspondence filed or received by
      Terranova with or from (A) the Public Registry of Commerce (Registro Público
      de Comercio) of its corporate domicile and (B) the Foreign Investment
      Registry (Registro Nacional de Inversiones Extranjeras).

     

    “CRE”
      shall mean the Mexican Energy Regulatory Commission (Comision Reguladora de
      Energia).

     

    “Environmental
      Laws” shall mean all Laws relating to the protection of the environment,
      natural resources or human health and safety, including but not limited to
      (i)
      the conservation, protection, contamination or remediation of natural resources,
      the air, water, groundwater, land, subsoil or the environment in general, (ii)
      any Release, including investigation and clean-up of such Release or threatened
      Release and (iii) the handling, storage, treatment, disposal, recycling or
      transportation of any Hazardous Materials, and such Laws including the
      Ecological Balance and Environmental Protection Act of Mexico (Ley General
      del Equilibrio Ecológico y la Protección al Ambiente) and the National
      Waters Act of Mexico (Ley de Aguas Nacionales), as such laws have been
      amended or supplemented, the regulations promulgated pursuant thereto and the
      corresponding environmental laws and regulations of the other states and
      municipalities of Mexico and the United States.

     

    “Exchange
      Act” shall mean the Securities Exchange Act of 1934, as amended, and the
      rules and regulations promulgated thereunder.

     

    “Excluded
      Assets” shall mean the assets described in Schedule
1.1(a), and all assets or properties transferred, assigned
      or
      sold by a Subsidiary pursuant to the Reorganization, as well as all other assets
      or properties previously owned by the Subsidiaries prior to the Closing but
      not
      owned by the Subsidiaries on the Mexican Project Closing Date.

     

    “Excluded
      Liabilities” shall mean all liabilities that are not specifically related to
      the Project owned by the Acquired Companies at Closing, including, specifically,
      all liabilities (contingent or not, known or unknown) related to or arising
      from
      Excluded Assets or relating to the Project and arising prior to the
      Closing.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    “Financial
      Statements” shall have the meaning specified in Section
4.6.

     

    “GAAP”
      shall mean United States or Mexico generally accepted accounting principles
      as
      of the date hereof applied on a consistent basis during the periods involved,
      as
      applicable depending on the jurisdiction of each of the Acquired Companies
      and
      under Law.

     

    “Governmental
      Entity” shall mean any federal, state, or local government within the United
      States of America or Mexico or any court of competent jurisdiction, regulatory
      or administrative agency or commission or other governmental entity or
      instrumentality, whether federal, state, or local, within the United States
      of
      America or Mexico, including any arbitrator or arbitral panel with respect
      to
      any matter subject to binding arbitration.

     

    “Hazardous
      Materials” shall mean any waste, pollutant, contaminant, hazardous
      substance, toxic, ignitable, reactive or corrosive substance, hazardous waste,
      special waste, chemical substance, industrial substance, by-product, petroleum
      or petroleum-derived substance or waste, whether in solid, liquid or gaseous
      form, or any constituent of any such substance, the generation, use, handling,
      treatment, remediation, storage, transportation, disposal, discharge, Release,
      existence or emission of which by the Acquired Companies are in any way governed
      by or subject to any applicable Environmental Law, including any and all
      hazardous substances, wastes and materials defined or regulated under any
      Environmental Law and any waste, material or substance which is
      (i) designated as “hazardous material” and/or “hazardous waste” pursuant to
      the Ecological Balance and Environmental Protection Act of Mexico (Ley
      General del Equilibrio Ecológico y la Protección al Ambiente),
      (ii) listed or characterized as hazardous under Mexican Official Norms
      NOM-052-ECOL-1993 and NOM-053-ECOL-1993 or (iii) any other hazardous waste,
      hazardous material, toxic substance, pollutant, hazardous substance, radioactive
      substance or waste, medical waste, petroleum or petroleum-derived substance
      or
      waste, asbestos, polychlorinated biphenyl, or any hazardous or toxic constituent
      thereof, and in general any substance or material that is of a corrosive,
      reactive, explosive, toxic, flammable or biologically infectious
      nature.

     

    “KIINERA”
      means Kiinera, S.A. de C.V., a company organized under the laws of Mexico,
      which
      main line of business is the performance of consulting services on the Mexican
      energy sector and is Controlled by Julio Bastarrachea.

     

    “Knowledge”
      shall mean the actual and current knowledge (which shall include such knowledge
      that a reasonably prudent person would have under similar circumstances) of
      (a)
      as to TOG, any of the Persons listed in Section (a) of Schedule
1.1(b) hereto and (b) as to Cheniere, any of the Persons
      listed in Section (b) of Schedule 1.1(b)
      hereto.

     

    “Law”
      shall mean any federal, state, local, municipal or foreign statute, law,
      ordinance, rule or regulation, Norma Oficial Mexicana, or other legal
      requirement or any published decision, opinion or interpretation thereof by
      any
      Governmental Entity of competent jurisdiction.

     

    “Liabilities”
      shall mean any debt, loss, damage, adverse claim, fines, penalties, liability,
      tax or obligation, including all costs and expenses relating thereto including
      all fees, disbursements and expenses of legal counsel, experts, engineers and
      consultants and costs of investigation.

     

    “Lien”
      shall mean, with respect to any asset, (i) any mortgage, deed of trust, lien,
      pledge, hypothecation, encumbrance, charge, security interest or other adverse
      claim in, on or of such asset, (ii) the interest of a vendor or a lessor under
      any conditional sale agreement, capital lease or title retention agreement
      (or
      any financing lease having substantially the same economic effect as any of
      the
      foregoing) relating to such asset and (iii) in the case of securities, any
      purchase option, right of first refusal, right of first offer, call or similar
      right of a third party with respect to such securities.

     

    “LLC
      Interests” shall have the meaning specified in the Recitals
      hereto.

     

    “Loss”
      and “Losses” shall have the meaning set forth in Section
7.2(a).

     

    “Material
      Adverse Effect” shall mean, with respect to TOG, the Acquired Companies or
      the Project, a material adverse effect on the assets, properties, financial
      condition or results of operations of the Acquired Companies, excluding any
      effect related to or resulting from (i) any event affecting the United States,
      Mexican or global economy or capital or financial markets generally, (ii) any
      change in conditions in the United States or Mexican natural gas storage and
      transportation business generally, including any changes in market value or
      prices for capital assets, commodities, goods or services within such business,
      and (iii) any change in Law or GAAP, or in the authoritative interpretations
      thereof or in regulatory guidance related thereto, or any revocation or
      cancellation of the Permits, or the commencement of an administrative proceeding
      to that effect.

     

    “Material
      Contracts” shall have the meaning specified in Section
4.19(a).

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    “Mexico”
      shall mean the United Mexican States (Estados Unidos
      Mexicanos).

     

    “Mexican
      Project Entities” shall mean the equity interests and all assets and permits
      of  Marea Associates L.P., Marea GP LLC and Terranova Energia S.R.L.
      de C.V.

     

    “Mexican
      Project Closing Date” shall have the meaning specified in Section
6.2.

     

    “Most
      Recent Balance Sheet” shall have the meaning specified in Section
4.6.

     

    “Operating
      Agreement” shall mean the Limited Liability Company Agreement of the Company
      in form and substance as attached hereto as Exhibit B.

     

    “Order”
      shall mean any judgment, decision, decree, order, settlement, injunction, writ,
      stipulation, determination or award, in each case to the extent binding and
      finally determined, made or given under the authority of any Governmental
      Entity.

     

    “Ordinary
      Course of Business” shall mean the ordinary and usual course of day-to-day
      operations of the business of the Acquired Companies, consistent with past
      practices and taken as a whole, and in accordance with applicable
      Law.

     

    “Parties”
      shall have the meaning specified in the Preamble hereto.

     

    “Party”
      shall have the meaning specified in the Preamble hereto.

     

    “Permit”
      shall mean any license, franchise, registration, permit, Order, approval,
      consent, waiver, variance, exemption or any other authorization of or from
      any
      Governmental Entity.

     

    “Permitted
      Exceptions” shall mean (i) all defects, exceptions, restrictions, easements,
      rights of way and encumbrances disclosed in policies of title insurance which
      have been delivered to Cheniere; (ii) statutory liens for current Taxes,
      assessments or other governmental charges not yet delinquent or the amount
      or
      validity of which is being contested in good faith by appropriate proceedings,
      provided an appropriate reserve has been established therefor; (iii)
      mechanics’, carriers’, workers’, and repairers’ Liens arising or incurred in the
      Ordinary Course of Business that are not material to the business, operations
      and financial condition of the Acquired Companies’ property so encumbered and
      that are not resulting from a breach, default or violation by an Acquired
      Company of any Contract or Law; and (iv) zoning, entitlement and other land
      use and environmental regulations by any Governmental Entity, provided
      that such regulations have not been violated.

     

    “Permitted
      LLC Interest Liens” shall mean (i) Liens set forth in Schedule
3.6; (ii) Liens for taxes, assessments and other charges of
      a
      Governmental Entity not yet due and payable; and (iii) restrictions on transfer
      arising under the Operating Agreement or by operation of Law.

     

     “Person”
      shall mean an individual, corporation, partnership, limited liability company,
      association, trust, incorporated organization, or other entity or group (as
      defined in Section 13(d)(3) of the Exchange Act).

     

    “Phase
      I” shall have the meaning set forth in the Operating Agreement.

     

    “Phase
      I FID Milestone Payment” shall have the meaning set forth in the Operating
      Agreement.

     

    “Phase
      I Royalty” shall have the meaning set forth in the Operating
      Agreement.

     

    “Phase
      II” shall have the meaning set forth in the Operating
      Agreement.

     

    “Phase
      II FID Milestone Payment” shall have the meaning set forth in the Operating
      Agreement.

     

    “Phase
      II Royalty” shall have the meaning set forth in the Operating
      Agreement.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    “Phase
      III FID Milestone Payment” shall have the meaning set forth in the Operating
      Agreement.

     

    “Phase
      III Royalty” shall have the meaning set forth in the Operating
      Agreement.

     

    “Project”
      shall have the meaning specified in the Recitals hereto.

     

    “Project
      Documentation” shall have the meaning specified in Section
2.6.

     

    “Purchase
      Price” shall have the meaning specified in Section
2.2.

     

    “Real
      Property Interests” shall have the meaning specified in Section
4.20.

     

    “Related
      Person” shall have the meaning specified in Section
4.22.

     

    “Release”
      shall mean the release, spill, discharge, emission, leaking, pumping, injection,
      deposit, disposal, discharge, dispersal, leaching or migrating into the indoor
      or outdoor environment of any contaminant through or in the air, soil, subsoil,
      water, underground water or real property.

     

    “Reorganization”
      shall mean the establishment and formation of certain corporate
      entities  and the divesture or transfer of certain assets or interests
      to or from the Subsidiaries (all corporate entities, transfers, divestitures
      and
      procedures as more specifically described in Schedule
1.1(c).

     

    “Securities
      Act” shall have the meaning specified in Section
5.7.

     

    “Subsidiaries”
      shall mean Sonora Pipeline L.L.C., Marea Associates L.P., Marea GP LLC and
      Terranova Energia S.R.L. de C.V.

     

    “Survival
      Period” shall have the meaning specified in Section
7.1.

     

    “Taxes”
      shall mean any and all taxes, charges, duties, fees, levies, tariffs, imposts
      and other charges of any kind (together with any and all interest, penalties
      or
      additions associated therewith) imposed by any Governmental Entity, including:
      taxes or other charges on or with respect to income (Impuesto Sobre la
      Renta), assets (Impuesto al Activo), franchises, capital stock,
      real property (including Impuesto Predial and Contribuciones por
      Mejoras), personal property, tangible, employment, payroll, windfall or
      social security contributions (contribuciones al Instituto Mexicano del
      Seguro Social), social contribution, unemployment compensation, retirement
      fund quotas (contribuciones al Sistema de Ahorro para el Retiro),
      disability, transfer, sales, use, excise, gross receipts, Mexican Housing Fund
      Institute contributions (contribuciones al Infonavit) and value added
      tax (Impuesto al Valor Agregado); taxes imposed or levied on the use
      and exploitation of public domain natural resources or for public services
      (Pagos de Derechos); taxes or other charges in the nature of excise,
      withholding, ad valorem, stamp, transfer or gains taxes; license, registration
      and documentation fees; customs duties, tariffs and similar charges; and all
      other taxes of any kind for which the Acquired Companies may have any liability
      imposed by any Governmental Entity, whether disputed or not, and any charges,
      interest or penalties imposed by any Governmental Entity in connection
      therewith

     

    “Tax
      Return” shall mean any return, report or statement required to be filed with
      respect to any Tax (including any elections, declarations, schedules or
      attachments thereto, and any amendment thereof) including any information
      return, claim for refund, amended return or declaration of estimated Tax, and
      including, where permitted or required, combined, consolidated or unitary
      returns for any group of entities that includes the Acquired
      Companies.

     

    “Terranova”
      shall have the meaning specified in the Preamble hereto.

     

    “Third-Party
      Approvals” shall mean any approval, consent, waiver, variance, exemption or
      any other authorization of or from any Person that is not a Governmental Entity
      or an Affiliate of the Person seeking such Third-Party Approval.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    “Third
      Party Claim” shall have the meaning specified in Section
7.3(b).

     

    “TOG”
      shall have the meaning specified in the Preamble hereto.

     

    “TOG
      Indemnified Parties” shall have the meaning specified in Section
7.2(c).

     

    “US-Mexico
      Tax Treaty” shall mean the Convention Between the Government of the United
      States of America and the Government of the United Mexican States for the
      Avoidance of Double Taxation and the Prevent of  Fiscal Evasion with
      respect to Taxes on Income.

