ex10-2.htm


    
      
        Exhibit
          10.2

      

      


      


      


      


      


      


      


      LIMITED
        LIABILITY COMPANY AGREEMENT

      


      OF

      


      FRONTERA
        PIPELINE, LLC

      


      A
        Delaware Limited Liability Company

      


      


      


      


      Dated
        as of September 28, 2007

      


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      


      


      


      


      


      TABLE
        OF CONTENTS

       

      
        
          	 	 	 	
                  Page

                
	
                  Article
                    I DEFINITIONS AND CONSTRUCTION  

                	
                  4

                
	 	
                  1.1

                	
                  Definitions

                	
                  4

                
	 	
                  1.2

                	
                  Construction

                	
                  10

                
	 	
                   

                
	
                  Article
                    II BUSINESS, PURPOSE, AND TERM OF COMPANY  

                	
                  10

                
	 	
                  2.1

                	
                  Formation

                	
                  10

                
	 	
                  2.2

                	
                  Name

                	
                  10

                
	 	
                  2.3

                	
                  Offices

                	
                  10

                
	 	
                  2.4

                	
                  Purposes

                	
                  11

                
	 	
                  2.5

                	
                  Term

                	
                  11

                
	 	
                  2.6

                	
                  Fiscal
                    Year

                	
                  11

                
	 	
                  2.7

                	
                  Powers
                    of the Company

                	
                  11

                
	 	
                   

                
	
                  Article
                    III REPRESENTATIONS AND WARRANTIES  

                	
                  12

                
	 	
                  3.1

                	
                  Representations
                    and Warranties

                	
                  12

                
	 	
                   

                
	
                  Article
                    IV CAPITAL CONTRIBUTIONS  

                	
                  12

                
	 	
                  4.1

                	
                  Capital
                    Contributions; Units

                	
                  12

                
	 	
                  4.2

                	
                  Additional
                    Capital Contributions

                	
                  12

                
	 	
                  4.3

                	
                  Subsequent
                    Capital Contributions

                	
                  13

                
	 	
                  4.4

                	
                  Pre-emptive
                    Rights

                	
                  13

                
	 	
                  4.5

                	
                  Capital
                    Accounts

                	
                  13

                
	 	
                  4.6

                	
                  No
                    Return of Capital Contribution

                	
                  14

                
	 	
                  4.7

                	
                  FID
                    Milestone Payments

                	
                  14

                
	 	
                  4.8

                	
                  TOG
                    Call Right

                	
                  14

                
	 	
                  4.9

                	
                  TOG
                    Forfeiture of Units

                	
                  14

                
	 	
                   

                
	
                  Article
                    V CREATION AND TRANSFER OF MEMBERSHIP
                    INTERESTS

                	
                  14

                
	 	
                  5.1

                	
                  Members

                	
                  14

                
	 	
                  5.2

                	
                  Classification
                    of Units; Membership Interests

                	
                  14

                
	 	
                  5.3

                	
                  Transferability

                	
                  14

                
	 	
                  5.4

                	
                  Transfers
                    of Cheniere Membership Interest

                	
                  15

                
	 	
                  5.5

                	
                  Transfers
                    of Other Membership Interest

                	
                  15

                
	 	
                  5.6

                	
                  Cheniere
                    Right of First Refusal

                	
                  15

                
	 	
                  5.7

                	
                  Closing

                	
                  15

                
	 	
                  5.8

                	
                  Tag-Along
                    Rights

                	
                  15

                
	 	
                  5.9

                	
                  Required
                    Sale

                	
                  16

                
	 	
                  5.10

                	
                  Transfer
                    by Operation of Law

                	
                  17

                
	 	
                   

                
	
                  Article
                    VI ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS  

                	
                  17

                
	 	
                  6.1

                	
                  Allocation
                    of Profits and Losses

                	
                  17

                
	 	
                  6.2

                	
                  Distributions
                    of Available Cash Flow

                	
                  18

                
	 	
                  6.3

                	
                  Special
                    Allocations

                	
                  18

                
	 	
                  6.4

                	
                  Other
                    Special Allocations

                	
                  19

                
	 	
                  6.5

                	
                  Tax
                    Allocations

                	
                  19

                


        

         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

        
 

        
          	 	 
	
                  Article
                    VII MANAGEMENT OF THE COMPANY  

                	
                  19

                
	 	
                  7.1

                	
                  General

                	
                  19

                
	 	
                  7.2

                	
                  Management
                    by the Managing Member

                	
                  20

                
	 	
                  7.3

                	
                  Officers

                	
                  21

                
	 	
                  7.4

                	
                  Liability
                    of the Managing Member

                	
                  21

                
	 	
                  7.5

                	
                  Indemnification

                	
                  22

                
	 	
                  7.6

                	
                  Tax
                    Status

                	
                  22

                
	 	
                  7.7

                	
                  Records
                    and Information

                	
                  22

                
	 	
                  7.8

                	
                  Tax
                    Matters

                	
                  22

                
	 	
                  7.9

                	
                  Collaboration

                	
                  22

                
	 	
                   

                
	
                  Article
                    VIII INSPECTION; CONFIDENTIALITY  

                	
                  23

                
	 	
                  8.1

                	
                  Right
                    to Inspect Books and Records

                	
                  23

                
	 	
                  8.2

                	
                  Confidentiality

                	
                  23

                
	 	
                   

                
	
                  Article
                    IX DISSOLUTION  

                	
                  23

                
	 	
                  9.1

                	
                  Dissolution

                	
                  23

                
	 	
                  9.2

                	
                  Winding
                    Up

                	
                  23

                
	 	
                  9.3

                	
                  Distribution
                    of Assets

                	
                  23

                
	 	
                   

                
	
                  Article
                    X MISCELLANEOUS  

                	
                  24

                
	 	
                  10.1

                	
                  Notices

                	
                  24

                
	 	
                  10.2

                	
                  Amendments

                	
                  25

                
	 	
                  10.3

                	
                  Severability

                	
                  25

                
	 	
                  10.4

                	
                  Entire
                    Agreement

                	
                  25

                
	 	
                  10.5

                	
                  Choice-of-Law

                	
                  25

                
	 	
                  10.6

                	
                  Headings

                	
                  25

                
	 	
                  10.7

                	
                  Further
                    Action

                	
                  25

                
	 	
                  10.8

                	
                  Waiver
                    of Action for Partition

                	
                  25

                
	 	
                  10.9

                	
                  Counterpart
                    Execution

                	
                  25

                
	 	
                  10.10

                	
                  Enforcement

                	
                  25

                


        

         

      

      


      


      EXHIBITS

      


      Exhibit
        A                                Book
        Value

      Exhibit
        B                                Project
        Development Map

      Exhibit
        C                                Capital
        Contributions

      Exhibit
        D                                Member’s
        Percentage Interest

      Exhibit
        E                                Promissory
        Note

      


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      LIMITED
        LIABILITY COMPANY AGREEMENT

      OF

      FRONTERA
        PIPELINE, LLC

      


      A
        Delaware Limited Liability Company

      


      This
        LIMITED LIABILITY COMPANY AGREEMENT OF FRONTERA PIPELINE, LLC (this
“Agreement”), dated as of September 28, 2007 (the
“Effective Date”), is entered into
        by Grand Cheniere
        Pipeline LLC, a Delaware limited liability company
        (“Cheniere”), and Tidelands Oil & Gas Corporation,
        a Nevada corporation, (“TOG”).  Each of
        Cheniere, TOG and any Person hereafter admitted to the Company are sometimes
        individually referred to herein as a “Party” and
        collectively referred to as the
“Parties”.

      


      W
        I T N E S S E T H:

      


      WHEREAS,
        the Certificate of Formation of the Company was filed with the Delaware
        Secretary of State on September 26, 2007; and

      


      WHEREAS,
        this Agreement shall constitute the “limited liability company agreement”
(within the meaning of the Act) of the Company, and shall be binding upon
        all
        Persons now or at any time hereafter who are Members.

      


      NOW,
        THEREFORE, in consideration of the mutual covenants and obligations set
        forth in this Agreement, and of other good and valuable consideration, the
        receipt of which is hereby acknowledged, the parties hereto, intending legally
        to be bound, hereby agree as follows:

      


      


      ARTICLE
I

      DEFINITIONS
        AND CONSTRUCTION

       

       

      1.1  Definitions.  As
        used in this Agreement, the following terms have the respective meanings
        set
        forth below or set forth in the Sections referred to below (and grammatical
        variants of such terms shall have correlative meanings):

       

      “Acceptance
        Notice” has the meaning set forth in Section 5.6
        hereof.

       

      “Acceptance
        Period” has the meaning set forth in Section 4.8
        hereof.

       

      “Act”
        means the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq., as
        may be amended from time to time.

       

      “Adjusted
        Capital Account Deficit” means, with respect to any Member, the
        deficit balance, if any, in such Member’s Capital Account as of the end of the
        relevant taxable year, after: (i) crediting to such Capital Account any amounts
        that such Member is obligated to restore pursuant to Regulations Section
        1.704-1(b)(2)(ii)(c) (or is deemed to be obligated to restore pursuant to
        the
        penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5))
        and (ii) debiting from such Capital Account the items described in Regulations
        Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

       

      “Adjustment
        Date” has the meaning set forth in the definition of Partially
        Adjusted Capital Account.

       

      “Affiliate”
        of a Person means any Person Controlling, Controlled by, or Under Common
        Control
        with such Person.

       

      “Agreement”
        has the meaning set forth in the introductory paragraph of this
        Agreement.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      “Available
        Cash” for any period means (i) all interest and other cash
        proceeds received by the Company during such period, minus (ii) all Company
        Expenses paid or reserved for by the Company during such period, plus (iii)
        subsequent reductions in the amount of any reserves described in clause
        (ii).

       

      “Book
        Value” means with respect to any asset, except as set forth below,
        such asset’s adjusted basis for federal income tax purposes:

       

      (a)           The
        initial Book Value of any asset contributed by a Member to the Company shall
        be
        the gross fair market value of such asset, as determined by the Managing
        Member;
        provided, that the Members agree that the gross fair market value of the
        assets
        contributed to the Company pursuant to Section 4.1 shall be the amounts set
        forth in Exhibit A attached hereto, as may be adjusted pursuant to
        Section 4.7.

       

      (b)           The
        Book Value of all Company assets shall be adjusted to equal their respective
        gross fair market values (taking Code Section 7701(g) into account), as
        determined by the Managing Member as of the following times:  (i) the
        acquisition of an additional interest in the Company by any new or existing
        Members in exchange for more than a de minimis Capital Contribution if
        the Managing Member reasonably determines that such adjustment is necessary
        or
        appropriate to reflect the relative economic interests of the Members in
        the
        Company; (ii) the distribution by the Company to a Member of more than a
de
        minimis amount of Company property as consideration for an interest in the
        Company if the Managing Member reasonably determines that such adjustment
        is
        necessary or appropriate to reflect the relative economic interests of the
        Members in the Company; (iii) the liquidation of the Company within the meaning
        of Treasury Regulations Section 1.704-1(b)(2)(ii)(g), and (iv) in connection
        with the grant of an interest in the Company (other than a de minimis
        interest) as consideration for the provision of services to or for the benefit
        of the Company by an existing Member.

       

      (c)           The
        Book Value of any Company asset distributed to any Member shall be the gross
        fair market value (taking Code Section 7701(g) into account) of such asset
        as
        determined by the Managing Member on the date of distribution.

       

      (d)           The
        Book Value of Company assets shall be increased or decreased to reflect any
        adjustments to the adjusted basis of such assets pursuant to Code Section
        734(b)
        or Code Section 743(b), but only to the extent that such adjustments are
        taken
        into account in determining Capital Accounts pursuant to Treasury Regulations
        Section 1.704-1(b)(2)(iv)(m); provided, however, that Book Values shall not
        be
        adjusted pursuant to this subparagraph (d) to the extent the Managing Member
        determines that an adjustment pursuant to subparagraph (b) hereof is necessary
        or appropriate in connection with a transaction that would otherwise result
        in
        an adjustment pursuant to this subparagraph (d).

       

      (e)           If
        the Book Value of an asset has been determined or adjusted pursuant to
        subparagraphs (a), (b) or (d) of this provision, such Book Value and the
        Members’ Capital Accounts shall thereafter be computed in accordance with
        Section 1.704-1(b)(2)(iv)(g) of the Regulations.

       

      “Brazil
        Storage Facility”  means an open access underground
        natural gas storage facility located at Municipality Rio Bravo, Tamaulipas,
        Mexico of 1,415.8 MMm3/day (50,000 MMPCD or 50 BCF) that will interconnect
        with
        the El Dorado LNG terminal, with natural gas injection from the B1 reservoir
        of
        Campo Brasil of 9.9 MMm3/day (350 MMPCD), delivery pressure at the
        interconnecting points fluctuating from 2,757.9 kPa to 6,205 kPa (400 psig
        to
        900 psig), a maximum discharge pressure at the exit of the compression station
        of 22,063.2 kPa (3,200 psig) and a maximum capability of storage design of
        1,415.8 MMm3/day (50,000 MMPCD or 50 BCF) after the third season, and a maximum
        extraction amount estimated in 14.15 MMm3/day (500 MMPCD), as more fully
        described in the permit application filed with the CRE on August 5, 2005
        under
        CRE File No. T46/1131.

