Exhibit 10.25
*** indicates material has been omitted pursuant to a Confidential Treatment
Request filed with the Securities and Exchange Commission. A complete copy of
this agreement has been filed separately with the Securities and Exchange
Commission.
OMNIBUS AGREEMENT
by and among
FREEPORT LNG DEVELOPMENT, L.P.,
FREEPORT LNG-GP, INC.,
and
CONOCOPHILLIPS COMPANY
As of December 20, 2003
TABLE OF CONTENTS
-----------------
ARTICLE 1 DEFINITIONS.........................................................2
ARTICLE 2 OBLIGATIONS.........................................................9
2.1 Obligations of COP, COP Lender and COP LNG.............................9
2.2 Obligations of Freeport LNG and the General Partner....................9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES.....................................10
3.1 Representations and Warranties of COP.................................10
3.2 Representations and Warranties of Freeport LNG........................11
3.3 Representations and Warranties of the General Partner.................17
ARTICLE 4 COVENANTS..........................................................18
4.1 Covenant of COP.......................................................18
4.2 Covenants of Freeport LNG and the General Partner.....................18
4.3 Joint Covenants.......................................................20
ARTICLE 5 CLOSING AND CONDITIONS TO CLOSING..................................22
5.1 The Closing...........................................................22
5.2 COP's, COP Lender's and COP LNG's Conditions to Closing...............22
5.3 Freeport LNG's and the General Partner's Conditions to Closing........24
5.4 Frustration of Closing Conditions.....................................25
ARTICLE 6 INDEMNIFICATION AND LIABILITY......................................25
6.1 Indemnification by COP................................................25
6.2 Indemnification by Freeport LNG.......................................26
6.3 [Intentionally Omitted]...............................................26
6.4 Tax Indemnification...................................................26
6.5 Matters Involving Third Parties.......................................27
6.6 Other Claims..........................................................28
6.7 SCOPE OF INDEMNITY....................................................28
6.8 LIMITATION ON DAMAGES.................................................28
6.9 Effect of Knowledge...................................................28
ARTICLE 7 TERMINATION........................................................29
7.1 Termination of Agreement..............................................29
7.2 Effect of Termination.................................................30
7.3 Termination upon Closing..............................................31
ARTICLE 8 MISCELLANEOUS......................................................31
8.1 No Third Party Beneficiaries..........................................31
8.2 Entire Agreement......................................................31
8.3 Succession and Assignment.............................................31
8.4 Counterparts; Facsimile Signatures....................................31
8.5 Survival of Representations and Warranties............................31
8.6 Interpretation........................................................31
8.7 Notices...............................................................32
8.8 GOVERNING LAW.........................................................33
8.9 Rights and Remedies...................................................33
8.10 Compliance with Laws..................................................33
8.11 Amendments and Waivers................................................33
8.12 Severability..........................................................33
8.13 Expenses..............................................................33
8.14 Construction..........................................................34
8.15 Specific Performance..................................................34
8.16 Attorneys' Fees.......................................................34
ARTICLE 9 DISPUTE RESOLUTION.................................................34
9.1 Arbitration...........................................................34
OMNIBUS AGREEMENT
-----------------
Omnibus Agreement (this "Agreement"), dated as of December 20, 2003 (the
"Effective Date"), by and among Freeport LNG Development, L.P., a Delaware
limited partnership ("Freeport LNG"), Freeport LNG-GP, Inc., a Delaware
corporation and the general partner of Freeport LNG (the "General Partner"), and
ConocoPhillips Company, a Delaware corporation ("COP"). Each of Freeport LNG,
the General Partner and COP is sometimes referred to herein as a "Party," and
all of them together are sometimes referred to herein as the "Parties."
RECITALS
--------
WHEREAS, Freeport LNG intends to construct, own and operate an LNG (as
defined below) terminal facility on Quintana Island, Texas capable of performing
certain LNG terminalling services, including: the berthing of LNG vessels; the
unloading, receiving and storing of LNG; the regasification of LNG; the storage
of natural gas; and the transportation and delivery of natural gas to a pipeline
interconnection point at Xxxxxxxx Ridge, Texas (the "Facility");
WHEREAS, upon completion of Phase I (as defined below), the Facility is
intended to have the ability to unload, store and revaporize LNG and redeliver
regasified LNG at a maximum gas redelivery rate of approximately 1.75 billion
standard cubic feet per day ("bcf/d"), including Peaking Gas (as defined below);
WHEREAS, Freeport LNG intends to begin construction of Phase I promptly
following the issuance of the FERC Approval (as defined below);
WHEREAS, subject to the terms and conditions of this Agreement and the
other Transaction Documents (as defined below), COP Lender (as defined below)
intends to lend to Freeport LNG funds necessary to cover certain costs of
engineering, design, procurement, construction and overhead relating to Phase I
from the date of issuance of the FERC Approval to the Commercial Start Date (as
defined below), and certain working capital and inventory incurred or to be
incurred in connection with Phase I from and after the date of issuance of the
FERC Approval, all as further described in the Loan Term Sheet (as defined
below);
WHEREAS, subject to the terms and conditions of this Agreement and the
other Transaction Documents, Xxxxxxx X. Xxxxx intends to sell and COP GP (as
defined below) intends to purchase 50% of the issued and outstanding common
stock of the General Partner;
WHEREAS, subject to the terms and conditions of this Agreement and the
other Transaction Documents, beginning on the Commercial Start Date, COP LNG
intends to purchase from Freeport LNG, and Freeport LNG intends to sell to COP
LNG, Services (as defined below); and
WHEREAS, the Parties desire to enter into this Agreement for the purpose of
providing the terms and conditions (a) upon which Freeport LNG, the General
Partner and the COP Participants (as defined below) will enter into the Loan
Documents (as defined below), the TUA (as defined below) and the Stockholders
Agreement (as defined below), (b) upon which Xxxxxxx X. Xxxxx and COP GP will
enter into the Stock Purchase Agreement (as defined below) and (c)
that will govern the relationship among the Parties between the Effective Date
and the Closing Date in respect of the transactions contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms have the following meanings:
"Acceptable Vessels" has the meaning set forth in Section 7.1(b)(ii).
"Action" means any judicial or administrative action, claim, suit, hearing,
demand or proceeding by or before any Governmental Entity.
"Affiliate" means with respect to a specified Person, any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, such specified Person, and for such purposes the terms "controls",
"controlled by" and "common control" shall mean the direct or indirect ownership
of more than fifty percent (50%) of the voting rights in a Person; provided that
in applying this definition each Party's ownership of shares in the General
Partner shall be disregarded.
"Agreement" has the meaning set forth in the preamble.
"bcf/d" has the meaning set forth in the second Whereas clause.
"Business Day" means any day excluding Saturday, Sunday and any day on
which commercial banks in Houston, Texas are authorized or required to close.
"Capacity Reservation Fee" means a non-refundable payment in the amount of
$10 million to be made by COP LNG to Freeport LNG in immediately available
funds.
"Channel" means the Port of Freeport channel.
"Claim" means any existing or threatened future claim, demand, suit,
action, investigation, proceeding, governmental action or cause of action of any
kind or character (in each case, whether civil, criminal, investigative or
administrative), known or unknown, under any theory, including those based on
theories of contract, tort, statutory liability, strict liability, employer
liability, premises liability, products liability, breach of warranty or
malpractice that is brought by or owed to a third party.
"Closing" has the meaning set forth in Section 5.1.
"Closing Date" has the meaning set forth in Section 5.1.
"Commercial Start Date" has the meaning set forth in the TUA.
"Company Pension Plans" has the meaning set forth in Section 3.2(q)(i).
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"COP" has the meaning set forth in the preamble.
"COP GP" means the Person (which shall be COP or an Affiliate of COP)
designated by COP to be party to the Stock Purchase Agreement.
"COP Indemnitees" has the meaning set forth in Section 6.2.
"COP Lender" means the Person (which shall be COP or an Affiliate of COP)
designated by COP to be party to the Loan Documents.
"COP LNG" means the Person (which shall be COP or an Affiliate of COP)
designated by COP to be party to the TUA.
"COP Participants" means COP, COP Lender, COP GP and COP LNG.
"Dispute" means any dispute, controversy or claim (of any and every kind or
type, whether based on contract, tort, statue, regulation, or otherwise) arising
out of, relating to, or connected with this Agreement, including any dispute as
to the construction, validity, interpretation, termination, enforceability or
breach of this Agreement, as well as any dispute over arbitrability or
jurisdiction.
"DOW" means The Dow Chemical Company, a Delaware corporation.
"XXX XXX" means the Heads of Agreement, dated June 19, 2003, by and between
DOW and Freeport LNG.
"DOW Option" means DOW's option under the XXX XXX to receive LNG
terminalling services at the Facility based on a maximum gas redelivery rate of
no less than 200 million standard cubic feet per day and no more than 500
million standard cubic feet per day, such option to be exercised pursuant to the
DOW TUA.
"DOW TUA" means the LNG Terminal Use Agreement and Supplemental Agreement
to be executed between DOW and Freeport LNG in accordance with the terms of the
XXX XXX. The DOW TUA shall replace and supersede the XXX XXX and upon execution
of the DOW TUA, the XXX XXX shall no longer be of any force or effect.
"Easement" means any easement, right-of-way, permit, servitude, license,
leasehold estate or similar right held by a Person relating to real property
used in such Person's business but owned by another Person.
"Effective Date" has the meaning set forth in the preamble.
"Environmental Laws" means all Laws relating to the protection,
investigation or restoration of the environment, public health or safety or
natural resources, or to the manufacture, processing, distribution, treatment,
labeling, storage, handling, use, presence, disposal, Release or threatened
Release of any Hazardous Substance, including any injury or threat of injury to
persons or property relating to any Hazardous Substance.
"EPC Contract" has the meaning set forth in Section 4.2(b).
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Facility" has the meaning set forth in the first Whereas clause.
"Facility Site" means the real property in Brazoria County, Texas, on which
the Facility and related structures and equipment are to be located.
"FERC" means the Federal Energy Regulatory Commission.
"FERC Approval" means the order of FERC granting authorization under
Section 3(a) of the Natural Gas Act (available at 15 U.S.C. Section717(c)) to
Freeport LNG for Phase I.
"Freeport Benefit Plans" has the meaning set forth in Section 3.2(q)(i).
"Freeport Entities" means the General Partner and Freeport LNG.
"Freeport Financial Statements" means (a) the unaudited balance sheet of
the General Partner as of March 31, 2003 and as of September 30, 2003, (b) the
related statement of income of the General Partner for the three-month period
ended March 31, 2003 and for the six-month period ended September 30, 2003, (c)
the unaudited balance sheet of Freeport LNG as of March 31, 2003 and as of
September 30, 2003, and (d) the related statement of income of Freeport LNG for
the three-month period ended March 31, 2003 and for the six-month period ended
September 30, 2003.
"Freeport Indemnitees" has the meaning set forth in Section 6.1.
"Freeport LNG" has the meaning set forth in the preamble.
"Freeport Material Adverse Effect" with respect to a Freeport Person means
a material adverse effect on such Freeport Person's business, assets, condition
(financial or otherwise), results of operations or prospects except as may be
caused by general economic conditions or conditions of the LNG industry,
generally.
"Freeport Persons" means the Freeport Entities and Seller.
"Full Year Property Taxes" has the meaning set forth in Section 6.4(b)(i).
"GAAP" means generally accepted accounting principles in effect in the
United States from time to time.
"General Partner" has the meaning set forth in the preamble.
"Governmental Approval" means any permit, license, franchise, approval,
consent, waiver, certification, qualification or other authorization issued,
granted, given or otherwise made available by or under the authority of any
Governmental Entity or pursuant to any applicable Law.
"Governmental Entity" means any federal, tribal, state, local or foreign
government or any provincial, departmental or other political subdivision
thereof, or any entity, body or authority exercising executive, legislative,
judicial, regulatory, administrative or other governmental
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functions or any court, department, commission, board, bureau, agency,
instrumentality or administrative body of any of the foregoing.
"GP Stock" means the issued and outstanding common stock, par value $0.001,
of the General Partner.
"Hazardous Substances" means, collectively, any substance which is
identified and regulated (or the cleanup of which can be required), or exposure
to which is regulated, under any Environmental Law. Without limiting the
generality of the foregoing, Hazardous Substances shall include (a) "hazardous
wastes," "hazardous substances," "toxic substances," "pollutants," or
"contaminants" or other similar identified designations in, or otherwise subject
to regulation under, any Environmental Law, (b) asbestos and asbestos containing
materials and (c) petroleum, refined petroleum products and fractions or
byproducts thereof, in each case whether in their virgin, used or waste state.
"Income Tax" means any Tax in whole or in part based on or measured by net
or gross income, gains or profits, and any tax (including a franchise Tax)
imposed in lieu thereof or similar thereto, whether disputed or not, together
with any interest, penalties, additions to Tax or additional amounts with
respect thereto.
"Indemnified Person" has the meaning set forth in Section 6.5(a).
"Indemnifying Party" has the meaning set forth in Section 6.5(a).
"IRC" means the Internal Revenue Code of 1986, as amended, and regulations
issued by the IRS pursuant to the Internal Revenue Code.
"IRS" means the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of Treasury.
"Knowledge" means, with respect to any Person, (a) if such Person is an
individual, the actual knowledge of such Person, or (b) if such Person is other
than an individual, the actual knowledge of the officers, directors and other
senior management of such Person, in each case after reasonable investigation
and inquiry of any officers, directors and employees of such Person and its
Affiliates with supervisory responsibility over the matter in question or that
are likely to have information regarding such matter.
"Law" means any applicable statute, law, regulation, ordinance, rule,
judgment, rule of law, order, decree, permit, approval, concession, grant,
franchise, license, agreement, requirement or other governmental restriction or
any similar form of decision of, or any provision or condition of any permit,
license or other operating authorization issued under any of the foregoing by,
or any determination by any Governmental Entity having or asserting jurisdiction
over the matter or matters in question, whether now or hereafter in effect and
in each case as amended (including all of the terms and provisions of the common
law of such Governmental Entity), as interpreted and enforced at the time in
question.
"Lease" means the Ground Lease and Development Agreement dated December 12,
2002, between the Partnership and Brazos River Harbor Navigation District of
Brazoria County, Texas, as the same may be amended or modified from time to
time.
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"Liability" means any liability or obligation (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, whether incurred directly or
consequentially and whether due or to become due), including any Tax or other
liability arising out of applicable statutory, regulatory or common law, any
contractual obligation and any obligation arising out of tort.
"Lien" means, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, encumbrance, charge, claim or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset and
(c) in the case of securities or other equity interests, any agreement to sell,
preemptive right, subscription right, right of first refusal, warrant, "phantom"
stock rights, purchase option, call or other agreement or commitment (including
any stockholders agreement) or right of a third party with respect to such
securities or other equity interests or any other limitation on the ability to
transfer or to vote such securities or other equity interests.
"LNG" means liquefied natural gas.
"Loan" has the meaning set forth in the definition of Loan Term Sheet.
"Loan Documents" means the Loan Agreement between COP Lender and Freeport
LNG, and any agreements executed by COP Lender (or its agent) and Freeport LNG
as a condition precedent to the closing thereunder, containing the terms and
conditions set forth in the Loan Term Sheet and such other terms and conditions
as COP Lender and Freeport LNG may agree.
"Loan Term Sheet" means the Term Sheet attached hereto as Exhibit A, which
sets forth the terms and conditions of COP Lender's loans to Freeport LNG (the
"Loan").
"Losses" has the meaning set forth in Section 6.1.
"Nondisclosure Agreement" means the Nondisclosure Agreement by and between
Freeport LNG and COP dated November 15, 2002 as amended or modified from time to
time.
"Partnership Agreement" means the Amended and Restated Limited Partnership
Agreement of Freeport LNG, dated as of February 27, 2003, as amended or modified
from time to time.
"Partnership Amendment" means an amendment to the Partnership Agreement
among the General Partner and the limited partners of Freeport LNG in the form
attached hereto as Exhibit F.
"Partnership Leased Property" means any real property and interests in real
property leased by Freeport LNG.
"Partnership Owned Property" means any real property and interests in real
property owned in fee by Freeport LNG.
"Partnership Property" means any Partnership Owned Property and any
Partnership Leased Property.
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"Party" or "Parties" has the meaning set forth in the preamble.
"Peaking Gas" has the meaning set forth in the TUA.
"Permitted Liens" means all:
(a) Liens of materialmen, mechanics, repairmen, employees,
contractors, operators or other similar Liens arising in the ordinary course of
business incidental to construction, maintenance or operation of the applicable
property;
(b) Liens arising under original purchase price conditional sales
contracts and equipment leases with third parties entered into in the ordinary
course of business;
(c) Liens for Taxes or assessments not yet due or not yet delinquent
or, if delinquent, that are not material or are being contested in good faith in
the normal course of business for which adequate reserves have been established;
(d) Easements, servitudes, permits, surface leases and other rights
in respect of surface operations, pipelines, grazing, logging, canals, ditches,
reservoirs or the like; conditions, covenants or other restrictions; and
Easements for streets, alleys, highways, telephone lines, pipelines, railways
and other Easements, on, over or in respect of such property or Easement in each
case that individually, or in the aggregate, do not have a material adverse
effect on the ownership or use of such property or Easement for its intended
purpose;
(e) rights reserved to or vested in any Governmental Entity
authorized to control or regulate the applicable property in any manner, and all
Law; and
(f) other imperfections of title or encumbrances, if any, which do
not, individually or in the aggregate, materially impair the use of the assets
to which they relate as contemplated by the Transaction Documents.
"Person" means any individual, partnership, corporation, limited liability
company, association, joint stock company, trust, joint venture, unincorporated
organization or Governmental Entity.
"Phase I" means the construction and operation of the Facility, as
authorized in the FERC Approval and any subsequent amendments or supplements
thereto, so that upon completion thereof the Facility is intended to have the
ability to unload, store and revaporize LNG and redeliver regasified LNG at a
maximum gas redelivery rate of approximately 1.75 bcf/d including Peaking Gas.
"Pre-Closing Tax Period" shall mean any taxable period ending on or before
the Closing Date and the portion ending on the Closing Date of any Straddle
Period.
"Port" has the meaning set forth in Section 7.1(e).
"Property Tax" means any real, personal or intangible property Tax, whether
disputed or not, together with any interest, penalties, additions to Tax or
additional amounts with respect thereto.
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"Release" means any spill, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching, emanation or migration of any
Hazardous Substance in, into, onto, or through the environment (including
ambient air, surface water, ground water, soils, land surface, subsurface
strata, workplace or structure).
"Return" means any return, declaration, report, statement, claim for refund
or information return relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means Xxxxxxx X. Xxxxx.
"Services" has the meaning set forth in the TUA.
"Services Quantity" has the meaning set forth in the TUA.
"Services Quantity Increase Agreement" means the agreement to be executed
by COP LNG and Freeport LNG in the form attached hereto as Exhibit E.
"Stock Purchase Agreement" means the Stock Purchase Agreement, to be
executed between COP GP and Seller, which sets forth the terms of COP GP's
purchase from Seller of 50% of the GP Stock for a purchase price equal to $9
million, attached hereto as Exhibit C.
"Stockholders Agreement" means the Stockholders Agreement to be executed by
COP and Seller in the form attached hereto as Exhibit B.
"Straddle Period" shall mean a taxable period that includes, but does not
end on, the Closing Date.
"Study 1" has the meaning set forth in Section 7.1(b)(ii).
"Study 2" has the meaning set forth in Section 7.1(b)(ii).
"Tax" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Section 59A of the IRC),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar, including FICA), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, including any interest,
penalty or addition thereto.
"Third Party Claim" has the meaning set forth in Section 6.5(a).
"Title Notice" has the meaning set forth in Section 7.1(e).
"Transaction Documents" means this Agreement, the Loan Documents, the TUA,
the Stock Purchase Agreement, the Stockholders Agreement, the Services Quantity
Increase Agreement, the Partnership Agreement (as amended by the Partnership
Amendment) and all
-8-
other documents and instruments to be executed and delivered in connection with
the transactions contemplated thereby and by this Agreement.
"TUA" means the LNG Terminal Use Agreement to be executed by COP LNG and
Freeport LNG, in the form attached hereto as Exhibit D, which sets forth the
terms and conditions of COP LNG's purchase of Services from Freeport LNG
beginning on the Commercial Start Date.
"USCG" means the United States Coast Guard for the Port of Freeport.
ARTICLE 2
OBLIGATIONS
2.1 Obligations of COP, COP Lender and COP LNG.
(a) Loan. At the Closing, COP shall cause COP Lender to execute and
deliver the Loan Documents and thereafter from time to time fund the Loan in
accordance with, and subject to the terms and conditions of, the Loan Documents.
In lieu of the Loan, COP Lender shall be entitled to fund construction of Phase
I through third party financing; provided that the overall financing package
shall (i) have a similar or more favorable financial impact on Freeport LNG as
compared to the Loan, (ii) be subject to essentially the same terms and
conditions as the Loan, including any subordination provisions, and (iii) be
structured such that the *** in the XXX XXX or DOW TUA, as applicable, is not
triggered.
(b) Purchase of GP Stock and Execution of Stockholders Agreement. At
the Closing and in accordance with the Stock Purchase Agreement, COP GP shall
(i) execute, deliver and close the transactions contemplated by the Stock
Purchase Agreement, (ii) pay to Seller $9 million in cash for 50% of the GP
Stock and (iii) execute and deliver the Stockholders Agreement.
(c) Capacity Reservation Fee. Within three (3) Business Days after
Freeport LNG's delivery to COP of a front-end engineering and design study
(which shall not occur prior to January 5, 0000), XXX XXX shall pay to Freeport
LNG in cash the Capacity Reservation Fee. Freeport LNG shall have no obligation
to refund to COP LNG the Capacity Reservation Fee, including as a result of the
failure of Freeport LNG to obtain the FERC Approval or termination of this
Agreement for any reason.
(d) TUA. At the Closing, COP shall cause COP LNG to execute and
deliver the TUA.
(e) Increase in Services Quantity. At the Closing, COP LNG shall have
the right but not the obligation to execute and deliver the Services Quantity
Increase Agreement.
2.2 Obligations of Freeport LNG and the General Partner.
(a) Loan. At the Closing, Freeport LNG shall execute and deliver the
Loan Documents.
(b) [Intentionally Omitted].
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(c) Execution of Partnership Amendment. Simultaneously with the
execution of this Agreement, Freeport LNG and the General Partner shall cause
the general partner and limited partners of Freeport LNG to execute and deliver
the Partnership Amendment.
(d) Legal Opinion. Simultaneously with the execution and delivery of
this Agreement, Freeport LNG and the General Partner shall cause to be delivered
to COP a legal opinion of Xxxxxxxxxx Hyatt & Xxxxxx, P.C., which opinion shall
be limited generally to the formation, good standing, power and authority of
Freeport LNG and the General Partner, and such entities' execution of, and
performance under, this Agreement.
(e) Sale of GP Stock and Execution of Stockholders Agreement. At the
Closing and in accordance with the Stock Purchase Agreement, the General Partner
shall, and shall cause Seller to (i) execute, deliver and close the transactions
contemplated by the Stock Purchase Agreement, and (ii) execute and deliver the
Stockholders Agreement.
(f) TUA. At the Closing, Freeport LNG shall execute and deliver the
TUA.
(g) Increase in Service Quantity. At the Closing, if COP LNG has
executed and delivered the Services Quantity Increase Agreement, Freeport LNG
shall execute and deliver the Services Quantity Increase Agreement.