     

    1.2  Interpretation.  When
      reference is made in this Agreement to a Section, such reference shall be to
      a
      Section of this Agreement unless otherwise indicated.  The headings
      contained in this Agreement are for convenience of reference only and shall
      not
      affect in any way the meaning or interpretation of this
      Agreement.  For purposes of this Agreement, (a) words in the singular
      will be deemed to include the plural and vice versa and words of one gender
      shall be deemed to include the other gender as the context requires, (b) the
      terms “hereof”, “herein”, “herewith” and “hereunder” and words of similar import
      shall, unless otherwise stated, be construed to refer to this Agreement as
      a
      whole and not to any particular provision of this Agreement, (c) the words
      “include”, “includes” and “including” shall be deemed to be followed by the
      words “without limitation” and (d) captions to articles, sections and
      subsections of, and schedules and exhibits to, this Agreement are included
      for
      convenience and reference only and shall not constitute a part of this Agreement
      or affect the meaning or construction of any provision hereof.  This
      Agreement shall be construed without regard to any presumption or rule requiring
      construction or interpretation against the Party drafting or causing any
      instrument to be drafted.

     

    Article
      II

    PURCHASE
      AND SALE OF LLC INTERESTS, CONSIDERATION AND CLOSING

     

     

    2.1  Purchase
      and Sale of Equity Interests.  In accordance with the terms and
      subject to this Agreement, Cheniere agrees to purchase the LLC Interests and
      TOG
      agrees to sell to Cheniere the LLC Interests free and clear of any Liens other
      than Permitted LLC Interest Liens.

     

    2.2  Consideration  In
      consideration for the purchase and sale of the LLC Interests and subject to
      the
      Purchase Price allocations set forth in Section 2.3, at Closing,
      Cheniere shall pay to TOG the sum of US$1,000,000 (the “Purchase Price”)
      and TOG shall transfer to Cheniere the LLC Interests.  Subject to
Section 2.3, the Purchase Price shall be payable by wire transfer
      of immediately available funds to an account(s) provided in writing by TOG
      to
      Cheniere.

     

    2.3  Use
      of
      Purchase Price Proceeds. The Purchase Price actually payable to TOG under
Section 2.2 shall be reduced by a sum equal to the total
      liabilities (including contingent liabilities) as reflected in the Financial
      Statements of the Acquired Companies.  The proceeds of such reduction
      shall be allocated by Cheniere, on behalf of TOG, to reduce all liabilities
      of
      the Acquired Companies or to establish appropriate reserves for contingent
      liabilities in the account(s) of the Acquired Companies, so that as soon as
      practicable after the Closing, Cheniere, on behalf of TOG, shall pay, cancel
      or
      reserve (as applicable) those liabilities set forth in the Financial Statements
      of the Acquired Companies and as more specifically set forth on Schedule
2.3.

     

    2.4  Closing.  The
      closing of the purchase and sale of the LLC Interests contemplated by this
      Agreement (the “Closing”) shall take place at the offices of King &
Spalding LLP, 1100 Louisiana Street, Suite 4000, Houston, Texas
      77002.

     

    2.5  Purchase
      Price Adjustments. The Phase I FID Milestone Payment, the Phase II FID
      Milestone Payment and the Phase III FID Milestone Payment by Cheniere to TOG
      pursuant to the Operating Agreement shall be treated as adjustments to the
      Purchase Price paid under this Agreement pursuant to Section 2.2
      (the Purchase Price and each of such payments and collectively all of such
      payments the “Adjusted Purchase Price”).

     

    2.6  Assignment
      of Project Documents.  At the Closing, for no additional
      consideration, TOG hereby assigns to the Company all title, right and interest
      in all technical, mechanical, geological, economic and financial information,
      including works in progress, associated with or related to the Project that
      as
      of the date hereof are owned by TOG and its Affiliates (other than the
      Subsidiaries) (the “Project Documentation”).  To the extent any
      of the Project Documentation was created in Mexico or is subject to the Laws
      of
      Mexico, the terms of Article 30 of the Mexican Ley Federal del Derecho de
      Autor shall apply and the assignment of such rights (except for those moral
      rights (derechos morales) not assignable thereunder) shall be valid
      from the Closing and for a period of fifteen (15) years thereafter, which term
      shall automatically renew (for indefinite consecutive terms of fifteen (15)
      years each) unless terminated by the Company through written notice to TOG
      at
      any time prior to or after the extension of any term thereof.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    2.7  Cheniere
      Deliveries.  At the Closing, Cheniere shall deliver to
      TOG:

    
       

                  (a)  a
        certificate confirming the good standing of Cheniere from the Secretary of
        State
        of the State of Delaware, dated within ten (10) Business Days of the
        Closing;

       

                  (b)  a
        copy of
        the certificate of formation of Cheniere, as amended, certified as of a date
        not
        earlier than ten (10) Business Days prior to the Closing;

       

                  (c)  a
        duly
        executed resolution of the managers of Cheniere approving
        the transactions contemplated in this Agreement;

       

                  (d)  a
        receipt
        acknowledging receipt of the LLC Interests being transferred by the
        TOG;

       

                  (e)  a
        certificate confirming the delivery of wire instructions for the delivery
        of
        one-hundred percent (100%) of the Purchase Price to TOG’s account as provided in
Section 2.2 or to the creditors in the respective
        amounts listed on Schedule 2.3;

       

                  (f)  a
        signed
        counterpart to the Consulting Agreement;

       

                  (g)  a
        signed
        counterpart to the Operating Agreement; and

       

                  (h)   other
        agreements, documents and instruments as are reasonably required to be delivered
        by Cheniere at or prior to the Closing pursuant to this Agreement or otherwise
        reasonably required in connection herewith, including all such other instruments
        as TOG, the Company or their respective counsel may reasonably request in
        connection with the purchase and sale of the LLC Interests contemplated
        hereby. 

    

     

    2.8  Deliveries
      of TOG and the Company.  At the Closing, the Company and TOG (as
      applicable) shall deliver to Cheniere:

    
                  

                  (a)  a
        certificate confirming the good standing of TOG from the Secretary of State
        of
        the State of Nevada, dated within ten (10) Business Days of the
        Closing;

                  

                  (b)  a
        copy of
        the bylaws of TOG, as amended, certified as of a date not earlier than ten
        (10)
        Business Days prior to the Closing;

       

                  (c)  a
        certificate confirming the good standing of the Company from the Secretary
        of
        State of the State of Delaware, dated within ten (10) Business Days of the
        Closing;

       

                  (d)  a
        duly
        executed resolution of the directors of TOG approving the transfer of the
        LLC
        Interests and the Mexican Project Entities;

                  

                  (e)  a
        duly
        executed certificate of the LLC Interests in a form and substance reasonably
        satisfactory to Cheniere, free and clear of all Liens other than Permitted
        LLC
        Interest Liens;

       

                  (f)       
        a
        receipt
        acknowledging receipt of one-hundred percent (100%) of the Purchase Price
        at
        Closing pursuant to Section 2.2;

       

                  (g)  a
        signed
        counterpart to the Operating Agreement;

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

                  (h)      
        a
        signed
        counterpart to the Consulting Agreement;

       

                  (i)       
        a
        written
        release executed by Julio Bastarrachea and KIINERA acknowledging: (i) the
        non-existence of a current or past employee/employer relationship with the
        Acquired Companies and (ii) payment in full of all consulting fees performed
        on
        behalf of the Acquired Companies, and releasing the Acquired Companies and
        Cheniere from any Liabilities whatsoever in connection with such
        services;

       

                  (j)       
        unanimous
        written resolutions approving the transfers of interests in the Mexican Project
        Entities, in form and substance reasonably satisfactory to
        Cheniere, as required to undertake the Reorganization upon
        the written approval of the CRE allowing for Cheniere’s indirect participation
        in the Project;

       

                  (k)  an
        irrevocable power of attorney of Terranova, in form and substance reasonably
        satisfactory to Cheniere, pursuant to which Terranova grants to Cheniere
        and its
        designees a broad power of attorney to perform all obligations of Terranova
        under Section 6.5(a) of this Agreement. As required under the
        applicable provisions of the Mexican Codigo Civil Federal, the granting
        and delivery of this irrevocable power of attorney to Cheniere and its designees
        will be a condition precedent for the validity of this Agreement;

       

                  (l)       
        the
        books
        and records of the Acquired Companies, including updated Corporate
        Records;

       

                  (m)     
        an
        affidavit of non-foreign status that complies with Section 1445 of the Code
        and
        Treasury Regulations Section 1.1445-2(b)(2);

       

                  (n)     
        originals
        of all Permits (including all applications filed by any of the Acquired
        Companies with any Governmental Entity, whether or not such filings resulted
        in
        the issuance or denial of a permit) and Project Documentation;

       

                  (o)      
        certificates
        of account status issued by the Comptroller of the State of Texas for all
        Acquired Companies (other than any Acquired Company that is a limited
        partnership) doing business in Texas;

       

                  (p)      
        copy
        of
        IRS Form 8832 executed on behalf of Terranova electing to treat that entity
        as a
        disregareded entity for U. S. tax purposes under Treasury Regulations Section
        301.7701-3 of the Code, as amended; and

       

                  (q)      
        such
        other agreements, documents and instruments as are reasonably required to
        be
        delivered by TOG or the Acquired Companies at or prior to the Closing pursuant
        to this Agreement or otherwise reasonably required in connection herewith,
        including all such other instruments as Cheniere or its counsel may reasonably
        request in connection with the purchase and sale of the LLC Interests
        contemplated hereby.

    

     

    
      .

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Article
      III

    REPRESENTATIONS
      AND WARRANTIES RELATING TO TOG

     

    TOG
      represents and warrants to Cheniere as follows:

     

    3.1  Due
      Organization and Power of TOG.  TOG is duly organized, validly
      existing and in good standing under the laws of Nevada and has the requisite
      company power and authority to conduct its business as it is now being
      conducted, and to own, lease and operate its assets and
      properties.  TOG is duly authorized, qualified or licensed to do
      business and is in good standing in every jurisdiction wherein the failure
      to be
      so qualified would, individually or in the aggregate, have a Material Adverse
      Effect.

     

    3.2  Authorization
      and Validity of Agreement.  The Execution and delivery of this
      Agreement and the consummation of the transactions contemplated hereby have
      been
      duly authorized by all requisite company action by TOG, and TOG has full company
      power, authority and legal capacity to execute and deliver this Agreement and
      to
      perform its obligations hereunder.  This Agreement has been duly
      executed and delivered by TOG.  This Agreement constitutes, or upon
      execution and delivery will constitute, the valid, legal and binding obligation
      of TOG enforceable against TOG in accordance with its terms except as
      enforceability may be limited by bankruptcy, insolvency or other similar Laws
      affecting the enforcement of creditors’ rights generally and subject to general
      principles of equity.

     

    3.3  Non-Contravention.  The
      execution and delivery by TOG of this Agreement does not, and the consummation
      by TOG of the transactions contemplated hereby and the performance of its
      obligations hereunder will not (a) violate or conflict with any provision of
      the
      certificate of incorporation or bylaws of TOG or (b) assuming that all Permits
      and Third-Party Approvals set forth in Schedule 3.3 hereto, have been
      obtained or made: (i) violate any Law or Order to which TOG is subject; or
      (ii)
      constitute a breach or violation of, or default under, or trigger any “change of
      control” rights or remedies under, or give rise to any Lien (other than
      Permitted Exceptions), acceleration of remedies, any buy-out right or any rights
      of first offer or refusal or termination under, any indenture, mortgage, lease,
      note, or other contract or other instrument to which TOG is a party or by which
      TOG’s assets are bound.

     

    3.4  Governmental
      Approvals; Consents and Actions.  Except as set forth in
Schedule 3.4 hereto, no Permit or approval from any Governmental Entity
      or Third-Party Approval is required on the part of TOG in connection with the
      execution and delivery of this Agreement or the consummation of the transactions
      contemplated hereby or thereby, except for such Permits, governmental approvals,
      or Third-Party Approvals of which the failure to obtain would not, individually
      or in the aggregate, have a Material Adverse Effect.

     

    3.5  Litigation.  Except
      as set forth in Schedule 3.5, TOG has received no notice of (a)
      Orders against TOG or any of its Affiliates or (b) pending or threatened Actions
      relating to the Acquired Companies which would have a Material Adverse
      Effect.

     

    3.6  LLC
      Interests.

    
                  

                  (a)  The
        LLC
        Interests being sold by TOG to Cheniere have been validly issued and are
        fully
        paid and nonassessable.  TOG has the full company power, right and
        authority to issue and convey such LLC Interests to Cheniere and the LLC
        Interests are not being transferred in violation of any purchase or call
        option,
        right of first refusal, subscription right, preemptive right or any similar
        rights.

       

                  (b)  Except
        for Permitted LLC Interest Liens, there are no outstanding options, warrants
        or
        other rights of any kind including any restrictions on transfers, relating
        to
        the sale, issuance or voting of such LLC Interests or any securities convertible
        into or evidencing the right to purchase such LLC Interests.

       

                  (c)  Upon
        Closing, Cheniere shall have good and indefeasible title to such LLC Interests,
        free and clear of any Liens, restrictions on transfer and voting or preemptive
        rights, other than Permitted LLC Interest Liens.
 

    

    3.7  Finders;
      Brokers.  There are, and after Closing there will be, no Claims
      (or any basis for any Claims) upon Cheniere or the Company for brokerage
      commissions, finder's fees or like payments in connection with this Agreement
      or
      the transactions contemplated hereby resulting from any action taken by TOG
      or
      by any other Person on TOG’s behalf.

     

    3.8  Bankruptcy.  TOG
      and its Affiliates are not subject to any pending bankruptcy proceeding, TOG
      and
      its Affiliates are not contemplating a bankruptcy proceeding, and to TOG’s
      Knowledge, no bankruptcy proceeding is contemplated by any third party, in
      which
      TOG, its Affiliates (or any guarantor of TOG or its Affiliates) would be
      declared insolvent or subject to the protection of any bankruptcy, receivership
      or reorganization laws or procedures.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    


    Article
      IV

    REPRESENTATIONS
      AND WARRANTIES RELATING TO THE ACQUIRED COMPANIES

     

    TOG
      represents and warrants to Cheniere as follows:

     

    4.1  Due
      Organization and Power of the Acquired Companies.  Each of the
      Acquired Companies is duly organized, validly existing and in good standing
      under the laws of jurisdiction of its formation and has the requisite power
      and
      authority to conduct its business as it is now being conducted, and to own,
      lease and operate its assets and properties.  Each of the Acquired
      Companies is duly authorized, qualified or licensed to do business and is in
      good standing in every jurisdiction wherein the failure to be so qualified
      would, individually or in the aggregate, have a Material Adverse
      Effect.