       

      “Call
        Price” means the sum of: (i) US$1,000,000; plus (ii) all
        amounts due and owing, inclusive of interest, for loans extended to TOG pursuant
        to Section 4.2(h), plus (iii) all other costs and expenses incurred by
        Cheniere for the development and construction of the Project (including all
        amounts paid by Cheniere to TOG or contributed by Cheniere to the Company
        as
        Development Costs and Project Equity Costs), inclusive of a twelve percent
        (12%)
        interest rate per annum, compounded annually, on such costs and
        expenses.

       

      “Capital
        Account” means a separate account to be maintained by the Company
        for each Member pursuant to Section 4.5 of this Agreement.

       

      “Capital
        Contributions” means the amount of cash and the Book Value of any
        property contributed by Members to the Company.

       

      “Certificate
        of Formation” means the Certificate of Formation of the Company as
        filed with the Delaware Secretary of State on September 26, 2007, as the
        same
        may be amended and restated from time to time.

       

      “Cheniere”
        has the meaning set forth in the introductory paragraph of this
        Agreement.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      “Code”
        means the Internal Revenue Code of 1986, as amended, and any corresponding
        provisions of succeeding law.

       

      “Company”
        means Frontera Pipeline LLC, a Delaware limited liability company.

       

      “Company
        Expenses” means all expenses relating to the Company’s operations,
        including (i) organizational and offering expenses of the Company and any
        of its
        subsidiaries, (ii) management fees and employee salaries of the Company or
        its
        subsidiaries, (iii) expenses of attorneys, accountants, consultants, custodians
        and experts hired on behalf of the Company or its subsidiaries, (iv) expenses
        (including travel) related to the Company’s investments or potential investments
        (whether or not consummated or whether performed directly or indirectly through
        any of its subsidiaries) or to the acquisition, holding, and sale or other
        disposition of investments, (v) any taxes, fees or other government charges
        levied against the Company or its subsidiaries, and (vi) other expenses related
        to the activities of the Company or its subsidiaries, including the development
        and implementation of the Project.

       

      “Control”
        including the correlative terms “Controlling,”
“Controlled by” and “Under
        Common Control
        with” means possession, directly or indirectly, of the power to
        direct or cause the direction of management or policies (whether through
        ownership of securities or any partnership or other ownership interest, by
        contract or otherwise) of a Person.  For the purposes of the preceding
        sentence, control shall be deemed to exist when a Person possesses, directly
        or
        indirectly, through one or more intermediaries: (i) more than fifty percent
        (50%) of the outstanding voting securities or interests thereof; (ii) in
        the
        case of a limited liability company, partnership, limited partnership or
        venture, the right to more than fifty percent (50%) of the distributions
        therefrom (including liquidating distributions); (iii) in the case of any
        other
        Person, more than fifty percent (50%) of the distributions therefrom (including
        liquidating distributions); or (iv) in the case of any other Person, more
        than
        fifty percent (50%) of the economic or beneficial interest therein.

       

      “Contribution
        Agreement” means the Contribution Agreement, dated September 28,
        2007, by and among Cheniere, TOG and the Company.

       

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

       

      “CRE
        Permit” means permit No. G/183/TRA/2006 dated May 23, 2006, issued
        by the CRE, together with Resolution RES/104/2006 also issued by CRE on that
        same date, both as amended from time to time by the CRE as a result of a
        petition by the Company, an Affiliate of the Company, or otherwise.

       

      “Development
        Costs” means the permitting, book and record keeping, third party
        consulting and other incidental development costs associated with the
        pre-construction period of each phase of the Project.

       

      “Effective
        Date” has the meaning set forth in the introductory paragraph of
        this Agreement.

       

      “Entity”
        means any limited liability company, corporation, limited partnership, general
        partnership, joint stock company, joint venture, association, company, trust,
        bank trust company, land trust, business trust, sociedad anonima, sociedad
        de
        responsabilidad limitada, or other organization, whether or not a legal entity,
        and any government or agency or political subdivision thereof.

       

      “Exercise
        Notice” has the meaning set forth in Section 4.8
        hereof.

       

      "FERC
        Certificate" means the Order Issuing Presidential Permit and NGA
        Sections 3 and 7 Authorizations issued July 10, 2007 by the Federal Energy
        Regulatory Commission of the United States of America in Docket Nos.
        CP07-74-000, CP07-75-000, CP07-76-000 and CP07-77-000, as may be amended
        from
        time to time, as a result of a petition by the Company, an Affiliate of the
        Company, or otherwise.

      


      “FID”
        means a final investment decision to proceed with any phase of the Project
        that
        is adopted by the Managing Member in its sole discretion.

       

      “FID
        Milestone Payments” means the Phase I FID Milestone Payment, the
        Phase II FID Milestone Payment and the Phase III FID Milestone
        Payment.

       

      “Force
        Majeure” means catastrophic storms or floods, lightning,
        tornadoes, hurricanes, earthquakes and other acts of God, wars, civil
        disturbances, terrorist attacks, revolts, insurrections, sabotage, commercial
        embargoes, epidemics, fires, explosions, actions of a governmental authority
        that were not requested, promoted, or caused by the affected party, governmental
        inactivity not attributable to the affected party, and any other similar
        unforeseeable event; provided that such act or event (i) renders
        impossible or delays the affected party’s performance of its obligations under
        this Agreement, (ii) is beyond the reasonable control of the affected party
        and
        not due to its fault or negligence, and (iii) could not have been prevented
        or
        avoided by the affected party through the exercise of due
        diligence.  For avoidance of doubt, Force Majeure shall include lawful
        strikes or other similar labor or social actions.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      “GAAP”
        means United States generally accepted accounting principles consistently
        applied.

       

      “Managing
        Member” has the meaning set forth in Section 7.1.

       

      “Member”
        refers to Cheniere and TOG or any Person hereafter admitted to the Company
        as a
        Member as provided in this Agreement but such term does not include any Person
        who has ceased to be a Member in the Company as provided in this
        Agreement.

       

      “Membership
        Interest” means the ownership interest of a Member in the
        Company.

       

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

       

      “Notice
        to Proceed” has the meaning set forth in Section 4.8
        hereof.

       

      “Officer”
        or “Officers” means any Person designated as an
        officer of the Company as provided in Section 7.3, but such term does not
        include any Person who has ceased to be an officer of the Company.

       

      “OL
        Exercise Notice” has the meaning set forth in Section 5.10(a)
        hereof.

       

      “OL
        Transfer Notice” has the meaning set forth in Section 5.10(a)
        hereof.

       

      “OL
        Transfer Units” has the meaning set forth in Section 5.10(a)
        hereof.

       

      “Option
        Units” has the meaning set forth in Section 5.6
        hereof.

       

      “Partially
        Adjusted Capital Account” means, with respect to any Member as of
        the close of business on the last day of any taxable year (an
“Adjustment Date”), the Capital Account of such Member
        as of the beginning of the taxable year ending on such Adjustment Date, adjusted
        to account for all allocations pursuant to Section 6.3 and all Capital
        Contributions and distributions during such taxable year ending on such
        Adjustment Date but before giving effect to any allocations of Profits or
        Losses
        for such period pursuant to Section 6.1 increased by (i) such Member’s share of
“partnership minimum gain,” as determined pursuant to Regulations Section
        1.704-2(d) and (g), as of the end of such taxable year and (ii) such Member’s
        share of “partner nonrecourse debt minimum gain,” as determined pursuant to
        Regulations Section 1.704-2(i), as of the end of such taxable year.

       

      “Percentage
        Interest” for each Member means the percentage obtained by
        dividing (i) the number of Units held by such Member by (ii) the aggregate
        number of Units held by all other Members from time to time.

       

      “Permitted
        Transferee” shall mean any transferee of a Restricted Member so
        long as such transferee is an Affiliate of the Restricted Member.

       

      “Person”
        means any natural person or Entity.

       

      “Phase
        I” means the construction of that certain stretch of pipeline
        extending from: (i) the Valero Gilmore Plant, located at Hidalgo County,
        Texas,
        United States of America to (ii) Estacion Arguelles of the Sistema Nacional
        de Gasoductos, located in Tamaulipas, Mexico, to (iii) Station 19 of
Pemex Gas y Petroquimica Basica (Terranova Oriente Segments), to (iv)
        Monterrey, Nuevo Leon, Mexico (Mission Occidente and Amended Occidente
        Segments), such phase as more specifically illustrated in the Project
        Development Map attached hereto as Exhibit B, and subject to the
        specifications of the CRE Permit and the FERC Certificate.

       

      “Phase
        I Project Budget” means the Project Equity Costs for the
        construction of Phase I of the Project as projected, adopted and revised
        from
        time to time by the Managing Member in its sole discretion and as approved
        by
        the FERC, the CRE or any other regulatory or governmental Entity in Mexico
        or in
        the United States of America.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      “Phase
        I FID Date” means the date on which the Managing Member adopts a
        FID and resolves to proceed with the construction of Phase I of the
        Project.

       

      “Phase
        I FID Milestone Payment” means a one time cash payment in an
        amount equal to US$4,800,000 payable by Cheniere to TOG upon the occurrence
        of
        the Phase I FID Date.

       

      “Phase
        I Royalty” means that amount payable to TOG from Available Cash
        equal to US$0.008 per Mmbtu/d of capacity subscribed pursuant to a firm
        transportation agreement across the entire stretch of pipeline for Phase
        I of
        the Project. The Phase I Royalty shall be proportionally reduced in the event
        that less than one hundred percent (100%) of the entire stretch of pipeline
        for
        Phase I of the Project is constructed.

       

      “Phase
        II” means the construction of that certain stretch of pipeline
        extending from: (i) the Donna Station to (ii) Brazil Storage to (iii) Station
        19
        of Pemex Gas y Petroquimica Basica (Terranova Oriente Segments), such
        phase as more specifically illustrated in the Project Development Map attached
        hereto as Exhibit B, and subject to the specifications of the CRE Permit
        and the FERC Certificate.

       

      “Phase
        II FID Date” means that date on which the Managing Member adopts a
        FID and resolves to proceed with the construction of Phase II of the
        Project.

       

      “Phase
        II FID Milestone Payment” means a one time cash payment in an
        amount equal to US$1,200,000 payable by Cheniere to TOG upon the occurrence
        of
        the Phase II FID Date.

       

      “Phase
        II Project Budget” means the Project Equity Costs for the
        construction of Phase II of the Project as projected, adopted and revised
        from
        time to time by the Managing Member in its sole discretion and as approved
        by
        the FERC, the CRE or any other regulatory or governmental Entity in Mexico
        or in
        the United States of America.

       

      “Phase
        II Royalty” means that amount payable to TOG from Available Cash
        equal to US$0.002 per Mmbtu/d of capacity subscribed pursuant to a firm
        transportation agreement across the entire stretch of pipeline for Phase
        II of
        the Project. The Phase II Royalty shall be proportionally reduced in the
        event
        that less than one hundred percent (100%) of the entire stretch of pipeline
        for
        Phase II of the Project is constructed.

       

      “Phase
        III” means the construction of the Brazil Storage
        Facility.

       

      “Phase
        III Project Budget” means the Project Equity Costs for the
        construction of Phase III of the Project as projected, adopted and revised
        from
        time to time by the Managing Member in its sole discretion and as approved
        by
        the CRE or any other regulatory or governmental Entity in Mexico.

       

      “Phase
        III FID Date” means the date on which the Managing Member adopts a
        FID and resolves to proceed with the construction of Phase III of the
        Project.

       

      “Phase
        III FID Milestone Payment” means a one time cash payment in an
        amount equal to US$2,000,000 payable by Cheniere to TOG upon the occurrence
        of
        the Phase III FID Date.

       

      “Phase
        III Royalty” means that amount payable to TOG from Available Cash
        equal to US$0.02 per Mmbtu/year of storage capacity subscribed pursuant to
        a
        firm storage service agreement (up to 50 Bcf/year).

       

      “Potential
        Acquirer” has the meaning set forth in Section 5.6
        hereof.

