Document:

ex10-1.htm

    Exhibit 10.1

     

    EQUITY
      PURCHASE AGREEMENT

    
 

     

    among

     

    

     

    TIDELANDS
      OIL & GAS CORPORATION,

     

    

     

    FRONTERA
      PIPELINE, LLC,

     

    

     

    and

     

    

     

    GRAND
      CHENIERE PIPELINE LLC

     

    

     

    and

     

    

     

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

    

     

    

     

    

     

    Dated
      as
      of September 28, 2007

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

    TABLE
      OF CONTENTS

     

    
      
        	 	
                Page

              
	 	 
	
                Article
                  I DEFINITIONS  

              	
                5

              
	 	
                1.1

              	
                Certain
                  Definitions

              	
                5

              
	 	
                1.2

              	
                Interpretation

              	
                10

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

              	
                10

              
	 	
                2.1

              	
                Purchase
                  and Sale of Equity Interests

              	
                10

              
	 	
                2.2

              	
                Consideration

              	
                10

              
	 	
                2.3

              	
                Use
                  of Purchase Price Proceeds

              	
                10

              
	 	
                2.4

              	
                Closing

              	
                10

              
	 	
                2.5

              	
                Purchase
                  Price Adjustments

              	
                10

              
	 	
                2.6

              	
                Assignment
                  of Project Documents

              	
                10

              
	 	
                2.7

              	
                Cheniere
                  Deliveries

              	
                11

              
	 	
                2.8

              	
                Deliveries
                  of TOG and the Company

              	
                11

              
	 	 	 	 
	
                Article
                  III REPRESENTATIONS AND WARRANTIES RELATING TO TOG  

              	
                13

              
	 	
                3.1

              	
                Due
                  Organization and Power of TOG

              	
                13

              
	 	
                3.2

              	
                Authorization
                  and Validity of Agreement

              	
                13

              
	 	
                3.3

              	
                Non-Contravention.

              	
                13

              
	 	
                3.4

              	
                Governmental
                  Approvals; Consents and Actions

              	
                13

              
	 	
                3.5

              	
                Litigation

              	
                13

              
	 	
                3.6

              	
                LLC
                  Interests

              	
                13

              
	 	
                3.7

              	
                Finders;
                  Brokers

              	
                13

              
	 	
                3.8

              	
                Bankruptcy

              	
                13

              
	 	 
	
                Article
                  IV REPRESENTATIONS AND WARRANTIES RELATING TO THE ACQUIRED
                  COMPANIES  

              	
                14

              
	 	
                4.1

              	
                Due
                  Organization and Power of the Acquired Companies

              	
                14

              
	 	
                4.2

              	
                Authorization
                  and Validity of Agreement

              	
                14

              
	 	
                4.3

              	
                Non-Contravention

              	
                14

              
	 	
                4.4

              	
                Governmental
                  Approvals

              	
                14

              
	 	
                4.5

              	
                Capitalization

              	
                14

              
	 	
                4.6

              	
                Financial
                  Statements

              	
                14

              
	 	
                4.7

              	
                Absence
                  of Undisclosed Liabilities, Absence of Changes

              	
                15

              
	 	
                4.8

              	
                Litigation

              	
                15

              
	 	
                4.9

              	
                Labor
                  Relations

              	
                15

              
	 	
                4.10

              	
                Books
                  of Accounts

              	
                15

              
	 	
                4.11

              	
                Bank
                  Accounts

              	
                15

              
	 	
                4.12

              	
                Corporate
                  Records

              	
                15

              
	 	
                4.13

              	
                Insurance

              	
                15

              
	 	
                4.14

              	
                Ethical
                  Practices

              	
                16

              
	 	
                4.15

              	
                No
                  Other Representations or Warranties

              	
                16

              
	 	
                4.16

              	
                Compliance
                  with Laws

              	
                16

              
	 	
                4.17

              	
                Taxes

              	
                16

              
	 	
                4.18

              	
                Environmental

              	
                17

              
	 	
                4.19

              	
                Material
                  Contracts

              	
                18

              
	 	