(h) Pre-FERC Approval Accrued Expenses. Before or at the Closing,
Freeport LNG shall pay and/or otherwise fully satisfy all expenses accrued and
indebtedness incurred for any reason prior to and through the date of initial
FERC Approval. Such payment and/or satisfaction shall not be made with funds
from the Loan, and shall be made from funds contributed by the partners of
Freeport LNG or otherwise paid to Freeport LNG. Freeport LNG shall be entitled
to a reimbursement from the proceeds of the Loan or an offset against the
payment obligation contained in this Section 2.2(h) equal to any prepaid
expenses paid by Freeport LNG and relating to the period after initial FERC
Approval. COP acknowledges and agrees that in the event Freeport LNG ***, prior
to the date of initial FERC Approval or thereafter, all costs, expenses and fees
associated with such *** shall be prepaid expenses payable or reimbursable from
the proceeds of the Loan. Notwithstanding the foregoing, Freeport LNG shall be
not be required to pay or otherwise satisfy the loan payable to DOW from
Freeport LNG Investments, LLLP (f/k/a Freeport Investments, LLC) made in
connection with the XXX XXX, and such loan shall be paid in accordance with the
terms thereof.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of COP. In order to induce Freeport LNG
and the General Partner to enter into and perform the Transaction Documents and
to consummate the transactions contemplated thereby, COP hereby represents and
warrants to Freeport LNG and the General Partner as follows:
(a) Organization and Qualification. COP is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and is qualified to do business in those jurisdictions where the
nature of its activities or property requires such qualification.
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(b) Authority and Validity. COP has the requisite power and authority
to execute and deliver, to perform its obligations under, and to consummate the
transactions contemplated by, the Transaction Documents to which it is a party.
No approval of COP's stockholders is required for consummation of the
transactions contemplated by the Transaction Documents. The execution and
delivery by COP of, the performance by COP of its obligations under, and the
consummation by COP of the transactions contemplated by, the Transaction
Documents to which it is a party have been duly authorized by the requisite
corporate action on its part. This Agreement is and, when executed and delivered
by COP, the other Transaction Documents to which COP is a party will be, the
valid and binding obligation of COP, enforceable against COP in accordance with
its and their respective terms, except insofar as enforceability may be affected
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by principles governing the
availability of equitable remedies.
(c) Noncontravention. The execution, delivery and performance by COP
of the Transaction Documents to which it is a party do not and will not (i)
conflict with or violate any provision of its certificate of incorporation or
by-laws, (ii) require any consent, approval or authorization of, or any filing
with or notice to, any Person, (iii) result in any violation of or breach or
default under any contract or agreement to which COP is a party or by which it
is bound, (iv) violate any Law to which COP is subject, or (iv) violate,
conflict with or result in a default, right to accelerate or loss of rights
under any order, judgment or decree to which COP is a party or by which it is
bound or affected.
(d) Finders and Brokers. Neither COP nor any of its Affiliates has
incurred any Liability to any financial advisor, broker or finder for any
financial advisory, brokerage, finder's or similar fee or commission in
connection with the transactions contemplated by the Transaction Documents for
which Freeport LNG or any of its Affiliates could be liable.
(e) Litigation. There are no Actions pending or, to the Knowledge of
COP, threatened against COP that have questioned or could reasonably be expected
to question the validity of any Transaction Document or enjoin or prohibit any
action taken or to be taken pursuant to or in connection with any of the
provisions of the Transaction Documents.
3.2 Representations and Warranties of Freeport LNG. In order to induce the
COP Participants to enter into and perform the Transaction Documents and to
consummate the transactions contemplated thereby, Freeport LNG hereby represents
and warrants to the COP Participants as follows:
(a) Organization and Qualification. Freeport LNG is a limited
partnership duly formed, validly existing and in good standing under the laws of
its state of formation and is qualified to do business in those jurisdictions
where the nature of its activities or property requires such qualification.
(b) Authority and Validity. Freeport LNG has all requisite
partnership power and authority to execute and deliver, to perform its
obligations under, and to consummate the transactions contemplated by, the
Transaction Documents to which it is a party. No approval of Freeport LNG's
general partners or limited partners (other than approvals that have been
obtained and are in full force and effect) is required for consummation of the
transactions contemplated by the Transaction Documents. The execution and
delivery by Freeport LNG of, the performance by Freeport LNG of its obligations
under, and the consummation by Freeport
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LNG of the transactions contemplated by, the Transaction Documents to which it
is a party have been duly authorized by the requisite partnership action on its
part. This Agreement is and, when executed and delivered by Freeport LNG, the
other Transaction Documents to which it is a party will be, the valid and
binding obligation of Freeport LNG, enforceable against Freeport LNG in
accordance with its and their respective terms, except insofar as enforceability
may be affected by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally or by principles governing
the availability of equitable remedies.
(c) Noncontravention. The execution, delivery and performance by
Freeport LNG of the Transaction Documents to which it is a party do not and will
not (i) conflict with or violate any provision of the Partnership Agreement,
(ii) except for the execution and delivery of the Partnership Amendment, require
any consent, approval or authorization of, or any filing with or notice to, any
Person, (iii) result in any violation of or breach or default under any contract
or agreement to which Freeport LNG is a party or by which it is bound, (iv)
violate any Law to which Freeport LNG is subject, or (v) violate, conflict with
or result in a default, right to accelerate or loss of rights under any order,
judgment or decree to which Freeport LNG is a party or by which it is bound or
affected.
(d) No Consents. No Governmental Approval of, or registration,
declaration or filing with, any Governmental Entity, or the consent or approval
of any other Person, is required to be obtained or made by or with respect to
any Freeport Entity or any of its Affiliates in connection with (a) the
execution, delivery and performance of the Transaction Documents or the
consummation of the transactions contemplated thereby or (b) the conduct of the
business of the Freeport Entities following the Closing as conducted on the
Effective Date; except to the extent failure to obtain such Governmental
Approval could not reasonably be expected to have a Freeport Material Adverse
Effect, and except those Governmental Approvals that have not been obtained, but
will be obtained by the time such Governmental Approvals are required for the
construction of the Facility and for which Freeport LNG has no reason to believe
that any such Governmental Approvals will not be obtained in due course prior to
the time required.
(e) Finders and Brokers. Neither Freeport LNG nor any of its
Affiliates has incurred any liability to any financial advisor, broker or finder
for any financial advisory, brokerage, finder's or similar fee or commission in
connection with the transactions contemplated by the Transaction Documents for
which COP or any of its Affiliates could be liable.
(f) Litigation. There are no Actions pending or, to the Knowledge of
Freeport LNG, threatened against Freeport LNG that have questioned or could
reasonably be expected to question the validity of this Agreement or enjoin or
prohibit any action taken or to be taken pursuant to or in connection with any
of the provisions of the Transaction Documents. There are no Claims pending, or
to the Knowledge of each Freeport Entity, threatened against any Freeport
Entity. Neither Freeport Entity is a party or subject to or in default under any
judgment, order, injunction or decree of any Governmental Entity or arbitration
tribunal applicable to it or any of its properties, assets, operations or
business. There is no pending, or, to the Knowledge of each Freeport Entity,
threatened, investigation of or affecting either Freeport Entity by any
Governmental Entity. This Section 3.2(f) does not relate to matters concerning
Taxes, such items being the subject of Section 3.2(m).
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(g) Absence of Undisclosed Liabilities. Neither Freeport Entity has
any Liabilities that are of a nature required under GAAP to be disclosed,
reflected or reserved against on the applicable Freeport Financial Statements
except (a) Liabilities disclosed, reflected or reserved against on the
applicable Freeport Financial Statements or (b) Liabilities arising in the
ordinary course of business or as contemplated by the Transaction Documents.
(h) Absence of Changes or Events. Since September 30, 2003, there has
not been any action, event or occurrence that has had or would reasonably be
expected to have a Freeport Material Adverse Effect, except for circumstances or
events that have affected the LNG industry generally. Since September 30, 2003,
the business of each Freeport Entity has been conducted in the ordinary course
and in substantially the same manner as previously conducted, and no Freeport
Person has taken any action that, if taken after the date of this Agreement,
would constitute a breach of any of the covenants of Freeport LNG or the General
Partner set forth in Sections 4.2 and 4.3, other than those arising in the
ordinary course of business or as contemplated by the Transaction Documents.
(i) Contracts. No Freeport Entity has entered into any agreement,
contract or commitment which (i) would prohibit such party's execution of the
Transaction Documents or performance thereunder, or (ii) was not entered into in
the ordinary course of business or as contemplated by the Transaction Documents.
No Freeport Entity has entered into any employment contract or agreement other
than the four employment agreements previously provided to COP by Freeport LNG.
(j) Real Property. Freeport LNG has (a) good and insurable fee title
to all Partnership Owned Property and (b) good and valid title to the leasehold
estates in all Partnership Leased Property, in each case free and clear of all
Liens, leases, assignments, subleases, Easements, covenants and other similar
restrictions of any nature whatsoever, except (i) such as could not reasonably
be expected to have a Freeport Material Adverse Effect, (ii) Permitted Liens,
(iii) all land use (including environmental and wetlands) zoning, building and
other similar restrictions.
(k) Assets Other than Real Property. The Freeport Entities, as the
case may be, have good and valid title to all of the assets reflected on the
balance sheets included in the Freeport Financial Statements or that were
acquired after September 30, 2003, except those assets sold or otherwise
disposed of for fair value since September 30, 2003 in the ordinary course of
business consistent with past practice and not in violation of this Agreement.
(l) Insurance. The Freeport Entities maintain policies of fire and
casualty, liability, business interruption and other forms of insurance in such
amounts, with such deductibles and against such risks and losses as are
reasonable for the business and assets of the Freeport Entities as conducted or
owned on the Effective Date. All such policies are in full force and effect, all
premiums due and payable thereon have been paid (other than retroactive or
retrospective premium adjustments that are not yet, but may be, required to be
paid with respect to any period ending on or prior to the Closing Date under
comprehensive general liability and workmen's compensation insurance policies),
and no notice of cancellation or termination has been received with respect to
any such policy which has not been replaced on substantially similar terms prior
to the date of such cancellation. To the Knowledge of each Freeport Person, the
activities and operations of each Freeport Entity have been conducted in a
manner so as to conform in all material respects to all applicable provisions of
such insurance policies.
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(m) Taxes.
(i) All Returns required to be filed by either Freeport
Entity or with respect to any Tax for which either Freeport Entity is liable or
that relates to the business of either Freeport Entity have been duly and timely
filed in a proper manner with the appropriate Governmental Entity, each such
Return is true, correct and complete in all material respects, each Tax shown to
be payable on each such Return has been timely paid in full, each Tax payable by
or with respect to either Freeport Entity (or Seller, as a result of owning an
interest in the General Partner) by assessment has been timely paid in the
amount assessed and adequate reserves have been established on the books of the
General Partner or Freeport LNG, as the case may be, for all Taxes for which the
General Partner or Freeport LNG, as the case may be, is liable or that relate to
the business of either Freeport Entity, but the payment of which is not yet due.
Neither Freeport Entity is, and never has been, liable for any Tax payable by
reason of the income or property of a Person other than a Freeport Entity. The
General Partner or Freeport LNG, as applicable, has timely filed true, correct
and complete declarations of estimated Tax with respect to each Freeport Entity
and/or the business of each Freeport Entity in each jurisdiction in which any
such declaration is required to be filed by it. No Liens for Taxes exist upon
the property or other assets of either Freeport Entity, except liens for Taxes
which are not yet due. Neither Freeport Entity (nor Seller, as a result of
owning an interest in the General Partner) is, and never has been, subject to
Tax in any jurisdiction outside of the United States. No claim has ever been
made by any Governmental Entity in any jurisdiction where neither Freeport
Entity (nor Seller on their behalf) files Tax returns that either Freeport
Entity is or may be subject to taxation in that jurisdiction.
(ii) No litigation with respect to any Tax for which either
Freeport Entity is asserted to be liable (or is asserted to relate to the
business of either Freeport Entity) is pending or, to the Knowledge of either
Freeport Entity, threatened and there is no basis on which any material
deficiency in Tax can be asserted against either Freeport Entity, insofar as
such deficiency relates to either Freeport Entity or the business of either
Freeport Entity. No requests for rulings or determinations in respect of any
Taxes are pending between either Freeport Entity and any Governmental Entity. No
extension of any period during which any Tax may be assessed or collected and
for which either Freeport Entity is or may be liable has been granted to any
Governmental Entity. No audit or similar proceeding with respect to any Tax for
which either Freeport Entity is or may be liable is pending or, to the Knowledge
of each Freeport Entity, threatened. Neither Freeport Entity has executed any
closing agreement pursuant to IRC Section 7121 (or any predecessor provision) or
any similar provision of state or local law with respect to itself or Freeport
LNG.
(iii) Neither Freeport Entity is, nor has been, a party to any
tax allocation or sharing agreement. All amounts required to be withheld by
either Freeport Entity or with respect to the business of either Freeport Entity
and paid to Governmental Entities for income, social security, unemployment
insurance, sales, excise, use and other Taxes (including in respect of any
employees, directors and non-resident Persons) have been collected or withheld
and paid to the proper Governmental Entity. The General Partner or Freeport LNG
have made all deposits required by applicable Law to be made with respect to
employees' withholding and other employment Taxes relating to employees of
either Freeport Entity or the business of the either Freeport Entity.
(iv) Freeport LNG has been, at all times from its formation,
and will be, at all times through the Closing, classified as a partnership for
federal Income Tax purposes.
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The General Partner has been, at all times from its organization, and will be,
classified as a corporation as defined in Treasury Regulation 301.7701-2(b)(1).
The General Partner is the "tax matters partner" of Freeport LNG within the
meaning of Section 6231 of the IRC and the regulations thereunder for all
federal Income Tax periods of the General Partner ending on or before the
Closing Date.
(n) Licenses; Permits. To the Knowledge of each Freeport Person,
except for FERC Approval, each Freeport Entity shall be able to timely obtain
all Governmental Approvals necessary for the ownership, operation or leasing of
the Partnership Property and the General Partner's and Freeport LNG's personal
property and that are necessary or useful for the conduct of the business of the
Freeport Entities, except where the failure to have such Governmental Approvals
would not have a Freeport Material Adverse Effect. To the Knowledge of each
Freeport Person, the transactions contemplated hereby shall not adversely affect
Freeport LNG's rights under any such Governmental Approvals.
(o) Compliance with Laws. To the Knowledge of each Freeport Entity,
each Freeport Entity is in material compliance with all Laws, including those
relating to occupational health and safety. No Freeport Entity has received any
written communication since its formation that has not been satisfactorily
resolved from a Governmental Entity that alleges that either Freeport Entity is
not in compliance in any material respect with any Laws, and no Freeport Entity
has Knowledge of any investigation or review pending or threatened by any
Governmental Entity relating to any alleged violation. This Section 3.2(o) does
not relate to matters with respect to Taxes or to environmental matters, which
are the subject of Section 3.2(m) and Section 3.2(p), respectively.
(p) Environmental Matters. To the Knowledge of each Freeport Person,
except as would not have a Freeport Material Adverse Effect, each Freeport
Entity is in compliance with all Environmental Laws.
(q) Benefit Plans.
(i) Neither Freeport Entity has any "employee pension benefit
plans" (as defined in Section 3(2) of ERISA) (sometimes referred to herein as
"Company Pension Plans"), "employee welfare benefit plans" (as defined in
Section 3(1) of ERISA), stock option, stock purchase, deferred compensation
plans or arrangements or other benefit plans maintained, or contributed to, by
any Freeport Person for the benefit of any employees of either Freeport Entity
(all the foregoing being herein referred to as "Freeport Benefit Plans").
(ii) Each Freeport Entity is in compliance in all material
respects with the applicable provisions of ERISA and the IRC.
(iii) At no time since the inception of Freeport LNG has any
Freeport Person been required to contribute to any "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) for the benefit of any employees of
either Freeport Entity or incurred any withdrawal liability, within the meaning
of Section 4201 of ERISA, with respect to any such multiemployer plan, which
liability has not been fully paid as of the date hereof, or announced an
intention to withdraw, but not yet completed such withdrawal, from any such
multiemployer plan.
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(iv) No employee or former employee of either Freeport Entity
will become entitled to receive from COP any bonus, retirement, severance, job
security or similar benefit or any enhanced benefit as a result of the
transactions contemplated hereby; provided, however, that Freeport LNG shall be
entitled to pay any bonus set forth in or permitted by the four employment
agreements of Freeport LNG previously provided to COP.
(v) No plan, program or arrangement maintained by any Freeport
Person provides for post-retirement medical benefits, post-retirement death
benefits or other post-retirement welfare benefits, except to the extent of the
continuation coverage rules as provided under the provisions of Section 4980B of
the IRC and Sections 601 through 608 of ERISA.
(r) Regulatory Authority. Neither Freeport Entity is regulated as a
pipeline company by the State of Texas. Neither Freeport Entity is subject to
regulation as (i) a "holding company," an "affiliate" of a "holding company" or
a "subsidiary company" of a "holding company" or a "public utility," as each of
such terms is defined in the Public Utility Holding Company Act of 1935, as
amended, and the rules and regulations thereunder or (ii) an "investment
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
(s) Certain Transactions. Neither Freeport Entity is a surety,
guarantor or indemnitor of any indebtedness or other obligation of any other
Person.
(t) Improper Payments. To the Knowledge of each Freeport Person, no
employee or agent of either Freeport Entity has made any payment of funds or
received or retained any funds in either case in violation of any Law.
(u) Absence of Bankruptcy Proceedings. There are no bankruptcy,
reorganization or arrangement proceedings pending against, being contemplated
by, or to the Knowledge of each Freeport Entity, threatened against, any
Freeport Entity.
(v) Patents. The Partnership has a perpetual, non-exclusive and
royalty-free license to utilize U.S. Patent Number 6,644,041 B1 in connection
with the Facility.
(w) Securities. Except for the general and limited partnership
interests set forth in the Partnership Agreement, there are no other equity
securities or interests of Freeport LNG or any securities or interests in
Freeport LNG reserved for issuance. All of the general and limited partnership
interests in Freeport LNG were issued in compliance with all applicable federal
and state securities laws. Freeport LNG does not directly or indirectly own any
capital stock of, or other equity interests in, any corporation, partnership,
limited liability company or other Person, and Freeport LNG is not a member of,
or a participant in, any limited liability company, partnership, joint venture,
strategic alliance or any other Person, association or business arrangement, and
Freeport LNG has not entered into any agreement or commitment to do any of the
foregoing.
(x) Disclosure. No representation or warranty of Freeport LNG
contained in this Agreement or any other Transaction Document, and no statement
contained in any letter, certificate or other document signed by or on behalf of
Freeport LNG or the General Partner and addressed or directed to any of the COP
Participants or any of their representatives pursuant to any Transaction
Document or in connection with the subject matter of any Transaction
-16-
Document, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements contained herein and therein not misleading or necessary in order to
fully and fairly provide the information required to be provided in any such
Transaction Document, letter, certificate or other document.
(y) Updated Information. Freeport LNG may, from time to time prior to
the Closing, update the representations and warranties contained in Sections
3.2(f), (g), (h), (i), (j), (k), or (l) to reflect changes arising in the
ordinary course of business; if such changes in the aggregate could not
reasonably be expected to result in a Freeport Material Adverse Effect, such
updated information shall automatically amend the representations and warranties
contained herein as of the date hereof; provided that such updated information
shall not amend the representations and warranties if the action giving rise to
such disclosure constitutes a breach of Section 4.2(c).
3.3 Representations and Warranties of the General Partner. In order to
induce the COP Participants to enter into and perform the Transaction Documents
and to consummate the transactions contemplated thereby, the General Partner
hereby represents and warrants to the COP Participants as follows:
(a) Organization and Qualification. The General Partner is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation and is qualified to do business in those
jurisdictions where the nature of its activities or property requires such
qualification.
(b) Authority and Validity. The General Partner has the requisite
power and authority to execute and deliver, to perform its obligations under,
and to consummate the transactions contemplated by, the Transaction Documents to
which it is a party. The General Partner's sole stockholder has approved the
transactions contemplated by the Transaction Documents. The execution and
delivery by the General Partner of, the performance by the General Partner of
its obligations under, and the consummation by the General Partner of the
transactions contemplated by, the Transaction Documents to which it is a party
have been duly authorized by the requisite corporate action on its part. This
Agreement is and, when executed and delivered by the General Partner, the other
Transaction Documents to which it is a party will be, the valid and binding
obligations of the General Partner, enforceable against the General Partner in
accordance with its and their respective terms, except insofar as enforceability
may be affected by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally or by principles governing
the availability of equitable remedies.
(c) Noncontravention. The execution, delivery and performance by the
General Partner of the Transaction Documents to which it is a party do not and
will not (i) conflict with or violate any provision of its certificate of
incorporation or by-laws, (ii) require any consent, approval or authorization
of, or any filing with or notice to, any Person, (iii) result in any violation
of or breach or default under any contract or agreement to which the General
Partner is a party or by which it is bound, (iv) violate any Law to which the
General Partner is subject, or (v) violate, conflict with or result in a
default, right to accelerate or loss of rights under any order, judgment or
decree to which the General Partner is a party or by which it is bound or
affected.
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(d) Finders and Brokers. Neither the General Partner nor any of its
Affiliates has incurred any Liability to any financial advisor, broker or finder
for any financial advisory, brokerage, finder's or similar fee or commission in
connection with the transactions contemplated by the Transaction Documents for
which COP or any of its Affiliates could be liable.
(e) Litigation. There are no Actions pending or, to the Knowledge of
the General Partner, threatened against the General Partner that have questioned
or could reasonably be expected to question the validity of any Transaction
Document or enjoin or prohibit any action taken or to be taken pursuant to or in
connection with any of the provisions of the Transaction Documents.
(f) Disclosure. No representation or warranty of the General Partner
contained in this Agreement or any other Transaction Document, and no statement
contained in any letter, certificate or other document signed by or on behalf of
the General Partner and addressed or directed to any of the COP Participants or
any of their representatives pursuant to any Transaction Document or in
connection with the subject matter of any Transaction Document, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements contained herein and therein not
misleading or necessary in order to fully and fairly provide the information
required to be provided in any such Transaction Document, letter, certificate or
other document.
(g) Updated Information. The General Partner may, from time to time
prior to the Closing, update the representations and warranties contained in
Section 3.3(e) to reflect changes arising in the ordinary course of business; if
such changes in the aggregate could not reasonably be expected to result in a
Freeport Material Adverse Effect, such updated information shall automatically
amend the representations and warranties contained herein as of the date hereof;
provided that such updated information shall not amend the representations and
warranties if the action giving rise to such disclosure constitutes a breach of
Section 4.2(c).
ARTICLE 4
COVENANTS
4.1 Covenant of COP. COP will use commercially reasonable efforts to
assist Freeport LNG and the General Partner in obtaining the FERC Approval.
4.2 Covenants of Freeport LNG and the General Partner.
(a) Access to Information. Subject to any non-disclosure agreement to
which Freeport LNG or the General Partner is a party, from the date hereof
through the Closing Date, Freeport LNG and the General Partner shall, and shall
cause their officers, directors, employees and agents to, afford the officers,
employees, agents, representatives and advisors of the COP Participants
reasonable access at all reasonable times during normal business hours to (i)
Freeport LNG's officers, employees, agents, properties, books, records and
contracts related to the Facility and the business and operations of Freeport
LNG, and shall furnish the COP Participants all financial, operating and other
data and information as any COP Participant may reasonably request with respect
to the Facility and the business and operations of Freeport LNG, and (ii)
Freeport LNG's properties and facilities (including the Facility Site) for
purposes of
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conducting the environmental investigation contemplated by Exhibit G which is
hereby incorporated by reference. Notwithstanding the foregoing, in no event
will any COP Participant be given access to or copies of any data, information,
records or drafts relating to or in connection with any negotiation, agreement
or communication with another customer or potential customer of the Facility,
except for final, completed, executed and delivered terminal use agreements with
a customer. To the extent that any non-disclosure agreement limits the
obligations of Freeport LNG or the General Partner under this Section 4.2(a),
Freeport LNG and the General Partner shall use commercially reasonable efforts
to remove the limitations of such non-disclosure agreement, including by
requesting consent from the counterparty thereto for disclosures to the COP
Participants.