       

      “Price”
        has the meaning set forth in Section 5.6 hereof.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      “Profits”
        and “Losses” mean, for each taxable year or other
        period, an amount equal to the Company’s taxable income or loss for the year or
        other period, determined in accordance with Section 703(a) of the Code
        (including all items of income, gain, loss or deduction required to be stated
        separately under Section 703(a)(1) of the Code), with the following
        adjustments:

       

      (a)           Any
        income of the Company that is exempt from federal income tax and not otherwise
        taken into account in computing Profits or Losses will be added to taxable
        income or loss;

       

      (b)           Any
        expenditures of the Company described in Section 705(a)(2)(B) of the Code
        or
        treated as Section 705(a)(2)(B) expenditures under Regulations Section 1.704
        1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits
        or
        Losses, will be subtracted from taxable income or loss;

       

      (c)           In
        the event the Book Value of any Company property is adjusted pursuant to
        subparagraphs (b) or (c) of the definition of Book Value, the amount of such
        adjustment shall be taken into account as gain or loss from the disposition
        of
        such asset for purposes of computing Profits or Losses;

       

      (d)           Gain
        or loss resulting from any disposition of Company property with respect to
        which
        gain or loss is recognized for federal income tax purposes shall be computed
        by
        reference to the Book Value of the property disposed of, notwithstanding
        that
        the adjusted tax basis of such property differs from its Book
        Value;

       

      (e)           In
        lieu of the depreciation, amortization and other cost recovery deductions
        taken
        into account in computing such taxable income or loss, there shall be taken
        into
        account depreciation and other cost recovery deductions computed in accordance
        with Treasury Regulations Section 1.704-1(b)(2)(iv)(g)(3) for such fiscal
        year
        or other period; and

       

      (f)           Any
        items which are specially allocated under Section 6.3 or Section 6.4
        hereof  will not affect calculations of Profits or
        Losses.

       

      “Project”
        means the construction of an integrated natural gas pipeline project traversing
        the United States of America and Mexico border and the construction of a
        related
        natural gas storage facility in Mexico, such project as more specifically
        set
        forth in the Project Development Map attached hereto as Exhibit
        B.

       

      “Project
        Equity Costs” means, with respect to a specified phase of the
        Project, the costs for construction of that phase of the Project, excluding
        Development Costs for that phase of the Project.

       

      “Project
        FID Dates” means the Phase I FID Date, the Phase II FID Date and
        the Phase III FID Date.

       

      “Pro
        Rata Share” has the meaning set forth in Section 4.4
        hereof.

       

      “Regulations”
        and “Treasury Regulations” means the regulations
        promulgated by the United States Department of the Treasury pursuant to and
        in
        respect of provisions of the Code.  All references herein to sections
        of the Regulations or Treasury Regulations shall include any corresponding
        provisions of succeeding, similar, substitute proposed or final
        Regulations.

       

      “Required
        Sale” has the meaning set forth in Section 5.9(a)
        hereof.

       

      “Required
        Sale Notice” has the meaning set forth in Section 5.9(a)
        hereof.

       

      “Restricted
        Members” has the meaning set forth in Section 5.5
        hereof.

       

      “Tag-Along
        Member” has the meaning set forth in Section 5.8
        hereof.

       

      “Tag-Along
        Notice” has the meaning set forth in Section 5.8
        hereof.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      “Tag-Along
        Units” has the meaning set forth in Section 5.8
        hereof.

       

      “Target
        Capital Account” means, with respect to any Member as of any
        Adjustment Date, an amount (which may be either a positive or a deficit balance)
        equal to the amount such Member would receive as a distribution if all assets
        of
        the Company as of such Adjustment Date were sold for cash equal to the Book
        Value of such assets, all the Company liabilities were satisfied to the extent
        required by their terms (limited in the case of each nonrecourse liability
        or
        partner nonrecourse debt to the Book Value of the assets securing each such
        liability) and the net proceeds were distributed pursuant to Section
        9.3.

       

      “TOG”
        has the meaning set forth in the introductory paragraph of this
        Agreement.

       

      “Transfer”
        including the correlative terms “Transferring” or
“Transferred”, means to sell,
        transfer, assign,
        pledge, mortgage, hypothecate or encumber any Membership Interest in the
        Company.  Notwithstanding the preceding sentence, the pledge of any
        Membership Interest in the Company pursuant to the promissory note, in
        substantially the form attached hereto as Exhibit E, shall not be
        considered a Transfer.

       

      “Transferor”
        has the meaning set forth in Section 5.6 hereof.

       

      “Transferor’s
        Notice” has the meaning set forth in Section 5.6
        hereof.

       

      “Units”
        means fractional, undivided shares of Membership Interests in the Company
        to be
        issued to all Members based upon their corresponding Membership
        Interests.

       

      “Unit
        Issue Price” has the meaning set forth in Section 4.1(a)
        hereof.

       

      1.2  Construction.  Unless
        the context requires otherwise: (a) the gender (or lack of gender) of all
        words
        used in this Agreement includes the masculine, feminine, and neuter; (b)
        references to Articles and Sections refer to Articles and Sections of this
        Agreement; (c) references to Exhibits refer to the Exhibits attached to this
        Agreement, each of which is made a part hereof for all purposes; (d) references
        to money refer to legal currency of the United States of America; (e) accounting
        terms shall be construed in accordance with GAAP; and (f) the words “include”,
“includes” and “including” shall be deemed to be followed by the words “without
        limitation”.

       

       

      ARTICLE
        II

      BUSINESS,
        PURPOSE, AND TERM OF COMPANY

       

       

      2.1  Formation.  The
        Company has been organized as a Delaware limited liability company by the
        filing
        of a Certificate of Formation under and pursuant to the Act.

       

      2.2  Name.  The
        name of the Company is “Frontera Pipeline, LLC” and all Company business must be
        conducted in that name or such other names selected by the Managing Member
        that
        comply with the Act.

       

      2.3  Offices.  The
        registered office of the Company required by the Act to be maintained in
        the
        State of Delaware shall be the office of the initial registered agent named
        in
        the Certificate of Formation or such other office (which need not be a place
        of
        business of the Company) as the Managing Member may designate in the manner
        provided by the Act.  The registered agent of the Company in the State
        of Delaware shall be the initial registered agent named in the Certificate
        of
        Formation or such other Person or Persons as the Managing Member may designate
        in the manner provided by the Act.  The principal office of the
        Company in the United States shall be at such place as the Managing Member
        may
        designate, which need not be in the State of Delaware.  The Company
        may have such other offices as the Managing Member may designate.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      2.4  Purposes.  The
        purposes of the Company are to engage in the development and construction
        of
        natural gas projects.

       

      2.5  Term.  The
        Company commenced upon the effectiveness of the Certificate of Formation
        and
        shall have a perpetual existence, unless and until it is dissolved and
        terminated in accordance with Article 9 of this Agreement.

       

      2.6  Fiscal
        Year.  The fiscal year of the Company shall be the
        calendar year.

       

      2.7  Powers
        of the Company.  In addition to the purpose set forth in
        Section 2.4 above, the Company shall have the power:

              

                  (a)  to
        conduct its business, carry on its operations and have and exercise the powers
        granted to a limited liability company by the Act in any state, territory,
        district or possession of the United States, or in any foreign country that
        may
        be necessary, convenient or incidental to the accomplishment of the purpose
        of
        the Company;

       

                  (b)  to
        acquire, by purchase, mortgage, lease, contribution of property or otherwise,
        and to own, hold, operate, maintain, finance, improve, lease, sell, convey,
        mortgage, transfer or dispose of any real or personal property that may be
        necessary, convenient or incidental to the accomplishment of the purpose
        of the
        Company;

       

                  (c)  to
        enter
        into, perform and carry out contracts of any kind, including, contracts with
        the
        Members or any Person that directly or indirectly Controls, is Controlled
        by, or
        is Under Common Control with the Members, or any agent of the Company necessary
        to, in connection with, convenient to, or incidental to, the accomplishment
        of
        the purpose of the Company;

       

                  (d)  to
        incorporate, organize and manage all kinds of Entities, or acquire and hold
        interests therein;

                  

                  (e)  to
        lend
        or borrow money and to invest its funds;

       

                  (f)  to
        sue
        and be sued;

       

                  (g)  to
        appoint employees and fix their compensation;

      \

                  (h)  to
        indemnify any Person; and

       

                  (i)       
        to
        guarantee obligations of an Affiliate or subsidiary.

       

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      ARTICLE
III

      REPRESENTATIONS
        AND WARRANTIES

       

       

      3.1  Representations
        and Warranties.  Each Member severally and jointly
        represents and warrants to the Company and to each other that:

       

                  (a)  such
        Member has full power and authority to execute and deliver this Agreement
        and to
        perform its obligations hereunder, and the execution, delivery, and performance
        by such Member of this Agreement has been duly authorized by all necessary
        action;

       

                  (b)  this
        Agreement has been duly and validly executed and delivered by such Member
        and
        constitutes the binding obligation of such Member enforceable against such
        Member in accordance with its terms;

       

                  (c)  the
        execution, delivery, and performance by such Member of this Agreement will
        not,
        with or without the giving of notice or the lapse of time, or both, (i) violate
        any provision of the Act or any other law to which such Member is subject,
        (ii)
        violate any order, judgment, or decree applicable to such Member, or (iii)
        conflict with, or result in a breach or default under, any term or condition
        of
        its organizational documents, or any agreement or other instrument to which
        such
        Member is a party; and

       

                  (d)  it
        has
        the necessary economic, human, and professional resources to comply with
        any and
        all of its obligations hereunder, and is familiar with the Project and the
        type
        of investment required for its implementation.

       

       

      ARTICLE
        IV

      CAPITAL
        CONTRIBUTIONS

       

       

      4.1  Capital
        Contributions; Units.

       

                  (a)  As
        of the
        Effective Date and as described in the Contribution Agreement, the Members
        have
        made Capital Contributions to the Company in the amounts set forth on Exhibit
        C attached hereto.  Each Member’s Percentage Interest as of the
        Effective Date is set forth opposite such Member’s name on Exhibit D
        attached hereto.  The issue price of each Unit issued shall be one
        thousand dollars (US$1,000) (the “Unit Issue
        Price”).  Fractional Units may be issued, except as
        otherwise provided herein.

       

                  (b)  Each
        Unit
        shall be entitled to one (1) vote at any meeting of the Members of the Company
        as provided under the Act.

       

      4.2  Additional
        Capital Contributions.  The Members hereby commit to
        make one or more capital contributions to the Company in excess of their
        initial
        Capital Contribution as set forth on Exhibit C (each and collectively an
“Additional Capital Contribution”) pursuant to the
        following terms and conditions:

       

                  (a)  At
        the
        sole and absolute discretion of the Managing Member, Cheniere shall be required
        to make one or more Additional Capital Contributions to fund all Development
        Costs related to Phase I up to the adoption by the Managing Member of, and
        FID,
        for Phase I.

       

                  (b)  If
        the
        Managing Member, in its sole and absolute discretion, resolves to adopt a
        FID
        for Phase I, each Member shall fund its pro-rata share (in proportion to
        their
        respective Percentage Interests) of Project Equity Costs in connection with
        Phase I as contemplated in the Phase I Project Budget approved by the Managing
        Member.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

                  (c)  At
        the
        sole and absolute discretion of the Managing Member, Cheniere shall be required
        to make one or more Additional Capital Contributions to fund all Development
        Costs related to Phase II up to the adoption by the Managing Member of, and
        FID
        for, Phase II.

       

                  (d)  If
        the
        Managing Member, in its sole and absolute discretion, resolves to adopt a
        FID
        for Phase II, each Member shall fund its pro-rata share (in proportion to
        their
        respective Percentage Interests) of Project Equity Costs in connection with
        Phase II as contemplated in the Phase II Project Budget approved by the Managing
        Member.

       

                  (e)  At
        the
        sole and absolute discretion of the Managing Member, Cheniere shall be required
        to make one or more Additional Capital Contributions to fund all Development
        Costs related to Phase III up to the adoption by the Managing Member of,
        and FID
        for, Phase III.

       

                  (f)  If
        the
        Managing Member, in its sole and absolute discretion, resolves to adopt a
        FID
        for Phase III, each Member shall fund its pro-rata share (in proportion to
        their
        respective Percentage Interests) of Project Equity Costs in connection with
        Phase III as contemplated in the Phase III Project Budget approved by the
        Managing Member.

       

                  (g)  Except
        for the Additional Capital Contributions provided for in Sections 4.2(a),
        4.2(c), and 4.2(e), upon the making of any Additional Capital Contribution,
        the
        Company shall issue and each Member shall subscribe to a number of Units
        equal
        to: (i) the amount of its Additional Capital Contribution divided by (ii)
        the
        Unit Issue Price.

       

                  (h)  In
        the
        event that TOG is unable to deliver the funds required to effect the Additional
        Capital Contributions required under subsections (b), (d) and (f) above,
        Cheniere shall extend a loan to TOG bearing an interest rate of twelve percent
        (12%) per annum, compounded annually.  In connection with such
        loan(s), TOG shall execute and deliver to Cheniere a promissory note in form
        and
        substance as attached hereto as Exhibit
        E. 

       

                  (i)  The
        Managing Member may adopt two or more Project FID Dates simultaneously or
        alternatively (i.e., not sequentially).