                4.20

              	
                Real
                  Property

              	
                18

              
	 	
                4.21

              	
                Subsidiaries
                  and Investments

              	
                18

              
	 	
                4.22

              	
                Related
                  Party Transactions

              	
                18

              

      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      
        	 	 
	
                Article
                  V REPRESENTATIONS OF BUYER  

              	
                19

              
	 	
                5.1

              	
                Due
                  Organization and Power of Cheniere

              	
                19

              
	 	
                5.2

              	
                Authorization
                  and Validity of Agreement

              	
                19

              
	 	
                5.3

              	
                Non-Contravention

              	
                19

              
	 	
                5.4

              	
                Governmental
                  Approvals; Consents and Action

              	
                19

              
	 	
                5.5

              	
                Litigation

              	
                19

              
	 	
                5.6

              	
                Independent
                  Decision

              	
                19

              
	 	
                5.7

              	
                Purchase
                  for Investment

              	
                19

              
	 	
                5.8

              	
                Financial
                  Capacity; No Financing Condition

              	
                19

              
	 	
                5.9

              	
                Finders;
                  Brokers

              	
                20

              
	 	
                5.10

              	
                No
                  Other Representations or Warranties

              	
                20

              
	 	 
	
                Article
                  VI AGREEMENTS OF THE COMPANY, TOG AND
                  Cheniere

              	
                20

              
	 	
                6.1

              	
                Transfer
                  of the Mexican Project Entities

              	
                20

              
	 	
                6.2

              	
                Operation
                  of the Business

              	
                20

              
	 	
                6.3

              	
                Pre-Mexican
                  Project Closing Date Investigation

              	
                22

              
	 	
                6.4

              	
                Confidentiality.

              	
                22

              
	 	
                6.5

              	
                Efforts;
                  Cooperation; No Inconsistent Action

              	
                23

              
	 	
                6.6

              	
                Public
                  Disclosures

              	
                23

              
	 	
                6.7

              	
                Exclusivity

              	
                23

              
	 	
                6.8

              	
                Tax
                  Treatment of Transaction.

              	
                23

              
	 	 
	
                Article
                  VII INDEMNIFICATION  

              	
                23

              
	 	
                7.1

              	
                Survival
                  of Representations and Warranties

              	
                23

              
	 	
                7.2

              	
                Indemnification

              	
                24

              
	 	
                7.3

              	
                Indemnification
                  Procedures

              	
                25

              
	 	 
	
                Article
                  VIII MISCELLANEOUS  

              	
                26

              
	 	
                8.1

              	
                Notices

              	
                27

              
	 	
                8.2

              	
                Expenses

              	
                27

              
	 	
                8.3

              	
                Assignability

              	
                27

              
	 	
                8.4

              	
                Amendment;
                  Waiver

              	
                27

              
	 	
                8.5

              	
                No
                  Third Party Beneficiaries

              	
                27

              
	 	
                8.6

              	
                Governing
                  Law

              	
                27

              
	 	
                8.7

              	
                Consent
                  to Jurisdiction

              	
                27

              
	 	
                8.8

              	
                Entire
                  Agreement

              	
                27

              
	 	
                8.9

              	
                Severability

              	
                27

              
	 	
                8.10

              	
                Counterparts

              	
                27

              
	 	
                8.11

              	
                Further
                  Assurances

              	
                28

              
	 	
                8.12

              	
                Schedules,
                  Annexes and Exhibits

              	
                28

              
	 	
                8.13

              	
                Specific
                  Performance; Limitation on Damages

              	
                28

              
	 	
                8.14

              	
                Waiver
                  of Jury Trial

              	
                28

              
	 	
                8.15

              	
                Time

              	
                28

              
	 	
                8.16

              	
                Attorneys
                  Fees

              	
                28

              

      

      
 

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBITS
      AND SCHEDULES

     

    
      
        	
                Exhibit
                  A

              	
                Form
                  Consulting Agreement

              
	
                Exhibit
                  B

              	
                Form
                  Operating Agreement

              
	
                Schedule
                  1.1(a)

              	
                Excluded
                  Assets

              
	