     

    4.2  Authorization
      and Validity of Agreement.  The execution and delivery of this
      Agreement and the consummation of the transactions contemplated hereby have
      been
      duly authorized by all requisite limited liability company action by the
      Company, and the Company has full limited liability company power, authority
      and
      legal capacity to execute and deliver this Agreement and to perform its
      obligations hereunder.  This Agreement has been duly executed and
      delivered by the Company.  This Agreement constitutes, or upon
      execution and delivery will constitute, the valid, legal binding obligation
      of
      the Company enforceable against the Company in accordance with its terms except
      as enforceability may be limited by bankruptcy, insolvency or other similar
      Laws
      affecting the enforcement of creditors’ rights generally and subject to general
      principles of equity.

     

    4.3  Non-Contravention.  The
      execution and delivery of this Agreement by the Company, and the consummation
      by
      the Company of the transactions contemplated hereby and the performance of
      its
      obligations hereunder will not (a) violate or conflict with any provision of
      the
      certificate of formation or limited liability company agreement of the Company
      or (b) assuming that all Permits and Third-Party Approvals set forth in
Schedule 4.3 hereto have been obtained or made: (i) violate any
      Law or Order to which the Acquired Companies are subject; or (ii) constitute
      a
      breach or violation of, or default under, or trigger any “change-in-control”
rights or remedies under, or give rise to any Lien (other than Permitted
      Exceptions), acceleration of remedies, any buy-out right or any rights of first
      offer or refusal or of termination under, any Contract to which any Acquired
      Company is a party or by which the assets of an Acquired Company are
      bound.

     

    4.4  Governmental
      Approvals. Except as set forth on Schedule 4.4 hereto, no
      Action or Order is pending or to the Knowledge of TOG and the Company threatened
      against the Acquired Companies.  Except as set forth in Schedule
4.4 hereto, no Permit from any Governmental Entity or Third-Party
      Approval is required on the part of the Acquired Companies in connection with
      the execution and delivery of this Agreement or the consummation of the
      transactions contemplated hereby.

     

    4.5  Capitalization.  As
      of the date hereof, the outstanding membership interests or the partnership
      interests, as applicable, of the Acquired Companies are set forth in Schedule
4.5 (“Acquired Company Interests”).  All of the
      issued and outstanding Acquired Company Interests were duly authorized for
      issuance and are validly issued, fully paid and non-assessable and were not
      issued in violation of any purchase or call option, right of first refusal,
      subscription right, preemptive right or any similar rights.  All of
      the outstanding Acquired Company Interests are owned of record by the holders
      and in the respective amounts as are set forth on Schedule
4.5(a).  There has not been any declaration, setting
      aside or payment of any dividend or other distribution in respect of any
      Acquired Company Interests or any repurchase, redemption or other acquisition
      by
      any Acquired Company of any Acquired Company Interests or other securities
      of,
      or other ownership interest in, the Acquired Companies.  After giving
      effect to Reorganization and the obligations of TOG pursuant to Section
6.1, all of the outstanding Acquired Company Interests will be
      owned
      of record by the holders and in the respective amounts as are set forth on
      Schedule 4.5(b).

     

    4.6  Financial
      Statements. Schedule 4.6contains a copy of the (i)
      consolidated audited balance sheet of TOG (including the financial condition
      of
      the Acquired Companies) as of December 31, 2006, and related statement of income
      for the year then ending  (the “Most Recent Balance Sheet”),
      (ii) the unaudited consolidated balance sheet of TOG as of June 30, 2007, and
      (iii) the unaudited financial statements of Terranova as of December 31, 2006
      and as of June 30, 2007 (collectively, the “Financial
      Statements”).  Except as set forth on
Schedule 4.6, each of the Financial Statements is complete
      and correct in all material respects, has been prepared in accordance with
      GAAP
      (U.S. or Mexico, as applicable depending on the jurisdiction of each of the
      Acquired Companies) consistently applied without modification of the accounting
      principles used in preparation thereof throughout the periods presented, and
      in
      accordance with, the books and records of the Acquired Companies (including
      the
      Corporate Records); provided, however, that the unaudited financial statements
      lack footnotes and other presentation items required by GAAP.  Each
      Financial Statement presents fairly in all material respects the consolidated
      financial position, results of the operations and cash flows of the respective
      Acquired Company as of the dates and for the respective periods
      indicated.  Schedule 2.3 contains all of the outstanding debts and
      contingent liabilities of the Acquired Companies. As of the Closing Date, after
      giving effect to Section 2.3, the Company and Sonora Pipeline L.L.C. will be
      debt free. As of the Mexican Project Closing Date, after giving effect to
      Section 2.3, the Mexican Project Entities will be debt free.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    4.7  Absence
      of Undisclosed Liabilities; Absence of Changes.

    
       

                  (a)  The
        Acquired Companies have no Liabilities that would be required to be reflected
        on
        the Financial Statements in accordance with GAAP, other than those: (i) set
        forth in the Most Recent Balance Sheet; (ii) incurred in the Ordinary Course
        of
        Business since the date of the Most Recent Balance Sheet; and (iii) specified
        in
Schedule 4.7(a).

       

                  (b)  Except
        as
        expressly contemplated by this Agreement or as set forth on
Schedule 4.7(b), since the date of the Most Recent Balance
        Sheet (i) the Acquired Companies have conducted their business only in the
        Ordinary Course of Business and (ii) there has not been any event, change,
        occurrence or circumstance that, individually or in the aggregate with any
        such
        events, changes, occurrences or circumstances, has had or could reasonably
        be
        expected to have, individually or in the aggregate, a Material Adverse
        Effect. 

    

     

    4.8  Litigation.  Except
      as set forth in Schedule 4.8, there is no Action pending or
      threatened against the Acquired Companies (or pending or threatened, against
      any
      of the officers, managers or employees of the Acquired Companies with respect
      to
      their business activities on behalf of the Acquired Companies), or to which
      an
      Acquired Company is otherwise a party before any Government Entity; nor is
      there
      any reasonable basis for any such Action.  Except as set forth on
Schedule 4.8, each Acquired Company is not subject to any Order,
      and each Acquired Company is not in breach or violation of any
      Order.  Except as set forth on Schedule 4.8, each
      Acquired Company is not engaged in any legal action to recover monies due it
      or
      for damages sustained by it.  There are no Actions pending or
      threatened against any Acquired Company or to which the Acquired Companies
      are
      otherwise a party relating to this Agreement or the transactions contemplated
      hereby.

     

    4.9  Labor
      Relations. Except as set forth in Schedule 4.9, none of the
      Acquired Companies (i) has or had any employees, or (ii) is a substitute
      employer or otherwise liable for any labor liability. No written notice, claim
      or warning has been received from any Governmental Entity to the effect that
      any
      Acquired Company has improperly classified an individual as an independent
      contractor.  No employee or independent contractor of the Acquired
      Companies or one of its Affiliates has commenced or threatened to commence
      a
      labor claim (including any claim for wages, salary or other benefits) against
      any of the Acquired Companies.

     

    4.10  Books
      of Accounts. TOG has made available to Cheniere all books and records and
      accounts of the Acquired Companies for the three (3) full calendar years
      preceding the Closing. Such books, records and accounts of the Acquired
      Companies are true, correct and complete and fairly reflect, in reasonable
      detail, in all material respects the transactions and the assets and liabilities
      of the Acquired Companies and are in compliance in all material respects with
      applicable Law; and during such period, none of the Acquired Companies have
      engaged in any material transaction, maintained any bank account or used funds,
      except for transactions, bank accounts and funds which have been and are
      reflected in the normally maintained books and records of the Acquired
      Companies.

     

    4.11  Bank
      Accounts. Schedule 4.11 sets forth an accurate and complete
      list showing the name and address of each bank in which each Acquired Company
      has an account or safe deposit box, the number of any such account or box,
      the
      purpose of any such account or box and the names of all individuals authorized
      to draw thereon or that have access thereto

     

    4.12  Corporate
      Records. TOG has made available for review by Cheniere true, correct and
      complete Corporate Records.  The Corporate Records, all of which have
      been made available to Cheniere, are true, and correct in all material respects
      and have been maintained in accordance with sound business practices and the
      requirements of applicable Laws.  All necessary corporate approvals,
      if any, for entering into this Agreement, consummating the transactions
      hereunder, and for the Reorganization, are or will be duly set forth in the
      Corporate Records.  The Corporate Records, reflect (and
      post-Reorganization will reflect) in all material respects the current corporate
      standing of each Acquired Company. 

     

    4.13  Insurance.
      Schedule 4.13 contains a true, correct and complete list of all
      insurance policies carried by or for the benefit of the Acquired Companies
      during the last three (3) full calendar years and the amount of all claims
      outstanding or paid with respect to such insurance
      policies.  

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    4.14  Ethical
      Practices. Neither TOG nor the Acquired Companies or any of their respective
      representatives have, in violation of Laws, offered or given or, to TOG’s or the
      Company’s  Knowledge, has any Person offered or given on behalf of the
      Acquired Companies in violation of Laws, anything of value to: (i) any official
      of a Governmental Entity, any political party or official thereof, or any
      candidate for political office; (ii) any customer or member of the government;
      or (iii) any other Person, in any such case while knowing or having reason
      to
      know that all or a portion of such money or thing of value may be offered,
      given
      or promised, directly or indirectly, to any customer, member of the government
      or candidate for political office for the purpose of the following: (x)
      influencing any action or decision of such Person, in his or its official
      capacity, including a decision to fail to perform his or its official function;
      (y) inducing such Person to use his or its influence with any government or
      instrumentality thereof to affect or influence any act or decision of such
      government or instrumentality in order to assist the Acquired Companies in
      obtaining or retaining business for, or with, or directing business to, any
      Person; or (z) where such payment would constitute a bribe, kickback or illegal
      or improper payment in order to assist the Acquired Companies in obtaining
      or
      retaining business for, or with, or directing business to, any
      Person.

     

    4.15  No
      Other Representations or Warranties.  Cheniere, the Company and
      TOG covenant and agree that:

     

    
      


                  (a)  EXCEPT
        FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE III AND THIS
        ARTICLE
        IV, NEITHER OF TOG OR THE COMPANY MAKE ANY OTHER REPRESENTATION OR WARRANTY,
        WHETHER EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, ON BEHALF OF TOG OR THE
        COMPANY, INCLUDING AS TO THE PROBABLE SUCCESS OR PROFITABILITY OF THE OWNERSHIP,
        USE OR OPERATION OF THE ACQUIRED COMPANIES OR THE PROJECT, BY CHENIERE AFTER
        THE
        CLOSING, INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO MERCHANTABILITY OR
        FITNESS FOR ANY PARTICULAR PURPOSE, AND ANY SUCH OTHER REPRESENTATIONS OR
        WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.

       

                  (b)  IN
        NO
        EVENT SHALL THE STIPULATIONS PROVIDED IN SUBSECTION (A) ABOVE, BE CONSTRUED
        TO
        NEGATE ANY COMMON LAW TORT CLAIMS FOR FRAUD OR INTENTIONAL
        MISREPRESENTATION. 

    

     

    4.16  Compliance
      with Laws. Schedule 4.16 contains a list of all material
      Permits which are required for the operation of the Project (“Company
      Permits”) other than those the failure of which to possess does not create a
      Material Adverse Effect.  Except as set forth on
Schedule 4.16, the Acquired Companies currently have all
      Permits which are required for the commencement of Phase I and Phase II of
      the
      Project other than those the failure of which to possess is
      immaterial.  Each Acquired Company is not in default or violation, and
      no event has occurred which, with notice or the lapse of time or both, would
      constitute a default or violation, in any material respect of any term,
      condition or provision of any Permit, and to the Knowledge of TOG, there are
      no
      facts or circumstances which could form the basis for any such default or
      violation.  Except as set forth in Schedules 3.4 and
4.4, none of the Permits will be impaired or in any way
      affected by the
      consummation of the transactions contemplated by this Agreement

     

    4.17  Taxes.

    
       

                  (a)  (i)
        All
        Tax Returns required to be filed by or on behalf of the Acquired Companies
        have
        been duly and timely filed with the appropriate Governmental Entity in all
        jurisdictions in which such Tax Returns are required to be filed (after giving
        effect to any valid extensions of time in which to make such filings), and
        all
        such Tax Returns are true, complete and correct in all material respects;
        and
        (ii) all Taxes payable by or on behalf of the Acquired Companies have been
        fully
        and timely paid or are being contested in good faith as set forth in Schedule
4.17(a).  With respect to any period for which Tax Returns
        have not yet been filed or for which Taxes are not yet due or owing, the
        Acquired Companies have made due and sufficient accruals for such Taxes in
        their
        books and records.

       

                  (b)  The
        Acquired Companies have complied in all material respects with all applicable
        Laws relating to the payment and withholding of Taxes and have duly and timely
        withheld and paid over to the appropriate Governmental Entity all amounts
        required to be so withheld and paid under all applicable Laws.

       

                  (c)  All
        deficiencies asserted or assessments made as a result of any examinations
        by any
        Governmental Entity of the Tax Returns of, or including, the Acquired Companies
        have been fully paid or satisfied, and there are no other audits or
        investigations by any Governmental Entity in progress, nor has any Acquired
        Company or TOG received any written notice from any Governmental Entity that
        it
        intends to conduct such an audit or investigation.

       

                  (d)  No
        Acquired Company has (i) requested any extension of time within which to
        file
        any Tax Return, which Tax Return has since not been filed, or (ii) granted
        any
        extension for the assessment or collection of Taxes, which Taxes have not
        since
        been paid.

       

                  (e)  No
        Acquired Company is a party to any tax sharing, allocation, indemnity or
        similar
        agreement or arrangement (whether or not written) pursuant to which it will
        have
        any obligation to make any payments after the Closing.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

                 

                   (f)  There
        are
        no Liens as a result of any unpaid Taxes upon any of the assets of the Acquired
        Companies, other than Liens for Taxes not yet due and payable or taxes being
        contested in good faith by appropriate proceedings.