(b) Advisory Board. From and after the Effective Date until the
earlier of the Closing Date or termination of this Agreement, the General
Partner shall create an advisory board comprised of six advisors, with three
appointed by Freeport LNG and three appointed by COP. Such advisory board shall
be consulted on (i) the form and negotiation of the Lump Sum Turnkey Agreement
for the Engineering, Procurement and Construction of the Facility proposed to be
entered in between Freeport LNG and Technip USA Corporation or a similarly
qualified and experienced contractor (the "EPC Contract"), as well as any other
agreements relating to the engineering, design or construction of Phase I, (ii)
other than any terminal use agreement with another customer or potential
customer of the Facility, the form and negotiation or all other significant
contracts and agreements relating to Phase I, (iii) the applications for and
efforts to obtain the FERC Approval and all other permits, licenses and
approvals required from any Governmental Entity in connection with Phase I, (iv)
all matters associated with stakeholder relations, and (v) all matters relating
to the standards, policies and guidelines with respect to health and safety,
engineering, design, operations and environmental matters. In addition, COP
shall have the right to second an employee to act as construction manager for
Freeport LNG (including the matters described in clauses (i) and (v) of this
Section 4.2(b)) and another employee to assist with the matters described in
clauses (ii), (iii) and (iv) of this Section 4.2(b), in each case until the
earlier of the Closing Date or termination of this Agreement; provided that (x)
such employees shall be under the direction and control of the General Partner
and its officers, (y) such secondment shall be at no cost to Freeport LNG, and
(z) subject to Section 4.2(a), such employees shall be restricted from sharing
with COP or any of its Affiliates any data, information, records or drafts as to
which the COP Participants are not to be given access pursuant to Section
4.2(a).
(c) Conduct of Business. Subject to the terms of Section 4.2(b), from
the Effective Date through the Closing Date, Freeport LNG and the General
Partner will continue to conduct their business operations consistent with
prudent business practices and otherwise in the ordinary course, including
seeking to obtain, as soon as practicable, the FERC Approval and completion of
the negotiation of the DOW TUA. Without limiting the foregoing, Freeport LNG
shall not, and the General Partner shall cause Freeport LNG not to, take any of
the following actions without COP's prior written approval (except to the extent
that, if the Stockholders Agreement were in effect, such action could be taken
solely by the MS Directors (as defined in the Stockholders Agreement), but in
such event the Freeport Entities shall consult with COP before taking such
action or causing or allowing either Freeport Entity to take such action):
(i) execute or deliver the EPC Contract;
(ii) amend, modify, terminate or waive any of its rights under
the EPC Contract;
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(iii) withdraw, amend, consent to or acquiesce in any
termination or material amendment of, or any other adverse action in respect of,
the application for the FERC Approval or the FERC Approval, except such
amendment as may be necessary to avoid termination of this Agreement under
Section 7.1(b)(iii);
(iv) amend its Certificate of Incorporation or Bylaws or the
Partnership Agreement, or cause its liquidation or dissolution, or fail to
preserve its existence;
(v) adopt or enter into any Freeport Benefit Plan or
collective bargaining agreement or employment agreement;
(vi) grant to any manager, executive officer or employee any
increase in compensation or benefits, except in the ordinary course of business
consistent with past practice or as may be required under existing agreements
that have been provided to COP;
(vii) incur or assume any liabilities, obligations or
indebtedness for borrowed money or guarantee any such liabilities, obligations
or indebtedness;
(viii) permit, allow or suffer any of its assets to become
subjected to any Lien, Easement, covenant or other similar restriction of any
nature except in the ordinary course of business or as contemplated by the
Transaction Documents;
(ix) waive any claims or rights of material value;
(x) modify, amend, terminate or waive any rights under any
agreement or contract or arrangement that is material to the business of either
Freeport Entity;
(xi) make or rescind any express or deemed election relating to
Taxes if such action would create a material additional Liability for either
Freeport Entity or COP or its Affiliates in respect of any period beginning
after the Closing Date;
(xii) enter into any swap, futures or derivatives transaction;
(xiii) take any other action that would require the approval of
the board of directors of the General Partner pursuant to Section 3(a)(iv) of
the Stockholders Agreement if the Stockholders Agreement were in effect; or
(xiv) agree, whether in writing or otherwise, to do any of the
foregoing.
(d) Exclusivity. Neither Freeport LNG nor the General Partner shall
continue, engage in, solicit, initiate or encourage the sale of capacity in the
Facility that COP LNG would be required to purchase according to the terms of
the form of TUA attached hereto as Exhibit D.
4.3 Joint Covenants.
(a) General. Each of the Parties will use commercially reasonable
efforts to take such actions and to do all other things necessary, proper or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction of the closing conditions
set forth in Article 5). Without limiting Freeport LNG's and
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the General Partner's obligations under the preceding sentence, Freeport LNG and
the General Partner shall continue to use diligent efforts to obtain the FERC
Approval and, if the FERC Approval as initially issued does not meet the
requirements of Section 7.1(b)(iii) or 7.1(c)(ii) to amend or modify the FERC
Approval so that it meets such requirements.
(b) Confidentiality. The Non-Disclosure Agreement dated as of
November 15, 2002 between the Parties and/or their Affiliates shall
automatically terminate and be of no further force and effect on the Closing
Date. None of the Parties will issue any press release or make any other public
announcement regarding the Transaction Documents or any of the transactions
contemplated thereby without the consent of the other Parties. Each Party will
hold, and will cause its employees, consultants, advisors and agents to hold, in
confidence the terms of the Transaction Documents and any non-public information
concerning any other Party obtained pursuant to the Transaction Documents or in
connection with the negotiation thereof. Notwithstanding the preceding
provisions, a Party (which, for purposes of this Section 4.3(b) shall include
the partners of Freeport LNG) may disclose such information to the extent
required by any applicable Law (including disclosure requirements under federal
and state securities laws and disclosure required in connection with any
judicial or administrative proceeding of any Governmental Entity), but, except
as permitted below, the Party proposing to disclose such information will first
notify and consult with the other Parties concerning the proposed disclosure, to
the extent reasonably feasible. The Parties acknowledge that the parent company
of COP and certain partners of Freeport LNG are "public companies" subject to
the disclosure requirements contained in the Securities Act and the Securities
Exchange Act of 1934 as well as the requirements of any exchange on which such
Person's securities are traded. Notwithstanding any other provision of this
Agreement, COP and its Affiliates and such partners of Freeport LNG may disclose
to their respective shareholders and the public such information as such Persons
reasonably determine is necessary or appropriate to comply with their respective
legal obligations or requirements, including their respective disclosure
obligations. Each Party also may disclose such information to employees,
consultants, advisors, agents and lenders or potential lenders whose knowledge
is necessary to facilitate the consummation of the transactions contemplated by
the Transaction Documents. Each Party's obligation to hold information in
confidence will be satisfied if it exercises the same care with respect to such
information as it would exercise to preserve the confidentiality of its own
similar information. Notwithstanding the foregoing, Freeport LNG shall be free
to share with any customer or prospective customer of the Facility, so long as
such Person shall have executed a nondisclosure agreement substantially in the
form then used in the ordinary course of business by Freeport LNG, copies of the
Stockholders Agreement, redacted as mutually agreed, and those portions of the
TUA dealing with shipping, scheduling and operations.
(c) Notification of Certain Matters. Between the Effective Date and
the Closing Date, each Party will promptly notify the other Parties of any fact,
event, circumstance or action known to the first Party the existence or
occurrence of which would cause any of such Party's representations or
warranties under this Agreement not to be materially correct and complete.
(d) Alternative Transaction Structure. Upon the request of any Party,
the Parties shall, and shall cause their Affiliates to, work together in good
faith to reach mutual agreement on an alternative structure for the transactions
contemplated by the Transaction Documents, which alternative structure would
provide for a *** and a *** for all the remaining capacity of the Facility
(subject to the COP TUA). Without limiting the generality of the foregoing, the
Parties will in good faith explore and discuss with one another whether it is in
the
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best interest of Freeport LNG to enter into any such *** or any other agreement
with COP or one of its Affiliates, whereby COP or one of its Affiliates will
provide to Freeport LNG (i) advisory services regarding the construction of
Phase I and/or (ii) maintenance and operation services for the Facility. If the
Parties determine one or both agreements are in the best interest of Freeport
LNG, the Parties will work with one another in good faith to cause the
applicable Persons to draft, negotiate and enter into such agreements on a
timely basis.
ARTICLE 5
CLOSING AND CONDITIONS TO CLOSING
5.1 The Closing. The execution and delivery of the Transaction Documents
(except for the Stock Purchase Agreement, which is executed and delivered
contemporaneously with the execution and delivery of this Agreement), the
closing and initial funding of the Loan and the closing of the sale and purchase
of 50% of the GP Stock (the "Closing") shall take place at the offices of King &
Spalding LLP, 0000 Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, XX, within ten Business Days
after the date of issuance of the FERC Approval (or, if the FERC Approval as
originally issued does not meet the requirements of Section 7.1(b)(iii) and
7.1(c)(ii), such later date as the FERC Approval is modified so that it meets
such requirements) or such other time and place as the Parties may mutually
agree in writing (the applicable date on which the Closing will occur is
referred to herein as the "Closing Date").
5.2 COP's, COP Lender's and COP LNG's Conditions to Closing. The
obligation of each of COP, COP Lender and COP LNG to consummate the transactions
contemplated to be performed by it at the Closing is subject to satisfaction of
the following conditions:
(a) Representations and Warranties. The representations and
warranties set forth in Sections 3.2 and 3.3 qualified as to materiality shall
be true and correct, and those not so qualified shall be true and correct in all
material respects, in each case when made and as of the Closing Date; provided
that in the event that any representation and warranty is not true and correct
as of the Closing as a result of any action approved by COP under Section
4.2(c), such representation and warranty shall be deemed to be true and correct
as of the Closing.
(b) No Breach. Neither Freeport LNG nor the General Partner shall be
in breach of or default under any of its respective covenants or obligations
under any of the Transaction Documents, and no party to the Partnership
Agreement shall be in breach of or default under any of its respective covenants
or obligations under the Partnership Agreement, as amended by the Partnership
Amendment, and no event shall have occurred which, with the giving of notice or
the passage of time or both, would become such a breach or default.
(c) Absence of Litigation. No injunction, judgment, order, decree, or
ruling shall be in effect that would (i) prevent, prohibit or make illegal the
consummation by COP, COP Lender or COP LNG of any aspect of the transactions
contemplated by the Transaction Documents or (ii) cause any of the transactions
contemplated by the Transaction Documents to be rescinded or ineffective in any
material respect following consummation.
(d) Transaction Documents. Each of Freeport LNG and the General
Partner shall have executed (or caused to be executed) and delivered to COP, COP
Lender and COP LNG each of the Transaction Documents to be executed and
delivered by Freeport LNG or the General Partner as set forth in Section 2.2,
and each such Transaction Document shall be in full
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force and effect and not subject to termination at such time as a result of any
state of facts existing at such time.
(e) Stock Purchase Agreement. Seller shall have executed the Stock
Purchase Agreement and delivered to COP GP the certificate representing 50% of
the GP Stock in accordance with the Stock Purchase Agreement duly endorsed for
transfer to COP GP or accompanied by a duly executed stock power effecting such
transfer, and shall have taken all other actions and executed all documents as
required under the Stock Purchase Agreement.
(f) Stockholders Agreement. Seller shall have executed and delivered
to COP GP the Stockholders Agreement and the Stockholders Agreement shall be in
full force and effect and not subject to termination at such time as a result of
any state of facts existing at such time.
(g) Partnership Agreement. The Partnership Agreement, as amended by
the Partnership Amendment, shall be in full force and effect and not subject to
termination at such time as a result of any state of facts existing at such
time.
(h) Governmental Approvals. All Governmental Approvals issued or
granted to either Freeport Entity by Governmental Entities that are necessary or
materially useful for the conduct of the business of the Freeport Entities shall
not be materially adversely affected due to the Closing.
(i) Consents. Any third party consents or waivers obtained by the
Freeport Entities that are necessary or materially useful for the conduct of the
business of the Freeport Entities or to consummate the transactions contemplated
by the Transaction Documents shall not be materially adversely affected due to
the Closing.
(j) Conditions under Loan Documents. All conditions precedent for
initial funding under the Loan Documents shall be satisfied or waived by COP
Lender; provided, such conditions precedent are set forth in the Loan Term
Sheet.
(k) Conditions under Stock Purchase Agreement. All conditions
precedent to COP GP's obligation to close under the Stock Purchase Agreement
shall have been satisfied or waived by COP GP.
(l) Certificates. Each of Freeport LNG and the General Partner shall
have executed (or caused to be executed) and delivered to COP, COP Lender and
COP LNG a certificate, in a form reasonably acceptable to COP, executed by a
senior officer of Freeport LNG and the chief executive officer of the General
Partner, to the effect that (i) each of the conditions specified above in
Sections 5.2(a) through 5.2(k) is satisfied, (ii) the requisite action has been
taken by the applicable entity required for execution, delivery and performance
of the Transaction Documents to which it is a party and (iii) each of the
officers and authorized Persons of the applicable entity executing the
Transaction Documents and such certificate is the duly elected or appointed
officer or Person holding the applicable position and the signature of each such
officer and Person is his or her genuine signature.
(m) Legal Opinion. Freeport LNG and the General Partner shall have
delivered to the COP Participants a legal opinion from counsel to Freeport LNG
in form reasonably agreed by counsel to Freeport LNG, the General Partner and
COP.
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(n) Good Standings. Freeport LNG shall have delivered to COP (i)
certified copies of the certificate of incorporation of the General Partner and
certificate of limited partnership of Freeport LNG, certified as of a recent
date by the Secretary of State of Delaware, and (ii) good standing certificates
of the General Partner and Freeport LNG as of a recent date from the Secretary
of State of the State of Delaware and each other state in which they are
qualified to do business.
(o) Environmental Condition. Either (i) COP shall have given Freeport
LNG and the General Partner notice that COP waives its right to terminate under
Section 7.1(d) or (ii) April 1, 2004 shall have occurred and COP shall not have
provided Freeport LNG with a notice of termination pursuant to Section 7.1(d).
(p) Title Matters. April 1, 2004 shall have occurred and COP shall
not have delivered a Title Notice to Freeport LNG pursuant to Section 7.1(e) or,
if such notice has been provided by April 1, 0000, Xxxxxxxx XXX shall have cured
the title matters set forth in the Title Notice to COP's reasonable satisfaction
in accordance with Section 7.1(e).
(q) Waiver. COP may waive any condition specified in this Section 5.2
if it executes a writing so stating at or prior to the Closing or proceeds to
the completion of the Closing notwithstanding that it has Knowledge of failure
of any such condition.
5.3 Freeport LNG's and the General Partner's Conditions to Closing. The
obligation of each of Freeport LNG and the General Partner to consummate the
transactions to be performed by it at the Closing is subject to satisfaction of
the following conditions:
(a) Representations and Warranties. The representations and
warranties set forth in Section 3.1 qualified as to materiality shall be true
and correct, and those not so qualified shall be true and correct in all
material respects, in each case when made and as of the Closing Date.
(b) No Breach. None of the COP Participants shall be in breach of or
default under any of its respective covenants or obligations under any of the
Transaction Documents, and no event shall have occurred which, with the giving
of notice or the passage of time or both, would become such a breach or default.
(c) Absence of Litigation. No injunction, judgment, order, decree, or
shall be in effect that would (i) prevent, prohibit or make illegal the
consummation by Freeport LNG or the General Partner of any aspect of the
transactions contemplated by the Transaction Documents or (ii) cause any of the
transactions contemplated by the Transaction Documents to be rescinded or
ineffective in any material respect following consummation.
(d) Transaction Documents. Each of the COP Participants shall have
executed (or caused to be executed) and delivered to Freeport LNG and the
General Partner each of the Transaction Documents to be executed and delivered
by such COP Participant as set forth in Section 2.1, and each such Transaction
Document shall be in full force and effect and not subject to termination at
such time as a result of any state of facts existing at such time.
(e) Capacity Reservation Fee. COP LNG shall have paid the Capacity
Reservation Fee.
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(f) Stock Purchase Agreement. COP GP shall have executed and
delivered to Seller the Stock Purchase Agreement and paid to Seller $9 million
in immediately available funds in consideration for the transfer to COP GP of
50% of the GP Stock in accordance with the Stock Purchase Agreement.
(g) Conditions under Stock Purchase Agreement. All conditions
precedent to Seller's obligation to close under the Stock Purchase Agreement
shall have been satisfied or waived by Seller.
(h) Certificates. COP shall have executed (or caused to be executed)
and delivered to Freeport LNG and the General Partner a certificate, in a form
reasonably acceptable to Freeport LNG and the General Partner, executed by a
senior officer of each of COP, COP Lender, COP GP and COP LNG to the effect that
(i) in the case of the certificate from each of COP Lender, COP GP and COP LNG,
each of the representations and warranties made in Section 3.1 as to COP shall
be true and correct as of the Closing Date in respect of COP Lender, COP GP or
COP LNG, as the case may be, (ii) each of the conditions specified above in
Sections 5.3(a) through 5.3(g) is satisfied, (iii) the requisite action has been
taken by the applicable entity required for execution, delivery and performance
of the Transaction Documents to which it is a party and (iv) each of the
officers and authorized Persons of the applicable entity executing the
Transaction Documents and such certificate is the duly elected or appointed
officer or Person holding the applicable position and the signature of each such
officer and Person is his or her genuine signature.
(i) Legal Opinion. COP shall have delivered to Freeport LNG and the
General Partner a legal opinion of counsel to COP in form reasonably agreed by
counsel to Freeport LNG, the General Partner and COP.
(j) Conditions under Loan Documents. All conditions precedent for
initial funding under the Loan Documents shall be satisfied or waived by COP
Lender; provided, such conditions precedent are set forth in the Loan Term
Sheet.
(k) Waiver. Freeport LNG or the General Partner, as applicable, may
waive any condition specified in this Section 5.3 if it executes a writing so
stating at or prior to the Closing or proceeds to the completion of the Closing
notwithstanding that it has Knowledge of failure of any such condition.
5.4 Frustration of Closing Conditions. No Party may rely on the failure of
any condition set forth in Sections 7.1, 7.2 and 7.3, to be satisfied if such
failure was caused by such Party's failure to act in good faith or to use its
commercially reasonable efforts to cause the Closing to occur.
ARTICLE 6
INDEMNIFICATION AND LIABILITY
6.1 Indemnification by COP. Subject to the limitations set forth in this
Article 6, following the Effective Date, COP shall indemnify and hold harmless
Freeport LNG and the General Partner and their respective Affiliates and the
officers, directors, employees, agents, partners and representatives of each of
them (collectively, the "Freeport Indemnitees"), from, against and in respect of
any and all Liabilities, obligations, judgments, Liens, injunctions, charges,
orders, decrees, rulings, damages, dues, assessments, losses, fines, penalties,
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injuries, deficiencies, demands, expenses, fees, costs, amounts paid in
settlement (including reasonable attorneys' and expert witness fees and
disbursements in connection with investigating, defending or settling any action
or threatened action (collectively "Losses") to the extent arising from,
relating to or otherwise in respect of (and including Losses resulting from any
claim, complaint, demand, cause of action, audit, investigation, hearing,
action, suit or other proceeding asserted or initiated or otherwise existing in
respect of any matter) (a) any breach of any representation or warranty of COP
contained in this Agreement or in any certificate delivered by COP pursuant
hereto, and (b) any breach of any covenant of COP contained in this Agreement.
6.2 Indemnification by Freeport LNG. Freeport LNG shall indemnify and hold
harmless each of the COP Participants and their respective Affiliates and the
officers, directors, employees, agents, managers and representatives of each of
them (collectively, the "COP Indemnitees") from, against and in respect of any
and all Losses (other than Losses relating to Taxes, for which indemnification
provisions are set forth in Section 6.4) to the extent arising from or related
to or otherwise in respect of (and including Losses resulting from any claim,
complaint, demand, cause of action, audit, investigation, hearing, action, suit
or other proceeding asserted or initiated or otherwise existing in respect of
any matter) (a) any claims made by any limited partner of Freeport LNG or any
other Person (excluding COP and its Affiliates) in respect of the ownership,
development, construction, operation or maintenance of the Facility at any time
prior to the Closing Date, except to the extent resulting from the gross
negligence or willful misconduct of any of the COP Indemnitees or the breach or
default of COP under this Agreement, or (b) any breach of any representation or
warranty of either Freeport Entity contained in this Agreement or in any
certificate delivered by either Freeport Entity pursuant hereto, and (c) any
breach of any covenant of either Freeport Entity contained in this Agreement.
6.3 [Intentionally Omitted]
6.4 Tax Indemnification.
(a) Freeport LNG shall indemnify COP and its Affiliates (including
the General Partner) and each of their respective officers, directors,
employees, stockholders, agents and representatives and hold them harmless from
all Losses for (i) Taxes of or with respect to the General Partner or Freeport
LNG for the Pre-Closing Tax Period, (ii) Taxes of Seller or any other entity
(other than the General Partner) which is or has been affiliated with any
Freeport Person, (iii) Taxes attributable to a breach by any Freeport Person of
a representation, warranty or obligation under this Agreement or any other
Transaction Document and (iv) reasonably necessary legal fees and expenses
incurred by COP in enforcing its rights under clause (i), (ii) or (iii) above;
provided that in the case of a Loss suffered by the General Partner itself that
is described in clause (i) above, Freeport LNG shall indemnify COP only for 50%
of the Loss. All indemnity payments required by this Section 6.4(a) shall be
paid by Freeport LNG to COP regardless of the identity of the Person that
suffered the Loss.
(b) In the case of any Straddle Period:
(i) Property Taxes of the General Partner and Freeport LNG for
the Pre-Closing Tax Period shall be equal to the amount of such Property Taxes
for the entire Straddle Period (the "Full Year Property Taxes") multiplied by a
fraction, the numerator of
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which is the number of days during the Straddle Period that are in the
Pre-Closing Tax Period and the denominator of which is the number of days in the
Straddle Period; and
(ii) the Taxes of the General Partner and Freeport LNG (other
than Property Taxes) for the Pre-Closing Tax Period shall be computed as if such
taxable period ended as of the close of business on the Closing Date.
(c) Notwithstanding anything to the contrary, Freeport LNG shall be
liable for and shall pay any and all Taxes arising in connection with the
transfer of the GP Stock and Freeport LNG shall indemnify and hold harmless COP
for any and all such Taxes.
(d) All amounts paid by Freeport LNG or the General Partner under the
terms of this Section 6 shall be increased to take into account the Tax, if any,
resulting from such payment.
6.5 Matters Involving Third Parties.
(a) If any third party shall notify any of the Freeport Indemnitees
or the COP Indemnitees (the "Indemnified Person") with respect to any matter (a
"Third Party Claim") which may give rise to a claim for indemnification against
any Party (the "Indemnifying Party") under this Article 6, then the Indemnified
Person shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that failure on the part of the Indemnified Person to notify
any Indemnifying Party shall not relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is thereby materially prejudiced by such failure.