                Schedule
                  1.1(b)

              	
                Knowledge
                  Parties

              
	
                Schedule
                  1.1(c)

              	
                Reorganization

              
	
                Schedule
                  2.3

              	
                Use
                  of Purchase Price Proceeds

              
	
                Schedule
                  2.8(f)

              	
                TOG’s
                  Governmental Approval

              
	
                Schedule
                  3.3

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

              
	
                Schedule
                  3.4

              	
                TOG’s
                  Governmental Approvals; Consents and Actions

              
	
                Schedule
                  3.5

              	
                TOG’s
                  Litigation

              
	
                Schedule
                  3.6

              	
                Permitted
                  LLC Interests Liens

              
	
                Schedule
                  4.3

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

              
	
                Schedule
                  4.4

              	
                Company’s
                  Actions and Orders

              
	
                Schedule
                  4.5

              	
                Company
                  Interests

              
	
                Schedule
                  4.6

              	
                Company’s
                  Financial Statements

              
	
                Schedule
                  4.7(a)

              	
                Certain
                  Liabilities

              
	
                Schedule
                  4.7(b)

              	
                Company’s
                  Non-Ordinary Course of Business

              
	
                Schedule
                  4.8

              	
                TOG’s
                  and the Company’s Litigation

              
	
                Schedule
                  4.9

              	
                Labor
                  Relations

              
	
                Schedule
                  4.11

              	
                Company’s
                  Bank Accounts

              
	
                Schedule
                  4.13

              	
                Company’s
                  Insurance

              
	
                Schedule
                  4.16

              	
                Company’s
                  Compliance with Laws; Permits

              
	
                Schedule
                  4.17(a)

              	
                Tax
                  Returns

              
	
                Schedule
                  4.17(h)

              	
                Partnership
                  Treatment

              
	
                Schedule
                  4.18

              	
                Company’s
                  Environmental

              
	
                Schedule
                  4.19(a)

              	
                Company’s
                  Material Contracts

              
	
                Schedule
                  4.19(b)

              	
                Affected
                  Material Contracts

              
	
                Schedule
                  4.20(a)

              	
                Company’s
                  Real Property Leases

              
	
                Schedule
                  5.3

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

              
	
                Schedule
                  5.5

              	
                Cheniere’s
                  Litigation

              
	
                Schedule
                  6.2

              	
                Operation
                  of the Business

              
	
                Schedule
                  6.2(k)

              	
                Capital
                  Expenditure

              

      

       

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

    EQUITY
      PURCHASE AGREEMENT

     

     

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

    

    WITNESSETH:

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

    

    WHEREAS,
      the Company, thorough the Subsidiaries (as defined below), is engaged in the
      development and construction of an integrated pipeline project traversing the
      United States of America and Mexico border and the construction of a related
      storage facility in Mexico, such project as more specifically set forth on
      Exhibit B of the Operating Agreement (the “Project”);
      and

    

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

    

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

     

    Article
      I

    DEFINITIONS

     

     

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

     

    “Acquired
      Companies” means the Company and the Subsidiaries.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

    Article
      II

    PURCHASE
      AND SALE OF LLC INTERESTS, CONSIDERATION AND CLOSING

     

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

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

    
       

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

       

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

       

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

       

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

       

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

       

                  (f)  a
        signed
        counterpart to the Consulting Agreement;

       

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

       

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

    

     

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

    
                  

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

                  

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

       

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

       

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

                  

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

       

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

       

                  (g)  a
        signed
        counterpart to the Operating Agreement;

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

                  (h)      
        a
        signed
        counterpart to the Consulting Agreement;

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

    

     

    
      .

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Article
      III

    REPRESENTATIONS
      AND WARRANTIES RELATING TO TOG

     

    TOG
      represents and warrants to Cheniere as follows:

     

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

     

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

     

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

     

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

     

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

     

    3.6  LLC
      Interests.

    
                  

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

       

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

       

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

    

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

     

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

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

    Article
      IV

    REPRESENTATIONS
      AND WARRANTIES RELATING TO THE ACQUIRED COMPANIES

     

    TOG
      represents and warrants to Cheniere as follows:

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    4.7  Absence
      of Undisclosed Liabilities; Absence of Changes.