       

      4.3  Subsequent
        Capital Contributions.  Subsequent Capital Contributions
        shall be made from time to time as the Managing Member shall determine;
provided however, that except as provided in Section 4.2, no Member
        shall have any further obligation to make any Capital Contributions to the
        Company.  In exchange for any subsequent Capital Contribution not
        contemplated in Section 4.2, the contributing Member shall receive a number
        of
        Units equal to (i) the amount of such Capital Contribution divided by
        (ii) the Unit Issue Price.

       

      4.4  Pre-emptive
        Rights.  Each Member shall have the pre-emptive right
        and option to purchase its Pro Rata Share of any new issuance of Units at
        the
        then price per Unit determined by the Managing Member.  Such option
        shall be exercised through the delivery of written notice to the Managing
        Member
        within twenty (20) days after the delivery of written notice by the Managing
        Member to each Member regarding the issuance of new Units, which notice shall
        be
        sent to all Members in connection with any issuance of Units.  If a
        Member fails to exercise the option to acquire its Pro Rata Share of new
        Units
        within such twenty (20) day period, then the other Members shall have successive
        pre-emptive rights and options to purchase their Pro Rata Share of such new
        Units not purchased by such Member at the Unit issue price originally
        communicated by the Managing Member until the earlier of such time that:
        (i) all
        Units have been fully subscribed for, (ii) two successive offers for the
        purchase of unsubscribed Units have been made to the subscribing Members,
        or
        (iii) the Company shall have withdrawn any such subscription
        offer.  Such option shall be exercised within twenty (20) days after
        the expiration of the option period granted to all Members.  For the
        purposes of this Section 4.4, the term “Pro Rata
        Share” for each Member shall be determined by multiplying the
        number of Units to be issued by the Company (or that remain to be issued
        pursuant to exercise of a successive pre-emptive rights calculation) by a
        fraction, the numerator of which is the number of Units owned by such Members
        to
        which the offer remains outstanding and the denominator of which is the total
        number of Units held by such Members.

       

      4.5  Capital
        Accounts.  A Capital Account shall be established and
        maintained for each Member to which shall be credited (i) such Member’s Capital
        Contributions, (ii) allocations of Company Profits, income and gain made
        to such
        Member, and (iii) the amount of any liabilities of the Company that the Member
        assumes or that are secured by property distributed by the Company to such
        Member.  The Capital Account of each Member shall be debited with (i)
        allocations of Company Losses, expenses, and deductions made to such Member,
        (ii) the amount of any distributions (including return of capital) made to
        the
        Member, and (iii) the amount of any liabilities of the Member that the Company
        assumes or takes subject to, to the extent not already taken into account
        in
        determining the Member’s Capital Contributions.  No interest shall be
        paid on the Member’s Capital Account.  This Section 4.5 is intended to
        comply with Regulations § 1.704-1(b) and shall be interpreted and applied
        consistently therewith.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      4.6  No
        Return of Capital Contribution.  No Member is entitled
        to a withdrawal or return of its Capital Contributions.

       

      4.7  FID
        Milestone Payments.  Upon a Project FID Date, Cheniere
        shall pay the corresponding FID Milestone Payment to TOG no later than five
        (5)
        days after the occurrence of such Project FID Date, such payment to be credited
        to TOG via wire transfer of immediately available funds to an account designated
        in writing by TOG.  As described more fully in the Contribution
        Agreement, for federal tax purposes (and, to the extent possible, for state,
        local and foreign income tax purposes), each such FID Milestone Payment by
        Cheniere to TOG shall be treated as an adjustment to the purchase price for
        the
        assets purchased by Cheniere, and a corresponding increase in the Book Value
        of
        the assets contributed to the Company by TOG and Cheniere pursuant to Section
        4.1.  

       

      4.8  TOG
        Call Right.  Subject to extensions due to events of
        Force Majeure, if on or after August 1, 2009, there is (i) a Project FID
        Date
        (except for the Phase III FID Date) that has not occurred and (ii) a definitive
        binding agreement for the financing of any phase of the Project which provides
        for a debt to total capitalization ratio of at least eighty percent (80%),
        TOG
        shall have the right, but not the obligation, to tender a written directive
        to
        Cheniere instructing Cheniere to cause the applicable Project FID Date to
        occur
        (the “Notice to Proceed”).  Cheniere shall
        have a period of ninety (90) days to resolve and adopt the applicable Project
        FID Date (the “Acceptance Period”).  If
        Cheniere fails to cause the applicable Project FID to occur within the
        Acceptance Period, then TOG or its Affiliates shall have the right upon notice
        to Cheniere, to purchase all, but not less than all, of the Units owned by
        Cheniere and its Affiliates for a purchase price equal to the Call Price
        (the
“Exercise Notice”).  The closing of any such
        purchase shall be within ninety (90) days after TOG delivers the Exercise
        Notice
        to Cheniere and at such closing Cheniere shall deliver the Units owned by
        it and
        its Affiliates free and clear of any liens or encumbrances and all promissory
        notes made by TOG pursuant to Section 4.2(h) marked “paid in
        full”.  

       

      4.9  TOG
        Forfeiture of Units In the event (i) TOG terminates its services
        under the Consulting Agreement without good reason or (ii) the Company
        terminates the Consulting Agreement for Cause (as defined in the Consulting
        Agreement), TOG shall immediately forfeit all of its Units in the
        Company.

       

       

      


      ARTICLE
        V

      CREATION
        AND TRANSFER OF

      MEMBERSHIP
        INTERESTS

       

       

      5.1  Members.  The
        Members of the Company are the Persons executing this Agreement as of the
        Effective Date as members and each Person that is hereafter admitted to the
        Company as a member in accordance with this Agreement.

       

      5.2  Classification
        of Units; Membership Interests.  The Membership
        Interests shall be represented by Units issued in the form of certificates
        to
        each subscribing Member.  The Units shall be of the same class with
        equal rights for all purposes under this Agreement.

       

      5.3  Transferability.  Except
        as provided in Section 5.10 (relating to transfers by operation of law),
        any
        Transfer of Units of the Company may only be made in accordance with the
        provisions of this Agreement and all other attempted Transfers shall be
        void.  It shall be a condition precedent to the Transfer of Units to
        any Person (other than a Transfer by operation of law) that:

       

                  (a)  The
        Transferor shall comply with all applicable laws, including any applicable
        securities laws;

       

                  (b)  The
        Transfer shall not cause the Company to be subject to regulation under the
        Investment Company Act of 1940, as amended;

       

                  (c)  The
        Transfer shall not cause any assets of the Company to be deemed “plan assets”
under the Employee Retirement Income Security Act of 1974 (“ERISA”);
        and

       

                  (d)  The
        transferor and transferee shall have executed or delivered to the Company
        such
        agreements and other documents as the Managing Member may reasonably request
        to
        confirm that the Transfer satisfies the requirements of this Agreement, to
        give
        effect to the Transfer, and to confirm the transferee’s agreement to be bound by
        the terms and conditions of this Agreement.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      5.4  Transfers
        of Cheniere Membership Interest.  Except as otherwise
        specifically provided in this Agreement, Cheniere may freely Transfer all
        or
        part of its Units by providing the Company with a legal opinion from a law
        firm
        that the Transfer complies with the requirements of Section 5.3.

       

      5.5  Transfers
        of Other Membership Interest.  Except as otherwise
        specifically provided in this Agreement, any Members (other than Cheniere)
        and
        any of their Permitted Transferees (each a “Restricted
        Member”) may, directly or indirectly, freely Transfer all or any
        part of such Member’s Units to a Permitted Transferee by providing the Company
        with a legal opinion from a law firm that the Transfer complies with the
        requirements of Section 5.3Error! Reference source not
        found..  Any Transfer by a Restricted Member to a Person that
        is not a Permitted Transferee shall be subject to Section 5.6, Section 5.8
        and
        Section 5.10 of this Agreement and the Permitted Transferee shall provide
        to the
        Company a legal opinion from a law firm that such  Transfer complies
        with the requirements of Section 5.3.

       

      5.6  Cheniere
        Right of First Refusal.  If any Restricted Member
        proposes to Transfer its Units (a “Transferor”) to a
        Person other than a Permitted Transferee (the “Potential
        Acquirer”), the Transferor shall give written notice to Cheniere
        and to the Company of the proposed Transfer (the “Transferor’s
        Notice”).  The Transferor’s Notice shall specify the
        number of Units to be sold (the “Option Units”),
        whether such Units constitute all or fewer than all the Units owned by the
        Transferor, and the cash price per Unit to be received therefor (the
“Price”) and shall include a legal opinion from a law
        firm that the Transfer (i) complies with applicable federal and state securities
        laws and (ii) will not result in the Company’s termination under Section 708 of
        the Code.  The Transferor’s Notice shall constitute an offer to sell
        all, but not a portion, of the Option Units to Cheniere at the Price, payable
        in
        U.S. Dollars, upon the following terms and conditions.  Cheniere may
        exercise its right only by giving written notice (the “Acceptance
        Notice”) to the Transferor and to the Company no later than thirty
        (30) days after the Transferor’s Notice is given.  The Acceptance
        Notice shall state that Cheniere accepts the Transferor’s offer for Cheniere to
        purchase all (but not less than all) of the Option Units at the
        Price.  Closing of the purchase of the Option Units shall take place
        at the Company’s principal place of business thirty (30) days following the date
        the first Acceptance Notice is given to the Company unless the Transferor
        and
        Cheniere agree in writing to a different date, time or place.

       

      5.7  Closing.  At
        the closing, the purchase of the Option Units by Cheniere shall be completed
        on
        the following terms and conditions:

       

                  (a)  The
        Transferor shall deliver to Cheniere the Unit certificates and any other
        documentation necessary to Transfer the Option Units to Cheniere or its designee
        free and clear of all liens, claims, encumbrances or rights of others of
        any
        nature created by the Transferor.

       

                  (b)  Cheniere
        shall pay the Transferor in U.S. Dollars, by wire transfer in immediately
        available funds to the account or accounts that the Transferor designates,
        the
        purchase price for the Option Units in an amount equal to the product of
        the
        Price multiplied by the number of Option Units.

       

                  (c)  At
        any
        time during the time period commencing as of the date of the relevant
        Transferor’s Notice and ending as of the date that the Acceptance Notice must be
        given hereunder, by means of notice to the Transferor and the Company, Cheniere
        may assign and delegate its rights and obligations to acquire Option Units
        to
        any of its Affiliates.

       

                  (d)  If
        Cheniere does not give a valid Acceptance Notice within the time period required
        under Section 5.6 or if Cheniere gives a valid Acceptance Notice but fails
        for
        any reason (other than a default by the Transferor) to close the purchase
        of the
        Option Units within the time period specified in Section 5.6, then the
        Transferor may (subject to compliance with the provisions of Section 5.2),
        sell
        up to all the Option Units; provided, however, that (a) such sale is
        completed within sixty (60) days following the date on which the period for
        giving a valid Acceptance Notice expired or the last date on which Cheniere
        should have closed the purchase of the Option Units and (b) the sale price
        per
        Unit at which the Option Units are sold is not less than the
        Price.  In the event the Transferor does not Transfer the Option Units
        within sixty (60) days as provided above, the proposed Transfer shall again
        become subject to the preferential rights set forth in Section 5.6.

       

      5.8  Tag-Along
        Rights.  If (i) Cheniere elects not to exercise its
        preferential rights under Section 5.6 or (ii) a Restricted Member wishes
        to
        participate in the sale of Units by Cheniere (Cheniere or such Restricted
        Member
        being called a “Tag-Along Member”), the Tag-Along
        Member shall have the right to elect to participate in any proposed sale
        of
        Units by notice to the transferring Member and the purchaser (the
“Tag Along Notice”).  The number of Units
        (the “Tag Along Units”) to be sold by each Tag-Along
        Member (including, for this purpose, the original transferring Member) to
        the
        purchaser shall equal the total number of Units to be transferred to the
        purchaser, multiplied by a fraction, the numerator of which is the number
        of
        Units owned by such Tag-Along Member and the denominator of which is the
        number
        of Units owned by all Tag-Along Members.  If necessary, the number of
        Units shall be rounded to the nearest full Unit so that no fractional Units
        shall be purchased.  The Tag Along Units shall be purchased by the
        transferring Member or the purchaser pursuant to, and on the terms and
        conditions provided in, Section 5.7 mutatis mutandis.

       

      
        
          
          

        

        
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      5.9  Required
        Sale.