(b) The Indemnifying Party may, (i) at its own expense, participate
in the defense of any claim, suit, action or proceeding covered by any of the
indemnities set forth in this Article 6 and (ii) upon (x) written notice to the
Indemnified Person and (y) delivering to the Indemnified Person of a written
agreement that the Indemnified Person is entitled to indemnification pursuant to
Sections 6.1 or 6.2 for all Losses arising out of such claim, suit, action or
proceeding and that the Indemnifying Party shall be liable for the entire amount
of any Loss, at any time during the course of any such claim, suit, action or
proceeding, assume the defense thereof, provided that (1) the Indemnifying
Party's counsel is reasonably satisfactory to the Indemnified Person, and (2)
the Indemnifying Party shall thereafter consult with the Indemnified Person upon
the Indemnified Person's reasonable request for such consultation from time to
time with respect to such claim, suit, action or proceeding. If the Indemnifying
Party assumes such defense, the Indemnified Person shall have the right (but not
the obligation) to participate in the defense thereof and to employ counsel, at
its own expense, separate from the counsel employed by the Indemnifying Party.
If, however, the representation by the Indemnifying Party's counsel of both the
Indemnifying Party and the Indemnified Person would present such counsel with a
conflict of interest, then such Indemnified Person may employ separate counsel
(Indemnifying Party's consent to the choice of counsel is required, such consent
not to be unreasonably withheld) to represent or defend it in any such claim,
action, suit or proceeding and the Indemnifying Party shall pay the reasonable
fees and disbursements of such separate counsel. Whether or not the Indemnifying
Party chooses to defend or prosecute any such claim, suit, action or proceeding,
all of the Parties hereto shall cooperate in the defense or prosecution thereof.
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(c) Any settlement or compromise made or caused to be made by the
Indemnified Person or the Indemnifying Party, as the case may be, of any such
claim, suit, action or proceeding of the kind referred to in this Section 6.5
shall also be binding upon the Indemnifying Party or the Indemnified Person, as
the case may be, in the same manner as if a final judgment or decree had been
entered by a court of competent jurisdiction in the amount of such settlement or
compromise, provided that no obligation, restriction or Loss shall be imposed on
the Indemnified Person as a result of such settlement without its prior written
consent. The Indemnified Person will give the Indemnifying Party at least 30
days' notice of any proposed settlement or compromise of any claim, suit, action
or proceeding it is defending, during which time the Indemnifying Party may
reject such proposed settlement or compromise; provided that from and after such
rejection, the Indemnifying Party shall be obligated to assume the defense of
and full and complete liability and responsibility for such claim, suit, action
or proceeding and any and all Losses in connection therewith in excess of the
amount of unindemnifiable Losses which the Indemnified Person would have been
obligated to pay under the proposed settlement or compromise.
6.6 Other Claims. If any Indemnified Person should have a claim against an
Indemnifying Party under this Article 6 that does not involve a Third Party
Claim being asserted against or sought to be collected from such Indemnified
Person, the Indemnified Person shall deliver notice of such claim with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Person so to notify the Indemnifying Party shall not relieve the Indemnifying
Party from any liability which it may have to such Indemnified Person under this
Article 6, except to the extent that the Indemnifying Party demonstrates that it
has been materially prejudiced by such failure. If the Indemnifying Party has
timely disputed its liability with respect to such claim, as provided above, the
Indemnifying Party and the Indemnified Person shall proceed in good faith to
negotiate a resolution of such dispute and, if not resolved through
negotiations, such dispute shall be resolved as provided in Section 9.1.
6.7 SCOPE OF INDEMNITY. IT IS THE PARTIES' INTENT THAT, EXCEPT AS
EXPRESSLY PROVIDED IN SECTIONS 6.1, 6.2 AND 6.3, THE INDEMNITY OBLIGATIONS IN
THIS ARTICLE 6 ARE WITHOUT REGARD TO THE CAUSES OF THE INDEMNIFIED CLAIMS,
INCLUDING THE NEGLIGENCE OF ANY INDEMNIFIED PERSON, WHETHER SUCH NEGLIGENCE IS
SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE OR THE STRICT LIABILITY OF ANY
INDEMNIFIED PERSON.
6.8 LIMITATION ON DAMAGES. NO PARTY SHALL BE LIABLE FOR, AND EACH PARTY
RELEASES THE OTHER PARTIES AND THEIR RESPECTIVE INDEMNIFIED PERSONS FROM, ANY
INCIDENTAL, PUNITIVE, EXEMPLARY, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES OF
ANY NATURE (INCLUDING DAMAGES ASSOCIATED WITH LOST PROFITS, BUSINESS
INTERRUPTION AND LOSS OF GOODWILL) ARISING AT ANY TIME, WHETHER IN TORT
(INCLUDING THE SOLE OR CONTRIBUTORY NEGLIGENCE OF ANY PARTY OR ANY INDEMNIFIED
PERSON), WARRANTY, STRICT LIABILITY, CONTRACT OR STATUTE, UNDER ANY INDEMNITY
PROVISION, OR OTHERWISE. THE PROVISIONS OF THIS SECTION 6.8 APPLY TO
INDEMNIFICATION CLAIMS UNDER SECTIONS 6.1, 6.2 AND 6.3, EXCEPT THAT THE
PROVISIONS OF THIS SECTION 6.8 DO NOT APPLY TO INDEMNIFICATION CLAIMS IN RESPECT
OF THIRD PARTY CLAIMS.
6.9 Effect of Knowledge. To the extent that COP has Knowledge of any
breach of any representation, warranty or covenant contained in this Agreement
as a result of disclosure
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made by Freeport LNG between the date hereof and the Closing Date and COP
nevertheless elects to proceed to Closing, no Freeport Indemnitee shall have any
Liability under this Article 6 as a result of such breach.
ARTICLE 7
TERMINATION
7.1 Termination of Agreement. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing as provided below:
(a) By written agreement executed by all the Parties; or
(b) By COP by giving notice to Freeport LNG or the General Partner at
any time prior to the Closing in the event:
(i) Freeport LNG has not received the FERC Approval by ***;
(ii) By April 1, 2004, COP has concluded a maneuverability study
addressing whether LNG vessels with (A) cargo capacity of *** cubic meters and
(B) a length, beam, tonnage and draft that would be typical of such a vessel
("Acceptable Vessels") can safely utilize the Facility and turning basin and
navigate the Channel at its current width of four hundred (400) feet ("Study 1")
and a maneuverability study addressing whether Acceptable Vessels can safely
utilize the Facility and turning basin and navigate the Channel if the Channel
were widened to *** feet ("Study 2") (copies of each such study shall be
provided to Freeport LNG by April 1, 2004), and Study 1 demonstrates that
Acceptable Vessels cannot safely utilize the Facility or turning basin or
navigate the Channel, or, after consultation with the USCG, COP reasonably
determines that such utilization or navigation will likely be prohibited by the
USCG; provided, however, that if (1) Study 2 demonstrates that Acceptable
Vessels can safely utilize the Facility and turning basin and navigate the
Channel, (2) after consultation with the USCG, COP reasonably determines that
such utilization and navigation is not likely to be prohibited by the USCG and
(3) no Governmental Entity has informed COP that widening the Channel to ***
feet will be prohibited, then (x) COP shall have no right to terminate this
Agreement under this Section 7.1(b)(ii), and (y) if COP and Freeport LNG
mutually agree to widen the Channel, the project cost limit of the Loan shall be
increased to $***; or
(iii) Freeport LNG has received the FERC Approval but it contains
specific terms or conditions that effectively preclude the use of the Facility
by Acceptable Vessels, and in such case Freeport LNG has not obtained a
modification or amendment to such FERC Approval such that it does not contain
any terms or conditions that effectively preclude such use within *** days of
the issuance of the initial FERC Approval; for the avoidance of doubt, but
without limiting the foregoing, a condition similar to the proposed condition in
the draft environmental impact statement precluding the use of Acceptable
Vessels would afford COP the right to terminate if not modified or amended
within *** days of the issuance of the initial FERC Approval, but a condition
similar to the proposed condition requiring a maneuverability study would not;
or
(c) By Freeport LNG or the General Partner by giving notice to COP at
any time prior to the Closing in the event:
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(i) Freeport LNG has not received the FERC Approval by ***;
(ii) Freeport LNG has received the FERC Approval but it contains
specific terms or conditions that effectively preclude the use of the Facility
by Acceptable Vessels, and in such case Freeport LNG has not obtained a
modification or amendment to such FERC Approval such that it does not contain
any terms or conditions that effectively preclude such use within *** days of
the issuance of the initial FERC Approval; for the avoidance of doubt, but
without limiting the foregoing, a condition similar to the proposed condition in
the draft environmental impact statement precluding the use of Acceptable
Vessels would afford Freeport LNG or the General Partner the right to terminate
if not modified or amended within *** days of the issuance of the initial FERC
Approval, but a condition similar to the proposed condition requiring a
maneuverability study would not; or
(iii) COP LNG has failed to pay the Capacity Reservation Fee
within ten (10) days from when it is due and payable to Freeport LNG; or
(d) By COP by giving notice to Freeport LNG and the General Partner
at any time prior to April 1, 2004 if the results of the environmental
investigations described in Exhibit G allow COP to terminate this Agreement
pursuant to paragraph 3 of such Exhibit; or
(e) By COP by giving notice to Freeport LNG and the General Partner
if at any time on or prior to April 1, 2004, COP has given Freeport LNG a
written notice (the "Title Notice") indicating with specificity which title
conditions and/or title curative actions being undertaken by the Brazos River
Harbor Navigation District of Brazoria County, Texas (the "Port") or Freeport
LNG with respect to the Facility Site are unsatisfactory to COP and with respect
to which Freeport LNG shall have failed within *** days after such Title Notice,
either through the Port or through its own actions, to (i) cure such title
conditions to the reasonable satisfaction of COP, or (ii) obtain replacement
real property or relocate the improvements comprising the Facility so that such
replacement or relocation allows for the completion of the Facility (either as
currently designed or as modified in a manner reasonably satisfactory to COP, so
long as such modification does not cause construction cost overruns of greater
than $***or a delay in completion of the Facility that could reasonably be
foreseen to cause a breach under any of the Project Documents); provided that
termination under this Section 7(e) shall be effective at the end of such ***
day period if Freeport LNG shall have cured such title matters in accordance
with this Section by such time;
(f) By Freeport LNG or the General Partner by giving notice to COP
within *** days of receipt of the Title Notice from COP pursuant to Section
7.1(e); or
(g) By any Party by giving notice to the other Parties at any time
prior to the Closing if the Closing has not occurred for any reason by ***.
7.2 Effect of Termination. If any Party terminates this Agreement pursuant
to Section 7.1, all rights and obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party, provided,
however, that (i) no termination shall relieve any Party from any Liability
arising from or relating to such Party's breach at or prior to termination and
(ii) the provisions of Sections 4.3(b), 8.4, 8.8, 8.13 and 8.14 and Article 9
shall survive the termination of this Agreement.
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7.3 Termination upon Closing. Upon the completion of the Closing, this
Agreement shall terminate, the agreements, covenants, indemnities,
representations and warranties contained herein shall be of no further force or
effect, and thereafter the Parties shall look to the other Transaction Documents
for any rights, obligations and remedies to which they may be entitled or bound;
provided that (a) no termination shall relieve any Party from any liability
arising from or relating to such Party's breach at or prior to termination (but
subject to Section 6.9) and (b) the provisions of Articles 6 and 9 and Sections
8.4, 8.5, 8.8, 8.13 and 8.14 shall survive the termination of this Agreement.
ARTICLE 8
MISCELLANEOUS
8.1 No Third Party Beneficiaries. Except as specifically set forth herein,
this Agreement shall not confer any rights or remedies upon any Person other
than the Parties and their respective successors and permitted assigns, except
for Indemnified Persons' rights to indemnification under Article 6.
8.2 Entire Agreement. This Agreement (including the schedules and exhibits
required to be delivered pursuant to this Agreement) and each other Transaction
Document constitute the entire agreement among the Parties with respect to the
subject matter hereof and thereof and supersedes any prior understandings,
agreements or representations by or among the Parties, written or oral, to the
extent they relate in any way to the subject matter hereof or thereof.
8.3 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors and
permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties.
8.4 Counterparts; Facsimile Signatures. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument. Each Party agrees to
accept the facsimile signature of the other Parties and to be bound by its own
facsimile signature; provided, however, that the Parties shall exchange original
signatures by overnight mail.
8.5 Survival of Representations and Warranties. The representations and
warranties of COP set forth in Sections 3.1(a) and (b) (first sentence only) and
of Freeport LNG set forth in Sections 3.2(a) and (b) (first sentence only) and
of the General Partner set forth in Sections 3.3(a) and (b) (first sentence
only) survive the Closing and shall terminate on the *** anniversary of Closing.
All other representations and warranties in this Agreement and in any
certificate delivered pursuant hereto shall survive the Closing and shall
terminate at the close of business *** following the Closing Date, except that
the representations and warranties relating to Tax matters shall survive the
Closing and shall terminate upon the expiration of the applicable statute of
limitations.
8.6 Interpretation. In this Agreement:
(a) Headings. The headings used in this Agreement are for convenience
only and shall not be construed as having any substantive significance or as
indicating that all of the provisions of this Agreement relating to any topic
are to be found in any particular Article.
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(b) Singular and Plural. Reference to the singular includes a
reference to the plural and vice versa.
(c) Gender. Reference to any gender includes a reference to all other
genders.
(d) Article. Unless otherwise provided, reference to any Article,
Section or Exhibit means an Article or Section of or Exhibit to this Agreement.
(e) Herein. The words "hereof," "herein," "hereto" and "hereunder"
and words of similar meaning shall, unless otherwise expressly specified, refer
to this Agreement as a whole and not to any particular portion or provision of
this Agreement.
8.7 Notices. Any and all notices or other communications or deliveries
required or permitted to be given or made pursuant to any of the provisions of
this Agreement shall be in writing and shall be deemed to have been duly given
or made for all purposes if (a) hand delivered, (b) sent by a nationally
recognized overnight courier or (c) sent by telephone facsimile transmission
(with prompt oral confirmation of receipt) as follows:
If to COP:
---------
c/o ConocoPhillips Company
000 Xxxxx Xxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attn: General Manager, LNG
Facsimile: (000) 000-0000
If to Freeport LNG:
------------------
Freeport LNG Development, L.P.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
with copies to:
--------------
Xxxxxxxxxx Xxxxx & Xxxxxx, P.C.
000 Xxxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxx, Esq.
If to the General Partner:
-------------------------
Freeport LNG-GP, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
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Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
with copies to:
--------------
Xxxxxxxxxx Xxxxx & Xxxxxx, P.C.
000 Xxxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxx, Esq.
or at such other address as any party may specify by notice given to the other
Parties in accordance with this Section 8.7. The date of giving of any such
notice shall be the date of hand delivery, the date sent by telephone facsimile,
and the day after delivery to the overnight courier service.
8.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO ANY
CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF TEXAS OR
ANY OTHER JURISDICTION) TO THE EXTENT SUCH PROVISIONS OR RULES WOULD APPLY THE
LAW OF ANOTHER JURISDICTION.
8.9 Rights and Remedies. Except where this Agreement expressly provides to
the contrary, the rights and remedies contained in this Agreement are cumulative
and not exclusive of any rights and remedies provided by law.
8.10 Compliance with Laws. In performance of their respective obligations
under this Agreement, each Party agrees to comply with all applicable laws,
statutes, rules, regulations, judgments, decrees, injunctions, writs and orders,
and all interpretations thereof, of all Governmental Authorities having
jurisdiction over such Party.
8.11 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any Party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent to such occurrence.
8.12 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
8.13 Expenses. Except as otherwise expressly provided in this Agreement,
each Party will pay all of its expenses, including attorneys' and accountants'
fees, in connection with the negotiation of this Agreement and the Transaction
Documents and the performance of its obligations and the consummation of the
transactions contemplated by this Agreement and the Transaction Documents.
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8.14 Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any Laws shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The words "include," "includes" and "including" shall be
deemed to be followed by the words "without limitation." All covenants,
agreements, representations and warranties of a Party made herein and in the
other Transaction Documents and any certificates, exhibits and schedules hereto
and thereto shall be deemed to have been relied on by the other Party,
notwithstanding any investigation made by or on behalf of any of the Parties or
any opportunity therefor.
8.15 Specific Performance. Each Party acknowledges and agrees that each
other Party would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each Party agrees that, in addition to any
other relief which may be available, the other Party shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in addition to any other remedy (subject to the provisions set
forth in Article 9) to which it may be entitled, at law or in equity.
8.16 Attorneys' Fees. If either Party brings any suit, action,
counterclaim, or arbitration to enforce the provisions of this Agreement
(including without limitation enforcement of any award or judgment obtained with
respect to this Agreement), the prevailing Party shall be entitled to recover a
reasonable allowance for attorneys' fees, litigation expenses, and the cost of
arbitration in addition to court costs.
ARTICLE 9
DISPUTE RESOLUTION
9.1 Arbitration. Any Dispute between (a) COP, COP Lender and/or COP LNG
and (b) Freeport LNG and/or General Partner (except for any dispute under the
Loan Documents) shall be exclusively and definitively resolved through final and
binding arbitration under the terms of Section 22.1 of the TUA, and the
provisions of Section 22.1 of the TUA are hereby incorporated herein by
reference in the form of the TUA attached hereto as Exhibit D and shall apply in
such form, mutatis mutandis, notwithstanding any amendment, modification or
termination of the TUA.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
individually or by their duly authorized officers on the date first above
written.
COP: CONOCOPHILLIPS COMPANY
By: /s/ X.X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
----------------------------------
Title: EVP ConocoPhillips
---------------------------------
Freeport LNG: FREEPORT LNG DEVELOPMENT, L.P.
By: Freeport LNG-GP, Inc.
Its: General Partner
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
----------------------------------
Title: Chief Executive Officer
---------------------------------
General Partner: FREEPORT LNG-GP, INC.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
----------------------------------
Title: Chief Executive Officer
---------------------------------
EXHIBIT A
LOAN TERM SHEET
*** indicates material has been omitted pursuant to a Confidential Treatment
Request filed with the Securities and Exchange Commission. A complete copy of
this agreement has been filed separately with the Securities and Exchange
Commission.
Freeport LNG Development, L.P.
Senior Secured Loans
Summary of Terms and Conditions
Certain capitalized terms used herein and not defined shall have the meanings
set forth in Appendix I.
THE LOANS
Borrower:
Freeport LNG Development, L.P. (the "Borrower"), a Delaware limited liability
partnership formed solely for the purpose of (i) developing, constructing,
financing, owning and operating the Project, and (ii) borrowing the Loans and
activities incidental thereto.
Phase 1 Loans:
The loans made by ConocoPhillips Company ("COP") or a wholly-owned subsidiary of
COP (together with its successors and assigns, the "COP Lenders") will consist
of senior secured loans to the Borrower of (i) up to $*** million to finance
project costs of Phase 1 of the Project, (ii) an additional amount to pay
interest during construction on such loans and (iii) an additional amount to
finance ***% of the cost overruns incurred in the completion of Phase 1 (the
"Phase 1 Loans"), issued under a Credit Agreement (the "Credit Agreement")
between the Borrower and the COP Lenders
Cost Overrun Loans:
The loans made by lenders financing ***% of any cost overruns (the "Cost Overrun
Loans") on Phase 1 ("Cost Overruns") which will be either (i) lenders
unaffiliated with the Borrower under facilities (the "Third Party Cost Overrun
Loans") organized by the MS Directors (as defined in the Stockholders Agreement)
(the "Third Party Cost Overrun Lenders"), or (ii) a wholly-owned subsidiary of
COP (the "Cost Overrun COP Lender") making loans with an interest rate of the
Prime Rate plus ***% per annum (the "COP Cost Overrun Loans"). The COP Cost
Overrun Loans shall be payable out of the Borrower's Cash Flow as described
under the caption "Flow of Funds".
Expansion Loans:
The loans made by lenders financing construction of Phase 2 of
1
EXHIBIT A
LOAN TERM SHEET
the Project (the "Expansion Lenders") making loans to the Borrower (the
"Expansion Loans") of (i) up to $*** to finance the development and construction
of Phase 2 and to refinance any Cost Overrun Loans and (ii) an additional amount
to pay interest on such loans during construction of Phase 2 (the "Expansion
Debt Amount"). No Cost Overrun Loans may be outstanding at the closing of the
Expansion Loans.
Equity Holders:
(i) Freeport LNG-GP, Inc. ("FGP"), a Delaware corporation and the sole general
partner of the Borrower, formed by Xxxxxxx Xxxxx ("Xxxxx"), (ii) Freeport LNG
Investments LLC ("FLNGI"), a Delaware limited liability company, holding 60% of
the limited partnership interests in the Borrower, (iii) Cheniere LNG, Inc.
("CLNGI"), a Delaware corporation formed by Cheniere Energy, Inc., a _________
corporation ("Cheniere Energy"), holding 30% of the limited partnership
interests in the Borrower, and (iv) Contango Sundance, Inc., a Delaware
corporation ("Contango LP"), a wholly-owned subsidiary of Contango ______
("Contango"), holding 10% of the limited partnership interests in the Borrower.
FGP owns all the general partnership interests in the Borrower. Xxxxx and COP
LNG-GP, ____ a _________, a wholly-owned subsidiary of COP ("COPLNG"), each will
own 50% of the common stock of FGP as of the Closing Date.
Each direct owner of a limited or general partnership interest in the Borrower
and its permitted assigns is referred to as a "Partner".
Project:
LNG terminal facility near Freeport, Texas, capable of providing certain LNG
terminal services, including regassification, storage and transportation to a
pipeline interconnection at Xxxxxxxx Xxxxx, Xxxxx.
Phase 1 of the Project means the construction and operation of the Project, as
authorized in the FERC Approval and any subsequent amendments or supplements
thereto, so that upon completion thereof the Project is intended to have the
ability to unload, store and revaporize LNG and redeliver regasified LNG at a
maximum gas redelivery rate of approximately 1.75 bcf/day including Peaking Gas
(as defined in the COP TUA) ("Phase 1"). Phase 2 of the Project consists of one
or more expansion(s) of the Project which expansion(s) may include any or all of
the following: (a) a third LNG storage tank of double containment design and/or
underground storage capacity at or near Xxxxxxxx Xxxxx, Xxxxx; (b) a second
piled dock and unloading facilities; and (c) increased vaporization capacity to
at least the XXXXX
0
EXHIBIT A
LOAN TERM SHEET
equivalent of *** bcf/day ("Phase 2").
COP TUA:
Terminal use agreements for the Project providing COP and its affiliates and
their assignees (collectively, the "COP Shipper") rights to terminal services
from the Borrower and the Project (the "COP TUA").
Facility Leases:
Subject to the Omnibus Agreement, COP Shipper (or its designee) and the Borrower
may mutually agree on an arrangement whereby COP Shipper would lease from the
Borrower all of its right, title and interest in the Project. That lease would
require COP Shipper to grant to the Borrower the remaining capacity subject to
the COP TUA. COP Shipper would retain the rights to the COP TUA. The lease would
be subject to the Security Documents.