       

                  (g)  The
        Acquired Companies have disclosed on their Tax Returns all positions taken
        therein that could give rise to a substantial understatement of federal income
        tax within the meaning of Section 6662 of the Code.

       

                  (h)  Except
        as
        set forth on Schedule 4.17(h), each Acquired Company is, and has been,
        since its inception, an entity disregarded as separate from its owner within
        the
        meaning of Treasury Regulations Section 301.7701-2(c)(2)(i) for U.S. Tax
        purposes and (ii) no Person has ever made any election to have any Acquired
        Company treated other than as an entity disregarded as separate from its
        owner
        within the meaning of Treasury Regulation Section 301.7701-2(c)(2)(i) for
        U.S.
        Tax purposes or has taken a position inconsistent with such
        treatment.

       

                  (i)  There
        have been no sales or exchanges (within the meaning of Section 708(b) of
        the
        Code) of any interest in any Acquired Company in the twelve-month period
        preceding the Closing.

       

                  (j)  Marea
        Associates L.P. is a US Tax resident covered by the protections afforded
        under
        the US-Mexico Tax Treaty.

       

                  (k)  Rio
        Bravo
        LLC is a disregarded entity for US Tax purposes and any prior Tax filing
        for
        Marea Associates L.P. was erroneously filed.

                  

                  (l)  The
        representations and warranties set forth in this Section 4.17 are the
        exclusive representations and warranties with respect to Taxes.  Other
        provisions of this Article IV shall be interpreted to apply only to matters
        other than Taxes. 

    

     

    4.18  Environmental.  Except
      as set forth in Schedule 4.18, (a) each Acquired Company is and
      has been in material compliance with all Environmental Laws, which compliance
      includes obtaining, maintaining and complying with all Permits required by
      Environmental Laws for the current operations of the Acquired Companies, and
      no
      facts, circumstances or conditions currently exist with respect to TOG, the
      Acquired Companies or any of their current or past assets or operations
      (including the Project) that would reasonably be expected to prevent TOG and
      the
      Acquired Companies from maintaining such compliance; (b) no Action is pending
      or, to the Knowledge of TOG, threatened against TOG, the Acquired Companies
      or
      any of their current and past assets or operations (including the Project)
      alleging non-compliance with or liability under Environmental Laws; (c) no
      Orders have been issued to TOG or the Acquired Companies under Environmental
      Laws, which are outstanding; (d) there has been no release of Hazardous
      Materials by TOG or the Acquired Companies or relating to the current and past
      assets or operations of the Acquired Companies or TOG that would reasonably
      be
      expected to result in any Acquired Company incurring Liability under
      Environmental Laws; and (e) no conditions currently exist with respect to TOG,
      the Acquired Companies or any of their current and past assets or operations
      (including the Project) that would reasonably be expected to result in TOG
      or
      any Acquired Company incurring Liabilities under Environmental
      Laws.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    4.19  Material
      Contracts.

     

    
      


                  (a)  Schedule
        4.19(a) sets forth each Contract to which an Acquired Company is a
        party or by which any of it or its respective assets or properties are bound
        (collectively, the “Material Contracts”).

       

                  (b)  Each
        of
        the Material Contracts is in full force and effect and is the legal, valid
        and
        binding obligation of the applicable Acquired Company, and to the Knowledge
        of
        the Company and TOG, enforceable against the counter parties to such contracts
        each of them in accordance with its terms, except as enforceability may be
        limited by bankruptcy, insolvency or other similar Laws affecting the
        enforcement of creditors’ rights generally and subject to general principles of
        equity and, upon consummation of the transactions contemplated by this
        Agreement, shall, except as otherwise stated in Schedule 4.19(b),
        continue in full force and effect without penalty.  The Acquired
        Companies are not in default under any Material Contract, nor is any other
        party
        to any Material Contract in breach of or default thereunder, and no event
        has
        occurred that with the lapse of time or the giving of notice or both would
        constitute a breach or default on the Acquired Companies or any other party
        thereunder.  No party to any of the Material Contracts has exercised
        any termination rights with respect thereto, and no party has given notice
        of
        any significant dispute with respect to any Material Contract.  TOG
        has delivered to Cheniere true, correct and complete copies of all of the
        Material Contracts, together with all amendments, modifications or supplements
        thereto.

    

    
       

       

    

    4.20  Real
      Property.

    
      


                  (a)  Schedule
        4.20(a) sets forth a complete list of all real property and
        interests in real property owned or leased by the Acquired Companies
        (individually, a “Real Property Interest” and collectively, the “Real
        Property Interests”) as owner, lessee or lessor, including a description of
        each such Real Property Interest (including the name of the third party lessor
        or lessee and the date of the lease or sublease and all amendments
        thereto).  The Real Property Interests constitute all interests in
        real property currently used, occupied or currently held for use in connection
        with the business of the Acquired Companies and that are necessary for the
        continued operation of the Project.  None of the improvements erected
        by an Acquired Company and located on the Real Property Interests constitutes
        a
        legal non-conforming use or otherwise require any special dispensation, variance
        or special permit under any Laws.  TOG has delivered to Cheniere true,
        correct and complete copies of the Real Property Interests, together with
        all
        amendments, modifications or supplements, if any,
        thereto.  

       

                  (b)  There
        does not exist any actual or, threatened or contemplated condemnation or
        eminent
        domain proceedings that affect any Acquired Company Property or any part
        thereof, and neither the Company nor TOG has received any notice, oral or
        written, of the intention of any Governmental Entity or other Person to take
        or
        use all or any part thereof.

       

                  (c)  The
        Company does not own, hold, is not obligated under or a party to, any option,
        right of first refusal or other contractual right to purchase, acquire, sell,
        assign or dispose of any real estate or any portion thereof or interest
        therein 

    

     

    4.21  Subsidiaries
      and Investments. Other than as set forth in Schedule
4.5, the Company has no subsidiaries or investments
      in any
      other Person.

     

    4.22  Related
      Party Transactions. No employee, officer, manager or member of an Acquired
      Company, any member of his or her immediate family or any of their respective
      Affiliates (“Related Persons”) (i) owes any amount to an Acquired Company
      nor does an Acquired Company  owe any amount to, or has an Acquired
      Company committed to make any loan or extend or guarantee credit to or for
      the
      benefit of, any Related Person, (ii) is involved in any business arrangement
      or
      other relationship with the Company (whether written or oral), (iii) owns any
      property or right, tangible or intangible, that is used by the Company, (iv)
      has
      any claim or cause of action against an Acquired Company or (v) owns any direct
      or indirect interest of any kind in, or controls or is a director, officer,
      employee or partner of, or consultant to, or lender to or borrower from or
      has
      the right to participate in the profits of, any Person that is a supplier,
      customer, landlord, tenant, creditor or debtor of any Acquired
      Company.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    Article
      V

    REPRESENTATIONS
      OF BUYER

     

    Cheniere
      represents and warrants that, as of the date of this Agreement:

     

    5.1  Due
      Organization and Power of Cheniere. Cheniere is duly organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      organization and has the requisite corporate power and authority to own, lease
      and operate properties and to carry on its business.  Cheniere is duly
      authorized, qualified or licensed to do business and is in good standing in
      every jurisdiction wherein it conducts its business where the failure to be
      so
      qualified would have, individually or in the aggregate, a Cheniere Material
      Adverse Effect.

     

    5.2  Authorization
      and Validity of Agreement. The execution and delivery of this Agreement and
      the consummation of the transactions contemplated hereby have been duly
      authorized by all requisite corporate or analogous action by Cheniere, and
      Cheniere has full corporate or analogous, authority and legal capacity to
      execute and deliver this Agreement and to perform its obligations
      hereunder.  This Agreement has been duly executed and delivered by
      Cheniere.  This Agreement constitutes, or upon execution and delivery
      will constitute, the valid, legal and binding obligation of Cheniere enforceable
      against Cheniere in accordance with its terms except as enforceability may
      be
      limited by bankruptcy, insolvency or other similar Laws affecting the
      enforcement of creditors’ rights generally and subject to general principles of
      equity.

     

    5.3  Non-Contravention.  The
      execution and delivery by Cheniere of this Agreement does not, and the
      consummation by Cheniere of the transactions contemplated hereby and the
      performance of its obligations hereunder will not (a) violate or conflict with
      any provision of the bylaws or analogous governance documents or (b) assuming
      that all Permits, approvals by Governmental Entities, and Third-Party Approvals
      set forth in Schedule 5.3 hereto have been obtained or made: (i)
      violate any Law or Order to which Cheniere is subject; or (ii) constitute a
      breach or violation of, or default under, or trigger any “change of control”
rights or remedies under, or give rise to any Lien (other than Permitted
      Exceptions), acceleration of remedies, any buy-out right or any rights of first
      offer or refusal or of termination under, any Contract to which Cheniere is
      a
      party or by which Cheniere’s assets are bound.

     

    5.4  Governmental
      Approvals; Consents and Action.  No Action or Order is pending or
      threatened against Cheniere which would have, individually or in the aggregate,
      a Cheniere Material Adverse Effect.  No Permit or Approval from any
      Governmental Entity or Third-Party Approval is required on the part of Cheniere
      in connection with the execution and delivery of this Agreement or the
      consummation of the transactions contemplated hereby and thereby, except for
      such Permits the failure of which to obtain or make would not, individually
      or
      in the aggregate, have a Cheniere Material Adverse Effect or which have been
      obtained.

     

    5.5  Litigation.  Except
      as set forth in Schedule 5.5, there are no (a) Orders against or
      affecting Cheniere or its Affiliates or (b) Actions pending against or affecting
      Cheniere or its Affiliates (i) challenging or seeking to restrain, delay or
      prohibit any of the transactions contemplated by this Agreement or (ii)
      preventing Cheniere from performing in all material respects its obligations
      under this Agreement.

     

    5.6  Independent
      Decision.  Cheniere (a) has knowledge and experience in financial
      and business matters, (b) has the capability of evaluating the merits and risks
      of investing in the business of the Acquired Companies, (c) can bear the
      economic risk of an investment in the LLC Interests and (d) is not in a
      disparate bargaining position with TOG.  Cheniere acknowledges that
      none of TOG, the Company nor any other Person have made any representation
      or
      warranty, expressed or implied, as to the accuracy or completeness of any
      information regarding the Project or the Company that has been furnished or
      made
      available to Cheniere and its representatives, except as expressly set forth
      in
      this Agreement or the schedules hereto.

     

    5.7  Purchase
      for Investment.  Cheniere is aware that the LLC Interests are not
      registered under the Securities Act of 1933, as amended (the “Securities
      Act”), or under any state or foreign securities Laws.  Cheniere is
      not an underwriter, as such term is defined under the Securities Act, and is
      purchasing the LLC Interests solely for investment, with no intention to
      distribute any of the LLC Interests to any Person, and Cheniere will not sell
      or
      otherwise dispose of the LLC Interests except in compliance with the
      registration requirements or exemption provisions under the Securities Act
      and
      the rules promulgated thereunder, and any other applicable securities
      Laws.

     

    5.8  Financial
      Capacity; No Financing Condition.  Cheniere has available to it as
      of the date hereof (or has commitments therefor) and will at Closing have funds
      sufficient to consummate the transactions contemplated by this
      Agreement.  Cheniere understands that its obligations to effect the
      transactions contemplated thereby are not subject to the availability to
      Cheniere or any other Person of financing.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    5.9  Finders;
      Brokers.  There are, and after Closing there will be, no claims
      (or any basis for any claims) upon TOG or the Company for brokerage commissions,
      finder's fees or like payments in connection with this Agreement or the
      transactions contemplated hereby resulting from any action taken by Cheniere
      or
      by any other Person on Cheniere’s behalf.

     

    5.10  No
      Other Representations or Warranties.  EXCEPT FOR THE
      REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE V, NEITHER CHENIERE
      NOR
      ANY OTHER PERSON MAKES ANY OTHER REPRESENTATION OR WARRANTY, WHETHER EXPRESS
      OR
      IMPLIED, ON BEHALF OF CHENIERE.

     

     

    Article
      VI

    AGREEMENTS
      OF THE COMPANY, TOG AND CHENIERE 

     

     

    6.1  Transfer
      of the Mexican Project Entities.  Immediately after the approval
      of the CRE authorizing the transfer of the Mexican Project Entities to the
      Company, TOG shall, as applicable, effect and shall cause its respective
      Affiliates to effect the transfer of the Mexican Project Entities to the
      Company.  For purposes of the Operating Agreement, TOG shall be
      treated as though it contributed the Mexican Project Entities to the Company
      as
      of the Closing.