    
       

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

       

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

    

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    
      

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

       

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

    

     

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

     

    4.17  Taxes.

    
       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

                 

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

       

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

       

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

       

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

       

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

       

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

                  

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

    

     

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

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    4.19  Material
      Contracts.

     

    
      

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

       

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

    

    
       

       

    

    4.20  Real
      Property.

    
      

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

       

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

       

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

    

     

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

     

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

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    Article
      V

    REPRESENTATIONS
      OF BUYER

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

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

     

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

     

     

    Article
      VI

    AGREEMENTS
      OF THE COMPANY, TOG AND CHENIERE 

     

     

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

     

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

     

    
      

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

                 

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

                  (t)  repay
        any
        indebtedness outstanding;

       

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

       

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

       

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

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

                 

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

       

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

       

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

    

     

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

     

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

     

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

     

    6.5  Efforts;
      Cooperation; No Inconsistent Action.

    
       

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

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

                 

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

       

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

       

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

    

     

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

     

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

     

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

     

    Article
      VII

    INDEMNIFICATION

     

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

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    7.2  Indemnification.

     

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

       

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

       

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

       

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

       

      (iii)           the
        Excluded Assets and Excluded Liabilities; and

       

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

       

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

       

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

       

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

       

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

    

    
       

    

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    7.3  Indemnification
      Procedures.

    
                  

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

       

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

       

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

    

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    Article
      VIII

    MISCELLANEOUS

     

     

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

     

    If
      to
      Cheniere:

    Cheniere
      Energy, Inc

    700
      Milam, Suite 803

    Houston,
      Texas  77002

    Attention:  Chief
      Financial
      Officer                                                                           

    Facsimile:
      713-325-6000

    

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

    

    King
      & Spalding LLP

    1100
      Louisiana Street

    Suite
      4000

    Houston,
      Texas 77002

    Attention:
      Carlos Treistman, Esquire

    Facsimile:  713-751-3290

    

    If
      to
      TOG:

    Tidelands
      Oil & Gas Corporation.

    1862
      W
      Bitters Bldg 1

    San
      Antonio, Texas 78248

    Attention:
      James B. Smith

    Facsimile:
      [*]

    

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

    

    Strasburger
      & Price, LLP

    300
      Convent St., Suite 900

    San
      Antonio, Texas 78205

    Attention:
      David J. Cibrian, Esquire

    Facsimile:
      210.258.2716 

    

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

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

     

     

    [SIGNATURE
      PAGE FOLLOWS]

     

     

    
 

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

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

     

    CHENIERE

    

    GRAND
      CHENIERE PIPELINE LLC

    

    By:                                                         
      

    Name:                                                                                                                                                                    

    Title:                                                                                                                      

    

    

    TOG

    

    TIDELANDS
      OIL & GAS CORPORATION

    

    By:                                                                                                               

    Name:                                                     

    Title:                                                                                                                    

    

    

    THE
      COMPANY

    

    FRONTERA
      PIPELINE, LLC

    

    By:                                                                                                          

    Name:                                                                                                                  

    Title:                                                                                                                     

    

    

    

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

    

    TERRANOVA

    

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

    

    

    By:                                                                                                                

    Name:                                                     

    Title:                                                                                                                      

    

    

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    
      Schedule
        1.1(c)

      

      Reorganization

      

      

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

      

      See
        attachment.

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      Exhibits
        and Schedules for Equity Purchase Agreement

      Dated
        September __, 2007

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

      

      

      Schedule
        2.3

      

      Use
        of
        Purchase Proceeds

    

     

     

    
      
        	
                Sonora

              	 
	 	 
	
                BNC
                  Engineering, LLC

              	
                $15,189.85

              
	
                607
                  River Bend Dr.

              	 
	
                Georgetown,
                  TX 78628

              	 
	
                Tax
                  ID 76-0578524

              	 
	 	 
	
                Project
                  Consulting Services, Inc.