Collateral:
The following is the Collateral and relative priorities of the various lenders:
Phase 1 Loan Collateral
The obligations of the Borrower to pay principal of, interest on, and other
amounts in respect of the Phase 1 Loans and to perform its other obligations
(the "Phase 1 Obligations") under the Credit Agreement and the documents
executed in connection therewith will be secured by (collectively, the "Phase 1
Collateral"):
(1) a grant to Collateral Agent of a first priority lien on all real estate,
leasehold estates, leases, subleases, equipment, revenues, contracts,
permits, receivables, personal property, the COP TUA and all other terminal
use agreements ("TUAs"), proceeds from providing terminal services and any
other receivables owing to the Project in respect of the Project and all
other tangible and intangible assets of the Borrower, whether now owned or
hereafter acquired, including, without limitation, a mortgage on all real
property associated with the Project and security documents (the "Security
Documents") on other assets of the Borrower;
(2) an assignment to the Collateral Agent of all insurance policies in respect
of property loss, casualty or condemnation of or to the Project entered
into in respect of the Project naming the Collateral Agent on behalf of the
COP Lenders as beneficiaries; and
3
EXHIBIT A
LOAN TERM SHEET
(3) a grant to the Collateral Agent of a lien on and security interest in the
Borrower's interest in each of the Depositary Accounts, except as described
below under "Depositary Accounts";
provided that
(a) the Collateral Agent's lien on the COP TUA, including amounts payable (and
other obligations performable) by the COP Shipper thereunder, will be a
first lien, subject to no other liens, except to the extent a lien upon the
royalty payment thereunder (the "COP Royalty") is granted to secure the
Third Party Cost Overrun Obligations or the Expansion Obligations.
Third Party Cost Overrun Collateral
(b) The obligations of the Borrower to pay principal of, interest on, and other
amounts in respect of the Third Party Cost Overrun Loans and to perform its
other obligations under the documents executed in connection therewith (the
"Third Party Cost Overrun Obligations") shall be secured by a first lien on
the COP Royalty, all Phase 1 TUAs (other than the COP TUA) (the "Other
Phase 1 TUAs"), including amounts payable (and other obligations
performable) by each shipper (the "Other Phase 1 Shippers") thereunder and
the related deposit accounts described below with the COP Lenders
subordinating their lien in such assets, with the COP Lenders and the Third
Party Cost Overrun Lenders executing a non-disturbance agreement granting
the Other Phase 1 Shippers and Third Party Cost Overrun Lenders and their
successors and assigns rights of quiet enjoyment respecting their TUAs and
the Third Party Cost Overrun Lenders recognizing such related liens; and
a grant to the Collateral Agent of a lien on and security interest in the
Borrower's interest in the Depositary Accounts described below.
COP Cost Overrun Collateral
(c) The obligations of the Borrower to pay principal of, interest on, and other
amounts in respect of the COP Cost Overrun Loans and to perform its other
obligations under the documents executed in connection therewith (the
"Third Party Cost Overrun Obligations") shall be secured with pari passu
lien on all security for the Phase 1 Obligations with the COP Lenders
subordinating their lien in such assets as described below;
4
EXHIBIT A
LOAN TERM SHEET
The COP Cost Overrun Loans shall be secured by a first lien pledge (subject
to no other liens) by
. Xxxxx of his interest in FGP;
. FGP of its general partnership interest in the Borrower; and
. FLNGI of its limited partnership interest in the Borrower.
Expansion Collateral
(d) The obligations of the Borrower to pay principal of, interest on, and other
amounts in respect of the Expansion Loans and to perform its other
obligations under the documents executed in connection therewith (the
"Expansion Obligations") may, at Borrower's option, be secured by
. a first lien on all Phase 1 TUAs (other than the COP TUA (except the
COP Royalty payable to the Borrower thereunder)) and the Phase 2 TUAs
(the "Expansion TUAs"), including amounts payable (and other
obligations performable) by each shipper thereunder (the "Expansion
Shippers") and the related deposit accounts described below with the
COP Lenders subordinating their lien in such TUAs and deposits as
described below
. a second lien upon the fixed assets of the Project,
with the COP Lenders and the Expansion Lenders executing a non-disturbance
agreement granting the Expansion Shippers and such Expansion Lenders and
their successors and assigns rights of quiet enjoyment respecting their
TUAs and the parties recognizing such related liens; and
the Expansion Obligations may also be secured by a first lien pledge by
Xxxxx of his interest in FGP (the "Xxxxx Interests") and with the
preferential rights of the Xxxxx Interests waived upon the exercise by the
Collateral Agent of any rights to such lien with the ability of the Xxxxx
Interest to manage the TUAs securing the Expansion Debt amended to be
consistent with the terms of non-disturbance agreements respecting the TUAs
securing the Expansion Debt.
5
EXHIBIT A
LOAN TERM SHEET
Intercreditor Agreement/Non-Disturbance
The relative interests will be subject to intercreditor arrangements acceptable
to the COP Lenders, the COP Cost Overrun Lender, the Third Party Cost Overrun
Lenders and the Expansion Lenders. The various shippers and lenders shall
recognize the lenders' rights and be provided with non-disturbance agreements
that assure the respective parties continuing access to the capacity controlled
by such shipper or its first lien lender, including rights of quiet enjoyment,
to manage such capacity in accordance with their TUAs and consistently with the
Project's continuing operation so long as such person is not in default with
respect to its obligations arising under such TUAs.
Expansion Completion Risk
Expansion completion risk will be mitigated by person having (or guaranteed by
persons having) investment grade ratings without claims on the Project's assets,
property, revenues or cash flows or interference with the Project's operation or
the continuing availability of the Project's capacity.
Non-Recourse:
The Obligations will be obligations of the Borrower and secured by the
Collateral. None of the Partners, Xxxxx, Cheniere Energy, Contango or any other
Affiliate, stockholder, partners, member, officer, director, or employee thereof
will guarantee, pledge Collateral or the Obligations, except as described under
the captions of "Collateral."
Phase 1 Loan Terms
Use of Proceeds:
The net proceeds of the Phase 1 Loans will be used to (a) reimburse Xxxxx and
Cheniere Energy, the Borrower and their Affiliates for certain development and
construction costs incurred by or on behalf of the Borrower and its Affiliates
to be mutually agreed, (b) finance a portion of the construction of the Project
(which amount shall be deposited into the Construction Account), (c) pay
interest on the Phase 1 Loans during construction, and (d) pay fees and approved
transaction costs.
Availability:
The Borrower may borrow Phase 1 Loans until the earlier of: (a) *** and (b) the
Completion Date (the "Availability Period"). Any Phase 1 Loan, once repaid, may
not be reborrowed.
Interest Rate :
***% per annum computed on the basis of a 360-day year, for the actual number of
days elapsed.
Interest Payment Dates:
Interest on the Phase 1 Loans is payable monthly in arrears on the last business
day of each month, commencing after the
6
EXHIBIT A
LOAN TERM SHEET
Closing (a "Payment Date") until principal amortization commences, at which time
interest and principal shall be payable according to mortgage-style
amortization.
Principal Payment:
Monthly during *** years beginning on the first Payment Date occurring after the
earlier of (i) *** and (ii) the date of Completion, until Final Maturity
according to mortgage-style amortization. Prepayments are applied to principal
installments in inverse order of maturity and accrued interest on the amount
prepaid.
Final Maturity Date of the Loans:
*** years after the earlier of (a) the Completion Date and (b) ***.
Ranking:
The Loans will be senior secured Debt of the Borrower ranking pari passu in
right of payment with all other existing and future senior Debt of the Borrower,
and senior in right of payment to all existing and future Debt of the Borrower
that is designated as subordinate or junior in right of payment to the Loans.
Conditions Precedent to Closing and Initial Phase 1 Advance:
Closing and initial funding of the Phase 1 Loans will be subject to the
following and other customary or appropriate conditions based on due diligence:
1. The EPC Contract and the guarantee by Technip-Coflexip, S.A. of the EPC
Contractors' obligations under the EPC Contract for the benefit of the
Borrower, shall each be in full force and effect and reasonably
satisfactory in all respects to the COP Lenders including, without
limitation, provisions with respect to scope of work, insurance,
warranties, liquidated damages, completion deadlines, performance
standards, performance testing and subcontractor approvals;
2. The Ground Lease with Brazos River Harbor Navigation District of Brazoria
County, Texas (the "Brazos River Authority") shall be in full force and
effect and all other documents necessary to establish control of the
Project Site, together with all easements and rights-of-way (other than the
easement for the pipeline from the outlet flange of the Project to the
pipeline interconnection at Xxxxxxxx Xxxxx, Xxxxx) necessary for the
construction and operation of the Project and title (other than exceptions
to title accepted by the COP Shipper pursuant to Section 7.1(e) of the
Omnibus Agreement (the "Permitted Title Defects") to the Project site,
shall be in full force and effect and reasonably satisfactory in all
respects to the
7
EXHIBIT A
LOAN TERM SHEET
COP Lenders.
3. The transactions contemplated by the Omnibus Agreement shall have become
effective;
4. The COP TUA, the Stockholders Agreement and the Stock Purchase Agreement
shall have been executed and delivered by all parties thereto and shall be
in full force and effect;
5. The closing under the Stock Purchase Agreement shall have occurred;
6. All regulatory and environmental Governmental Approvals and consents from
all Governmental Authorities, and all others required for the Phase 1 Loans
or to commence and conduct construction and to own and operate the Project
shall be in full force and effect and not subject to appeal except to the
extent failure to obtain such permits, approvals, and licenses could not
reasonably be expected to have an adverse effect on the construction
budget, construction schedule or operation, maintenance or ownership of the
Project and except those that have not been obtained but will be obtained
by the time such approvals are required for the performance by any project
participant of any of its obligations respecting the Project and for which
none of the Borrower or the Independent Engineer has any reason to believe
that any such approvals will not be obtained in due course prior to the
time required;
7. All Governmental Approvals and other consents obtained or to be obtained in
paragraph 6, are free from conditions or requirements, the compliance with
which could reasonably be expected to have an adverse effect on the
construction budget, construction schedule, operation, maintenance or
ownership of the Project or which any of the Borrower or the Independent
Engineer does not reasonably expect to be able to satisfy;
8. Insurance coverages with reasonable limits and deductibles required for
projects of a similar nature shall be in full force and effect;
9. Execution of documentation for the Loans and Collateral and related
transactions, in form and substance satisfactory to the COP Lenders;
8
EXHIBIT A
LOAN TERM SHEET
10. Receipt of legal opinions from the Borrower's counsel and counsel to the
General Partner and the EPC Contractor (and its guarantor) and certain
other Project parties (as reasonably requested by the COP Lenders).
11. (i) No Material Adverse Effect shall have occurred and (ii) no material
adverse change shall have occurred in the business, operations or condition
(financial or otherwise) of the EPC Contractor (and its guarantors and
sureties) and each provider of the Cost Overrun Debt (and any Acceptable
Credit Support Issuer) which could reasonably be expected to have a
Material Adverse Effect);
12. Representations and warranties shall be true and complete in all material
respects as of the drawdown, and receipt of appropriate certificates of the
Borrower and certain other Project parties to that effect;
13. No existing Default or Event of Default, and receipt of appropriate
certificates of the Borrower to that effect;
14. Receipt of a capital expenditure drawdown schedule and budget ("Approved
Budget") reasonably satisfactory in all respects to the COP Lenders; and
15. Neither the COP Lenders nor the Borrower shall be subject to regulation as
an investment company, a gas utility, gas utility holding company or other
public utility or public utility holding company by reason of the
contemplated transactions.
Conditions to Advance of All Phase 1 Loans:
1. All representations and warranties of the Borrower and the General Partner
in the Financing Documents shall be true and correct in all material
respects on and as of the date of the borrowing before and after giving
effect to such borrowing and to the application of the proceeds therefrom,
as though made on and as of such date;
2. No Default or Event of Default shall have occurred and be continuing, or
would result from such borrowing;
3. Construction of the Project is proceeding such that Completion will occur
on or before ***, as certified by the Independent Engineer;
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4. No cost overrun or funding shortfall that is not a Budgeted Construction
Cost (including construction contingency) and is not covered by the
aggregate principal amount available under the Credit Agreement (a
"Projected Shortfall") has been identified as of the date of such drawing
and in the event that any Projected Shortfall has been identified that is
expected to occur in the next 12 months (as confirmed by the Independent
Engineer), the MS Directors shall have taken any actions required under the
caption "Cost Overrun Debt Trigger Events";
5. All regulatory and environmental Governmental Approval and consents from
all Governmental Authorities and third parties required to commence and
conduct construction and to own and operate the Project shall be in full
force and effect and not subject to appeal except to the extent failure to
obtain such permits, approvals, and licenses could not reasonably be
expected to have an adverse effect on the construction budget, construction
schedule or operation, maintenance or ownership of the Project except those
that have not been obtained but will be obtained by the time such approvals
are required for the performance by any project participant of any of its
obligations respecting the Project and for which none of the Borrower or
the Independent Engineer has any reason to believe that any such approvals
will not be obtained in due course prior to the time required;
6. All Governmental Approvals and other consents obtained or to be obtained in
paragraph 5, are free from conditions or requirements, the compliance with
which could reasonably be expected to have an adverse effect on the
construction budget, construction schedule, operation, maintenance or
ownership of the Project or which any of the Borrower or the Independent
Engineer does not reasonably expect to be able to satisfy;
7. The Independent Engineer shall have approved the expenditures to be paid
with the proceeds of such advance.
The certifications set forth in clauses (1) and (3) through (6) above shall be
confirmed by the Independent Engineer which confirmation shall be submitted with
each certificate requesting
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a monthly drawdown.
Optional Redemption:
The Phase 1 Loans are subject to optional redemption only with the consent of
the COP Lenders. The COP Cost Overrun Loans may be prepaid at any time without
penalty or premium.
Redemption at the Option of the Lenders:
Upon the occurrence of a "Change of Control" (as defined in the Stockholders
Agreement), at the COP Lenders' option, the Borrower shall redeem all of the
Phase 1 Loans held by each of the COP Lenders at such time at a price equal to
***% of the outstanding principal amount of such COP Lender's Loans, plus
accrued interest to the date of redemption and Premium.
Premium:
In connection with any redemption of Phase 1 Loans requiring the payment of a
Premium, such Premium will be calculated as a "make-whole premium" using a
discount rate equal to the applicable rate on U.S. Treasury securities, based on
an interpolated final maturity equal to the remaining average life of such Phase
1 Loans, plus *** basis points.
Mandatory Redemption:
The Phase 1 Loan will be subject to mandatory redemption and ratably with other
Debt to the extent of the net excess proceeds described in (1) and (2) below, at
***% of the principal amount thereof, together with the interest to the
redemption date and Premium, under the following circumstances:
(1) receipt by or on behalf of the Borrower of Loss Proceeds in connection with
an Event of Loss related to the Project if the amount of such Loss Proceeds
exceeds $[__] million or the Project is not repaired or rebuilt in
accordance with an Approved Restoration Plan to the extent of such excess;
or
(2) receipt by or on behalf of the Borrower of amounts representing Performance
Liquidated Damages for Phase 1 of the Project (that are not expended to
cure or remediate the construction issues giving rise to such Performance
Liquidated Damages, which expenditures shall be subject to the reasonable
consent of the COP Lender).
Expansion Financing:
The Borrower may incur Debt in the aggregate principal amount of up to the
Expansion Debt Amount so long as at such time and after giving effect to
the incurrence of such Debt:
(i) there is no Default or Event of Default;
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(ii) an Authorized Officer of the Borrower certifies, and the Independent
Engineer and Construction Advisor confirm as reasonable, that (A) the
minimum Projected Debt Service Coverage Ratio for the next four
consecutive fiscal quarters, commencing with the quarter in which
such Debt is incurred and for each subsequent fiscal year through the
Final Maturity Date of the Phase 1 Loans, will not be less than ***,
(B) the average Projected Debt Service Coverage Ratio for the next
four consecutive fiscal quarters, commencing with the quarter in
which such Debt is incurred and for each subsequent fiscal year
through the Final Maturity Date of the Phase 1 Loans, will not be
less than ***, and (C) the engineering, design, procurement,
contracting and construction plan for Phase 2 will not cause a breach
or default under the Project Documents;
(iii) the Completion Date for Phase 1 has occurred or the Independent
Engineer has certified that he is highly confident that the
Completion Date for Phase 1 will occur no later than ***
notwithstanding Phase 2's construction;
(iv) the COP Lenders shall be reasonably satisfied that (A) all reasonable
risks (construction, engineering, permittings, financial, legal and
other) to the timely and effective completion of Phase 2 shall have
been effectively mitigated and (B) the Phase 1 Loans and the COP
Lenders' rights with respect thereto (including any liens and other
credit support therefor) shall not be adversely affected;
(v) the terms of such Debt provide to the COP Lenders (A) at least 30
days notice of any default under such Debt before the Expansion
Lenders may exercise any remedies respecting such Debt and at least
60 days thereafter to cure such default, subject to extension if the
COP Lenders are diligently pursuing such cure, and (B) the right to
purchase such Debt at any time at a cash price equal to the aggregate
principal and accrued and unpaid interest outstanding plus any
applicable make whole amount, whereupon the
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EXHIBIT A
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lenders (and their representatives) of such Debt shall assign to the
COP Lenders or their representatives all of their claims, liens and
other rights in connection with such Debt upon terms and conditions
reasonably acceptable to the COP Lenders; and
(vi) the Expansion Lenders and the COP Lenders shall have agreed to
acceptable intercreditor arrangements.
Depositary Accounts:
The following accounts (collectively, the "Depositary Accounts") shall be
established with the Collateral Agent pursuant to a depositary agreement (the
"Depositary Agreement") with other accounts (if necessary to avoid commingling):
.. Revenue Account
.. O&M Account
.. COP Revenue Account
.. Expansion Revenue Account
.. Third Party Cost Overrun Revenue Account
.. Debt Payment Account
.. Crest Reserve Account
.. Distribution Suspense Account
.. Distribution Account
.. Redemption Account
.. Loss Proceeds Account
.. O&M Reserve Account
.. Major Maintenance Reserve Account
.. Working Capital Facility Reserve Account
.. Construction Account
The Borrower may elect, at any time, in lieu of funding any of such accounts
with cash, to provide Acceptable Credit Support for which the Borrower is not
the account party.
The Borrower may only withdraw funds from any Depositary Account (a) under the
circumstances set forth under "Flow of Funds" below or (b) if the Borrower has
caused to be issued Acceptable Credit Support in the amount of such withdrawal,
which Acceptable Credit Support may be released if the conditions to the
withdrawal of the applicable funds set forth under "Flow of Funds" shall have
been satisfied. Monies on deposit in the Depositary Accounts will be invested in
Permitted
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Investments in accordance with the terms of the Depositary Agreement.
Loss Proceeds shall be deposited in the appropriate account of the Loss Proceeds
Account, subject to disbursement for repair or replacement of the assets
affected, in accordance with an Approved Restoration Plan, and provided that,
prior to the initial release of funds for such repair or replacement, (i) the
COP Lenders receive a copy of the Approved Restoration Plan and (ii) for the
initial and each subsequent release of funds, the Collateral Agent receives an
executed Restoration Requisition and Independent Engineer's certificate each in
form and substance reasonably satisfactory to the COP Lenders or such release is
in connection with a mandatory redemption, as the case may be.
Redemption Account shall contain funds to be applied to repay Debt subject to
redemption as described under "Optional Redemption" and "Mandatory Redemption."
Flow of Funds:
Proceeds of all Cost Overrun Debt shall be deposited into the Construction
Account. The Contractor (its guarantor or sureties) shall deposit all payments
to the Borrower under the Construction Contracts into the Construction Account.
All proceeds of any capacity reservation fees shall be paid directly to the
Borrower and used only to pay income taxes payable by the Partnership or
Partners on such payments, to pay a $*** million payable to Cheniere under the
Partnership Agreement or to be retained by the Borrower to pay expansion,
development and construction costs of the Project.
All proceeds of any drawing on the Acceptable Credit Support shall be deposited
into the Depositary Account for which funding obligations such Acceptable Credit
Support has been provided.
Except as otherwise described, the Borrower will provide irrevocable
instructions to deposit all other available cash flow, Revenues and proceeds of
business interruption insurance (collectively, "Cash Flows") into the Revenue
Account.
Distinct Revenue Accounts:
COP Revenue Account:
COP Shipper shall deposit payments to the Borrower in respect of the COP TUA in
a segregated account of the Revenue Account (the "COP Revenue Account"), except
that, while
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EXHIBIT A
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Expansion Debt is outstanding, the COP Royalty shall be paid to the Expansion
Revenue Account. Amounts in the COP Revenue Account shall be distributed as
follows:
So long as no Event of Default has occurred and is continuing, all amounts on
deposit in the COP Revenue Account will be distributed on a monthly basis in the
following order of priority upon receipt of a certificate from the COP Lenders
detailing the amounts to be paid:
1) to the O&M Account in an amount equal to a percentage calculated by
reference to the COP TUA (the "COP O&M Percentage") (as established from
time to time in the Operating Budget) of the Operating and Maintenance
Costs for such month;
2) to a segregated account for the payment of the next scheduled Payment Date
(the "COP Debt Payment Account") in an amount equal to the Debt Service
Payment due to the COP Lenders on the next Payment Date;
3) to the deposit reserve account, the COP O&M Percentage of the next two
months' payments of the Operating and Maintenance Costs (the "O&M Reserve
Account"); and
4) with any amounts remaining to be deposited into the Revenue Account.
Third Party Cost Overrun Reserve Accounts:
If any Third Party Cost Overrun Loans are outstanding, the Other Phase 1
Shippers shall deposit payments to the Borrower in respect of the Other Phase 1
TUAs in a segregated account of the Revenue Account (the "Third Party Cost
Overrun Revenue Account"). The COP Shipper shall deposit the COP Royalty in the
Third Party Cost Overrun Revenue Account. Amounts in the Third Party Cost
Overrun Revenue Account shall be distributed as follows:
So long as no Event of Default has occurred and is continuing, all amounts on
deposit in the Third Party Cost Overrun Revenue Account will be distributed on a
monthly basis in the following order of priority upon receipt of a certificate
from the Third Party Cost Overrun Lenders detailing the amounts to be paid:
1) to the O&M Account in an amount equal to a percentage (the "Third Party
Cost Overrun O&M Percentage") (as established from time to time in the
Operating Budget) of
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EXHIBIT A
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the Operating and Maintenance Costs for such month;
2) to a segregated account for the payment of the next scheduled Payment Date
(the "Third Party Cost Overrun Debt Payment Account") in an amount equal to
the Debt Service Payment due to the Third Party Cost Overrun Lenders on the
next Payment Date;
3) to the O&M Reserve Account, the Third Party Cost Overrun O&M Percentage of
the next two months' payments under the Operating and Maintenance Costs;
and
4) to a segregated account for the payment of the next scheduled Payment Date
(the "Third Party Cost Overrun Debt Reserve Account") in an amount equal to
the Third Party Cost Overrun Debt Service Reserve Requirement, if any;
5) with any amounts remaining to be deposited into the Revenue Account.
Expansion Reserve Accounts:
If any Expansion Loans are outstanding, the Expansion Shippers shall deposit
payments to the Borrower in respect of the Expansion TUA in a segregated account
of the Revenue Account (the "Expansion Revenue Account"), the COP Shipper shall
deposit the COP Royalty into the Expansion Revenue Account if Expansion Debt is
outstanding, and the Other Phase 1 Shippers shall deposit payments to the
Borrower in respect of the Other Phase 1 TUAs in the Expansion Revenue Account.
Amounts in the Expansion Revenue Account shall be distributed as follows:
So long as no Event of Default has occurred and is continuing, all amounts on
deposit in the Expansion Revenue Account will be distributed on a monthly basis
in the following order of priority upon receipt of a certificate from the
Expansion Lenders detailing the amounts to be paid:
1) to the O&M Account in an amount equal to a percentage (the "Expansion O&M
Percentage") (as established from time to time in the Operating Budget) of
the Operating and Maintenance Costs for such month;
2) to a segregated account for the payment of the next scheduled Payment Date
(the "Expansion Debt Payment Account") in an amount equal to the Debt
Service Payment due to the Expansion Lenders on the next
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EXHIBIT A
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Payment Date;
3) to the O&M Reserve Account, the Expansion O&M Percentage of the next two
months' payments of the Operating and Maintenance Costs (the "O&M Reserve
Account"); and
4) to a segregated account for the payment of the next scheduled Payment Date
(the "Expansion Debt Reserve Account") in an amount equal to the Expansion
Debt Service Reserve Requirement, if any;
5) with any amounts remaining to be deposited into the Revenue Account.