     

    6.2  Operation
      of the Business.  Until the transfer of the Mexican Project
      Entities to the Company (the “Mexican Project Closing Date”), TOG will,
      and will cause its Affiliates to, conduct the development of the Project and
      operate and maintain the assets of the Mexican Project Entities in the ordinary
      course consistent with past practices, keep the books and records of the Mexican
      Project Entities, including the Corporate Records, in accordance with recent
      past practices, and pay all of the Mexican Project Entities’ trade payables and
      other obligations on a timely basis.  Until the Mexican Project
      Closing Date, TOG shall, and shall cause it Affiliates to, use their reasonable
      efforts to maintain current relationships with customers, lessees, suppliers,
      Governmental Entities and others having business dealings with the Mexican
      Project Entities.  Except as otherwise contemplated by this Agreement
      or in Schedule 6.2, from the date hereof until the Mexican Project
      Closing Date, TOG will not, and will cause its Affiliates not to, without the
      prior written approval of Cheniere, take any of the following actions with
      respect to any Mexican Project Entity:

     

    
      


                  (a)  amend
        its
        certificate of formation, limited liability company agreement, estatutos
        sociales or similar governing document, or issue or agree to issue any
        additional membership interests (or other equity interests) of any class
        or
        series, or any securities convertible into or exchangeable or exercisable
        for
        membership interests (or other equity interests), or issue any options, warrants
        or other rights to acquire any membership interests (or other equity
        interests);

       

                  (b)  sell,
        transfer or otherwise dispose of or encumber any assets other than in the
        Ordinary Course of Business;

       

                  (c)  conduct
        the business of the Mexican Project Entities other than in the Ordinary Course
        of Business;

       

                  (d)  fail
        to
        maintain all of the assets and properties of, or used by, the Mexican Project
        Entities in their current condition, ordinary wear and tear
        excepted;

       

                  (e)  (i)
        fail
        to maintain the books, accounts and records of the Mexican Project Entities
        (including the Corporate Records) in the Ordinary Course of
        Business  or (ii) fail to comply with all contractual and other
        obligations of the Mexican Project Entities;

       

                  (f)       
        fail
        to
        comply in all material respects with all applicable Laws;

       

                  (g)  cancel
        any material debts or waive any material claims or rights pertaining to the
        Mexican Project Entities;

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

                 

                   (h)  incur,
        assume or guarantee any material indebtedness for borrowed money, or issue
        any
        notes, bonds, debentures or other similar securities, or grant any option,
        warrant or right to purchase any of the same, or issue any security convertible
        or exchangeable or exercisable for debt securities of the Mexican Project
        Entities;

       

                  (i)       
        make
        or
        change any material Tax elections (except any election to treat Terranova
        as an
        entity disregarded as separate from its owner within the meaning of Treasury
        Regulation Section 301.7701-2(c)(2)(i) or as required by Law), adopt or change
        any accounting method with respect to Taxes except as may be required as
        a
        result of a change in Law, file any amendment to a Tax return, enter into
        any
        closing agreement with respect to Taxes, settle any material claim or assessment
        with respect to Taxes, consent to any extension or waiver of the limitation
        period applicable to any claim or assessment in respect to Taxes, or settle
        or
        compromise any material Tax liability;

       

                  (j)       
        except
        as
        may be required as a result of a change in Law or GAAP, change any of the
        accounting principles or practices used by the Mexican Project
        Entities;

       

                  (k)   make
        any capital expenditure or make any commitment to make any capital expenditure
        other than (i) pursuant to existing commitments or business plans described
        in
Schedule 6.2(k), or (ii) to repair, maintain or replace any
        assets, properties or facilities in the Ordinary Course of Business, provided
        in
        both cases it has obtained first Cheniere’s written consent;

       

                  (l)       
        declare
        or pay any dividend with respect to the securities of the Mexican Project
        Entities or make any distribution or payment to any member of the Mexican
        Project Entities;

       

                  (m)  adopt
        a
        plan of complete or partial liquidation, dissolution, recapitalization or
        other
        restructuring;

       

                  (n)  pledge
        or
        mortgage the assets of the Mexican Project Entities or otherwise cause or
        permit
        a Lien (other than a Permitted Exception) to exist against the assets of
        the
        Mexican Project Entities;

       

                  (o)  effect
        any split, combination or reclassification of the securities of the Mexican
        Project Entities or any like change in the capitalization of the Mexican
        Project
        Entities, or amend the terms of any outstanding securities of the Mexican
        Project Entities;

       

                  (p)  redeem,
        repurchase or otherwise acquire, directly or indirectly, any securities of
        the
        Mexican Project Entities;

       

                  (q)  acquire
        (by purchase, merger or otherwise) any equity interest in or substantially
        all
        of the assets of, or otherwise make any investment in any other Person, or
        enter
        into any joint venture, partnership or similar arrangement;

       

                  (r)  knowingly
        allow any material Permits held by the Mexican Project Entities to terminate
        or
        lapse or fail to comply with any material term of a Permit held by the Mexican
        Project Entities;

       

                  (s)  enter
        into any agreement or amend, modify or terminate any contract or Permit to
        which
        any Mexican Project Entity is a party or by which any of its assets are bound,
        except in the Ordinary Course of Business consistent with past
        practices;

       

                  (t)  repay
        any
        indebtedness outstanding;

       

                  (u)  pay
        for
        any trade payables or other obligations incurred in the Ordinary Course of
        Business, including servicing existing debt);

       

                  (v)  increase
        the salary or other compensation of any manager, officer or employee, consultant
        or independent contractor of the Mexican Project Entities;

       

                  (w)  grant
        any
        unusual or extraordinary bonus, benefit or other direct or indirect compensation
        to any manager, officer, employee, consultant or independent
        contractor;

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

                 

                   (x)  increase
        the coverage or benefits available under any (or create any new) severance
        pay,
        termination pay, vacation pay, company awards, salary continuation for
        disability, sick leave, deferred compensation, bonus or other incentive
        compensation, insurance, pension or other employee benefit plan or arrangement
        made to, for, or with any of the managers, officers, employees, agents or
        representatives of the Mexican Project Entities or otherwise modify or amend
        or
        terminate any such plan or arrangement;

       

                  (y)  enter
        into any employment, deferred compensation, severance, special pay, consulting,
        non-competition or similar agreement or arrangement with any managers or
        officers of the Mexican Project Entities (or amend any such agreement to
        which
        the Mexican Project Entities is party); or

       

                  (z)  agree,
        whether in writing or otherwise, to do any of the
        foregoing; 

    

     

    provided,
      however, that nothing in this Section 6.2 shall preclude TOG,
      its Affiliates or the Mexican Project Entities from obtaining the consent of
      any
      third party required in connection with the transactions contemplated by this
      Agreement.  Prior to the Mexican Project Closing Date, TOG and its
      Affiliates shall make their representatives, consultants, independent
      contractors and employees who are actively engaged in the operation of the
      Mexican Project Entities available to Cheniere (and its representatives) on
      a
      reasonable basis as appropriate to confer and discuss with respect to (i) the
      operation of the assets of the Mexican Project Entities and the Project, (ii)
      the legal, operational and other actions required or reasonably necessary for
      the consummation of the transactions contemplated by this Agreement, and (iii)
      the status of TOG, its Affiliates and the Mexican Project Entities compliance
      with this Section 6.2.

     

    6.3  Pre-Mexican
      Project Closing Date Investigation. During the period commencing on the date
      hereof and ending on the Mexican Project Closing Date, TOG, Affiliates and
      the
      Mexican Project Entities shall provide, upon reasonable request and notice,
      Cheniere and its authorized agents or representatives reasonable access during
      normal business hours to the properties, books, accounts and Corporate Records
      of the Mexican Project Entities for the purpose of reviewing information and
      documentation relative to the properties, books, accounts and Corporate Records
      of the Project.    Cheniere agrees to indemnify and hold
      harmless, release and defend TOG, its Affiliates and the Mexican Project
      Entities from and against any and all losses arising, in whole or in part,
      from
      any claims for personal injuries, property damages or reasonable attorney’s fees
      (provided that such fees are incurred in connection with the enforcement of
      the
      indemnity provided for in this sentence) resulting from Cheniere's or its
      representatives' inspection of the properties, books and records of the Mexican
      Project Entities as set forth in this paragraph, which indemnification
      obligation shall not survive the Mexican Project Closing Date, unless a claim
      therefor has been made prior to the Mexican Project Closing Date.

     

    6.4  Confidentiality.  The
      Parties agree that  the terms and conditions of this Agreement and any
      agreements to be delivered hereunder, shall not be disclosed to any other Person
      without the prior written consent of the other Party, except to the extent
      required by applicable Law, but only to the extent so required.  The
      Parties shall be entitled to disclose the existence and occurrence of the
      transactions and relationships described by this Agreement and other agreements
      delivered hereunder, provided, however, that in connection with any
      press releases, the Party issuing such press release shall allow the other
      Party
      reasonable time to comment in advance of such issuance.

     

    6.5  Efforts;
      Cooperation; No Inconsistent Action.

    
       

                  (a)  Subject
        to the terms and conditions of this Agreement and the Confidentiality Agreement,
        each of the Parties will use its best efforts to take or cause to be taken,
        all
        action, and to do, or cause to be done, all things necessary, proper or
        advisable under applicable Laws to consummate the transactions contemplated
        by
        this Agreement, including using its reasonable efforts to ensure satisfaction
        of
Section 6.1 hereunder and complete the
        Reorganization.  Each of Cheniere, the Company, TOG,
        Terranova and their respective Affiliates shall timely and promptly make
        all
        filings which may be required by any of them in connection with the consummation
        of the transactions contemplated hereby.  Each Party shall furnish to
        the other Party such necessary information and assistance as such other Party
        may reasonably request in connection with the preparation of any necessary
        filings or submissions by it to any Governmental Entity.  Each Party
        shall provide the other Party the opportunity to make copies of all
        correspondence, filings or communications (or memoranda setting forth the
        substance thereof) between such Party and its representatives, and any
        Governmental Entity and members of their respective staffs with respect to
        this
        Agreement and the transactions contemplated hereby.  With the
        exception of payment of the required filing fees and the Parties’ costs and
        expenses necessary to prosecute such filings, neither TOG, the Company, nor
        Cheniere shall be required to make any material monetary expenditures, commence
        or participate in any material litigation, or offer or grant any material
        accommodation (financial or otherwise) to any third Person in connection
        therewith; provided, that TOG shall be responsible for expenses
        incurred by the Mexican Project Entities prior to the Mexican Project Closing
        Date.  For purposes of this Section 6.5, TOG shall have
        caused Rio Bravo L.L.C., Marea Associates L.P. and Terranova to grant those
        irrevocable powers of attorney to Cheniere in accordance with Sections
2.8(j) and 2.8(k).  Except as provided
        in this Section 6.5(a), nothing contemplated in this Section
6.5 shall be construed by a Party as a grant
        of authority or consent
        by the other Party to submit correspondence, filings or communications on
        behalf
        of such Party with any Governmental Entity.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

                 

                   (b)    
        From
        time
        to time after the Closing, without further consideration, TOG and its Affiliates
        will, at their own expense, execute and deliver such documents to Cheniere
        as
        Cheniere may reasonably request in order to more effectively consummate the
        transactions contemplated by this Agreement.  From time to time after
        the Closing, without further consideration, Cheniere will, at its own expense,
        execute and deliver such documents as TOG and its Affiliates may reasonably
        request in order to more effectively consummate the transactions contemplated
        by
        this Agreement.

       

                  (c)  TOG
        and
        Cheniere shall notify and keep the other advised as to any litigation or
        administrative proceeding pending and known to such Party, or to their
        Knowledge, threatened, which challenges the transactions contemplated
        hereby.  TOG and Cheniere shall act in good faith and shall not take
        any action inconsistent with its obligations under this Agreement or which
        would
        materially hinder or delay the consummation of the transactions contemplated
        by
        this Agreement, or the prompt receipt of required consents or approvals under
        applicable Laws.

       

                  (d)  After
        the
        Closing and after the Mexican Project Closing Date and continuing for a
        commercially reasonable period of time thereafter, each Party shall have
        reasonable access to the employees of the other Party and its Affiliates,
        for
        purposes of consultation or otherwise, to the extent that such access may
        reasonably be required in connection with matters relating to or affected
        by the
        operations of the Company and the Subsidiaries prior to the
        Closing.  The Parties agree to cooperate in connection with any audit,
        investigation, hearing or inquiry by any Governmental Entity, litigation
        or
        regulatory or other proceeding which may arise following the Closing and
        which
        relates to the ownership of the Company, the Subsidiaries or operation of
        the
        Project, prior to the Closing.  Notwithstanding any other provision of
        this Agreement to the contrary, each of Cheniere, TOG and the Company shall
        bear
        its own expenses including fees of attorneys or other representatives, in
        connection with any such matter described in this Section 6.5 in
        which TOG, the Company and Cheniere are subjects or Parties or in which they
        have a material interest. 

    

     

    6.6  Public
      Disclosures.  No Party to this Agreement or its representatives or
      Affiliates will issue any press release or make any public disclosure concerning
      the transactions contemplated by this Agreement without the prior written
      consent of the other Parties.  Notwithstanding the above, nothing in
      this Section 6.6 will preclude any Party or its representatives or Affiliates
      from making any disclosures in connection with the procurement of capital
      financing for the Project, as may be required by Law, or as may be necessary
      and
      proper in conjunction with the filing of any Tax Return or other document
      required to be filed with any Governmental Entity; provided that any
      Party required to make such disclosure shall allow the other Parties reasonable
      time to review and comment thereon in advance of such disclosure.

     

    6.7  Exclusivity.  Each
      of the Parties agree that, from the date hereof to the Mexican Project Closing
      Date, it shall not, and shall not authorize or permit any of its Affiliates
      or
      any of its Affiliates’ managers, officers, employees, agents or representatives
      to, directly or indirectly, solicit, initiate, knowingly encourage, take any
      action to facilitate, furnish or disclose nonpublic information in furtherance
      of any inquiries or the making of any offer or proposal regarding any
      Acquisition Transaction, or participate in any discussions or negotiations
      with,
      or provide any information to, any Person (other than as contemplated in this
      Agreement) concerning any Acquisition Transaction or enter into any definitive
      agreement, arrangement or understanding for any Acquisition Transaction or
      requiring it to abandon, terminate or fail to consummate the transactions
      contemplated by this Agreement.

     

    6.8  Tax
      Treatment of Transaction. The Company, TOG and Cheniere hereby agree that
      the transactions contemplated by this Agreement, and, to the extent reflected
      therein, the Operating Agreement, shall be treated for U.S. federal income
      tax
      purposes as (i) a purchase of an eighty percent (80%) interest by Cheniere
      in
      the assets of the Subsidiaries followed by (ii) a contribution by TOG of a
      twenty percent (20%) interest in the assets of the Subsidiaries to the Company
      and (iii) a contribution by Cheniere of an eighty percent (80%) interest in
      the
      assets of the Subsidiaries to the Company.

     

    Article
      VII

    INDEMNIFICATION

     

    7.1  Survival
      of Representations and Warranties.  The representations and
      warranties of the parties contained in this Agreement shall survive the Closing
      until thirty (30) days following the expiration of the applicable statute of
      limitations with respect to the particular matter that is the subject matter
      thereof (in each case, the “Survival Period”).

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    7.2  Indemnification.