              	
                $4,700.83

              
	
                3300
                  W Esplanade Ave. S., Suite 500

              	 
	
                Metarie,
                  LA 70002-7406

              	 
	
                Tax
                  ID 72-1206233

              	 
	 	 
	
                Ross,
                  Marsh, & Foster

              	
                $89,721.38

              
	
                2001
                  L Street, N.W.

              	 
	
                Suite
                  400

              	 
	
                Washington,
                  D.C. 20036

              	
                 

              
	
                Tax
                  ID 53-0214335

              	 
	 	 
	
                Thomas
                  R. Hughes & Associates, Inc.

              	
                $14,231.25

              
	
                9
                  Buxton Lane

              	 
	
                Riverside,
                  CT 06878

              	
                 

              
	
                Tax
                  ID 06-1159849

              	 
	 	 
	
                Strasburger
                  & Price LLP

              	
                $5,527.63

              
	
                300
                  Convent, Suite 900

              	 
	
                San
                  Antonio, TX 78205

              	 
	
                Tax
                  ID 75-0838805

              	 
	 	 
	
                Sonora
                  Total

              	
                $129,370.94

              
	 	 

      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      
        	 	 
	
                Terranova

              	 
	 	 
	
                Hanhausen,
                  Domenech y Asociados

              	
                $3,185.50

              
	
                Jorge
                  Eliot 12-701, Col. Polanco Chapultepec

              	 
	
                Mexico
                  DF 11560

              	 
	 	 
	
                Asociacion
                  Mexicana de Gas Natural

              	
                $1,400.00

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

              	 
	
                Mexico
                  DF 03800

              	 
	 	 
	
                Reynaldo
                  Morado Dimas

              	
                $5,700.00

              
	
                Tepic
                  90-402, Col. Roma Sur

              	 
	
                Mexico
                  DF 06760

              	 
	 	 
	
                Ritch
                  Mueller, S.C.

              	
                $905.63

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

              	 
	
                Mexico
                  DF 11000

              	 
	 	 
	
                Kiinera
                  SA de CV

              	
                $52,785.00

              
	
                Jorge
                  Eliot 12-701, Col. Polanco Chapultepec

              	 
	
                Mexico
                  DF 11560

              	 
	 	 
	
                Strasburger
                  & Forastieri, S.C.

              	
                $8,357.57

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

              	 
	
                Col.
                  Santa Fe

              	 
	
                Mexico
                  DF 01210

              	 
	 	 
	
                Secretaria
                  de Hacienda y Crédito Publico

              	
                $58,095.87

              
	 	 
	
                Terranova
                  Total

              	
                $130,429.57

              
	 	 

      

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      

      Schedule
        3.4

      

      TOG’s
        Governmental Approvals; Consents and Actions

      

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

      

      CRE
        Approval of Terranova’s proposed ownership changes

      

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

      

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

       

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

       

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      Schedule
        4.16

      

      Company’s
        Compliance with Laws; Permits

      

      Terranova

      

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

      

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

      

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

      

      

      SCHEDULE
        OF REQUIREMENTS RELATIVE TO THE

      PIPELINE
        PROJECT BASED ON

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

      BOTH
        ISSUED ON MAY 23, 2006

      

      

      

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

      

      
        	
                a.  

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

              

      

      

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

      

      
        	
                b.  

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

              

      

      

      III           Prior
        to commencement of pipeline construction:

      

      
        	
                a.  

              	
                Conduct
                  an Open Season.

              

      

      

      IV           Within
        10 days after commencing construction:

      
        

        
          	
                   

                	
                  a.

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

                  

                

        

         

      

      V           Within
        30 days after construction completed and service commenced:

      

      
        	
                 

              	
                a.

              	
                File
                  a written notice of such completion and commencement
                  date.

              

      

      

      
        	
                VI

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

              

      

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

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

      

      
        	
                Authorization,
                  License or Permit

              	
                Government
                  office

              	
                Description

              
	
                Permiso
                  de transporte de gas natural para acceso abierto.

              	
                CRE

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

              
	
                Permiso
                  de Uso de Suelo.