Revenue Account Disbursements:
So long as no Event of Default has occurred and is continuing, all amounts on
deposit in the Revenue Account will be distributed on a monthly basis in the
following order of priority upon receipt of a certificate from an Authorized
Officer of the Borrower detailing the amounts to be paid (taking into
consideration any Acceptable Credit Support):
1) to the O&M Account to be used by the Borrower to pay Operating and
Maintenance Costs up to an amount equal to the Operating and Maintenance
Costs due in the next month; provided that a portion of the Operating and
Maintenance Costs for the Project in an amount equal to the applicable
Major Maintenance Reserve Requirement shall be transferred to the Major
Maintenance Reserve Account (if the Independent Engineer determines that a
Major Maintenance Reserve Account is necessary);
2) to the O&M Reserve Account up to an amount equal to Operating and
Maintenance Costs for the two next succeeding months;
3) to the Debt Payment Account to pay principal of, interest on, and any other
amounts due in respect of the Loans (to the extent not covered by the
amounts in the COP Debt Payment Account, the Third Party Cost Overrun
Payment Account, the Expansion Debt Payment Account), and any other senior
Permitted Debt of the Borrower incurred pursuant to subclauses 1(a) through
1(d) of Appendix IV, up to an amount equal to the sum of all amounts due
(i) as interest and such fees during the current quarterly
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EXHIBIT A
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period and (ii) as principal during the current quarterly period;
4) to the Working Capital Facility Reserve in an amount equal to the amounts
outstanding on the Working Capital Facility;
5) to a segregated account (the "COP Cost Overrun Debt Payment Account") an
amount up to the unpaid amounts owing on the COP Cost Overrun Obligations
until the COP Cost Overrun Obligations are paid in full;
6) to the Crest Reserve Account up to an amount such that the balance therein
equals the amount payable to Crest Investment Company under the Settlement
and Purchase Agreement dated as of June 14, 2001, among Crest Investment
Company ("Crest"), Cheniere Energy and the other parties thereto, as in
effect on the date hereof (the "Crest Agreement"), for the current month,
if any;
7) to the Distribution Suspense Account for further transfer as follows:
(i) First, prior to Completion, to the Construction Account, to fund
Construction Costs;
(ii) in the event that the O&M Account, any Debt Payment Account, the O&M
Reserve Account, the Major Maintenance Reserve Account, the
Redemption Account, Debt Service Requirements, the Crest Reserve
Account or the Working Capital Facility Reserve are not fully funded
to the extent, if any, required, cash available in the Distribution
Suspense Account shall be deposited into such accounts, as necessary,
to cover any such shortfall; and
(iii) to the Distribution Account to make Distribution, and Restricted
Payments as set forth below under the Section entitled "Distributions
and Restricted Payments."
Construction Account:
The Borrower will use the proceeds of the Phase 1 Loans to repay or reimburse
the Partners, the Borrower and their Affiliates for Budgeted Construction Costs
incurred by or on behalf of the Borrower or its Affiliates in respect of the
Project prior to the Completion Date as certified by the Independent
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EXHIBIT A
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Engineer. Payments under the Construction Contracts will be funded as described
below with the proceeds of the Equity Contributions and other amounts deposited
into the Construction Account.
Amounts will be disbursed from the Construction Account upon receipt by the
Depositary Bank of a certificate from an Authorized Officer of the Borrower
delivered to the Depositary Bank no less than seven days prior to the applicable
drawdown date certifying that:
(a) [$_______] is requested to be drawn to pay Budgeted Construction Costs and
that such Budgeted Construction Costs have been paid, are due and payable
or are reasonably expected to be due and payable within the next 10 days;
and
(b) all other conditions to the advance of a Phase 1 Loan under the "Conditions
to Advance of All Phase 1 Loans" shall have been satisfied.
On and from the Completion Date, excess funds on deposit in the
Construction Account shall be deposited in the COP Revenue Account for
distribution to the other Depository Accounts or in the order set forth
under "Flow of Funds."
EPC Contractor:
Technip USA Corporation or other Person acceptable to the Lenders.
Distributions and Restricted Payments:
Distributions to the Partners and other Restricted Payments will be made
quarterly, only from and to the extent of monies in the Distribution Suspense
Account; provided that, on such distribution dates each of the following
conditions (the "Distribution Conditions") has been satisfied:
1) the Project has reached Completion;
2) no Default or Event of Default has occurred and is continuing;
3) if during the Test Period, the Projected Debt Service Coverage Ratio for
the 12 month period succeeding such distribution date shall each be greater
than or equal to *** and the calculation thereof shall be certified by an
Authorized Officer of the Borrower;
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EXHIBIT A
LOAN TERM SHEET
4) each of the Debt Payment Accounts and related accounts (taking into account
any Acceptable Credit Support) is fully funded with an amount equal to the
aggregate of all amounts due in respect of the Loans and other Permitted
Debt incurred pursuant to subclauses 1(a) through 1(c) of Appendix IV,
including without limitation, principal, interest and fees on the Phase 1
Loans, for the current quarterly period; and
5) the other Depositary Accounts (taking into account Acceptable Credit
Support) shall have been funded to their required levels, if any, as of
such date.
Monies not able to be transferred from the Distribution Suspense Account to the
Distribution Account shall remain on deposit in the Distribution Suspense
Account and shall be used to make required payments when monies on deposit in
the other Depositary Accounts are insufficient to make such payments.
Notwithstanding the foregoing, if Acceptable Credit Support is in place for any
amount otherwise required to be deposited in cash in any Depositary Account, the
Borrower may receive distributions in an amount equal to the aggregate amount of
cash in lieu of which the Borrower has placed Acceptable Credit Support.
Representations and Warranties:
The Credit Agreement shall include, subject to ongoing due diligence, the
representations and warranties set forth in Appendix II hereto.
Affirmative Covenants:
The Credit Agreement shall include, subject to ongoing due diligence, the
affirmative covenants of the Borrower set forth in Appendix III hereto.
Negative Covenants:
The Credit Agreement shall include, subject to ongoing due diligence, the
negative covenants of the Borrower set forth in Appendix IV hereto.
Events of Default:
The Credit Agreement shall include, subject to ongoing due diligence, the Events
of Default set forth in Appendix V hereto.
Remedies:
The Credit Agreement shall include all remedies provided at law and equity and
other remedies customarily included in similar documents.
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Cost Overrun Debt Trigger Event:
The MS Directors (as defined in the Stockholders Agreement) will provide cost
overrun financing of Phase 1 by causing capital calls to be made on the Partners
or arranging for Third Party Cost Overrun Debt for ***% of any Cost Overruns on
Phase 1 constituting Project Shortfalls. If they fail to so provide such
arrangements supported by Acceptable Credit Support within *** days after
receipt of notice that a Projected Shortfall is expected by the Independent
Engineer to occur within the next 12 months, the COP Cost Overrun Lender shall
provide the COP Cost Overrun Loans as described herein.
Upon Completion (as confirmed by the Independent Engineer) the obligations of
the MS Directors to provide such cost overrun financing shall be terminated.
Any Third Party Cost Overrun Debt shall contain terms satisfactory to the COP
Lenders, including that the terms of such Debt provide to the COP Lenders (A) at
least 30 days notice of any default under such Debt before the Cost Overrun
Lenders may exercise any remedies respecting such Debt and at least 60 days
thereafter to cure such default, subject to extension if the COP Lenders are
diligently pursuing such cure, and (B) the right to purchase such Debt at any
time at a cash price equal to the aggregate principal and accrued and unpaid
interest outstanding plus a make whole amount, whereupon the lenders (and their
representatives) of such Debt shall assign to the COP Lenders or their
representatives all of their claims, liens and other rights in connection with
such Debt upon terms and conditions reasonably acceptable to the COP Lenders).
Acceptable Credit Support:
"Acceptable Credit Support" means cash pledged or any letter of credit or
guarantee issued for the account of a Person other than the Borrower by
financial institutions or other Person rated at least "A-" by S&P and "A3" by
Xxxxx'x in respect of which the Borrower is not an obligor.
"Acceptable Credit Support Issuer" means a Person issuing or primarily obligated
on any Acceptable Credit Support.
If any existing Acceptable Credit Support ceases to constitute Acceptable Credit
Support or is not renewed at least 30 days before it is scheduled to expire,
substitute Acceptable Credit Support meeting the requirements shall be provided
within three Business Days of such event or the Collateral Agent shall be
entitled to draw on such Acceptable Credit Support.
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EXHIBIT A
LOAN TERM SHEET
OTHER TERMS
Documentation:
The Financing Documents shall contain terms and conditions customary for
transactions of this type and be in form and substance reasonably satisfactory
to the COP Lenders and the Borrower.
Tax Reporting:
Borrower and COP Lenders shall report the Phase 1 Loans and any COP Cost Overrun
Loans as loan transactions for federal income tax purposes.
Governing Law:
State of New York/Texas.
Collateral Agent and Depositary Bank:
A bank or trust company located in New York to be selected by the COP Lenders in
consultation with the Borrower. The institution serving as the Depositary Bank
shall also serve as the Collateral Agent.
Independent Engineer:
_______________________________.
Counsel to the COP Lenders:
Xxxxx Xxxxx L.L.P.
Counsel to the Borrower:
_______________________________.
Voting:
Amendments and waivers of the definitive credit documentation and exercise of
certain remedies will require the approval of COP Lenders (the "Required
Lenders") holding more than ***% of the aggregate amount of commitments and/or
outstandings (as appropriate) under the Credit Agreement, provided that the
consent of each COP Lender adversely affected thereby shall be required in
connection with (but not limited to) the following: (a) reductions of principal,
interest or fees; (b) extensions of final maturity; and (c) releases of all or
substantially all of the collateral securing the Borrower's obligations under
the Credit Agreement.
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Assignments and Participations:
The Borrower may not assign its rights or obligations under the Credit
Agreement. Any COP Lender may assign, and may sell participations in, its rights
and obligations under the Credit Agreement, subject (x) in the case of
participations, to customary restrictions on the voting rights of the
participants and (y) in the case of assignments, to such limitations as may be
established by the Collateral Agent and the COP Lenders (including (i) a minimum
assignment amount to be established by the Collateral Agent and the COP Lenders
(or, if less, the entire amount of such assignor's commitments and outstanding
obligations at such time) and (ii) an assignment fee in the amount of $*** to be
paid by the respective assignor or assignee to the Collateral Agent. Borrower
agrees to take all actions reasonably requested by the COP Lenders to assist in
Lenders' sale of the Phase 1 Loans.
Expenses and Indemnification:
The Borrower will indemnify the Collateral Agent and the COP Lenders and hold
them harmless from and against all losses, costs, expenses (including reasonable
fees, disbursements and other charges of counsel) and liabilities of the
Collateral Agent and the COP Lenders arising out of or relating to the
transaction contemplated hereby or the Credit Agreement, including any claim or
any litigation or other proceeding (regardless of whether the Borrower, the
Collateral Agent or any COP Lender is a party thereto) that relates to any
transaction connected therewith, including the financing contemplated hereby,
PROVIDED THAT NONE OF THE COLLATERAL AGENT OR ANY LENDER WILL BE INDEMNIFIED FOR
ANY COST TO THE EXTENT ARISING FROM ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
(AS DETERMINED BY A COURT OF COMPETENT JURISDICTION IN A FINAL NON-APPEALABLE
DECISION). In addition, all out-of-pocket expenses of the Collateral Agent and
the COP Lenders for enforcement costs and documentary taxes associated with the
Credit Agreement are to be paid by the Borrower.
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EXHIBIT A
LOAN TERM SHEET
Appendix I
Defined Terms
-------------
"Acceptable Credit Support" has the meaning set forth under the section entitled
"Acceptable Credit Support."
"Acceptable Credit Support Issuer" has the meaning set forth under the section
entitled "Acceptable Credit Support."
"Acceptable Use Agreement" means a use agreement in respect of which or that (a)
the counterparty of which or the credit support provider for such counterparty
(including any parent of such counterparty which guarantees such counterparty's
obligations) is rated at least BBB- by S&P and at least Baa3 by Xxxxx'x, (b) has
a minimum term remaining at the time of determination of at least two years and
(c) the pricing and commercial terms that are fair and reasonable and of the
kind which would be entered into by a prudent Person in the position of the
Borrower.
"Additional TUAs" has the meaning assigned to such term in the Stockholders
Agreement.
"Affiliate" means, as to any Person, any subsidiary of such Person and any other
Person which, directly or indirectly, controls or is controlled by or under
direct or indirect common control with such specified Person. For the purposes
of this definition, "control," when used with respect to any Person, means the
possession of the power to direct or cause the direction of management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing, no individual shall be an Affiliate of any Person solely by reason of
his or her being a director, manager, officer or employee of such Person and
none of COP or its Affiliates shall be deemed to be Affiliates of the Borrower
or its other Affiliates.
"Affiliate Payment" means any payments made or amounts distributed by or on
behalf of the Borrower to an Affiliate of any Partner in connection with the
Project pursuant to a written agreement that are not reimbursements of
reasonable expenses incurred on behalf of the Borrower or reasonable
consideration for services rendered to the Borrower.
"Applicable Law" means, with respect to any Person, property or matter, any of
the following applicable thereto: any statute, law, regulation, ordinance, rule,
judgment, rule of common law, order, decree, Governmental Approval, approval,
concession, grant, franchise, license, agreement, directive, guideline, policy,
requirement or other governmental restriction or any similar form of decision
of, or determination by, or any interpretation or administration of any of the
foregoing by, any Governmental Authority, in each case as amended.
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EXHIBIT A
LOAN TERM SHEET
"Approved Hedging Agreements" means capacity sales, fuel supply, commodity,
interest rate, contracts or other types of hedging arrangements that are in
accordance with a framework to be agreed from time to time with the COP Lenders.
Such framework agreement will outline the terms and conditions required for
Approved Hedging Agreements. In the absence of such framework agreement,
Approved Hedging Agreements shall mean any type of hedging arrangement entered
into in the ordinary course of business in connection with the ownership,
operation and maintenance of the Project, except for arrangements entered into
for speculative purpose, including speculative transactions relating to (x) fuel
procurement or sales, (y) purchase, sales or exchanges related to capacity from
the Borrower or financial instruments related thereto or (x) purchase, sales or
exchanges of energy or emission credits.
"Approved Restoration Plan" means a plan submitted to and approved by the
Independent Engineer which provides for the repair or rebuilding of all or any
portion of the Project and which is accompanied by a certificate of (A) the
Independent Engineer certifying that in its professional judgment (i) such plan
is reasonable and technically feasible and is reasonably expected to restore the
Project to at least as good condition or state of repair as it was in prior to
such Event of Loss or its original specifications, (ii) after taking into
consideration the availability of Loss Proceeds and such other proceeds
available for the repair or restoration of the Project, there will be adequate
cash flow during the period of repair or restoration to pay all ongoing expenses
as they become due, including Debt Service due on the Loans, and the Borrower's
ability to pay such expenses will not be materially adversely affected following
such repair and (iii) if the Project has not yet reached Completion, the repair
or restoration in accordance with the plan will not materially adversely affect
the construction budget or construction schedule of such Project and (B) the
Borrower certifying that the repair or restoration of the Project in accordance
with the plan or the operation of the Project following such repair will not
violate in any material respect (x) the terms of any other Transaction Document,
(y) Applicable Law or (z) any of the Project's Governmental Approvals.
"Authorized Officer" means, with respect to any Person, the chief executive
officer, president, chief financial officer, general counsel, principal
accounting officer or any vice president of such Person.
"Base Case Projections" means the projections of the Borrower as of the Closing
Date as confirmed by, and set forth in the report of, the Independent Engineer.
"Budgeted Construction Cost" means the anticipated Construction Cost of the
Project excluding the initial funding of the O&M Account, the O&M Reserve
Account and the Debt Payment Accounts, as confirmed by the Independent Engineer
and set forth in the construction budget as of the Closing Date and included in
the Approved Budget, with some level of initial working capital as agreed
between the COP Lender and the Borrower.
"Business Day" means any day that is not a Saturday, Sunday or legal holiday in
the State of Texas, or a day on which banking institutions chartered by the
State of Texas, or the United States, are legally required or authorized to
close.
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"Capitalized Lease Liabilities" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"Cash Flows" has the meaning provided under the section entitled "Flow of
Funds."
"Closing Date" means the date of the execution and delivery by the Borrower of
the Phase 1 Loans.
"Completion" means confirmation by the Independent Engineer that Phase 1 of the
Project has achieved "Project Completion" in accordance with a completion test
for Phase 1 of the Project designed by the Independent Engineer in consultation
with the Construction Advisor, the Borrower and the COP Lenders covering
construction, engineering, permittings, financial, legal and other matters.
"Completion Date" means the date on which the Project has reached Completion.
"Consents" means (1) the consent and agreement between the EPC Contractor, the
Borrower and the Collateral Agent dated as of the Closing Date (2) the consent
and agreement between the Brazos River Harbor Navigation District, the Borrower
and the Collateral Agent dated as of the Closing Date, (3) consent and agreement
in respect of each of (a) an Acceptable Use Agreement with a capacity of more
than ___ bcf/day, (b) any guarantee of any such Acceptable Use Agreements, (c)
the ______________ and (d) the _______________ Agreement.
"Construction Advisor" means COP entity as construction advisor pursuant to the
Construction Advisory Services Agreement.
"Construction Advisory Agreement" means the Construction Advisory Services
Agreement to be entered into between the Borrower and the Construction Advisor.
"Construction Contracts" means, collectively the EPC Contract and any other
agreement for the engineering, procurement, installation or construction of
Phase 1 of the Project, including to construct the pipeline interconnection from
the Project to Xxxxxxxx Xxxxx, Xxxxx.
"Construction Costs" means all payments under the EPC Contract, all operating
and maintenance costs during the construction of Phase 1 and the cost of minimum
volumes of LNG and gas necessary to commence normal commercial operations of the
LNG terminal and pipeline for Phase 1, excluding any development or other costs
for Phase 2.
"Credit Agreement" has the meaning set forth under the section entitled
"Documentation."
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"Debt" of any Person means, without duplication, (i) all obligations of such
Person for borrowed money; (ii) all obligations issued, undertaken or assumed as
the deferred purchase price of property or services which purchase price is due
more than six months from the date of incurrence of the obligation in respect
thereof or is evidenced by a note or other instrument, except trade accounts
arising in the ordinary course of business; (iii) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses; (iv) all obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by the Person; (v) (A) all Capitalized Lease Liabilities and (B)
Operating Lease Liabilities that are entered into in the ordinary course of
business in an aggregate amount in excess of $*** in rental payments annually;
(vi) all net payment obligations with respect to interest rate cap agreements,
interest rate swap agreements, sales of foreign exchange options and other
hedging agreements or arrangements; (vii) all payment obligations, contingent or
otherwise, of such Person as an account party in respect of letters of credit
and letters of guarantee; (viii) Project capacity rights, terminal use
agreements, leases or other agreements of such Person or binding on its property
with respect to which any payments receivable by such Person in any *** period
is in excess of ***% of the projected average annual payments thereunder and
weighted average life of such payment flow is not not less than, (ix) all Debt
referred to in clauses (i) through (viii) above secured by (or for which the
holder of such Debt has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including accounts and contracts
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Debt; and (x) all Guarantees by such Person of
the Debt of others. The Debt of any Person shall include the Debt of any other
entity (including any partnership in which such Person is a general partner) to
the extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Debt provide that such Person is not liable therefor.
"Debt Service" means, for any period and Debt, the obligation to pay principal
of and interest on such Debt during such period.
"Debt Service Coverage Ratio" means for any period, without duplication, the
ratio of (a) the sum of all Cash Flows of the Borrower during such period less
the aggregate amount of the Operating and Maintenance Costs (including, without
limitation, amounts to be deposited in the Major Maintenance Reserve Account
during such period) for the Borrower for such period to (b) the sum of all
principal, premium (if any) and interest due and payable with respect to the
Loans and other Permitted Debt outstanding.
"Debtor Relief Law" means any applicable liquidation, dissolution,
conservatorship, bankruptcy, moratorium, rearrangement, insolvency,
reorganization, readjustment of debt or similar law affecting the rights or
remedies of creditors generally, as in effect from time to time.
"Default" means any event or condition that, with the giving of notice, the
passage of time or both, would become an Event of Default.
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"Distribution Conditions" has the meaning provided under the section entitled
"Distributions."
"EPC Contract" means.collectively, the engineering, procurement and construction
contract to be entered into between the Borrower and the EPC Contractor for the
construction of certain work on Phase 1 and the engineering, procurement and
construction contract to be entered into between the Borrower for the pipeline
for Phase 1.
"EPC Contractor" means Technip (USA) or another Person acceptable to the COP
Lenders.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" shall mean (a) a corporation which is a member of a controlled
group of corporations with the Borrower within the meaning of Section 414(b) of
the Code, (b) a trade or business (including a sole proprietorship, partnership,
trust, estate or corporation) which is under common control with the Borrower
within the meaning of Section 414(c) of the Code or Section 4001(b)(1) of ERISA,
(c) a member of an affiliated service group with the Borrower within the meaning
of Section 414(m) of the Code or (d) an entity described in Section 414(o) of
the Code.
"Event of Default" means an event of default under the Credit Agreement.
"Event of Loss" means an event that causes all or a material part of the Project
to be damaged, destroyed or rendered unfit for normal use for any reason
whatsoever, or any compulsory transfer or taking, or transfer under threat of
compulsory transfer or taking, of any material part of the Project by any
Governmental Authority.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expansion Debt Amount" has the meaning assigned to such term under the caption
"Expansion Loans."
"Federal Bankruptcy Code" means Title 11, Section 101 et seq. of the United
States Code titled "Bankruptcy," as amended from time to time, and any successor
statute thereto.
"FERC Approval" means issuance by the Federal Energy Regulatory Commission of
the order granting authorization under Section 3(a) of the Natural Gas Act
(available at 15 U.S.C. Section 717(c)) for Phase I, pursuant to the application
filed by Freeport LNG with the Federal Energy Regulatory Commission on March 28,
2003.
"Financing Documents" means, collectively, the notes, the Credit Agreement, the
Depositary Agreement, the Security Documents and any other similar or related
documents executed in connection with the making of the Loans other than
opinions and certificates.
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"Governmental Approval" means any action, order, authorization, consent,
approval, license, lease, ruling, permit, tariff, rate, certification,
exemption, filing or registration by or with any Governmental Authority.
"Governmental Authority" means the government of any federal, state, municipal
or other political subdivision in which the Project is located, and any other
government or political subdivision thereof exercising jurisdiction over the
Project or any party to any of the Project Documents, including all agencies and
instrumentalities of such governments and political subdivisions.
"Guarantee" of or by any Person means any obligation, contingent or otherwise,
of such Person guaranteeing or having the economic effect of guaranteeing any
Debt or other obligation of any other Person in any manner, whether directly or
indirectly, and including any obligation of such guarantying Person, direct or
indirect, (a) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Debt or other obligation of the payment thereof, (c) to
maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Debt or other obligation or (d) as an account party in
respect of any letter of credit or letter of guarantee issued to support such
Debt or obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
"Independent Engineer" means ___________________ or a successor appointed
pursuant to the Financing Documents.