     

    
                  (a)  Subject
        to this Section 7.2 hereof, TOG hereby agrees, to indemnify and
        hold Cheniere, the Company, and their respective managers, officers, employees,
        Affiliates, members, stockholders, agents, attorneys, representatives,
        successors and assigns (collectively, the “Cheniere Indemnified Parties”)
        harmless from and against, and pay to the applicable Cheniere Indemnified
        Parties the amount of any and all losses, Liabilities, claims, interest,
        obligations, deficiencies, demands, judgments, damages, interest, fines,
        penalties, claims, suits, actions, causes of action, assessments, awards,
        costs
        and expenses (including costs of investigation and defense and attorneys’ and
        other professionals’ fees), whether or not involving a third party claim
        (individually, a “Loss” and, collectively, “Losses”) based upon,
        attributable to or resulting from:

       

      (i)           the
        failure of any of the representations or warranties made by TOG in this
        Agreement to be true and correct in all respects at and as of the date
        hereof;

       

      (ii)           the
        Reorganization (including costs, expenses, and Taxes arising in connection
        or
        associated with the Reorganization), or Taxes related to the transfer of
        the LLC
        Interests to Cheniere;

       

      (iii)           any
        liability for Taxes with respect to any Tax year or portion thereof ending
        on or
        before the Closing (or any Tax year beginning before and ending after the
        Closing to the extent allocable to the portion of such period beginning before
        and ending on the Closing); provided that to the extent Cheniere causes the
        Acquired Companies to take a Tax position following the Closing (other than
        the
        supplemental Tax Returns of Terranova amending the deductions for unpaid
        inter-company debt for the years ending 2005 and 2006) that results in an
        increase in Taxes owed for the period prior to the Closing, TOG shall not
        be
        liable for the amount of any such increase and Cheniere shall indemnify TOG
        for
        any such increase paid by TOG;

       

      (iii)           the
        Excluded Assets and Excluded Liabilities; and

       

      (iv)           the
        breach of any covenant or other agreement on the part of TOG, the Company
        or
        Terranova under this Agreement, provided, however, that this
        indemnity shall not cover the Company and Terranova after such entities are
        under the Control of Cheniere.

       

                  (b)   Without
        limiting any other remedies available under this Agreement and applicable
        Law, a
        Cheniere Indemnified Party shall have the right to set off any Losses incurred
        by such Cheniere Indemnified Party from any Third Party Claim against the
        Phase
        I FID Milestone Payment, the Phase II FID Milestone Payment, the Phase III
        FID
        Milestone Payment, the Phase I Royalty, Phase II Royalty, and the Phase III
        Royalty.  The Company shall have the right to set off any Losses
        incurred by the Company against the Phase I FID Milestone Payment, the Phase
        II
        FID Milestone Payment, the Phase III FID Milestone Payment, the Phase I Royalty,
        Phase II Royalty, and the Phase III Royalty.  For avoidance of doubt,
        any indemnifiable Losses suffered solely by Cheniere, shall not be subject
        to
        the set off rights as provided for in this Section 7.2(b).

       

                  (c)  Subject
        to Sections 7.2, Cheniere hereby agrees to indemnify and hold TOG
        its managers, officers, employees and Affiliates and their respective members,
        agents, attorneys, representatives, successors and permitted assigns
        (collectively, the “TOG Indemnified Parties”) harmless from and against,
        and pay to the applicable TOG Indemnified Parties the amount of any and all
        Losses:

       

      (i)           based
        upon, attributable to or resulting from the failure of any of the
        representations or warranties made by Cheniere in this Agreement to be true
        and
        correct in all respects at the date hereof; and

       

      (ii)           based
        upon, attributable to or resulting from the breach of any covenant or other
        agreement on the part of Cheniere under this Agreement.

    

    
       

    

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    7.3  Indemnification
      Procedures.

    
                  

                  (a)  A
        claim
        for indemnification for any matter not involving a third party claim may
        be
        asserted by notice to the party from whom indemnification is sought;
provided, however, that failure to so notify the indemnifying
        party shall not preclude the indemnified party from any indemnification which
        it
        may claim in accordance with this Article VII, except to the extent that
        the indemnifying party can demonstrate actual loss and prejudice as a result
        of
        such failure.

       

                  (b)  In
        the
        event that any Action shall be instituted or that any claim or demand shall
        be
        asserted by any third party in respect of which indemnification may be sought
        under Section 7.2 (a “Third Party Claim”), the indemnified
        party shall promptly cause written notice of the assertion of any Third Party
        Claim of which it has knowledge which is covered by this Article VII to
        be forwarded to the indemnifying party.  The failure of the
        indemnified party to give reasonably prompt notice of any Third Party Claim
        shall not release, waive or otherwise affect the indemnifying party’s
        obligations with respect thereto except to the extent that the indemnifying
        party can demonstrate actual loss and prejudice as a result of such
        failure.  Subject to the provisions of this Section 7.3,
        the indemnifying party shall have the right, at its sole expense, to be
        represented by counsel of its choice, which must be reasonably satisfactory
        to
        the indemnified party, and to defend against, negotiate, settle or otherwise
        deal with any Third Party Claim which relates to any Losses indemnified against
        hereunder; provided that the indemnifying party shall have acknowledged in
        writing to the indemnified party its unqualified obligation to indemnify
        the
        indemnified party as provided hereunder.  If the indemnifying party
        elects to defend against, negotiate, settle or otherwise deal with any Third
        Party Claim which relates to any Losses indemnified by it hereunder, it shall
        within five (5) days of the indemnified party’s written notice of the assertion
        of such Third Party Claim (or sooner, if the nature of the Third Party Claim
        so
        requires) notify the indemnified party of its intent to do so;
provided, that the indemnifying party must conduct the defense of the
        Third Party Claim actively and diligently thereafter in order to preserve
        its
        rights in this regard.  If the indemnifying party elects not to defend
        against, negotiate, settle or otherwise deal with any Third Party Claim which
        relates to any Losses indemnified against hereunder, fails to notify the
        indemnified party of its election as herein provided or contests its obligation
        to indemnify the indemnified party for such Losses under this Agreement,
        the
        indemnified party may defend against, negotiate, settle or otherwise deal
        with
        such Third Party Claim.  If the indemnified party defends any Third
        Party Claim, then the indemnifying party shall reimburse the indemnified
        party
        for the expenses of defending such Third Party Claim upon submission of periodic
        bills.  If the indemnifying party shall assume the defense of any
        Third Party Claim, the indemnified party may participate, at his or its own
        expense, in the defense of such Third Party Claim; provided,
however, that such indemnified party shall be entitled to participate
        in any such defense with separate counsel at the expense of the indemnifying
        party if (i) so requested by the indemnifying party to participate or (ii)
        in
        the reasonable opinion of counsel to the indemnified party, a conflict or
        potential conflict exists between the indemnified party and the indemnifying
        party that would make such separate representation advisable; and
provided, further, that the indemnifying party shall not be
        required to pay for more than one such counsel for all indemnified parties
        in
        connection with any Third Party Claim.  The parties hereto agree to
        provide reasonable access to the other to such documents and information
        as may
        be reasonably requested in connection with the defense, negotiation or
        settlement of any such Third Party Claim.  Notwithstanding anything in
        this Section 7.3 to the contrary, neither the indemnifying party
        nor the indemnified party shall, without the written consent of the other
        party,
        settle or compromise any Third Party Claim or permit a default or consent
        to
        entry of any judgment unless the claimant or claimants and such party provide
        to
        such other party an unqualified release from all liability in respect of
        the
        Third Party Claim.  If the indemnifying party makes any payment on any
        Third Party Claim, the indemnifying party shall be subrogated, to the extent
        of
        such payment, to all rights and remedies of the indemnified party to any
        insurance benefits or other claims of the indemnified party with respect
        to such
        Third Party Claim.

       

                  (c)  After
        any
        final decision, judgment or award shall have been rendered by a Governmental
        Entity of competent jurisdiction and the expiration of the time in which
        to
        appeal therefrom, or a settlement shall have been consummated, or the
        indemnified party and the indemnifying party shall have reached an agreement,
        in
        each case with respect to an indemnifiable claim hereunder, the indemnified
        party shall forward to the indemnifying party notice of any sums due and
        owing
        by the indemnifying party pursuant to this Agreement with respect to such
        matter.
 

    

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    Article
      VIII

    MISCELLANEOUS

     

     

    8.1  Notices.  All
      communications provided for hereunder shall be in writing and shall be deemed
      to
      be given when delivered in person or by private courier with receipt, when
      faxed
      and received, or five (5) days after being deposited in the United States mail,
      first-class, registered or certified, return receipt requested, with postage
      paid and addressed as follows:

     

    If
      to
      Cheniere:

    Cheniere
      Energy, Inc

    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
      TOG:

    Tidelands
      Oil & Gas Corporation.

    1862
      W
      Bitters Bldg 1

    San
      Antonio, Texas 78248

    Attention:
      James B. Smith

    Facsimile:
      [*]

    


    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 

    


    or
      to
      such other address as any such Party shall designate by written notice to the
      other Parties hereto.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    8.2  Expenses.  Each
      Party shall each pay their respective expenses (such as legal, investment banker
      and accounting fees) incurred in connection with the origination, negotiation,
      execution and performance of this Agreement.

     

    8.3  Assignability.  This
      Agreement shall inure to the benefit of and be binding on the Parties and their
      respective successors and permitted assigns.  This Agreement shall not
      be assigned by any Party without the express prior written consent of the other
      Party, in its sole discretion, and any attempted assignment without such consent
      shall be null and void; provided that Cheniere may assign this
      Agreement to an Affiliate of Cheniere without the consent of TOG and the Company
      as long as Cheniere remains obligated for all of the obligations of Cheniere
      hereunder.  In no event shall any assignment or transfer hereunder
      serve to release or discharge the assigning Party from any of its duties and
      obligations hereunder, unless expressly released, in writing, by the
      non-assigning Party.

     

    8.4  Amendment;
      Waiver.  This Agreement may be amended, supplemented or otherwise
      modified only by a written instrument executed by each of the
      Parties.  No waiver by a Party of any of the provisions hereof shall
      be effective unless explicitly set forth in writing and executed by the Party
      so
      waiving.  Except as provided in the preceding sentence, no action
      taken pursuant to this Agreement, including without limitation any investigation
      by or on behalf of any Party, shall be deemed to constitute a waiver by the
      Party taking such action of compliance with any representations, warranties,
      covenants or agreements contained herein, and in any documents delivered or
      to
      be delivered pursuant to this Agreement and in connection with the Closing
      hereunder.  The waiver by either Party hereto of a breach of any
      provision of this Agreement shall not operate or be construed as a waiver of
      any
      subsequent breach.

     

    8.5  No
      Third Party Beneficiaries.  This Agreement is not intended, nor
      shall it be deemed, construed or interpreted, to confer upon any Person not
      a
      party hereto any rights or remedies hereunder.

     

    8.6  Governing
      Law.  This Agreement and the rights and duties of the Parties
      hereunder shall be governed by, and construed in accordance with, the laws
      of
      the State of Texas without regard to its conflict of laws rules, other than
      matters dealing with the ownership of real property or interests therein, which
      shall be governed by the laws of the state where such property is
      located.

     

    8.7  Consent
      to Jurisdiction.  Each Party irrevocably submits to the exclusive
      jurisdiction of the United States District Court for the Southern District
      of
      Texas located in Harris County in the City of Houston, or if such court does
      not
      have jurisdiction, the District Courts of the State of Texas, Harris County,
      Texas, for the purposes of any suit, action or other proceeding arising out
      of
      this Agreement or any transaction contemplated hereby.  Each Party
      hereto further agrees that service of any process, summons, notice or document
      by U.S. registered mail to such Party’s respective address set forth in
Section 8.1 shall be effective service of process for any action,
      suit or proceeding in Texas with respect to any matters to which it has
      submitted to jurisdiction as set forth above in the immediately preceding
      sentence.  Each Party hereto irrevocably and unconditionally waives
      any objection to the laying of venue of any action, suit or proceeding arising
      out of this Agreement or the transactions contemplated hereby in (a) the United
      States District Court for the Southern District of Texas or (b) the District
      Courts of the State of Texas, Harris County, and hereby further irrevocably
      and
      unconditionally waives and agrees not to plead or claim in any such court that
      any such action, suit or proceeding brought in any such court has been brought
      in an inconvenient forum.

     

    8.8  Entire
      Agreement.  This Agreement and the schedules and exhibits hereto
      set forth the entire understanding of the Parties hereto with respect to the
      subject matter hereof.

     

    8.9  Severability.  If
      any provision of this Agreement shall be declared by any court of competent
      jurisdiction to be illegal, void or unenforceable, all other provisions of
      this
      Agreement shall not be affected and shall remain in full force and
      effect.

     

    8.10  Counterparts.  This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed to be an original and all of which together shall be deemed to be one
      and
      the same instrument.

     

    8.11  Further
      Assurances.  Upon request from time to time, the Parties shall
      execute and/or cause to be executed and delivered such other documents and
      instruments and shall do such other acts as may be reasonably necessary or
      desirable, to consummate the transactions contemplated hereby and to carry
      out
      the intent of this Agreement.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    8.12  Schedules,
      Annexes and Exhibits.  All exhibits, annexes and schedules hereto
      are hereby incorporated by reference and made a part of this
      Agreement.

     

    8.13  Specific
      Performance; Limitation on Damages.  The Parties agree that
      irreparable damage would occur in the event of any provision of this Agreement
      was not performed in accordance with the terms hereof and that the Parties
      shall
      be entitled to specific performance of the terms hereof, in addition to any
      other remedy at law or in equity.  In no event, however, shall either
      Party or its Affiliates be liable for special, indirect, incidental,
      consequential or punitive damages arising from or relating to any claims or
      Actions relating to any breach by a Party of this Agreement.

     

    8.14  Waiver
      of Jury Trial.  THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY
      JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
      OR
      ANY TRANSACTION CONTEMPLATED HEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING,
      AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.  THE PARTIES
      AGREE THAT EITHER OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT
      AS
      WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT BETWEEN
      THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY AND THAT ANY ACTION OR PROCEEDING
      WHATSOEVER BETWEEN THEM RELATING TO THIS AGREEMENT OR ANY TRANSACTION
      CONTEMPLATED HEREBY SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION
      BY A JUDGE SITTING WITHOUT A JURY.