       

                  (a)  Anything
        contained herein to the contrary notwithstanding, in the event that the majority
        of Units outstanding as of the relevant time approve (i) a bona fide
        arms length proposal from a Person for the Transfer, directly or indirectly,
        of
        all of the Units of the Company to such Person, (ii) the merger or consolidation
        of the Company with or into another Person in which the Members will receive
        cash or securities of any other Person for their Units or (iii) the sale
        by the
        Company and its subsidiaries of all or substantially all of the assets to
        a
        Person, in each of the above cases for a specified price payable in cash
        or
        otherwise and on specified terms and conditions, then the Company shall deliver
        a notice (a “Required Sale Notice”) to all Members
        stating that the Company proposes to effect such transaction.  Each
        such Member and the members of the Affiliates thereof, if any, shall be
        obligated to sell their Units and participate in the transaction (a
“Required Sale”), vote their Units in favor of such
        Required Sale at any meeting of the Members called to vote on or approve
        such
        Required Sale and otherwise to take all necessary action to cause the Company
        and the Members to consummate such Required Sale.  Any such Required
        Sale Notice may be rescinded by the Company by delivering written notice
        thereof
        to all of the Members.

       

                   (b)  The
        obligations of the Members pursuant to this Section 5.9 are subject to the
        satisfaction of the following conditions:

       

                          (i)  upon
        the
        consummation of the Required Sale, each Member shall receive in consideration
        of
        the Transfer or surrender of its Units the same proportion of the aggregate
        consideration from such Required Sale that such Member would have received
        if
        such aggregate consideration had been distributed by the Company in complete
        liquidation pursuant to the rights and preferences set forth in this Agreement
        immediately prior to such Required Sale;

       

                          (ii)  if
        any
        Members are given an option as to the form and amount of consideration to
        be
        received, all Members will be given the same option;

       

                          (iii)  no
        Member
        shall be obligated to make any out-of-pocket expenditure prior to the
        consummation of the Required Sale and no Member shall be obligated to pay
        more
        than its or his pro rata share (based upon the amount of consideration
        received) of reasonable expenses incurred in connection with a consummated
        Required Sale to the extent such costs are incurred for the benefit of all
        Members and are not otherwise paid by the Company or the acquiring party
        (costs
        incurred by or on behalf of a Member for its or his sole benefit will not
        be
        considered costs of the transaction hereunder), provided that a Member’s
        liability for such expenses shall be capped at the total purchase price actually
        received by such Member for its Units;

       

                          (iv)  in
        the
        event that the Members are required to provide any representations or
        indemnities in connection with the Required Sale (other than representations
        and
        indemnities concerning each Member’s valid ownership of its Units, free of all
        liens and encumbrances (other than those arising under applicable securities
        laws), and each Member’s authority, power, and right to enter into and
        consummate such purchase or merger agreement without violating any other
        agreement, law, constitutive document or other obligation or limitation
        applicable to such Member or its or his interest in Units), each Member shall
        not be liable for more than his pro rata share (based upon the amount
        of consideration actually received) of any liability for misrepresentation
        or
        indemnity; and

       

                          (v)  prior
        notice of a Required Sale shall be provided to all Members.

       

      
        
          
          

        

        
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      5.10  Transfer
        by Operation of Law.

       

                  (a)  In
        the
        event of any Transfer of Units of a Member by operation of law (the
“OL Transferred Units”), including but not limited to
        the filing of a petition in bankruptcy under the Bankruptcy Code by or against
        the transferring Member or any appointment of a receiver of assets, the
        transferring Member and the transferee, as applicable, shall give immediate
        notice thereof to the Company and the other Members, stating the date and
        circumstances of such transfer and the name and address of the transferee
        or
        proper party in interest (the “OL Transfer
        Notice”).  The Company shall have the right, but not the
        obligation, to purchase all, but not less than all, of the OL Transferred
        Units.  The option to purchase shall be exercisable at the purchase
        price determined pursuant to Section 5.10(b) by giving written notice (the
        “OL Exercise Notice”) with a copy to the transferee of
        the OL Transferred Units no later than thirty (30) days after the receipt
        of the
        OL Transfer Notice.  If such option is not timely exercised, the other
        Members shall have the option to purchase all, but not less than all, of
        the OL
        Transferred Units at the same price and on the same terms as the Company
        by
        giving an OL Exercise Notice, with a copy to the transferee of the OL
        Transferred Shares, within sixty (60) days after the receipt of the OL Transfer
        Notice.  Such right to purchase shall be allocated pro rata (based on
        their respective Percentage Interests) among the Members who have timely
        exercised their respective options.  Any purchase hereunder shall be
        consummated within thirty (30) days after the latest of such OL Exercise
        Notices
        unless otherwise agreed in writing by the parties to the purchase.

       

                  (b)  Purchase
        Price.  Unless otherwise provided herein, the purchase price for
        the OL Transferred Units to be sold pursuant to an OL Exercise Notice shall
        be:

       

                          (i)  the
        fair
        market value of such OL Transferred Units as determined by the Company;
        or

       

                          (ii)  if
        the
        transferring Member (which shall include the trustee of a bankrupt Member’s
        estate) is not in agreement with the Company’s determination of the fair market
        value, the Company and the transferring Member shall jointly select a qualified
        independent appraiser to value the OL Transferred Units within fifteen (15)
        business days.  If the Company and the transferring Member cannot
        agree as to the appointment of the independent appraiser within the above
        mentioned term, the Managing Member will be authorized to unilaterally appoint
        such appraiser and such appointment by the Managing Member shall be binding
        and
        conclusive upon the Company and the transferring Member.  The
        appraiser so selected shall proceed to promptly determine the fair market
        value
        of the OL Transferred Units, taking into consideration any outstanding
        indebtedness, liabilities, liens, and obligations relating to the property
        of
        the Company.  In the event that a fair market value of the OL
        Transferred Units as determined by the qualified independent appraiser is
        within
        five percent (5%) of the fair market value as determined by the Company,
        the fee
        and expenses of the appraiser shall be split evenly between the Company and
        the
        transferring Member.  In the event that the fair market value of the
        OL Transferred Units so appraised is more than five percent (5%) higher than
        as
        determined by the Company, the Company shall pay the fee and expenses of
        the
        appraiser, and if more than five (5%) percent lower than as determined by
        the
        Company, the transferring Member shall pay the fee and expenses of the
        appraiser.

       

       

      ARTICLE
        VI

      ALLOCATION
        OF PROFITS AND LOSSES; DISTRIBUTIONS

       

       

      6.1  Allocation
        of Profits and Losses.  After application of Section 6.3
        and Section 6.4, remaining Profits and Losses for each taxable year shall
        be
        allocated among the Members so as to reduce, proportionately, in the case
        of any
        Profits, the difference between their respective Target Capital Accounts
        and
        Partially Adjusted Capital Accounts for such taxable year and, in the case
        of
        Losses, the difference between their respective Partially Adjusted Capital
        Accounts and Target Capital Accounts for such taxable year.  No
        portion of Profits or Losses for any taxable year shall be allocated to a
        Member, in the case of Profits, whose Partially Adjusted Capital Account
        is
        greater than its Target Capital Accounts or, in the case of Losses, whose
        Target
        Capital Account is greater than or equal to its Partially Adjusted Capital
        Account for such taxable year.

       

      
        
          
          

        

        
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      6.2  Distributions
        of Available Cash Flow.  The Company may, at the
        discretion of the Managing Member, distribute, if and to the extent permitted
        by
        applicable law or contract (including any loan agreement to which the Company
        is
        bound), Available Cash to the Members in the following order of
        priority:

       

                  (a)  First,
        to
        TOG to pay the Phase I Royalty, the Phase II Royalty and the Phase III Royalty,
        if any; and

       

                  (b)  Second,
        to the Members in proportion to their Membership Interests.

       

      To
        the
        extent there is any amount due from TOG to Cheniere with respect to promissory
        notes made by TOG pursuant to Section 4.2(h), any amounts that otherwise
        would
        be distributed to TOG shall be first paid to Cheniere on behalf of TOG as
        a
        repayment of such promissory notes.  Any amounts distributed to TOG
        pursuant to this Section 6.2(a) shall be treated for federal income tax purposes
        as a “guaranteed payment” described in Section 707(c), and any deduction
        attributable thereto shall be specially allocated to Cheniere.

       

      6.3  Special
        Allocations.  The following special allocations shall be
        made in the following order.

       

                  (a)  Minimum
        Gain Chargeback.  If there is a net decrease in “partnership
        minimum gain” (as that term is defined in Sections 1.704 2(b)(2) and 1.704¬-2(d)
        of the Regulations) during any taxable year, each Member shall, to the extent
        required by Section 1.704-2(f) of the Regulations, be specially allocated
        items
        of Company income and gain for such taxable year (and, to the extent required
        by
        Section 1.704-2(j)(2)(iii) of the Regulations, subsequent taxable years)
        in an
        amount equal to that Member's share of the net decrease in Company minimum
        gain.  Allocations pursuant to the previous sentence shall be made in
        accordance with Section 1.704-2(f)(6) of the Regulations.  This
        Section 6.3(a) is intended to comply with the minimum gain chargeback
        requirement in Section 1.704-2(f) of the Regulations and shall be interpreted
        consistently therewith.

       

                  (b)  Member
        Minimum Gain Chargeback.  If there is a net decrease in “partner
        nonrecourse debt minimum gain” (as that term is defined in Sections 1.704
        2(i)(2) and (3) of the Regulations) during any taxable year, each Member
        who has
        a share of that partner nonrecourse debt minimum gain as of the beginning
        of the
        taxable year shall, to the extent required by Section 1.704 2(i)(4) of the
        Regulations, be specially allocated items of Company income and gain for
        such
        taxable year (and, if necessary, subsequent taxable years) equal to that
        Member's share of the net decrease in partner nonrecourse debt minimum
        gain.  Allocations pursuant to the previous sentence shall be made in
        accordance with Section 1.704 2(i)(4) of the Regulations.  This
        Section 6.3(b) is intended to comply with the requirement in Section 1.704
        2(i)(4) of the Regulations and shall be interpreted consistently
        therewith.

       

                  (c)  Qualified
        Income Offset.  If any Member unexpectedly receives any
        adjustments, allocations, or distributions described in Sections
        1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6)
        of
        the Regulations, items of Company income and gain shall be specially allocated
        to each such Member in an amount and manner sufficient to eliminate, to the
        extent required by the Regulations, the Adjusted Capital Account Deficit
        of such
        Member as quickly as possible, provided that an allocation pursuant to this
        Section 6.3(c) shall be made only if and to the extent that such Member would
        have an Adjusted Capital Account Deficit after all other allocations provided
        for in this Article 6 have been made as if this Section 6.3(c) were not in
        the
        Agreement.

       

                  (d)  Gross
        Income Allocation.  In the event any Member has an Adjusted
        Capital Account Deficit as of any Adjustment Date, that Member will be specially
        allocated items of Company income and gain in the amount of the Adjusted
        Capital
        Account Deficit as quickly as possible, except that an allocation pursuant
        to
        this Section 6.3(d) will be made only if and to the extent that Member would
        have a Adjusted Capital Account Deficit after all other allocations provided
        for
        in this Article VI have been made as if this Section 6.3(d) was not in the
        Agreement.

       

                  (e)  Deductions.  “Nonrecourse
        deductions” (as that term is defined in Sections 1.704 2(b)(1) and (c) of the
        Regulations) for any taxable year or other period shall be specially allocated
        to the Members in proportion to their respective Percentage
        Interests.

       

      
        
          
          

        

        
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                  (f)  Member
        Nonrecourse Deductions.  “Partner nonrecourse deductions” (as that
        term is defined in Section 1.704 2(i) of the Regulations) for any taxable
        year
        or other period shall be specially allocated to the Member who bears the
        economic risk of loss with respect to the “partner nonrecourse debt” (as that
        term is defined in Section 1.704 2(b)(4) of the Regulations) to which such
        partner nonrecourse deductions are attributable, in accordance with Regulations
        Section 1.704-2(i)(1).

       

                  (g)  Section
        754 Adjustments.  To the extent an adjustment to the adjusted tax
        basis of any Company asset pursuant to Sections 734(b) or 743(b) of the Code
        is
        required, pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations to
        be
        taken into account in determining Capital Accounts, the amount of such
        adjustment to the Capital Accounts shall be treated as an item of gain (if
        the
        adjustment increases the basis of the asset) or loss (if the adjustment
        decreases such basis) and such gain or loss shall be specially allocated
        to the
        Members in accordance with the requirements of Section 1.704-1(b)(2)(iv)(m)
        of
        the Regulations.

       

      6.4  Other
        Special Allocations.

       

                  (a)  If
        the
        Company has Profits for any taxable year  and the balance of any
        Member’s Partially Adjusted Capital Account is greater than the balance of its
        Target Capital Account for such taxable year, then the Member with such excess
        balance shall be specially allocated items of Company deduction or loss for
        such
        taxable year (to the extent available) equal to the difference between its
        Partially Adjusted Capital Account and its Target Capital Account.

       

                  (b)  If
        the
        Company has Losses for any taxable year and the balance of any Member’s
        Partially Adjusted Capital Account is less than the balance of its Target
        Capital Account for such taxable year, then the Member with such deficit
        balance
        shall be specially allocated items of Company income or gain for such taxable
        year (to the extent available) equal to the difference between its Partially
        Adjusted Capital Account and its Target Capital Account.