"Intercreditor Agreement" means the Collateral Agency and Intercreditor
Agreement, dated as of the Closing Date, to be entered into among the Borrower,
the Collateral Agent, the Depositary Bank, the COP Lenders, the Third Party Cost
Overrun Lenders, the COP Cost Overrun Lenders and the Expansion Lenders.
"Lien" means any mortgage, pledge, hypothecation, assignment, mandatory deposit
arrangement with any Person owning Debt of such Person, encumbrance, lien
(statutory or other), preference, priority or other security agreement of any
kind or nature whatsoever which has the substantial effect of constituting a
security interest, including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the same
effect as any of the foregoing and the filing of any financing statement or
similar instrument under the Uniform Commercial Code or comparable law of any
jurisdiction, domestic or foreign.
"Loans" means, unless the context otherwise indicates, collectively, the Phase 1
Loans, the COP Cost Overrun Loans, the Third Party Cost Overrun Loans and the
Expansion Loans.
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"Loss Proceeds" means all net proceeds from an Event of Loss, including, without
limitation, insurance proceeds or other amounts actually received on account of
an Event of Loss, but excluding proceeds of business interruption insurance.
"Major Maintenance Expenses" means all expenditures by the Borrower on regularly
scheduled (or reasonably anticipated) maintenance of the Project in accordance
with good industry practice and vendor and supplier requirements constituting
major maintenance (including, without limitation, teardowns, turnarounds,
overhauls, capital improvements, replacements and/or refurbishments of major
components of the Project).
"Major Maintenance Reserve Requirement" means the aggregate of that portion of
the Operating and Maintenance Costs for the Project equal to the amount the
Borrower projects it will need in the succeeding ___-month period for Major
Maintenance Expenses, as such amount may be adjusted from time to time based
upon actual operating results. The Independent Engineer shall review such
projected amounts and, if necessary, provide the Borrower with its
recommendations for adjustments to such amounts.
"Material Adverse Effect" means a material adverse effect on (i) the condition
(financial or otherwise), results of operation or business of the Borrower, (ii)
the ability of the Borrower, any guarantor of the obligations of the Borrower
under the Financing Documents, to perform its obligations under any of the
Financing Documents, (iii) the validity or priority of the Liens on the
Collateral, (iv) the ability of the Borrower to perform its material obligations
under the Credit Agreement, the Loans or any of the other Financing Documents,
or (v) the ability of the Borrower to perform its obligations under any Project
Document.
"Moody's" means Xxxxx'x Investors Services, Inc.
"Mortgage" means the leasehold deed of trust, mortgage, security agreement and
assignment of leases and rents, dated as of the Closing Date between the
Borrower and the Collateral Agent.
"Multiemployer Plan" shall mean a plan that is a multiemployer plan within the
meaning of Section 4001(a)(3) of ERISA to which the Borrower or any ERISA
Affiliate is making, or has an obligation to make, contributions or had made, or
has been obligated to make, contributions since the Closing Date.
"O&M Agreement" means Operation and Maintenance Agreement to be entered into
between the Operator and the Borrower.
"Operating Budget" means the annual budget for the Project, including Operating
and Maintenance Costs, as prepared by the Operator in consultation with the
Borrower.
"Operating Lease Liability" of any Person means all monetary obligations of such
Person other than Capitalized Lease Liabilities under any lease of (or other
arrangement conveying the right to
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EXHIBIT A
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use) real or personal property of such Person, or a combination thereof, and,
for purposes of each Financing Document, the amount of such obligations shall be
the termination value of such lease.
"Operating and Maintenance Costs" means (a) all amounts disbursed by or on
behalf of the Borrower for operation, maintenance (including Major Maintenance
Expenses), repair or improvement of the Project, including, without limitation,
premiums on insurance policies, property and other taxes, and payments under the
relevant operating and maintenance agreements, leases, royalty and other land
agreements, and any other payments required under the applicable Project
Documents, including the approved salaries and expenses of the Borrower's
employees, or for the administration or performance of the Transaction
Documents, and (b) all fees and other amounts due and owing to the Collateral
Agent and Depositary Bank, provided however, that this term shall not include
any Affiliate Payment, other Restricted Payment or amounts payable under the
Crest Agreement or amounts paid for the development, construction and operation
of Phase 2.
"Operator" means a _____________ corporation.
"Partnership Agreement" means the Amended and Restated Agreement of Freeport LNG
Development, L.P. dated as of February 27, 2003.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" shall mean any pension plan within the meaning of Section 3(2) of
ERISA, including any multiemployer pension plan which is subject to the
provisions of Title I and IV of ERISA or Section 412 of the Code and which (a)
is established, sponsored, maintained or administered by the Borrower or any
ERISA Affiliate or for which the Borrower or any ERISA Affiliate has an
obligation to contribute or any liability or in which the Borrower or any ERISA
Affiliate participates, or (b) has at any time since the Closing Date been
established, sponsored, maintained, or administered on behalf of employees of
the Borrower or any of its current or former ERISA Affiliates or for which the
Borrower or any of its current or former ERISA Affiliates had an obligation to
contribute or any liability or in which the Borrower or any of its current or
former ERISA Affiliates participated.
"Performance Liquidated Damages" means any sums received by or on behalf of the
Borrower pursuant to the EPC Contract pursuant to such agreement to meet the
performance standards set forth in the EPC Contract.
"Permitted Debt" has the meaning set forth in paragraph (1) of Appendix IV.
"Permitted Investments" means mean, as to any Person: (i) securities issued or
directly and fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities
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of not more than one (1) year from the date of acquisition by such Person; (ii)
time deposits and certificates of deposit, with maturities of not more than one
(1) year from the date of acquisition by such Person of any commercial bank of
recognized standing having combined capital and surplus in excess of $*** and
having a rating on its commercial paper of at least A-1 or the equivalent
thereof by S&P or at least P-1 or the equivalent thereof by Moody's; (iii)
commercial paper issued by any Person, which commercial paper is rated at least
A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof
by Moody's and matures not more than one (1) year after the date of acquisition
by such Person; (iv) investments in money market funds substantially all the
assets of which are comprised of securities of the types described in clauses
(i) and (ii) above, (v) United States Securities and Exchange Commission
registered money market mutual funds conforming to Rule 2a-7 of the Investment
Company Act of 1940 if in effect in the United States, that invest primarily in
direct obligations issued by the United States Treasury and repurchase
obligations backed by those obligations, and rated in one of the two the highest
category by S&P and Moody's, (vi) investments in repurchase agreements having a
term not more than seven (7) days for underlying securities of the types
described in clauses (i) and (ii) above, and (vii) tax exempt securities rated
at least A, MIG1 or VMIG1 by Moody's and A or SP-1 by S&P.
"Permitted Liens" has the meaning set forth in paragraph (2) of Appendix IV.
"Person" means any individual, sole proprietorship, corporation, partnership,
joint venture, limited partnership, limited liability partnership, limited
liability company, trust, unincorporated association, institution, Governmental
Authority or any other entity.
"Plan" shall mean any employee benefit plan within the meaning of Section 3(3)
of ERISA, subject to Title I of ERISA, which (a) is established, sponsored,
maintained or administered by the Borrower or any ERISA Affiliate, or for which
the Borrower or any ERISA Affiliate has an obligation to contribute or any
liability or in which the Borrower or any ERISA Affiliate participates, or (b)
has since the Closing Date been established, sponsored, maintained or
administered for employees of the Borrower or any of its current or former ERISA
Affiliates or for which the Borrower or any of its current or former ERISA
Affiliates had an obligation to contribute or any liability or in which the
Borrower or any of its current or former ERISA Affiliates participated.
"Pledge Agreement" means each of the pledge agreements made by and General
Partner or its Affiliates in favor of the Collateral Agent.
"Project Document" means any terminal use agreement, operation and maintenance
agreement, any Debt Service guarantee, the Partnership Agreement and other
material constituent documents of the Borrower, engineering contract,
construction contract, terminal use agreement, transportation agreement,
capacity rights agreement, interconnection agreement or other material agreement
related to the construction ownership, maintenance and operation of the Project.
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"Projected Debt Service Coverage Ratio" means, for any period and on any date of
determination, a projection of the Debt Service Coverage Ratio for such period
using only the Cash Flows from Acceptable Use Agreements with a term of at least
two years remaining after the date of determination in the projection of Cash
Flows and revenues.
"Project Site" means the real estate in Brazoria County, Texas, where the
Project is located.
"Replacement Project Document" means one or more Project Documents that replace
an existing Project Document, and contain terms and conditions that as
reasonably determined in good faith by the Borrower's General Partner, in the
aggregate, are not materially worse than those of the Project Document that is
being replaced.
"Restricted Payment" means, with respect to any Person, (i) the declaration and
payment of distributions, dividends or any other similar payment made to equity
owners of such Person in cash, property, obligations or other securities, (ii)
any payment of the principal of or interest on any Subordinated Debt (iii) the
making of any loan, advances or other credit extension to any Affiliate or (iv)
any Affiliate Payment.
"Revenues" means the revenues or income calculated on a cash basis and
recognized pursuant to the terms of the relevant Project Documents.
"S&P" means Standard & Poor's Rating Group.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means the security and assignment agreement between the
Borrower and the Collateral Agent dated as of the Closing Date.
"Security Documents" means the Pledge Agreement, the Mortgage, the Security
Agreement, the Consents and any other documents necessary to create a security
interest in any of the Collateral.
"Termination Event" shall mean certain events under ERISA that would reasonably
be expected to result in a Material Adverse Effect.
"Test Period" means, for any distribution date, the period beginning one year
prior to such distribution date and ending one year after such distribution
date, provided however, that with respect to any Merchant Period, the "Test
Period" shall mean the period beginning one year prior to such distribution date
and ending two years after such distribution date. Computations with respect to
each Test Period shall be based on projections provided by the Borrower and
certified by an Authorized Officer of the Borrower and verified by the
Independent Engineer regarding the rates and assumptions used by the Borrower.
"Transaction Documents" means the Financing Documents and the Project Documents.
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"Working Capital Facility" means the working capital facility pursuant to which
Debt permitted by subclauses 1(d) of Appendix IV is outstanding.
All references to any agreements or laws shall include any permitted amendments,
replacements or other modifications thereto.
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Appendix II
Representations and Warranties of the Borrower
The Borrower and the General Partner shall represent and warrant for the
benefit of the Lenders as to the following items (with qualifications and
exceptions customary for transactions of this type):
(1) due organization, existence and good standing of the Borrower;
(2) full power and authority of the Borrower to execute and deliver the
Transaction Documents, and due authorization, execution, delivery and
enforceability thereof;
(3) the execution, delivery and performance by the Borrower of the
Transaction Documents does not violate or breach (i) its certificate of limited
partnership or Partnership Agreement, (ii) any Applicable Law or (iii) any other
agreement to which it is a party;
(4) no litigation, investigation or government proceeding pending, or to
the best of its knowledge, threatened against or affecting the Borrower, the
Project, the General Partner or the transactions contemplated by the Transaction
Documents other than the FERC Approval;
(5) no business conducted by the Borrower other than the development,
construction and operation of the Project and all activities related thereto;
(6) good, legal and valid title to all assets, subject to Permitted
Liens;
(7) the security documents create valid first priority security interests
in all of the Collateral, subject to only Permitted Liens;
(8) All regulatory and environmental Governmental Approval and consents
from all Governmental Authorities and third parties required to commence and
conduct construction and to own and operate the Project shall be in full force
and effect and not subject to appeal except to the extent failure to obtain such
permits, approvals, and licenses could not reasonably be expected to have an
adverse effect on the construction budget, construction, schedule or operation
or ownership of the Project except those that have not been obtained but will be
obtained by the time such approvals are required for the performance by any
project participant of any of its obligations respecting the Project and for
which none of the Borrower or the General Partner has any reason to believe that
any such approvals will not be obtained in due course prior to the time
required;
(9) All Governmental Approvals and other consents obtained or to be
obtained in paragraph 8, are free from conditions or requirements, the
compliance with which could reasonably be expected to have an adverse effect on
the construction budget, construction schedule, operation maintenance or
ownership of the Project or which any of the Borrower or the General Partner
does not reasonably expect to be able to satisfy;
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(10) all factual information (which shall not include any information by
way of projections, estimates or other expressions of view as to future
circumstances) taken as a whole, furnished by the Borrower in writing to the
Lenders was true in all material respects on the date as of which such
information was furnished and under the circumstances furnished; no omission of
a material fact (which representations shall not apply to any information by way
of projections, estimates or other expressions of view as to future
circumstances);
(11) compliance by the Borrower with all laws;
(12) the Borrower is not an investment company, a public utility or a
public utility holding company and is exempt from regulation as such;
(13) compliance by it with all applicable environmental laws, rules and
regulations, and no environmental claims and no releases or discharges of
pollutants, except where such claim, release or discharge could not reasonably
be expected to have a Material Adverse Effect;
(14) the Borrower has filed all tax returns and paid all taxes other than
any thereof which are being contested in good faith for which adequate reserves
(in accordance with US GAAP) are being maintained;
(15) no Event of Default has occurred and is continuing; no event of force
majeure, or breach or default under any Financing Document or Project Document
or other material contract has occurred and is continuing;
(16) all representations and warranties by the Borrower and to its
knowledge, each other party in any Project Document are true and correct;
(17) use of proceeds of the Loans in accordance with the Credit Agreement;
no use of proceeds to purchase margin stock;
(18) the Lenders have received a complete copy of each material Project
Document then in effect (including all exhibits, schedules and disclosure
letters referred to therein or delivered pursuant thereto, if any);
(19) to the best of the Borrower's knowledge, the services to be
performed, the materials to be supplied and the easements, licenses and other
rights granted or to be granted to the Borrower pursuant to the terms of the
Project Documents, provide or will provide the Borrower with all rights and
property interest required to enable the Borrower to obtain all services,
materials or rights (including access) required for the design, construction,
start-up, operation and maintenance of the Project, including the Borrower's
full and prompt performance of its obligations, and full and timely satisfaction
of all conditions precedent to the performance by others of their obligations,
under the Project Documents, other than those services, materials or rights that
reasonably can be expected to be obtainable in the ordinary course of business
without material additional expenses or material delay; and
(20) the Borrower has no Plans other than those listed on the Schedule
having the same number as this Section. No accumulated funding deficiency (as
defined in Section 412 of the
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Code or Section 302 of ERISA) or Reportable Event has occurred with respect to
any Plan which would reasonably be expected to have a Material Adverse Effect.
Certain ERISA events that would reasonably be expected to have a Material
Adverse Effect have not occurred.
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Appendix III
Affirmative Covenants of the Borrower
The Credit Agreement shall contain, without limitation, the following
affirmative covenants of the Borrower, as applicable, in favor of the Lenders
(with qualifications and exceptions customary for transactions of this type:
(1) The Borrower shall furnish or cause to be furnished to the Collateral
Agent and, in the case of clause (a) or (b) below, any Lender or prospective
Lender upon request:
(a) within 45 days after the end of the first three quarterly accounting
periods of the Borrower, unaudited financial statements of the
Borrower and each of its subsidiaries together with a certificate of
an Authorized Officer of certifying (i) that such financial
statements fairly present the financial condition and results of
operation of the Borrower and each of its subsidiaries in accordance
with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes and (ii) that no Default or
Event of Default has occurred and is continuing, or, if such an event
has occurred, describing the nature thereof;
(b) within 90 days after the end of each fiscal year of the Borrower,
audited financial statements of the Borrower and each of its
subsidiaries together with a certificate of an Authorized Officer of
the Borrower certifying that no Default or Event of Default has
occurred and is continuing, or, if such an event has occurred,
describing the nature thereof;
(c) within 2 Business Days after the Borrower obtains actual knowledge of
any Default or Event of Default, a written notice describing such
Default or Event of Default and any action being or proposed to be
taken with respect thereto;
(d) within 2 Business Days after an Authorized Officer of the Borrower
obtains actual knowledge of the occurrence of any event that could
reasonably be expected to result in a Material Adverse Effect, notice
of the occurrence of such event; and
(e) within 2 Business Days after any Person makes a request therefor, a
list of the current balances in each of the Depositary Accounts no
more frequently than monthly if no default or Event of Default
exists.
(f) all reports related to material environmental matters within a
reasonable period of time after receipt thereof;
(g) copies of all material notices delivered in connection with any
Project Document or otherwise in connection with the Project within a
reasonable period of time and after receipt thereof;
(h) (i) until Completion, on a quarterly basis, copies of all
construction schedules and construction budgets and copies of all
quarterly reports issued by the Independent
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Engineer prior to the Completion of the Project and (ii) on an annual
basis (x) at least 30 days before the beginning of each calendar year
an Operating Budget for such fiscal year which is approved by the
Independent Engineer (together, periodically, with evidence of
compliance therewith) and (y) at least 30 days before the beginning
of each calendar year after the Completion of Project, a copy of the
annual operating budget for such year;
(i) until Completion, on a quarterly basis, copies of all change orders
and any document or written notice from the construction contractor
requesting or recommending the initiation of a change order and any
other notice, including, without limitation, notices with respect to
the occurrence of a force majeure event (or event of a similar
effect) under any Project Document which may result in a material
increase in project costs within a reasonable period of time after
receipt thereof; and
(j) notice and details of, within 2 Business Days after an Authorized
Officer of the Borrower obtains actual knowledge of, any litigation
pending or threatened involving the Borrower or the Project, that, if
adversely determined, could reasonably be expected to result in a
Material Adverse Effect.
(2) The Borrower shall at all times preserve and maintain in full force
and effect (i) its existence as a limited partnership in good standing under the
laws of its jurisdiction of formation and (ii) its qualification to do business
in each other jurisdiction in which the character of properties owned or leased
by it or in which the transaction of its business as conducted or proposed to be
conducted makes such qualification necessary except in the case of clause (ii)
where such failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect.
(3) The Borrower shall maintain and renew all of the powers, rights,
privileges and franchises necessary for the transaction of its business as
conducted or proposed to be conducted.
(4) The Borrower shall comply with all Applicable Laws and Governmental
Approvals applicable to it, and all other acts, rules, regulations, permits,
orders and requirements of any legislative, executive, administrative or
judicial body relating to the issuance of the Loans by the Borrower and
performance by the Borrower of its obligations under the Financing Documents.
(5) The Borrower shall perform all of its covenants and agreements
contained in any of the Financing Documents to which it is a party and shall
take all reasonable and necessary actions to prevent the termination or
cancellation of any such Financing Document.
(6) The Borrower shall preserve and maintain good and valid title to its
properties and assets (subject to no Liens other than Permitted Liens) and
defend its title to the Collateral against the claims of all Persons subject to
Permitted Liens.
(7) The Borrower shall preserve and maintain the Liens on the Collateral
and the priority thereof and, without limiting the generality of the foregoing,
shall cause the Security
39
EXHIBIT A
LOAN TERM SHEET
Documents to which it is a party, all supplements thereto and any instruments of
conveyance, transfer, assignment or further assurance, or appropriate
certificates, financing statements or other statements with respect thereto, at
all times to be recorded and filed and re-recorded and re-filed, in such manner
and in such places as may in the reasonable opinion of counsel be required by
Applicable Law in order to fully preserve and protect the rights of the
Collateral Agent and Lenders.
(8) The Borrower shall pay and discharge all taxes, assessments and other
governmental charges or levies imposed upon it or its property, except any
charges or levies (i) being diligently contested in good faith by appropriate
proceedings and for which adequate reserves have been established in accordance
with GAAP.
(9) The Borrower shall at all times keep proper books and records of all
of its business and financial affairs in order to permit the preparation of
financial reports in accordance with GAAP.
(10) The Borrower shall permit the Collateral Agent, the Depositary Bank
or any duly authorized agent or representative thereof (including the
Independent Engineer) from time to time during normal business hours to conduct
reasonable inspections and examinations at all reasonable times of the books and
records and properties of the Borrower provided that a representative of the
Borrower shall at all times have the opportunity to be present.
(11) The Borrower shall use the proceeds of the Loans in accordance with
the Financing Documents.
(12) The Borrower shall retain a nationally recognized independent
accounting firm and authorize such firm to communicate directly with the
Collateral Agent provided that a representative of the Borrower shall at all
times have the opportunity to be present during such communications.
(13) The Borrower shall obtain in a timely manner and maintain in full
force and effect (or where appropriate, renew) all Government Approvals required
at any time (i) in connection with the operation of the Borrower's business and
(ii) to execute and deliver the Financing Documents to which it is a party and
to perform its obligations thereunder.
(14) The Borrower shall cause all Cash Flows to be deposited into the
Revenue Account and disbursed therefrom in accordance with the "Flow of Funds"
set forth herein.
(15) The Borrower shall maintain and operate the Project in good working
order and condition in accordance with the Project Documents.
(16) The Borrower shall obtain and maintain necessary insurance in
amounts, with limits and deductibles, on terms and conditions and with
appropriate carriers as is customary for others similarly situated, including,
without limitation, business interruption insurance and title insurance so long
as such insurance remains available on commercially reasonable terms and
conditions. The Collateral Agent, on behalf of the holders of the Loans, shall
be named as the sole loss payee in insurance policies in respect of property
loss, casualty and condemnation of
40
EXHIBIT A
LOAN TERM SHEET
the Project, and as additional insured in respect of all other insurance
policies. Within 120 days after the end of each year, the Borrower shall provide
the Collateral Agent with a certificate of an Authorized Officer that summarizes
the Borrower's insurance then in effect and states that such insurance satisfies
the requirements of this provision.
(17) The Borrower shall perform and observe its covenants and obligations
under all Project Documents and take all necessary action to prevent the
termination or cancellation of any Project Documents to which it is a party
except where the Borrower has entered into a Replacement Project Document and
all necessary third party consents related thereto;
(18) The Borrower shall cause all Loss Proceeds to be deposited into the
Loss Proceeds Account and all payments from the EPC Contractor (its guarantors
and sureties) to be deposited in the Depositary Accounts as set forth under the
caption "Flow of Funds."
(19) The Borrower shall cause construction of Project to be carried out
with diligence and continuity (subject to interruptions provided for in the
Construction Contracts and force majeure) in accordance with material approvals
and the Construction Contracts.
41
EXHIBIT A
LOAN TERM SHEET
Appendix IV
Negative Covenants of the Borrower
The Credit Agreement shall contain, without limitation, the following
negative covenants of the Borrower in favor of the Lenders (with qualifications
and exceptions customary for transactions of this type):
(1) The Borrower shall not create or incur or suffer to exist any Debt
except the following (such Debt, "Permitted Debt"):
(a) Debt incurred in respect of the COP Loans, or any other COP Financing
Document;
(b) Cost Overrun Debt for Phase 1;
(c) Debt to fund Phase 2 of the Project up to an aggregate principal
amount of the Expansion Debt Amount, so long as after giving effect
to the incurrence of such Debt the conditions described above under
"Expansion Financing" shall have been satisfied.
(d) After Completion, Debt to finance the reasonable cost of the
construction, installation or acquisition of equipment or facilities
required by applicable law for the continued operation of the Project
in accordance with applicable laws so long as the Projected Debt
Service Coverage Ratio for each subsequent fiscal year through the
Maturity Date of the Phase 1 Loan will not be less than ***;
(e) After Completion, Debt under an unsecured revolving credit facility
issued to third parties in an aggregate principal amount not to
exceed $*** million outstanding at any time; and
(f) renewals, extensions, replacements and refinancings of any Permitted
Debt that does not increase the outstanding principal amount.