     

    8.15  Time.  Time
      is of the essence in the performance of this Agreement in all
      respects.

     

    8.16  Attorneys
      Fees.  If any action is brought by either Party under this
      Agreement prior to the Closing by reason of any claim or cause of action against
      the other arising out of or in connection with any breach or other
      nonperformance of the provisions of this Agreement, then the Party that is
      successful upon any final determination of any such claim or cause of action
      shall be entitled to reasonable attorneys’ fees and court costs, as are fixed by
      a court of competent jurisdiction.

     

     

     

    [SIGNATURE
      PAGE FOLLOWS]

     

     

    
 

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the Parties have caused this Agreement to be duly
      executed as of the date first above written.

     

    CHENIERE

    


    GRAND
      CHENIERE PIPELINE LLC


    


    By:                                                         
      

    Name:                                                                                                                                                                    

    Title:                                                                                                                      

    


    


    TOG

    


    TIDELANDS
      OIL & GAS CORPORATION


    


    By:                                                                                                               

    Name:                                                     

    Title:                                                                                                                    

    


    


    THE
      COMPANY

    


    FRONTERA
      PIPELINE, LLC


    


    By:                                                                                                          

    Name:                                                                                                                  

    Title:                                                                                                                     

    


    


    


    Solely
      for Purpose of Sections  2.8(k) and 6.5 of
      this Agreement

    


    TERRANOVA

    


    TERRANOVA
      ENERGIA, S. DE R.L. DE C.V.

    


    


    By:                                                                                                                

    Name:                                                     

    Title:                                                                                                                      

    


    


    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    
      Schedule
        1.1(c)

      


      Reorganization

      


      


      On
        August
        24, 2007, Sonora Pipeline, L.L.C. and Rio Bravo Energy, LLC executed a quitclaim
        conveyance in which  they conveyed all ownership and rights in
        pipelines and other facilities located in Dimmit and Zavala Counties, TX
        to Reef
        International, L.L.C.

      


      See
        attachment.

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      Exhibits
        and Schedules for Equity Purchase Agreement

      Dated
        September __, 2007

      Capitalized
        terms used but not defined in these Exhibits and Schedules shall have the
        meanings set forth in the Equity Purchase Agreement

      


      


      Schedule
        2.3

      


      Use
        of
        Purchase Proceeds

    

     

     

    
      
        	
                Sonora

              	 
	 	 
	
                BNC
                  Engineering, LLC

              	
                $15,189.85

              
	
                607
                  River Bend Dr.

              	 
	
                Georgetown,
                  TX 78628

              	 
	
                Tax
                  ID 76-0578524

              	 
	 	 
	
                Project
                  Consulting Services, Inc.

              	
                $4,700.83

              
	
                3300
                  W Esplanade Ave. S., Suite 500

              	 
	
                Metarie,
                  LA 70002-7406

              	 
	
                Tax
                  ID 72-1206233

              	 
	 	 
	
                Ross,
                  Marsh, & Foster

              	
                $89,721.38

              
	
                2001
                  L Street, N.W.

              	 
	
                Suite
                  400

              	 
	
                Washington,
                  D.C. 20036

              	
                 

              
	
                Tax
                  ID 53-0214335

              	 
	 	 
	
                Thomas
                  R. Hughes & Associates, Inc.

              	
                $14,231.25

              
	
                9
                  Buxton Lane

              	 
	
                Riverside,
                  CT 06878

              	
                 

              
	
                Tax
                  ID 06-1159849

              	 
	 	 
	
                Strasburger
                  & Price LLP

              	
                $5,527.63

              
	
                300
                  Convent, Suite 900

              	 
	
                San
                  Antonio, TX 78205

              	 
	
                Tax
                  ID 75-0838805

              	 
	 	 
	
                Sonora
                  Total

              	
                $129,370.94

              
	 	 


      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      
        	 	 
	
                Terranova

              	 
	 	 
	
                Hanhausen,
                  Domenech y Asociados

              	
                $3,185.50

              
	
                Jorge
                  Eliot 12-701, Col. Polanco Chapultepec

              	 
	
                Mexico
                  DF 11560

              	 
	 	 
	
                Asociacion
                  Mexicana de Gas Natural

              	
                $1,400.00

              
	
                Av.
                  Revolucion 468, Piso 2B, Col. San Pedro de los Pino

              	 
	
                Mexico
                  DF 03800

              	 
	 	 
	
                Reynaldo
                  Morado Dimas

              	
                $5,700.00

              
	
                Tepic
                  90-402, Col. Roma Sur

              	 
	
                Mexico
                  DF 06760

              	 
	 	 
	
                Ritch
                  Mueller, S.C.

              	
                $905.63

              
	
                Blvd.
                  Avila Camacho No. 24, Piso 20, Col. Lomas de Chapultepec

              	 
	
                Mexico
                  DF 11000

              	 
	 	 
	
                Kiinera
                  SA de CV

              	
                $52,785.00

              
	
                Jorge
                  Eliot 12-701, Col. Polanco Chapultepec

              	 
	
                Mexico
                  DF 11560

              	 
	 	 
	
                Strasburger
                  & Forastieri, S.C.

              	
                $8,357.57

              
	
                Prolongación
                  Paseo de la Reforma 600, Desp. 201-A

              	 
	
                Col.
                  Santa Fe

              	 
	
                Mexico
                  DF 01210

              	 
	 	 
	
                Secretaria
                  de Hacienda y Crédito Publico

              	
                $58,095.87

              
	 	 
	
                Terranova
                  Total

              	
                $130,429.57

              
	 	 


      

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      


      Schedule
        3.4

      


      TOG’s
        Governmental Approvals; Consents and Actions

      


      After
        Closing, the Company will have to file a new Form P-5 (Organization Report)
        with
        the Railroad Commission of Texas (RRC) for Sonora Pipeline, LLC.  The
        contact person at the RRC is Ms. Linda Turk, (512) 463-6777, linda.turk@rrc.state.tx.us
        .

      


      CRE
        Approval of Terranova’s proposed ownership changes

      


      Terranova
        has filed the request for CRE to approve the ownership changes.  The
        request letter explains that TOG will transfer 80% of its interest in Terranova
        to Cheniere by forming a new company to which TOG will transfer all its
        interests in Terranova.  TOG and Cheniere will jointly own the new
        company 20%-80%, respectively.

      


      The
        CRE
        response is expected by the middle of October, 2007.

       

      The
        contact person at the CRE is the Director General of Natural Gas, Dr. Alejandro
        Brena, (52-55) 5283-1515, abrena@cre.gob.mx

       

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      Schedule
        4.16

      


      Company’s
        Compliance with Laws; Permits

      


      Terranova

      


      Terranova
        Pipeline. Terranova was awarded a CRE transportation permit
        G/186/TRA2006 on May 23, 2006, which expires 24 months after such issuance
        date
        (May 22, 2008). Terranova may request a permit extension beyond the expiration
        date or file for a permit amendment extending the expiration
        date.  Terranova plans to file for an extension of the pipeline permit
        in March 2008.  The extension will cover from the point known as
        Station 19 to the reception station in Monterrey, known as the GIMSA Terminal
        Station (190 Kms).  The CRE will likely take between six to nine
        months to process the amendment application.

      


      Terranova
        Underground Natural Gas Storage. Terranova submitted a permit
        application on August 7, 2005.  To date, Mexico has no underground
        natural gas storage facilities and this was the first permit application
        for a
        facility based on the use of a depleted reservoir.

      


      Since
        Mexico had no policy on the use of depleted reservoirs for storage purposes
        and
        current legislation is not clear on the ownership of depleted reservoirs,
        Terranova has been advised that the CRE, in collaboration with the Secretary
        of
        Energy and Pemex Exploration and Production (PEP), are working towards a
        Mexican
        national policy for the use of depleted reservoirs, differing from exploration
        and production, and that Terranova will be advised as soon as a policy is
        officially in place.

      


      


      SCHEDULE
        OF REQUIREMENTS RELATIVE TO THE

      PIPELINE
        PROJECT BASED ON

      THE
        CRE
        RESOLUTION RES/104/2006 AND CRE PERMIT G/183/TRA/2006

      BOTH
        ISSUED ON MAY 23, 2006

      


      


      


      I           If
        the construction of the pipeline as permitted goes ahead, within 60 days
        before
        construction begins, or at least 24 months from the permit issuing date (May
        23,
        2006):

      


      
        	
                a.  

              	
                File
                  for CRE approval the corresponding Maximum Revenue and the corresponding
                  transmission tariff.

              


      

      


      II           If
        the pipeline project changes, by May 22, 2008:

      


      
        	
                b.  

              	
                File
                  with CRE an application to amend the permit G/183/TRA/2006, or
                  file an a
                  letter requesting an extension to such permit for another 12
                  months.

              


      

      


      III           Prior
        to commencement of pipeline construction:

      


      
        	
                a.  

              	
                Conduct
                  an Open Season.

              


      

      


      IV           Within
        10 days after commencing construction:

      
        


        
          	
                   

                	
                  a.

                	
                  
                    File
                      with CRE a written notice of the date that construction commencement,
                      with
                      the risk analysis reports and the necessary insurance to cover
                      those
                      risks.

                  

                


        

         

      

      V           Within
        30 days after construction completed and service commenced:

      


      
        	
                 

              	
                a.

              	
                File
                  a written notice of such completion and commencement
                  date.

              


      

      


      
        	
                VI

              	
                At
                  the end of 5 years of actual operation, file either a cost and
                  revenue
                  study under the published CRE guidelines for the 5-year tariff
                  evaluation.

              


      

      


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      List
        of permits, authorizations and licenses to build and operate a pipeline in
        MX

      


      
        	
                Authorization,
                  License or Permit

              	
                Government
                  office

              	
                Description

              
	
                Permiso
                  de transporte de gas natural para acceso abierto.

              	
                CRE

              	
                Permiso
                  requerido para el transporte de gas natural para acceso abierto.
                  Art. 32
                  RGN.

              
	
                Permiso
                  de Uso de Suelo.

              	
                Municipio
                  afectado

              	
                Autorización
                  para que determinados predios o zonas puedan destinarse a fines
                  particulares.

                Art.
                  9 LAH.

              
	
                Licencia
                  de Construcción.

              	
                Municipio
                  afectado

              	
                Autorización
                  para la ejecución de obras. Art. 9 LAH.

              
	
                Caminos
                  de acceso.

              	
                SCT
                  o JFC Gobierno del Estado

              	
                Autorización
                  para la construcción de los caminos de acceso en terrenos o caminos de
                  jurisdicción estatal.

              
	
                Revisión
                  y aprobación del sistema eléctrico.

              	
                SE

              	
                Solicitud
                  por escrito acompañada de planos del proyecto. Memoria descriptiva y
                  memoria de cálculo.

              
	
                Autorización
                  para Uso de Explosivos.

              	
                SEDENA

              	
                Permiso
                  requerido para el uso de explosivos en caso de ser necesario en
                  la
                  construcción del gasoducto. Art. 37 de LFAFE.

              
	
                Adquisición
                  o posesión de terrenos por expropiación.

              	
                SENER

                SAGARPA

              	
                Procedimiento
                  para la obtención de terrenos que no haya sido posible adquirir a través
                  de negociaciones con sus propietarios.

              
	
                Permiso
                  de Ocupación de Vía Pública.

              	
                Municipio
                  afectado

              	
                Planos
                  de trazo y perfil.

              
	
                Permiso
                  de Ocupación de Zonas Adyacentes. Permiso de Cruzamiento.

              	
                Gobierno
                  del Estado

              	
                Presentación
                  de planos de trazo y perfil (donde se localice la carretera) y
                  planos de
                  cruzamiento de la carretera.

              
	
                Permiso
                  de construcción de accesos, cruzamientos e instalaciones en el derecho de
                  vía de caminos y carreteras federales.

              	
                SCT

                En
                  la capital del Estado, o en México, D.F.

                 

              	
                Permiso
                  requerido para el tendido de ductos a 2.5 m. dentro del derecho
                  de vía.
                  Art. 8 LCPAF, Art. 2 RADVCF

              
	
                Permiso
                  para el Uso de Frecuencia de Radio y Comunicación Vía
                  Satélite.

              	
                SCT

              	
                Permiso
                  para instalar, operar o explotar estaciones terrestres transmisoras
                  en
                  comunicación vía satélite.  Se requiere de concesión para
                  utilizar bandas de frecuencia del espectro.

              
	
                Permiso
                  de Cruzamiento de Vías de Ferrocarril. Permiso de Ocupación de Zonas
                  Adyacentes.

              	
                SCT

                En
                  las oficinas de Ferronales.

              	
                Permiso
                  requerido para construir accesos, cruzamientos e instalaciones
                  en el
                  derecho de vía de las vías férreas.  Se requerirán planos de
                  trazo y perfil y memorias, entre otros. Art. 15, LRSF.

              
	
                Permiso
                  de Ocupación Marginal y Permiso de Cruzamiento.

              	
                CNA.

                Gerencias
                  Estatales.

              	
                Para
                  el uso o aprovechamiento de bienes nacionales a cargo de la CNA
                  se
                  requiere de concesión por parte de la misma. Se requerirán diferentes
                  planos. Art. 118 LAN. 174 RLAN.

              
	
                Autorización
                  de la Manifestación de  Impacto Ambiental que se presente
                  (Autorización de la MIA)

              	
                SEMARNAT

                Dirección
                  General de Impacto Ambiental

              	
                Autorización
                  para llevar a cabo actividades u obras que pudiesen tener un impacto
                  adverso en el medio ambiente. Art. 28 LGEEPA.

              
	
                Estudio
                  de riesgo.

              	
                SEMARNAT

                Dirección
                  General de Impacto Ambiental

              	
                Estudio
                  tendiente a reducir las probabilidades de accidente que afecten
                  a
                  poblaciones cercanas y a las instalaciones mismas.