              	
                Municipio
                  afectado

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

                Art.
                  9 LAH.

              
	
                Licencia
                  de Construcción.

              	
                Municipio
                  afectado

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

              
	
                Caminos
                  de acceso.

              	
                SCT
                  o JFC Gobierno del Estado

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

              
	
                Revisión
                  y aprobación del sistema eléctrico.

              	
                SE

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

              
	
                Autorización
                  para Uso de Explosivos.

              	
                SEDENA

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

              
	
                Adquisición
                  o posesión de terrenos por expropiación.

              	
                SENER

                SAGARPA

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

              
	
                Permiso
                  de Ocupación de Vía Pública.

              	
                Municipio
                  afectado

              	
                Planos
                  de trazo y perfil.

              
	
                Permiso
                  de Ocupación de Zonas Adyacentes. Permiso de Cruzamiento.

              	
                Gobierno
                  del Estado

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

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

              	
                SCT

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

                 

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

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

              	
                SCT

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

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

              	
                SCT

                En
                  las oficinas de Ferronales.

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

              
	
                Permiso
                  de Ocupación Marginal y Permiso de Cruzamiento.

              	
                CNA.

                Gerencias
                  Estatales.

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

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

              	
                SEMARNAT

                Dirección
                  General de Impacto Ambiental

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

              
	
                Estudio
                  de riesgo.

              	
                SEMARNAT

                Dirección
                  General de Impacto Ambiental

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

              
	
                Licencia
                  de Funcionamiento

              	
                SEMARNAT

                Delegaciones
                  Estatales.

                 

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

              
	
                Cédula
                  de operación

              	
                SEMARNAT

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

              
	
                Inventario
                  de emisiones a la atmósfera

              	
                SEMARNAT.

                Delegaciones
                  Estatales.

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

              
	
                Permiso
                  de combustión a cielo abierto en prácticas de contra
                  incendio

              	
                SEMARNAT.

                Delegaciones
                  Estatales.

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

              
	
                Autorización
                  para cambio de uso de terreno forestal

              	
                SEMARNAT

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

              
	
                Título
                  de Concesión o Asignación de Aguas Nacionales

              	
                CNA
                  Gerencias Estatales

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

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

              	
                CNA
                  Gerencias Estatales

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

              
	
                Registro
                  Público de Derechos de Aguas

              	
                CNA
                  Gerencias Estatales

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

              
	
                Registro
                  de Descarga de Aguas Residuales

              	
                CNA
                  Gerencias Estatales

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

              
	
                Permiso
                  de Descarga de Aguas Residuales

              	
                CNA
                  Gerencias Estatales

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

              
	
                Pago
                  de Derechos por Descargas de Aguas Residuales

              	
                CNA
                  Gerencias Estatales

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

              
	
                Registro
                  como empresa generadora de residuos peligrosos

              	
                SEMARNAT   Delegaciones
                  Estatales.

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

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

              	
                SEMARNAT   Delegaciones
                  Estatales.

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

              
	
                Aviso
                  de Contingencias

              	
                CRE

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

              
	
                Informe
                  de Siniestros

              	
                CRE

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

              
	
                Programa
                  de Mantenimiento del Sistema

              	
                CRE

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

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

              	
                CRE

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

              

      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      ABREVIACIONES

      

      
        	
                CNA

              	
                Comisión
                  Nacional del Agua

              
	
                CRE

              	
                Comisión
                  Reguladora de Energía

              
	
                Ferronales

              	
                Ferrocarriles
                  Nacionales de México

              
	
                JFC

              	
                Junta
                  Federal de Caminos

              
	
                LAH

              	
                Ley
                  de Asentamientos Humanos

              
	
                LAN

              	
                Ley
                  de Aguas Nacionales

              
	
                LCPAF

              	
                Ley
                  de Caminos Puentes y Autotransporte Federal

              
	
                LF

              	
                Ley
                  Forestal

              
	
                LFAFE

              	
                Ley
                  Federal de Armas de Fuego y Explosivos

              
	
                LGEEPA

              	
                Ley
                  General de Equilibrio Ecológico y Protección al
                  Ambiente