       

                  (c)  If
        the
        Company has neither Profits nor Losses for any taxable year and, notwithstanding
        the application of Section 6.1, the balance of any Member’s Partially Adjusted
        Capital Account differs from the balance of its Target Capital Account, then
        the
        Member with an excess or deficit balance, as the case may be, shall be specially
        allocated items of Company deduction or loss or income or gain, as the case
        may
        be, for such taxable year (to the extent available) to eliminate the difference
        between its Partially Adjusted Capital Account and its Target Capital
        Account.

       

                  (d)  Notwithstanding
        any other provision of this Agreement, no Member shall be allocated any Losses
        or items in the nature of deduction or loss pursuant to Section 6.1 or this
        Section 6.4 to the extent that such allocation would cause or increase an
        Adjusted Capital Account Deficit with respect to such
        Member.  Allocations of Losses that would be made to a Member but for
        this Section 6.4(d) shall be made to the other Members to the extent not
        inconsistent with such proviso.  To the extent allocations of Losses
        cannot be made to any Member because of this Section 6.4(d), such allocations
        shall be made to the Members in accordance with their respective Percentage
        Interests.

       

                  (e)  “Excess
        nonrecourse liabilities” of the Company within the meaning of Section
        1.752-3(a)(3) of the Regulations shall be allocated among the Members in
        accordance with the manner in which nonrecourse deductions are allocated,
        as set
        forth in Section 6.3(e).

       

      6.5  Tax
        Allocations.  In accordance with Code Section 704(c) and
        the Treasury Regulations thereunder, income, gain, loss and deduction with
        respect to any Company asset shall, solely for tax purposes, be allocated
        among
        the Members so as to take account of any variation between the adjusted tax
        basis of such asset and its Gross Asset Value using the remedial method as
        described in Section 1.704-3(d) of the Regulations.

       

       

      ARTICLE
        VII

      MANAGEMENT
        OF THE COMPANY

       

       

      7.1  General.  The
        business and affairs of the Company shall be managed by Cheniere (the
“Managing Member”).

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      7.2  Management
        by the Managing Member.  Subject to the other provisions
        of this Agreement, the Managing Member shall have full, exclusive, and complete
        discretion in the management and control of the affairs of the Company, shall
        make all decisions affecting Company affairs, and shall have all of the rights,
        powers, and obligations of a manager of a limited liability company organized
        under the Act and otherwise as provided by law.  Except as otherwise
        expressly provided in this Agreement, the Managing Member shall be and hereby
        is
        authorized and empowered to do or cause to be done any and all acts determined
        by the Managing Member to be necessary, advisable, convenient or incidental
        in
        furtherance of the purposes of the Company or its subsidiaries, without any
        further act, approval, or vote of any Person, including any Member, and without
        limiting the generality of the foregoing, by way of illustration and not
        by way
        of limitation, the Managing Member is hereby authorized and empowered from
        time
        to time:

       

                  (a)  to
        perform all normal business functions and otherwise operate and manage the
        business and affairs of the Company or its subsidiaries, in accordance with
        and
        as limited by this Agreement;

       

                  (b)  to
        acquire, buy, sell, or otherwise hold, invest in, and deal with, in any form
        or
        manner, directly or indirectly, ownership interests of the Company or its
        subsidiaries;

       

                  (c)  to
        borrow
        money or engage in other forms of borrowing for any purpose, and for paying
        expenses and fees;

       

                  (d)  to
        employ
        and dismiss from employment on behalf of the Company or its subsidiaries,
        any
        and all employees, agents, attorneys, accountants, consultants, custodians
        of
        Company or subsidiary assets, transfer agents, or servicing agents, including
        Persons that may be Members or Affiliates thereof, and to authorize each
        such
        agent and employee (who may be designated as an Officer) to act for and on
        behalf of the Company or its subsidiaries;

       

                  (e)  to
        enter
        into, make, and perform on behalf of the Company or its subsidiaries such
        contracts, agreements, and other undertakings of every kind, and amendments
        thereto, as it may deem necessary for, or incidental to, the conduct of the
        business of the Company or its subsidiaries;

       

                  (f)  to
        establish and maintain one or more bank accounts for the Company or its
        subsidiaries in such bank or banks as may, from time to time, be designated
        as
        depositaries of the funds of the Company or its subsidiaries;

       

                  (g)  to
        incur
        on behalf of the Company or its subsidiaries all expenditures permitted by
        this
        Agreement and, to the extent that funds of the Company are available, to
        pay all
        such expenses and debts and obligations of the Company and its subsidiaries,
        including all political and charitable contributions;

       

                  (h)  to
        admit
        Members to the Company pursuant to the terms hereof;

       

                  (i)  to
        establish and maintain a Capital Account and other appropriate accounts,
        for
        each Member;

       

                  (j)  to
        authorize the repurchase of any security of the Company pursuant to the terms
        hereof;

       

                  (k)  subject
        to Section 6.2, to determine the amount and timing of distributions to the
        Members;

       

                  (l)  to
        establish and maintain the books and records of the Company, and cause the
        establishment and maintenance of the books and records of the Company’s
        subsidiaries;

       

                  (m)  to
        cause
        the Company or its subsidiaries to purchase or bear the cost of any insurance
        covering the potential liabilities of the Managing Member, and the directors,
        officers, employees, agents, and other Affiliates of the Managing Member,
        acting
        for the benefit of the Company or its subsidiaries;

       

                  (n)  to
        compromise and settle claims against or on behalf of the Company or its
        subsidiaries;

       

                  (o)  to
        cause
        the necessary contributions by the Company to its subsidiaries in order to
        implement the Project in accordance with the CRE Permit and the FERC
        Certificate, as well as to cause the execution of all such documents as are
        necessary to update and maintain in full force and effect the CRE Permit
        and the
        FERC Certificate, including the execution, filing, negotiation and follow-up
        of
        any and all filings presented by the Company or its subsidiaries with any
        governmental Entity in Mexico or in the United States;

       

      
        
          
          

        

        
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                  (p)  to
        make a
        call for subsequent Capital Contributions in accordance with the provisions
        hereof; and

       

                  (q)  to
        carry
        on any other activities necessary to, connected with, or incidental to any
        of
        the foregoing or the Company’s investments and other activities.

       

      The
        specific grants of power and authority to the Managing Member under this
        Section
        7.2 in no way limit the rights, power, or authority of the Managing Member
        under
        this Agreement, the Act, or as otherwise provided by law.


       

      7.3  Officers.

       

                  (a)  The
        Managing Member, in its sole discretion, may appoint such officers or agents
        of
        the Company as it deems desirable to carry on the affairs of the Company,
        including a Chief Executive Officer, a President, a Chief Financial Officer
        and
        a Secretary (each an “Officer” and collectively, the
“Officers”), and any such Officer
        shall have the
        responsibilities expressly designated to him or her by the Managing
        Member.

       

                  (b)  Pursuant
        to the authority set forth in Section 7.3(a), the Managing Member hereby
        appoints Stanley C. Horton as the Chief Executive Officer, R. Keith Teague
        as
        the President, Don A. Tukleson as the Chief Financial Officer and Anne V.
        Vaughn
        as the Secretary of the Company.  These Officers shall render
        full-time services to the Company and devote their best efforts to the
        performance and discharge of their duties and responsibilities in a manner
        that
        promotes the best interests of the Company.

       

                  (c)  The
        Managing Member, in its sole discretion, may cause any of its subsidiaries
        to
        appoint such officers or agents of the Company’s subsidiaries as it deems
        desirable.  Upon the execution of this Agreement, the Managing Member
        shall cause the revocation of all outstanding powers of attorney granted
        by the
        subsidiaries of the Company, and shall cause the granting of the following
        new
        powers of attorney:

       

                          (i)  to
        licensed Mexican attorneys designated by the Managing Member (i) a general
        power
        of attorney for lawsuits and collections, and (ii) a special power of attorney
        to represent the Company before any public authorities, including the Tax
        Administration Service of the Ministry of Finance and Public Credit
        (Servicio de Administracion Tributaria de la Secretari a de Hacienda
        y
        Credito Publico), the National Registry of Foreign Investment (Registro
        Nacional de Inversiones Extranjeras), and the CRE; and

       

                          (ii)  to
        persons designated by Cheniere (i) a general power of attorney for lawsuits
        and
        collections, acts of administration and acts of ownership; (ii) a power of
        attorney to issue, subscribe, negotiate and endorse all negotiable instruments
        as provided in Article 9 of the Mexican General Law on Negotiable Instruments
        and Credit Transactions (Ley General de Titulos y Operaciones de
        Credito); (iii) the authority to establish bank accounts for the Company,
        appoint and remove signatories and draw checks against such accounts; and
        (iv)
        the authority to delegate or substitute their powers of attorney and to revoke
        such delegation or substitution.

       

                          (iii)  The
        Managing Member shall also cause the Company’s subsidiaries to grant their
        respective operating manager or officer sufficient authority to carry out
        the
        necessary actions on behalf of such companies in order to attain their corporate
        purposes, provided that such operating manager or officer will be subject
        to the
        guidelines and directives of the Company and the Managing Member.

       

      7.4  Liability
        of the Managing Member.

       

                  (a)  The
        sole
        duty of the Managing Member shall be to act in such a manner as it believes
        in
        good faith to be in the best interests of the Company.

       

                  (b)  Neither
        the Managing Member, its Affiliates, nor any of their respective directors,
        officers, employees, or agents, shall be liable, responsible, or accountable
        in
        damages or otherwise to the Company or any Member for any act or omission
        performed or omitted by one or more of them except for breach of the duty
        set
        forth in Section 7.4(a), and none of such Persons shall have any liability
        to
        the Company or any Member for such Person’s good faith reliance on the
        provisions of this Agreement, including the provisions of Section
        7.4(a).  Notwithstanding the generality of this paragraph, this
        paragraph shall not limit the liability of any Person for any intentional
        misconduct, for any knowing violation of law, or for any transaction for
        which
        such Person received a benefit in violation or breach of any provision of
        this
        Agreement.

       

                  (c)  Neither
        the Managing Member, its Affiliates, nor any of their respective directors,
        officers, employees, or agents shall have any liability to any Member for
        the
        repayment of any amounts outstanding in the Capital Account of a Member,
        including, but not limited to, Capital Contributions. Any such payment shall
        be
        solely from the assets of the Company.

       

      
        
          
          

        

        
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      7.5  Indemnification.

       

                  (a)  The
        Company shall, solely from the assets of the Company, indemnify and hold
        harmless, to the maximum extent permitted by law, the Managing Member, any
        Affiliate thereof and any present or former director, officer, employee,
        or
        agent of such Member or Affiliate (an “Indemnified
        Person”) against any claims, demands, liabilities, costs, losses,
        damages, or expenses (including attorneys fees, judgments, fines, penalties,
        and
        amounts paid in settlement) incurred by any such Indemnified Person arising
        out
        of or relating to any acts or omissions or alleged acts or omissions of such
        Indemnified Person that relate in any way to the Company or the business
        or
        assets thereof; provided, however, that such Indemnified Person has not been
        adjudicated in a final judgment not subject to appeal to have breached the
        duty
        set forth in Section 7.4(a) or to have engaged in intentional misconduct,
        a
        knowing violation of law, or any transaction for which such Person received
        a
        benefit in violation or breach of any provision of this Agreement.

       

                  (b)  The
        Company shall pay expenses as they are incurred by an Indemnified Person
        in
        connection with any action, claim, or proceeding that such Indemnified Person
        asserts in good faith to be subject to the indemnification provisions of
        this
        Section 7.5, upon receipt of an undertaking from such Indemnified Person
        to
        repay all amounts so paid by the Company to the extent that it is adjudicated
        in
        a final judgment not subject to appeal that such Indemnified Person is not
        entitled to indemnification under this Agreement.

       

                  (c)  The
        Managing Member, notwithstanding any apparent conflict of interest, and subject
        only to the duty expressly set forth in Section 7.4(a), shall have the power
        to,
        and is hereby authorized and directed to, cause the Company to comply with
        the
        indemnification and expense payment provisions hereof.  If a claim for
        indemnification or payment of expenses hereunder is not paid in full within
        ten
        (10) days after a written claim has been received by the Company, the claimant
        may file suit to recover the unpaid amount and, if successful in whole or
        in
        part, shall be entitled to be indemnified for the expense of prosecuting
        such
        claim.  In any such action the Company shall have the burden of
        proving that the claimant is not entitled to the requested indemnification
        or
        payment of expenses under this Agreement.

       

                  (d)  The
        indemnification provided or granted pursuant to this Section 7.5 shall not
        be
        deemed exclusive of any other rights to which any Person seeking indemnification
        may be entitled under any law, agreement, vote of stockholders, unitholders,
        or
        disinterested directors, or otherwise, either as to actions in such Person’s
        official capacity or as to actions in another capacity while holding such
        office

       

                  (e)  In
        no
        event shall a Member be subject to personal liability by reason of the
        indemnification provisions set forth in this Agreement.