              
	
                Licencia
                  de Funcionamiento

              	
                SEMARNAT

                Delegaciones
                  Estatales.

                 

              	
                Si
                  se califica como fuente fija de emisiones a la atmósfera, se necesita
                  autorización para que la fuente pueda emitir olores, gases o partículas
                  sólidas o líquidas a la atmósfera. Art. 18 RLGEEPAA

              
	
                Cédula
                  de operación

              	
                SEMARNAT

              	
                Obligación
                  de la fuente fija de remitir a la SEMARNAT en febrero de cada año, la
                  cédula de operación de la instalación. Art. 19 y 21
                  RLGEEPAA

              
	
                Inventario
                  de emisiones a la atmósfera

              	
                SEMARNAT.

                Delegaciones
                  Estatales.

              	
                Obligación
                  de remitir a SEMARNAT un inventario de las emisiones contaminantes
                  a la
                  atmósfera, en los formatos correspondientes. Art. 17
                  RLGEEPAA

              
	
                Permiso
                  de combustión a cielo abierto en prácticas de contra
                  incendio

              	
                SEMARNAT.

                Delegaciones
                  Estatales.

              	
                Es
                  el permiso otorgado para la realización de adiestramiento para el combate
                  de incendios con combustión a cielo abierto. Art. 27 del
                  RLGEEPAA

              
	
                Autorización
                  para cambio de uso de terreno forestal

              	
                SEMARNAT

              	
                Autorización
                  para el cambio de destino de terrenos forestales. Art. 5 LF, 19-22
                  RLF

              
	
                Título
                  de Concesión o Asignación de Aguas Nacionales

              	
                CNA
                  Gerencias Estatales

              	
                Concesión
                  de la CNA necesaria para hacer uso o explotación de aguas nacionales para
                  la construcción y/u operación de Gasoducto.

              
	
                Título
                  de Concesión o Asignación para aguas del subsuelo en zonas reglamentadas o
                  de veda

              	
                CNA
                  Gerencias Estatales

              	
                Remitir
                  a la autoridad el volumen anual de agua usada o aprovechada como
                  promedio
                  en los dos años inmediatamente anteriores al decreto
                  respectivo.

              
	
                Registro
                  Público de Derechos de Aguas

              	
                CNA
                  Gerencias Estatales

              	
                Obtener
                  el certificado de las inscripciones y documentos referentes a los
                  títulos
                  de concesión, asignación y permisos.

              
	
                Registro
                  de Descarga de Aguas Residuales

              	
                CNA
                  Gerencias Estatales

              	
                Inscripción
                  del permiso requerido para la descarga de aguas residuales en cuerpos
                  receptoras propiedad de la Nación.

              
	
                Permiso
                  de Descarga de Aguas Residuales

              	
                CNA
                  Gerencias Estatales

              	
                Permiso
                  que autoriza a realizar descargas de aguas residuales en cuerpos
                  receptoras de jurisdicción federal.

              
	
                Pago
                  de Derechos por Descargas de Aguas Residuales

              	
                CNA
                  Gerencias Estatales

              	
                Pago
                  de derechos por la descarga de aguas residuales a cuerpos receptoras
                  propiedad de la Nación, conforme al volumen de descarga y cumplimiento de
                  los parámetros de D.Q.O., y S.S.T. o de condiciones particulares de
                  descarga o de la norma oficial aplicable.

              
	
                Registro
                  como empresa generadora de residuos peligrosos

              	
                SEMARNAT   Delegaciones
                  Estatales.

              	
                Si
                  se generan de manera constante residuos peligrosos, se debe registrar
                  como
                  empresa generadora de residuos peligrosos. Si sólo se generan de manera
                  esporádica, debe registrarse como generador eventual de residuos
                  peligrosos.

              
	
                Reporte
                  semestral de residuos peligrosos enviados para su reciclaje, tratamiento,
                  incineración o confinamiento

              	
                SEMARNAT   Delegaciones
                  Estatales.

              	
                Reporte
                  semestral ante la autoridad  sobre la generación de residuos y
                  sus movimientos.

              
	
                Aviso
                  de Contingencias

              	
                CRE

              	
                Notificación
                  de cualquier hecho que derivado de las actividades del transportista
                  ponga
                  en peligro la salud y seguridad públicas. Art. 70 RGN

              
	
                Informe
                  de Siniestros

              	
                CRE

              	
                Informe
                  detallado de causas y medidas tomadas en una contingencia.  Art.
                  70 RGN

              
	
                Programa
                  de Mantenimiento del Sistema

              	
                CRE

              	
                Anualmente,
                  se debe presentar el programa ante la CRE en los términos de las Normas
                  Oficiales Mexicanas aplicables. Art. 70 del RGN.

              
	
                Bitácora
                  para la supervisión, operación y mantenimiento de obras e
                  instalaciones

              	
                CRE

              	
                Libro
                  que debe llevar el transportista y debe siempre estar a disposición de la
                  CRE.

              


      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      ABREVIACIONES

      


      
        	
                CNA

              	
                Comisión
                  Nacional del Agua

              
	
                CRE

              	
                Comisión
                  Reguladora de Energía

              
	
                Ferronales

              	
                Ferrocarriles
                  Nacionales de México

              
	
                JFC

              	
                Junta
                  Federal de Caminos

              
	
                LAH

              	
                Ley
                  de Asentamientos Humanos

              
	
                LAN

              	
                Ley
                  de Aguas Nacionales

              
	
                LCPAF

              	
                Ley
                  de Caminos Puentes y Autotransporte Federal

              
	
                LF

              	
                Ley
                  Forestal

              
	
                LFAFE

              	
                Ley
                  Federal de Armas de Fuego y Explosivos

              
	
                LGEEPA

              	
                Ley
                  General de Equilibrio Ecológico y Protección al
                  Ambiente

              
	
                LRSF

              	
                Ley
                  Reglamentaria del Servicio Ferroviario

              
	
                MIA

              	
                Manifestación
                  de Impacto Ambiental

              
	
                RADVCF

              	
                Reglamento
                  para el Aprovechamiento del Derecho de Vía de las Carreteras Federales y
                  Zonas Aledañas

              
	
                RGN

              	
                Reglamento
                  de Gas Natural

              
	
                RPLAN

              	
                Reglamento
                  de la Ley de Aguas Nacionales

              
	
                RLF

              	
                Reglamento
                  de la LF

              
	
                RLGEEPAA

              	
                Reglamento
                  de la LGEEPA en Materia de Prevención y Control de la Contaminación de la
                  Atmósfera

              
	
                SAGARPA

              	
                Secretaría
                  de Agricultura, Ganadería, Desarrollo Rural, Pesca y
                  Alimentos

              
	
                SCT

              	
                Secretaría
                  de Comunicaciones y Transportes

              
	
                SENER

              	
                Secretaría
                  de Energía

              
	
                SE

              	
                Secretaría
                  de Economía

              
	
                SEDENA

              	
                Secretaría
                  de la Defensa Nacional

              
	
                SEMARNAT

              	
                Secretaría
                  del Medio Ambiente y Recursos
                  Naturales

              


      

      


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      


      Sonora

      


      Sonora
        Pipeline L.L.C. needs to file for a permit from the U.S. Corps of Engineers
        to
        bore under the Rio Grande River.  This permit will expire after six
        months, therefore, Sonora Pipeline L.L.C., or the applicable entity, needs
        to
        apply for this permit not more than six months prior to
        construction.  Sonora Pipeline L.L.C. must also apply for a permit
        with the U.S. Boundary and Water Commission for permission to drill under
        dykes
        in the pipeline ROW.  This permit also expires after six months,
        therefore, Sonora Pipeline L.L.C., or the applicable entity, needs to apply
        for
        this permit not more than six months prior to construction.

      


      Additionally:

      


      SCHEDULE
        OF REQUIREMENTS

      RELATIVE
        TO

      FERC
        AUTHORIZATIONS

      


      


      I           By
        August 9, 2007:

      


      
        	
                a.  

              	
                File
                  Application for Rehearing relative to authorizations, if
                  necessary  (Section 19 of the Natural Gas Act).  This
                  was not necessary.

              


      

      


      
        	
                b.  

              	
                File
                  acceptance of Section 7 certificate; an automatic extension is
                  provided if
                  rehearing requested. (Ordering Paragraph (E) (2) referencing § 157.20(1)
                  of FERC’s Regs.) Filed
                  acceptance of Presidential Permit with FERC on August 8, 2007.
                  See
                  attachment.

              


      

      


      
        	
                c.  

              	
                File
                  acceptance of Presidential Permit, OR file for an extension if
                  rehearing is requested.  [Ordering Paragraph (H)]. Filed
                  with FERC on August 8, 2007. See
                  attachment.

              


      

      


      II           Within
        60 days of certificate acceptance and before construction begins

      


      
        	
                 

              	
                a.

              	
                File
                  an Initial Implementation Plan relative to the
                  environment.  [Appendix  B, ¶ 7], OR get an
                  extension of time. Filed
                  for and received the attached
                  extension

              


      

      


      III           Prior
        to commencement of pipeline construction:

      
        


        
          	
                   

                	
                  
                    b.  

                  

                	
                  Conduct
                    an Open Season.  [Ordering Paragraph
                    (E)(5)].

                


        

         

      

      IV           Within
        10 days after commencing construction:

      


      
        	
                 

              	
                a.

              	
                File
                  a written notice under oath of the date that construction
                  commenced.  [Ordering Paragraph (E)(2) referencing §157.20(c) of
                  FERC’s regs.].

              


      

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      V           By
        July 10, 2008:

      


      
        	
                a.  

              	
                Complete
                  pipeline construction and make facilities available for service,
OR
                  have requested and obtained an extension of this requirement. [Ordering
                  Paragraph (E)(1)].

              


      

      


      
        	
                VI

              	
                Not
                  less than 30 days, nor more than 60 days prior to the commencement
                  of
                  interstate service:

              


      

      


      
        	
                 

              	
                a.

              	
                File
                  revised pro forma tariff sheets [Ordering Paragraphs (E)(3) &
                  (4)], together with a redline version [Text ¶ 31],
                  that:

              


      

      


      
        	
                1.  

              	
                Use
                  billing determinants of 1Dth/d. [Text ¶
23].

              


      

      


      
        	
                2.  

              	
                Reflect
                  a 14% ROE.  [Text ¶ 26].

              


      

      


      
        	
                3.  

              	
                Incorporate
                  an interruptible revenue crediting mechanism.  [Text ¶
                  28].

              


      

      


      
        	
                4.  

              	
                Obligates
                  Sonora to advise a shipper within 10 days of Sonora’s determination that
                  the shipper is not creditworthy and provide the shipper recourse
                  to
                  challenge the findings.  [Text ¶
34].

              


      

      


      
        	
                5.  

              	
                Incorporate
                  matrix identifying language in Tariff that complies with NAESB
                  creditworthiness standards.  [Text ¶
                  35].

              


      

      


      
        	
                6.  

              	
                Complies
                  with Order 587-S and NAESB requirements in effect at the time of
                  filing.  [Text ¶ 36].

              


      

      


      
        	
                7.  

              	
                Includes
                  cross-reference matrix for all NAESB requirements.  [Text ¶
                  37]

              


      

      


      
        	
                8.  

              	
                Awards
                  reservation credits in force majeure situations.  [Text
                  ¶ 39].

              


      

      


      
        	
                9.  

              	
                Incorporates
                  the tariff changes listed in Appendix A to the certificate
                  order.

              


      

      


      
        	
                VII

              	
                Within
                  10 days after construction completed and service
                  commenced:

              


      

      


      
        	
                 

              	
                a.

              	
                File
                  a written notice under oath of such completion and commencement
                  date.  [Ordering Paragraph (E)(2) referencing §
                  157.20(c)(2)].

              


      

      


      VIII           Within
        6 months after construction completed:

      
        


        
          	
                   

                	
                  a.

                	
                  
                    File
                      a statement detailing the actual cost information required
                      by §
                      157.20(c)(3) of FERC’s Regs.  Ordering Paragraph (E) referencing
                      § 157.20(c)(3) of FERC’s
                      Regs.].

                  

                


        

         

      

      
        	
                IX

              	
                Within
                  3 years of the in-service date, file either a cost and revenue
                  study or a
                  Section 4 rate change filing.  [Text ¶
                  30].

              


      

      


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      


      


      FEDERAL
        ENERGY REGULATORY COMMISSION

      WASHINGTON,
        D.C. 20426

      


      


      


                                                                                                     

      
        	OFFICE
                OF ENERGY PROJECTS  	In
                Reply Refer To:


        	
                 

              	
                OEP/DG2E/Gas
                  Branch 1

              


      

      
        	
                 

              	
                Sonora
                  Pipeline, LLC

              


      

      
        	
                 

              	
                Burgos
                  Hub Export/Import Project

              


      

      
        	
                 

              	
                Docket
                  Nos. CP07-74-000, et al

              


      

      
        	
                 

              	 


      

       

      August
        27, 2007

      Bernard
        Foster, III

      
        Ross,
          Marsh, and Foster

      

      2001
        L
        Street, NW, Suite 400

      Washington,
        DC  20036

      


      Re:           Extension
        of Time to File Initial Implementation Plan

      


      Dear
        Mr.
        Foster:

      


      I
        approve Sonora Pipeline, LLC’s
        (Sonora) request filed on August 17, 2007, for an extension of time for filing
        its initial Implementation Plan required by condition 7 of the Commission’s
        November 10, 2007 Order Issuing Certificate (Order), to a date sixty days
        prior
        to commencement of construction.  Sonora requests the extension due to
        a delay in its planned construction dates.

      


      I
        remind
        you that Sonora must comply with all applicable terms and conditions of the
        Order in the above-referenced docket.

      


      Sincerely,

      


      Signed
        MJB 8/27/07

      


      Michael
        J. Boyle, Chief

      Gas
        Branch 1, Division of Gas - Environment and Engineering

      


      cc:           Public
        File, Docket Nos. CP07-74-000, et al.

      


      All
        Parties

      James
        B.
        Smith

      Sonora
        Pipeline, LLC

      1862
        West
        Bitters, Bldg. 1

      San
        Antonio, TX
        78248