              
	
                LRSF

              	
                Ley
                  Reglamentaria del Servicio Ferroviario

              
	
                MIA

              	
                Manifestación
                  de Impacto Ambiental

              
	
                RADVCF

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

              
	
                RGN

              	
                Reglamento
                  de Gas Natural

              
	
                RPLAN

              	
                Reglamento
                  de la Ley de Aguas Nacionales

              
	
                RLF

              	
                Reglamento
                  de la LF

              
	
                RLGEEPAA

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

              
	
                SAGARPA

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

              
	
                SCT

              	
                Secretaría
                  de Comunicaciones y Transportes

              
	
                SENER

              	
                Secretaría
                  de Energía

              
	
                SE

              	
                Secretaría
                  de Economía

              
	
                SEDENA

              	
                Secretaría
                  de la Defensa Nacional

              
	
                SEMARNAT

              	
                Secretaría
                  del Medio Ambiente y Recursos
                  Naturales

              

      

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      

      Sonora

      

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

      

      Additionally:

      

      SCHEDULE
        OF REQUIREMENTS

      RELATIVE
        TO

      FERC
        AUTHORIZATIONS

      

      

      I           By
        August 9, 2007:

      

      
        	
                a.  

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

              

      

      

      
        	
                b.  

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

              

      

      

      
        	
                c.  

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

              

      

      

      II           Within
        60 days of certificate acceptance and before construction begins

      

      
        	
                 

              	
                a.

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

              

      

      

      III           Prior
        to commencement of pipeline construction:

      
        

        
          	
                   

                	
                  
                    b.  

                  

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

                

        

         

      

      IV           Within
        10 days after commencing construction:

      

      
        	
                 

              	
                a.

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

              

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      V           By
        July 10, 2008:

      

      
        	
                a.  

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

              

      

      

      
        	
                VI

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

              

      

      

      
        	
                 

              	
                a.

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

              

      

      

      
        	
                1.  

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

              

      

      

      
        	
                2.  

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

              

      

      

      
        	
                3.  

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

              

      

      

      
        	
                4.  

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

              

      

      

      
        	
                5.  

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

              

      

      

      
        	
                6.  

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

              

      

      

      
        	
                7.  

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

              

      

      

      
        	
                8.  

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

              

      

      

      
        	
                9.  

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

              

      

      

      
        	
                VII

              	
                Within
                  10 days after construction completed and service
                  commenced:

              

      

      

      
        	
                 

              	
                a.

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

              

      

      

      VIII           Within
        6 months after construction completed:

      
        

        
          	
                   

                	
                  a.

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

                  

                

        

         

      

      
        	
                IX

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

              

      

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      

      

      FEDERAL
        ENERGY REGULATORY COMMISSION

      WASHINGTON,
        D.C. 20426

      

      

      

                                                                                                     

      
        	OFFICE
                OF ENERGY PROJECTS  	In
                Reply Refer To:

        	
                 

              	
                OEP/DG2E/Gas
                  Branch 1

              

      

      
        	
                 

              	
                Sonora
                  Pipeline, LLC

              

      

      
        	
                 

              	
                Burgos
                  Hub Export/Import Project

              

      

      
        	
                 

              	
                Docket
                  Nos. CP07-74-000, et al

              

      

      
        	
                 

              	 

      

       

      August
        27, 2007

      Bernard
        Foster, III

      
        Ross,
          Marsh, and Foster

      

      2001
        L
        Street, NW, Suite 400

      Washington,
        DC  20036

      

      Re:           Extension
        of Time to File Initial Implementation Plan

      

      Dear
        Mr.
        Foster:

      

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

      

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

      

      Sincerely,

      

      Signed
        MJB 8/27/07

      

      Michael
        J. Boyle, Chief

      Gas
        Branch 1, Division of Gas - Environment and Engineering

      

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

      

      All
        Parties

      James
        B.
        Smith

      Sonora
        Pipeline, LLC

      1862
        West
        Bitters, Bldg. 1

      San
        Antonio, TX
        78248ex10-2.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.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

                  (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;

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

                  (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.

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      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

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