       

      7.6  Tax
        Status.  It is the intent of the Members and the Company
        that the Company be a partnership for federal, state and local income tax
        purposes.  If the Company or the Managing Member is required to take
        any action, including the amendment of this Agreement in accordance with
        the
        terms hereof, in order for the Company to establish or maintain such tax
        status,
        the Company or the Managing Member (as the case may be) shall take such
        action.

       

      7.7  Records
        and Information.  The Company shall maintain complete
        and accurate books and records at the Company’s principal place of business,
        showing the name, address and Membership Interest of each Member, all receipts
        and expenditures, assets and liabilities, and all other records necessary
        for
        recording the Company’s business and affairs, all in accordance with sound
        accounting practices and as required by this Agreement.

       

      7.8  Tax
        Matters.

       

                  (a)  Cheniere
        shall, without any further consent of the Members being required, make any
        and
        all elections with respect to the Company for federal, state, local and foreign
        tax purposes that Cheniere deems appropriate and not inconsistent with the
        other
        provisions of this Agreement.  Upon written request of any Member,
        Cheniere shall cause the Company to make an election to adjust the basis
        of
        Company assets pursuant to Code Sections 754, 734(b) and 743(b), and any
        comparable provisions of state, local or foreign law.

       

                  (b)  Cheniere
        shall be designated as the “tax matters partner” of the Company pursuant to Code
        Section 6231(a)(7) (and comparable provisions of state, local and foreign
        law).  The tax matters partner shall arrange for and cause to be taken
        such actions as may be necessary to cause each other Member to become a “notice
        partner” within the meaning of Code Section 6223 (and comparable provisions of
        state, local and foreign law).  All expenses incurred in connection
        with any audit, investigation, settlement or review by the IRS or any other
        governmental authority of the Company’s tax returns, “as partnership items” (as
        such term is defined in Code Section 6231(a)(3)) or other tax items shall
        be
        borne by the Company.  The tax matters partner shall prepare or cause
        to be prepared any and all tax returns required to be filed by the
        Company.

       

      7.9  Collaboration.
        TOG shall collaborate with the Company in the preparation, drafting and filing
        of all required filings in connection with the CRE Permit, the FERC Certificate
        and the application for the Brazil Storage Facility.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        VIII

      INSPECTION;
        CONFIDENTIALITY

       

       

      8.1  Right
        to Inspect Books and Records.  In order to determine or
        enforce its rights as a Member, each Member, itself or through its designated
        representatives, shall have the right upon reasonable notice, during normal
        business hours, at its cost, (i) to inspect and copy any of the books and
        records of the Company, (ii) to audit the financial books and records of
        the
        Company and (iii) to obtain information regarding the business and financial
        condition of the Company. All information obtained shall be considered
        confidential information and shall only be utilized by the Member in connection
        with the determination or enforcement of its rights as a Member.

       

      8.2  Confidentiality.  Subject
        to the preceding section, each Member agrees that it will keep confidential
        and
        will not disclose or divulge, or use for any purpose other than in relation
        to
        its investment in the Company, any information contributed to the Company
        by any
        Member or obtained from the Company, unless such Member can demonstrate that
        such confidential information (i) is known or becomes known to the public
        in
        general (other than as a result of a breach of this Section 8.2 by such Member),
        (ii) is or has been independently developed or conceived by the Member after
        the
        Effective Date without use of the Company’s confidential information or (iii) is
        or has been made known or disclosed to the Member by a third party without
        a
        breach of any obligation of confidentiality such third party may have to
        the
        Company; provided, however, that a Member may disclose confidential
        information (a) to its attorneys, accountants, consultants, and other
        professionals to the extent necessary to obtain their services in connection
        with its investment in the Company, (b) to any prospective purchaser of any
        Units from such Member as long as such prospective investor agrees to be
        bound
        by the provisions of a written confidentiality agreement approved as to form
        and
        substance by the Managing Member, (c) to a prospective investor in the Company
        as long as such prospective investor agrees to be bound by the provisions
        of a
        written confidentiality agreement approved as to form and substance by the
        Managing Member, (d) to a prospective lender to the Company to the extent
        necessary to obtain financing in connection with the construction or development
        of any project approved by the Managing Member as long as such prospective
        lender agrees to be bound by the provisions of this a written confidentiality
        agreement approved as to form and substance by the Managing Member, (e) to
        any
        governmental or regulatory authority, including the CRE and the Federal Energy
        Regulatory Commission, to the extent necessary to obtain, amend, update or
        maintain in full force and effect the CRE Permit, the FERC Certificate or
        any
        other permit, resolution or certificate related to the Project or any other
        project approved by the Managing Member, or (f) as may otherwise be required
        by
        law, provided that the disclosing Member takes reasonable steps to minimize
        the
        extent of any such required disclosure.

       

       

      ARTICLE
        IX

      DISSOLUTION

       

       

      9.1  Dissolution.  The
        Company shall be dissolved, and shall terminate and wind up its affairs,
        upon
        the first to occur of the following:

       

                  (a)  the
        determination by one or more Members holding a simple majority of all Units
        to
        dissolve the Company; or

       

                  (b)  the
        entry
        of a decree of judicial dissolution pursuant to Section 18-802 of the
        Act.

       

      9.2  Winding
        Up.  If the Company is dissolved, the Managing Member
        shall wind up the affairs of the Company.

       

      9.3  Distribution
        of Assets.  Upon the merger, consolidation, liquidation,
        dissolution or winding up of the Company, subject to the provisions of the
        Act,
        the Managing Member shall pay or make reasonable provision to pay all claims
        and
        obligations of the Company, including all costs and expenses of the liquidation
        and all contingent, conditional or unmatured claims and obligations that
        are
        known to the Members but for which the identity of the claimant is
        unknown.  If there are sufficient assets, such claims and obligations
        shall be paid in full and any such provision shall be made in full and any
        remaining assets shall be distributed to the Members in accordance with Section
        6.2 hereof.  If there are insufficient assets, such claims and
        obligations shall be paid or provided for according to their priority and,
        among
        claims and obligations of equal priority, ratably to the extent of assets
        available therefore.  If any Member has a deficit balance in such
        Member’s Capital Account (after giving effect to all contributions,
        distributions and allocations for all periods, including the taxable year
        during
        which the liquidation of the Company occurs), such Member shall have no
        obligation to make any contribution to the capital of the Company with respect
        to such deficit, and such deficit shall not be considered a debt owed to
        the
        Company or to any other Person for any purpose whatsoever.

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        X

      MISCELLANEOUS

       

       

      10.1  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.

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      10.2  Amendments.  This
        Agreement may be amended only by a written agreement executed by the Members
        representing at least sixty-six and two-thirds percent (66 2/3%) of the
        outstanding Units.  For so long as Cheniere beneficially owns
        sufficient Units otherwise to effect such an action, the Company shall not,
        without the approval of a majority of the Units held by the Restricted Members
        voting together as a separate class, take any action that amends, waives
        or
        alters any provision of this Agreement in a manner that materially, adversely
        and disproportionately affects the Restricted Members.

       

      10.3  Severability.  If
        any portion of this Agreement is declared by a court of competent jurisdiction
        to be void or unenforceable, such portion shall be deemed severed from this
        Agreement and the balance of this Agreement shall remain in effect.

       

      10.4  Entire
        Agreement.  This Agreement constitutes the entire
        agreement with respect to the Company.  This Agreement constitutes the
“limited liability company agreement” (as defined in Section 18-101(7) of the
        Act) of the Company and is hereby made effective as of the date
        hereof.

       

      10.5  Choice-of-Law.  This
        Agreement shall be governed by and construed in accordance with the laws
        of the
        State of Delaware, without reference to its choice-of-law principles. The
        parties submit to the exclusive jurisdiction of the United States District
        Court
        for the Southern District of Texas located in the City of Houston, Texas,
        or if
        such court does not have jurisdiction, the District Court of the State of
        Texas,
        Harris County, 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
        herein shall be effective service of process for any action, suit or proceeding
        in the State of 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
        Court 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.

       

      10.6  Headings.  Headings
        are for reference purposes only and are not intended to describe, interpret,
        define, or limit the scope, extent, or intent of this Agreement or any provision
        hereof.

       

      10.7  Further
        Action.  The Members agree to perform all further acts
        and execute, acknowledge, and deliver any documents which may be reasonably
        necessary, appropriate, or desirable to carry out the provisions of this
        Agreement.

       

      10.8  Waiver
        of Action for Partition.  To the fullest extent
        permitted by law, the Members irrevocably waive any right that they may have
        to
        maintain any action for partition with respect to any of the Company’s
        assets.

       

      10.9  Counterpart
        Execution.  This Agreement may be executed in any number
        of counterparts with the same effect as if the signatories had signed the
        same
        document. All counterparts shall be construed together and shall constitute
        one
        agreement.

       

      10.10  Enforcement.  Notwithstanding
        any other provision of this Agreement, the Members agree that this Agreement
        constitutes a legal, valid and binding agreement of the Members, and is
        enforceable against the Members.

       

       

       

       

       

       

      


      (Signature
        Page Follows)

       

       

       

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

       

       

       

       

      IN
        WITNESS WHEREOF, the Members have
        executed and delivered this Limited Liability Company Agreement as of the
        Effective Date.

      


      


      


      TIDELANDS
        OIL & GAS CORPORATION

      


      


      


      By:                                                      

            
Name:

             Title:

      


      GRAND
        CHENIERE PIPELINE LLC

       

       

       

      
        By:                                                      

              
Name:

               Title:


      

      


      


      


      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

       

      EXHIBIT
        A

      


      BOOK
        VALUE

      


      


      Sonora
        Pipeline L.L.C.        US
        $888,064

       

       

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

      
 

      EXHIBIT
        B

      


      PROJECT
        DEVELOPMENT MAP

      


      
        

      

       

       

      
 

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

       

      EXHIBIT
        C

      


      CAPITAL
        CONTRIBUTIONS

      


      


      Cheniere        US
        $1,000,000

      TOG                                US
        $888,064

       

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        D

      


      MEMBERS’
        PERCENTAGE INTEREST

      


      


      Cheniere        80%

      TOG               
        20%

       

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        E

      


      FORM
        PROMISSORY NOTE

       

      
        


        NEGOTIABLE

        PROMISSORY
          NOTE AND SECURITY AGREEMENT

         

        
 

        
          	US$[*]      	
                  Dated:
                    [*]

                
	 	
                  Houston,
                    Texas U.S.A.

                


        

        


                                                                                                                          

        FOR
          VALUE RECEIVED, Tidelands Oil & Gas Corporation. (the
“Maker”), a corporation organized under the
          laws of
          the State of Nevada, promises to pay to Grand Cheniere Pipeline LLC, a
          limited
          liability company organized under the laws of the State of Delaware, (the
          “Payee”), the
          principal sum of [*] (US$[*]) (the
“Loan”),
          which shall be payable in
          accordance with the terms of this Promissory Note (this
“Note”).  The Maker acknowledges that this
          Note is being made in exchange for the Payee making an Additional Capital
          Contribution on behalf of the Maker to Frontera Pipeline LLC a Delaware
          limited
          liability company (the “Company”) governed under terms
          of that certain Limited Liability Company Agreement dated as of
[*] (the “Operating
          Agreement”).  Capitalized terms used but not defined
          herein shall have the meanings ascribed to them in the Operating
          Agreement.

         

        1.  Mandatory
          Pre-payments, and
          Maturity.

         

        (a)  Mandatory
          Prepayments. The Maker agrees to make mandatory prepayments to the Loan by
          allowing the Managing Member to credit the total amount payable to the
          Maker
          from any distributions by the Company to the outstanding interest and principal
          amount of the Loan.  Any payment pursuant to this Section 1(a) shall
          be made immediately upon the Company’s issuance of a capital distribution in
          accordance with Section 5 hereof.

         

        (b)  Maturity.
          Notwithstanding the foregoing, the outstanding principal amounts of the
          Loan
          shall become due and payable, together with any accrued and unpaid interest
          on
          that portion of the principal amount, seven hundred and
          thirty (730) days after the date of this Note (the
“Maturity Date”).

         

        2.  Interest.  
          The
          Maker promises to pay interest on the outstanding and unpaid principal
          amount of
          the Loan at a rate per annum equal to 12% compounded annually (the
“Interest Rate”), payable on the Maturity Date as well
          as on each date the Maker effects a mandatory prepayment of the Loan pursuant
          to
          Section 1(a) hereof.

         

        3.  Penalty
          Interest. If any amount hereunder shall not be paid when due
          (at stated maturity, by acceleration or otherwise), interest shall accrue
          on
          such amount from and including such due date until paid in full at a rate
          per
          annum equal to eighteen percent (18%).

         

        4.  Maximum
          Lawful Rate. This Note
          is hereby expressly limited so that in no contingency or event whatsoever,
          whether by acceleration of maturity of the indebtedness evidenced hereby
          or
          otherwise, shall the amount paid or agreed to be paid to the Payee for
          the use,
          forbearance or detention of money exceed the highest lawful rate permissible
          under applicable law.  If, under any circumstances whatsoever,
          fulfillment of any provision hereof, at the time performance of such provision
          occurs, shall involve payment of interest in excess of that authorized
          by law,
          the obligation to be fulfilled shall be reduced to the limits so authorized
          by
          law, and if, from any circumstances, the Payee shall ever receive as interest
          an
          amount which would exceed the highest lawful rate applicable to the Maker,
          such
          amount which would be excessive interest shall be applied to the reduction
          of
          the unpaid principal balance hereof and not to the payment of
          interest.

         

        
          
            
            

          

          
            31

            
              

            

          

          
            
            

          

        

         

        5.  Payments.
All
          payments of the
          Loan required by this Note shall be exclusively made in U.S. Dollars, free
          of
          any set-off or counterclaim, in immediately available funds, not later
          than
          12:00 a.m. Houston, Texas time on the respective due date to an account
          to be
          designated by the Payee in writing.  If the due date of any payment
          hereunder falls on a day that is a Saturday, Sunday or other day in which
          the
          commercial banks in the State of Texas are authorized or required to close,
          such
          date shall be extended to the next succeeding business day, and interest
          shall
          be payable for the period of such extension.

         

        6.  Representations,
          Warranties and
          Covenants of the Maker.  Maker represents, warrants and covenants to
          Payee as follows:

         

        (a)  The
          Maker
          is and shall remain duly organized, validly existing and in good standing
          under
          the laws of the State of Nevada;

         

        (b)  The
          Maker
          has the full legal right, power and authority to execute and deliver this
          Note,
          to consummate the transactions contemplated hereby, and to perform its
          obligations hereunder.  This Note and the security instruments to be
          executed and delivered hereunder are and have been duly authorized, executed
          and
          delivered on behalf of the Maker and are the legal, valid and binding
          obligations of the Maker, enforceable against the Maker in accordance with
          their
          respective terms;

         

        (c)  The
          execution and delivery of this Note does not conflict with or contravene
          the
          provisions of the Maker’s organizational documents or any agreement or
          instrument by which the Maker or any of its respective properties are bound
          or
          any law, rule, regulation, order or decree to which the Maker or its properties
          is subject; and

         

        (d)  The
          Maker
          is not contemplating either the filing of a petition by it under state
          or
          federal bankruptcy or insolvency laws or the liquidation of all or a major
          portion of its assets or property, and the Maker has no knowledge of any
          person
          or entity contemplating the filing of any such petition against it.

         

        7.    
          Security
          Interest As security for the principal amount of the Loan, all accrued and
          unpaid interest thereon, and the payment and performance of any other obligation
          of the Maker under this Note:

         

        (a)  Maker
          hereby pledges, assigns, transfers and delivers to the Payee and does hereby
          grant to the Payee a first lien and continuing and unconditional security
          interest in, all of its right, title and interest in and to the Maker’s Units
          issued by the Company.

         

        (b)  The
          Units
          pledged, assigned, transferred and delivered pursuant to paragraphs 7(a)
          are
          referred to herein collectively as the
“Collateral”).  The term “Collateral” as used
          herein means and includes, and the security interests granted under this
          Note
          covers, all of the assets described above, as well as any accessions, additions
          and attachments to those assets and the proceeds and products thereof. 
Maker expressly acknowledges and agrees that the Payee’s security interest in
          the Collateral is first in priority to any other security interest in the
          Collateral.  Maker hereby agree to execute and deliver such mortgages,
          deeds of trust, assignments, security agreements, documents and other
          instruments as may be necessary or desirable to perfect the Payee’s security
          interest in the Collateral, in such forms as the Payee reasonably requests,
          and
          to take all steps necessary or advisable to perfect such security interest,
          including filing the financing statements, and paying all expenses and
          fees in
          connection therewith, including, without limitation, filing fees, documentary
          stamp taxes and/or intangible taxes imposed by any governmental body in
          connection with the filing or recording of the financing statements (whether
          filed by the Maker or the Payee) and any penalties and interest for non-payment
          of such taxes or fees.  Maker hereby authorizes the Payee to file a
          financing statement covering the grant of Collateral contained herein without
          the Payee’s signature.

         

        8.  Voluntary
          Prepayment.  Notwithstanding any other provision of this Note,
          the Maker shall have the right to prepay the principal amount outstanding
          under
          this Note, together with all accrued interest, in whole or in part at any
          time
          or from time to time, without premium or penalty.  The Maker shall
          have no right to reborrow under this Note any amounts paid or prepaid in
          respect
          of principal or interest on this Note.

         

        
          
            
            

          

          
            32

            
              

            

          

          
            
            

          

        

         

        9.  Events
          of
          Default.  The occurrence of any one or more of the following
          conditions or events shall constitute an “Event of
          Default” hereunder:  (a) the failure to pay or
          perform any obligation, liability or indebtedness of the Maker to the Payee
          as
          and when due (whether upon demand, at maturity or by acceleration); (b)
          the
          commencement of a proceeding against the Maker for dissolution or liquidation,
          the voluntary or involuntary termination or dissolution of the Maker or
          the
          merger or consolidation of the Maker with or into another entity; (c) the
          insolvency of, the business failure of, the appointment of a custodian,
          trustee,
          liquidator or receiver for or for any of the properties of, the assignment
          for
          the benefit of creditors by, or the filing of a petition under bankruptcy,
          insolvency or debtor’s relief law or the filing of a petition for any adjustment
          of indebtedness, composition or extension by or against the Maker; (d)
          the entry
          of a judgment against the Maker which the Payee deems to be of a material
          nature. The Maker shall promptly notify the Payee of (1) any event of default,
          together with a detailed statement of the steps being taken to cure the
          same;
          (2) any notice of default received by the Maker under any other obligations
          material to the Maker’s finances; and (3) any threatened or pending legal,
          judicial or regulatory proceedings, including any dispute between the Maker
          and
          any governmental authority, affecting either the Maker or any of its properties
          which would have a material and adverse affect on Maker or its
          assets.

         

        10.    
          Remedies.
          Upon the occurrence of an Event of Default:

         

        (a)  Acceleration.  The
          Payee and/or its assignee may without requirement of any judicial or
          extrajudicial notice or interpellation of any kind (i) accelerate any remaining
          terms outstanding for the payment of the Loan, and (ii) declare the Loan
          with
          accrued interest immediately due and payable; and

         

        (b)  Use
          of
          Courts and Executory Title.  The Payee may enforce this Note, in
          any courts of competent jurisdiction, being clearly understood that for
          purposes
          of enforcement in the courts of the State of Texas, this Note is construed
          as
          granting an extra-judicial execution title.

         

        (c)  Possession
          and Liquidation of the Collateral.  The Payee and/or its assignee
          may sell, lease an otherwise dispose of any of the Collateral at a public
          or
          private sale with or without advertisement.

         

        


        11.  Restrictions
          on Transfer. The
          Maker agrees that it will not transfer this Note or any interest herein,
          whether
          by operation of law or otherwise, except with the express written approval
          of
          the Payee.  No transfer or purported transfer of this Note or any
          interest herein or obligation hereunder without the express written approval
          of
          the Payee shall be effective for any purpose or confer upon any transferee
          or
          purported transferee any rights whatsoever.

         

        12.  Costs
          of Collection. The Maker
          agrees to pay on demand all costs and expenses, including attorneys’ fees and
          expenses, arising in connection with any enforcement or collection action
          by the
          Payee, whether by or through an attorney or collection agency or in an
          action in
          bankruptcy, insolvency or other judicial proceedings.  All such costs
          and expenses of collection shall be added to and become part of the principal
          of
          this Note and shall be collectible as part of such principal.

         

        13.  Waivers;
          Amendment.

         

        (a)  The
          rights, powers and remedies provided to the Payee herein are cumulative
          and not
          exclusive of any right, power or remedy provided at law or in equity, and
          the
          Payee may enforce any one or more remedies hereunder successively or
          concurrently, at its option.  No delay or failure on the part of the
          Payee to exercise any right or remedy accruing to the Payee hereunder,
          upon any
          default or breach by the Maker of any term or provision hereof, shall be
          held to
          be an abandonment thereof.  No delay on the part of the Payee in
          exercising any of its rights or remedies shall preclude the Payee from
          the
          exercise thereof at any time during the continuance of any default or
          breach.  No waiver of a single default or breach shall be deemed a
          waiver of any subsequent default or breach.  All waivers under this
          Note must be in writing signed by the party entitled to enforce the right
          waived.  All amendments to this Note must be in writing and signed by
          both the Maker and the Payee.

         

        (b)  Except
          as
          otherwise provided herein, the Maker, its successors and assigns, and any
          other
          persons liable for the payment of this Note, waive presentment for payment,
          demand, protest and notice of demand, dishonor, protest and nonpayment,
          and
          consent to any and all renewals, extensions or modifications that might
          be made
          by the Payee and the Maker as to the time of payment of this Note from
          time to
          time.  The Maker also expressly waives, as a defense, any
          counterclaim, set-off or claim that the Maker may now or hereafter have
          against
          the holder of this Note.

         

        
          
            
            

          

          
            33

            
              

            

          

          
            
            

          

        

         

        14.  Severability.  The
          invalidity or unenforceability of any provision hereof in any jurisdiction
          will
          not affect the validity or enforceability of the remainder hereof in that
          jurisdiction or the validity or enforceability of this Note, including
          that
          provision, in any other jurisdiction.  To the extent permitted by
          applicable law, each party hereto waives any provision of applicable law
          that
          renders any provision hereof prohibited or unenforceable in any
          respect.  If any provision of this Note is held to be unenforceable
          for any reason, it shall be adjusted rather than voided, if possible, in
          order
          to achieve the intent of the parties hereto to the closest extent
          possible.

         

        15.  Notices.  All
          notices, requests, or consents provided for or permitted to be given under
          this
          Note must be in writing and are effective (a) on actual receipt by the
          addressee
          if personally delivered (including delivery against a written receipt by
          an
          internationally recognized courier) to the address below or (b) on transmission
          (with written confirmation of receipt, whether from the transmitter’s machine or
          otherwise) to the addressee if transmitted by facsimile to the number below
          during normal business hours of the addressee on a business day (or if
          transmitted outside such hours, as of the opening of business of the addressee
          on the next business day):

         

        To:           MAKER:

         

        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 

        


        


        To:           PAYEE:

         

        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

        


        Either
          party may change the address or facsimile number to which notices are to
          be
          directed to it by notice to the other party in the manner specified
          above.

         

        
          
            
            

          

          
            34

            
              

            

          

          
            
            

          

        

        
 

        16.  Captions.
The
          captions herein
          set forth are for convenience only and should not be deemed to define,
          limit or
          describe the scope or intent of this Note.

         

        17.  Governing
          Law.  This
          Note shall be deemed to be made in and in any and all respects shall be
          governed
          by, and construed in accordance with, the laws of the State of Texas, U.S.A.,
          without regard to principles of conflict of laws.

         

        18.    
          Assignment.
          All the terms of this Agreement shall be binding on and inure to the
          benefit of the parties, their permitted assigns and
          successors-in-interests.  Any assignment of rights and obligations under
          this Note by the Maker shall be subject to the express written consent
          of the
          Payee.

         

        19.    
          Jurisdiction
          The parties hereto irrevocably (a) agree that any legal action or
          proceeding with respect to this Note shall be brought in the State of Texas,
          U.S.A., (b) consent to the exclusive jurisdiction of the courts of the
          State of
          Texas, U.S.A. in any such suit, action or proceeding, and (c) waive any
          objection which any of them may have to the laying of venue of any such
          suit,
          action or proceeding in any of the courts of the State of Texas, U.S.A.
          including any claim that such legal action, suit, or proceeding brought
          in such
          court has been brought in an inconvenient forum.  Each party further
          consents to the service of process out of any of the aforementioned courts
          in
          any such action or proceeding by the mailing of copies thereof by registered
          or
          certified mail, postage prepaid, to such party at its address specified
          herein
          for the giving of notices, or by such other notice given in accordance
          with the
          rules and procedures of such courts.

         

        


        IN
          WITNESS WHEREOF, the parties hereto have caused this Note to be duly
          executed as of the day and year first above written.

        


        


        TIDELANDS
          OIL & GAS CORPORATION

        


        


        By:                                                               
          

        Name:                                                                                                                

        Title:                                                                                                                        

        


        


        


        


        GRAND
          CHENIERE PIPELINE LLC

         

        
 

        
          By:                                                               
            

          Name:                                                                                                                

          Title:                                                                      

        

         

      

      
        
          
          

        

        
          35