(2) The Borrower shall not create or suffer to exist or permit any Lien
upon or with respect to any of its properties except the following Liens (such
Liens, "Permitted Liens"):
(a) Liens specifically permitted or required by, or created by, any
Transaction Document;
(b) Liens to secure Permitted Debt under clauses (a) - (c) as limited
herein; provided that the holder of such Permitted Debt, or a
representative thereof, shall have entered into an intercreditor
agreement;
(c) Liens for taxes, assessments or governmental charges which are either
not yet due or which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves are
established in accordance with GAAP;
42
EXHIBIT A
LOAN TERM SHEET
(d) Mechanic's or materialmen's Liens secured by bonds for which the
Borrower is not liable;
(e) Liens arising by operation of law;
(f) Deposits or pledges to secure statutory obligations or appeals,
release or attachments, stay of execution or injunction, or for
purposes of like general nature in the ordinary course of business;
(g) Other Liens incidental to the conduct of the Borrower's business
which were not incurred in connection with the borrowing of money or
the obtaining of advances or credit (other than vendor's liens for
accounts payable in the ordinary course of business), and which do
not in the aggregate materially impair the use thereof in the
operation of the Borrower's business;
(h) the Permitted Title Defects;
(i) defects, easements, rights of way, restriction, irregularities,
encumbrances and clouds on title and statutory Liens which do not
materially impair the property affected and that do not materially
impair the value of the security interests granted under the Security
Documents;
(j) Liens for worker's compensation, unemployment insurance or other
social security or pension obligations;
(k) legal or equitable encumbrances deemed to exist because of the
existence of any litigation or other proceeding if brought in good
faith provided that such encumbrances shall be canceled by bonding or
otherwise within 5 Business Days after their creation; and
(l) any renewals, extensions, replacements and refinancing of any of the
foregoing.
(3) The Borrower shall not contingently or otherwise be or become liable,
directly or indirectly, in connection with any Guarantee or Debt except as
contemplated by the Transaction Documents.
(4) The Borrower shall not engage in any activities other than those
contemplated by the Credit Agreement and the other Transaction Documents, and
activities related thereto or the ownership, construction and operation of the
Project and all related activities thereto.
(5) The Borrower shall not enter into any transaction of merger or
consolidation, change its legal form, liquidate, wind-up or dissolve itself (or
suffer any liquidation or dissolution), discontinue its business or purchase or
acquire all or substantially all of the assets of any Person.
(6) The Borrower shall not sell, transfer, assign, hypothecate, pledge,
lease, sublease or otherwise dispose of (in one transaction or in a series of
transactions) any of its assets, except (a) assets that in a single transaction
or a series of related transactions do not have a fair market
43
EXHIBIT A
LOAN TERM SHEET
value in excess of $*** million in the aggregate (unless replaced by assets
which are necessary and useful, as certified by the Independent Engineer, to the
Borrower's business), (b) assets sold in the ordinary course of business, (c)
assets that are obsolete and not integral to the business of the Borrower, or
(d) as otherwise permitted or contemplated by the Transaction Documents.
(7) The Borrower shall not form or have any subsidiaries, make
investments, loans or advances or acquire the stock, obligations or securities
of any Person, except that the Borrower may (a) create, and make investments in,
subsidiaries as necessary in connection with transactions contemplated by the
Transaction Documents, and (b) make Permitted Investments.
(8) The Borrower shall not enter into any transaction or series of
related transactions, whether or not in the ordinary course of business, with
any affiliate of the Borrower which is not on terms and conditions at least as
favorable as would be obtained in a comparable arm's-length transaction with a
Person other than an affiliate of the Borrower, except that the Borrower may
perform its obligations under and engage in the transactions contemplated by the
Transaction Documents.
(9) The Borrower shall not make any Restricted Payments other than as
permitted under the Depositary Agreement and the Credit Agreement.
(10) Subject to (5) above, the Borrower shall not assign any of its rights
or obligations under any Financing Document.
(11) The Borrower shall not amend its certificate of limited partnership,
Partnership Agreement or any other constitutive document; provided that the
Borrower may convert to a limited liability limited partnership.
(12) The Borrower shall not take any action which will cause it to be an
"investment company" as defined in the Investment Company Act of 1940, as
amended or a public utility or public utility holding company.
(13) The Borrower shall not elect to be treated as an association taxable
as a corporation for federal income tax purposes.
(14) The Borrower shall not enter into any additional Project Document
(other than Additional TUAs) other than (i) as contemplated by the Transaction
Documents or activities permitted thereby or (ii) those that could not
reasonably be expected to have a Material Adverse Effect.
(15) The Borrower (or any Affiliate thereof) shall not amend, cancel or
terminate any Project Document (unless contemplated by such Project Document)
(other than Additional TUAs).
(16) The Borrower shall not accept Completion of the Project until an
Authorized Officer of the Independent Engineer shall have delivered to the
Collateral Agent a certificate confirming that Completion has occurred.
44
EXHIBIT A
LOAN TERM SHEET
(17) The Borrower shall not enter into capacity sales contracts or other
types of hedging arrangements other than Acceptable Use Agreements or Approved
Hedging Agreements.
(18) Initiate or approve any change orders (other than those included in
the Budgeted Construction Costs) under the Construction Contracts unless the
Borrower certifies that such change order (i) is in accordance with sound
engineering practice, (ii) is not reasonably expected to materially and
adversely affect the operation or reliability of the Project, and (iii) if
implemented, is not reasonably expected to materially delay the Completion Date,
and (iv) in the case of change orders which exceed $_________ individually or,
when aggregated with all change orders not included in the Budgeted Construction
Costs exceed $________ in the aggregate, the Independent Engineer provides
written confirmation of its concurrence with such certification.
45
EXHIBIT A
LOAN TERM SHEET
Appendix V
Events of Default under the Credit Agreement
The following events shall constitute Events of Default (with
qualifications and exceptions customary for transactions of this type):
(1) The Borrower shall fail to pay any principal of, premium, if any, or
interest on any Security when the same becomes due and payable, whether by
scheduled maturity or required prepayment or redemption or by acceleration or
otherwise within 2 days after the date such payment is due except if it is
determined that the COP Shipper shall have unlawfully failed to make the
corresponding payment of such amounts under the COP TUA;
(2) The Borrower shall fail to pay any unscheduled and undisputed cost,
charge or other sum due under any of the Financing Documents within 10 days
after the date the Borrower receives notice that such payment is due;
(3) Any representation or warranty made by the Borrower in the Credit
Agreement or in any other Financing Document to which it is a party, or any
representation, warranty or statement in any certificate, financial statement or
other document furnished is incorrect when made or deemed to be made;
(4) The Borrower shall fail to perform or observe any covenant under the
Credit Agreement relating to maintenance of existence, incurrence of Debt,
creation of Liens, issuance of guarantees, business activities, fundamental
changes, sales of assets or Restricted Payments;
(5) The Borrower shall fail to perform or observe any of its covenants
contained in the Credit Agreement (other than those referred to in clause (4)
immediately above) and such failure shall continue uncured for 30 or more days
from the date the Borrower obtains actual knowledge of such failure;
(6) The Borrower shall (a) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, Collateral Agent or
liquidator of itself or all or a substantial part of its property, (b) admit in
writing its inability or be generally unable to pay its debts as such debts
become due, (c) make a general assignment for the benefit of its creditors, (d)
commence a voluntary case under the Federal Bankruptcy Code, (e) file a petition
seeking to take advantage of any other Debtor Relief Law, (f) fail to controvert
in a timely and appropriate manner, or acquiesce in writing to, any petition
filed against it in an involuntary case under the Federal Bankruptcy Code or any
other Debtor Relief Law or (g) take any action for the purpose of effecting any
of the foregoing;
(7) A proceeding or case shall be commenced without the application or
consent of the Borrower in any court of competent jurisdiction, seeking (a) its
liquidation, reorganization, dissolution or winding-up or the composition or
readjustment of its debts or (b) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Borrower or any other party to a
material Project Document or all or a substantial part of its property under any
Debtor Relief
46
EXHIBIT A
LOAN TERM SHEET
Law and such proceeding or case shall continue undismissed, or any order,
judgment or decree approving any of the foregoing shall be entered and continue
unstayed and in effect for a period of 60 or more consecutive days, or any order
for relief against the Borrower or any other party to a material Project
Document shall be entered in any involuntary case under the Federal Bankruptcy
Code or any other Debtor Relief Law;
(8) Any Security Document shall cease to be in full force and effect in
any material respect or any Lien purported to be granted thereby shall cease to
be a valid and perfected Lien in favor of the Collateral Agent for the benefit
of the Lenders on the Borrower Collateral described therein with the priority
purported to be created thereby;
(9) The Cost Overrun Debt, Expansion Debt or other Debt of the Borrower
outstanding in excess of $*** (other than Debt incurred pursuant to the Credit
Agreement) is in payment default or shall be required to be prepaid, or shall be
declared to be due and payable, other than by regularly scheduled required
repayment, prior to the stated maturity thereof, as the result of the
acceleration of the stated maturity thereof following an event of default
thereunder (subject to the applicable grace periods thereunder) or an event
occurs that, with the passage of time or giving of notice, permits the holders
of the Cost Overrun Debt, Expansion Debt or other Debt outstanding in excess of
$*** to be prepaid or to be declared due and payable other than by regularly
scheduled required repayment;
(10) One or more final and non-appealable judgment or judgments for the
payment of money in excess of $*** not fully covered by insurance shall be
entered against the Borrower and shall remain unpaid or unstayed for a period of
30 or more consecutive days;
(11) Any Acceptable Credit Support ceases to be valid and binding and in
full force and effect and any party thereto fails to make any required payments
pursuant to its Acceptable Credit Support within 3 days of the date when due;
(12) Commitments respecting any required Cost Overrun Debt and any
required Acceptable Credit Support therefor are not in effect.
(13) EPC Contractor fails to comply with its obligations pursuant to the
EPC Contract and such failure is not cured within 10 days and could reasonably
to be expected to have a Material Adverse Effect;
(14) Any Governmental Approval required for the operation of the Project
is revoked, terminated, withdrawn or ceases to be in full force and effect if
such revocation, termination, withdrawal or cessation could reasonably be
expected to have a Material Adverse Effect; provided that no such event shall be
a Event of Default if the Borrower diligently pursues in good faith and (x)
obtains an additional Governmental Approval in substitution therefor or
replacement thereof or (y) causes such Governmental Approval to be reissued, or
until such time as such cure cannot reasonably be achieved;
(15) Failure by any party to comply with any covenants under the Project
Documents to which it is a party, subject to applicable cure periods, the result
in the judgment of the COP Lenders which is a Material Adverse Effect; provided
that the Borrower may cure such Event of
47
EXHIBIT A
LOAN TERM SHEET
Default by entering into a Replacement Project Document and the necessary third
party consents related thereto;
(16) All or a material part of the Project is destroyed or suffers a
material actual loss or material damage and an Approved Restoration Plan does
not exist in respect thereof within 90 days of such destruction or loss;
(17) Any material Project Document ceases to be valid and binding and in
full force and effect in any material respect, any third party thereto denies
that it has any liability or obligation under any material Project Document and
such third party ceases performance thereunder, or any third party is in default
under such Project Document (subject to any applicable grace period), and in
each case such cessation or default has resulted or would reasonably be expected
to result in a Material Adverse Effect and such circumstance remains uncured for
30 days; provided that the Borrower may cure such Event of Default by entering
into a Replacement Project Document and the necessary third party consents
related thereto;
(18) Phase 1 of the Project fails to reach Completion by ***; or
(19) the Borrower or any General Partner breaches any of its
representations, warranties, covenants or other obligations under the COP TUA,
the Omnibus Agreement, the Stock Purchase Agreement or the Stockholder
Agreement, any Project Document or other documents executed in connection
therewith.
48
EXHIBIT B
---------
FORM OF STOCKHOLDERS AGREEMENT
See attached.
EXHIBIT C
---------
FORM OF STOCK PURCHASE AGREEMENT
See attached.
Exhibit D
*** indicates material has been omitted pursuant to a Confidential Treatment
Request filed with the Securities and Exchange Commission. A complete copy of
this agreement has been filed separately with the Securities and Exchange
Commission.
================================================================================
LNG TERMINAL USE AGREEMENT
between
[CONOCOPHILLIPS __________]
and
FREEPORT LNG DEVELOPMENT, L.P.
dated [____________], 2004
================================================================================
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS.........................................................1
ARTICLE 2 SERVICES AND SCOPE.................................................12
2.1 Services to be Provided by FLNG...................................12
2.2 Additional Services...............................................12
2.3 Activities Outside Scope of this Agreement........................12
ARTICLE 3 SALE AND PURCHASE OF SERVICES......................................13
3.1 Services Quantity.................................................13
3.2 Customer's Use of Services Quantity...............................14
3.3 Gas Redelivery....................................................14
3.4 Failure to Take Delivery of Gas at Delivery Point.................15
3.5 Freeport Services Manual..........................................16
ARTICLE 4 COMPENSATION FOR SERVICES..........................................16
4.1 Fee...............................................................16
4.2 Retainage.........................................................19
4.3 Services Unavailability...........................................19
4.4 New Regulatory Costs or Taxes.....................................19
4.5 Services Provided to Other Customers..............................20
4.6 Relief from Certain Payments for Annual Shortfall.................20
ARTICLE 5 SCHEDULING.........................................................22
5.1 Customer LNG Receipt Schedule.....................................22
5.2 Gas Delivery Procedure............................................25
5.3 Standard..........................................................27
5.4 Scheduling Representative.........................................27
5.5 Scheduling Coordination Among Customer and Other Customers........27
ARTICLE 6 RELEASE OF SERVICES................................................28
6.1 General...........................................................28
6.2 Temporary Release.................................................28
ARTICLE 7 TERM ..............................................................30
7.1 Term..............................................................30
7.2 Commencement of Deliveries........................................31
7.3 Delay Caused by Force Majeure.....................................32
7.4 Construction Progress Reports.....................................32
ARTICLE 8 FREEPORT FACILITY..................................................32
8.1 Freeport Facility.................................................32
8.2 Compatibility of Freeport Facility with LNG Vessels...............34
8.3 Customer Inspection Rights........................................35
ARTICLE 9 TRANSPORTATION AND UNLOADING.......................................35
9.1 LNG Vessels.......................................................35
9.2 Freeport Facility Marine Operations Manual........................38
9.3 LNG Vessel Inspections; Right to Reject LNG Vessel................39
i
9.4 Advance Notices re LNG Vessel and Cargoes.........................40
9.5 Notice of Readiness...............................................42
9.6 Berthing Assignment...............................................42
9.7 Unloading Time....................................................43
9.8 Unloading at the Freeport Facility................................44
9.9 LNG Vessel Not Ready for Unloading; Excess Berth Time.............45
ARTICLE 10 RECEIPT OF LNG.....................................................46
10.1 Title, Custody and Risk of Loss...................................46
10.2 No Encumbrance....................................................46
10.3 Receipt of LNG....................................................47
10.4 Quality and Measurement of Customer's LNG.........................47
10.5 Off-Specification LNG.............................................48
10.6 Customer's Responsibility and Reimbursement.......................48
10.7 Subsequent Deliveries.............................................49
ARTICLE 11 REDELIVERY OF GAS..................................................49
11.1 General...........................................................49
11.2 Customer's Responsibility.........................................50
11.3 Specifications and Measurement of Gas at the Delivery Point.......51
11.4 Nonconforming Gas.................................................52
ARTICLE 12 PAYMENT............................................................52
12.1 Monthly Statements................................................52
12.2 Other Statements..................................................53
12.3 Adjustments.......................................................53
12.4 Payment Due Dates.................................................53
12.5 Payment...........................................................54
12.6 Nonpayment........................................................54
12.7 Disputed Statements...............................................55
12.8 Final Settlement..................................................55
ARTICLE 13 CUSTOMER CREDIT....................................................55
13.1 Guarantee.........................................................55
13.2 Material Adverse Change...........................................55
ARTICLE 14 DUTIES, TAXES AND OTHER GOVERNMENTAL CHARGES.......................56
ARTICLE 15 INSURANCE..........................................................56
15.1 FLNG's Insurance..................................................56
15.2 Customer's Insurance..............................................57
15.3 Port Liability Agreement..........................................58
ARTICLE 16 LIABILITIES........................................................58
16.1 Limitation of Liability of FLNG...................................58
16.2 Consequential Loss or Damage......................................58
16.3 Parties' Liability; Relationship of Shareholders..................59
16.4 Liability for Personal Injury.....................................59
ARTICLE 17 FORCE MAJEURE......................................................59
17.1 Events of Force Majeure...........................................59
ii
17.2 Limitation on Scope of Force Majeure Protection...................59
17.3 Notice............................................................60
17.4 Measures..........................................................60
17.5 No Extension of Term..............................................60
17.6 Settlement of Industrial Disturbances.............................60
17.7 Allocation of Services............................................61
ARTICLE 18 CURTAILMENT OF SERVICES OR TEMPORARY
DISCONTINUATION OF SERVICES........................................61
18.1 Scheduled Curtailment or Temporary Discontinuation of Services....61
18.2 Unscheduled Curtailment or Temporary Discontinuation of Services..61
ARTICLE 19 ASSIGNMENT.........................................................62
19.1 Restrictions on Assignment........................................62
19.2 Permitted Assignments.............................................62
19.3 Other.............................................................63
ARTICLE 20 TERMINATION........................................................64
20.1 Early Termination Events..........................................64
20.2 Termination Relating to Guarantee.................................64
20.3 Other Termination Provisions......................................65
20.4 Consequences of Termination.......................................65
ARTICLE 21 APPLICABLE LAW.....................................................65
ARTICLE 22 DISPUTE RESOLUTION.................................................65
22.1 Dispute Resolution................................................65
22.2 Expert Determination..............................................67
ARTICLE 23 CONFIDENTIALITY....................................................68
23.1 Confidentiality Obligation........................................68
23.2 Public Announcements..............................................70
ARTICLE 24 REPRESENTATIONS AND WARRANTIES.....................................70
24.1 Representations and Warranties of Customer........................70
24.2 Representations and Warranties of FLNG............................71
ARTICLE 25 NOTICES............................................................71
ARTICLE 26 MISCELLANEOUS......................................................72
26.1 Amendments........................................................72
26.2 Approvals.........................................................72
26.3 Successors and Assigns............................................72
26.4 Waiver............................................................72
26.5 No Third Party Beneficiaries......................................73
26.6 Rules of Construction.............................................73
26.7 Survival of Rights................................................73
26.8 Rights and Remedies...............................................73
26.9 Interpretation....................................................74
26.10 Disclaimer of Agency..............................................74
26.11 No Sovereign Immunity.............................................74
26.12 Severance of Invalid Provisions...................................75
iii
$$/BREAK$$END
26.13 Compliance with Laws..............................................75
26.14 Conflicts of Interest.............................................75
26.15 Expenses..........................................................75
26.16 Scope.............................................................76
26.17 Counterpart Execution.............................................76
Annex I - Measurements and Tests of LNG at Receipt Point
Annex II - Measurements and Tests for Gas at Delivery Point
Exhibit A - Guarantee
Exhibit B - Freeport Services Manual
iv
LNG TERMINAL USE AGREEMENT
This LNG TERMINAL USE AGREEMENT (the "Agreement"), dated as of this ___ day of
_____________, 2004 (the "Effective Date"), is made by and between
[ConocoPhillips _______], a company incorporated under the laws of [___________]
with its principal office at [__________] ("Customer"); and FREEPORT LNG
DEVELOPMENT, L.P., a Delaware limited partnership with a place of business at
0000 Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx, X.X.X. 00000 ("FLNG").
RECITALS
WHEREAS, FLNG intends to construct, own and operate an LNG terminal facility
near Freeport, Texas capable of performing certain LNG terminalling services,
including: the berthing of LNG vessels; the unloading, receiving and storing of
LNG; the regasification of LNG; the storage of natural gas; and the
transportation and delivery of natural gas to a pipeline interconnection point
at Xxxxxxxx Ridge, Texas;
WHEREAS, Customer will purchase LNG for importation into the United States
natural gas market and desires to purchase such LNG terminalling services from
FLNG; and
WHEREAS, FLNG desires to make such LNG terminalling services available to
Customer and to Other Customers in accordance with the terms hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by the Parties hereto and for the mutual
covenants contained herein, FLNG and Customer hereby agree as follows:
ARTICLE 1
DEFINITIONS
In addition to any terms or expressions defined elsewhere in this Agreement, the
terms or expressions set forth below shall have the following meanings in this
Agreement:
1.1 "Actual FOC" means fixed operating costs and maintenance capital actually
incurred by FLNG acting as a Reasonable and Prudent Operator; provided
that the amount of fixed operating costs shall be reduced by (a) any
insurance proceeds (including proceeds from business interruption
insurance) received by FLNG which have the effect of offsetting fixed
operating costs, (b) any bonuses paid to employees of FLNG to the extent
that such bonuses are based on or attributable to distributions to any of
FLNG's limited partners, (c) any New Taxes and New Regulatory Costs borne
by FLNG pursuant to Section 4.4, (d) any permitting, engineering,
development, financing, design and environmental remediation costs paid to
third parties which costs are directly related to the development of any
modification that significantly expands the Freeport Facility; (e) Awards;
and (f) all indemnities, liabilities, and other damages arising from any
arbitral award, expert determination, judgment, or settlement payable by
FLNG to any Indemnitee (as defined
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in the Partnership Agreement of FLNG). For the avoidance of doubt, Actual
FOC shall not include capital expenditures (other than maintenance
capital) and debt service incurred by FLNG.
1.2 "Adverse Weather Conditions" means weather and sea conditions actually
experienced at the Freeport Facility that are sufficiently severe either:
(a) to prevent an LNG vessel from proceeding to berth, or unloading or
departing from berth, in accordance with one or more of the following: (i)
regulations published by a Governmental Authority, (ii) an Approval, or
(iii) an order of a Pilot; or (b) to cause an actual determination by the
master of an LNG Vessel that it is unsafe for such vessel to berth, unload
or depart from berth.
1.3 "Affiliate" means a Person (other than a Party) that directly or
indirectly controls, is controlled by, or is under common control with, a
Party to this Agreement, and for such purposes the terms "control",
"controlled by" and other derivatives shall mean the direct or indirect
ownership of more than fifty percent (50%) of the voting rights in a
Person.
1.4 "Aggregate Actual Capacity" means the sum of Customer Actual Capacity in a
Contract Year plus the aggregate contracted quantity of LNG and any
quantities of LNG received by FLNG in excess of such contracted quantity
at the Freeport Facility for the account of each Other Customer in such
Contract Year.
1.5 "Aggregate Contracted Capacity" means the sum of the Maximum LNG Reception
Quantity plus the aggregate quantity of LNG contracted at the Freeport
Facility for the account of each Other Customer in such Contract Year.
1.6 "Agreement" means this agreement, together with the Annexes and Exhibits
attached hereto, which are hereby incorporated into and made a part
hereof, as the same may be hereafter amended.
1.7 "Alternate ***" shall have the meaning set forth in Section 3.3(c)(ii).
1.8 "Approvals" means all consents, authorizations, licenses, waivers,
permits, approvals and other similar documents from or by a Governmental
Authority.
1.9 "Arrival Location" shall have the meaning set forth in Section 9.5(a).
1.10 "Awards" means all indemnities, liabilities, and other damages arising
from any arbitral award, expert determination, judgment, or settlement
paid by FLNG to Customer under this Agreement or paid by FLNG under an LNG
terminalling services agreement with Other Customers, such indemnities,
liabilities, and other damages being determined after deduction of any
insurance proceeds received by FLNG which have the effect of offsetting
such Awards.
1.11 "Awards Installment" shall have the meaning set forth in Section
4.1(a)(i)e.
1.12 "Base Rate" means: (a) the interest rate per annum equal to (i) the prime
rate (sometimes referred to as the base rate) for corporate loans as
published by The Wall Street Journal in the money rates section on the
applicable date, or (ii) in the event The Wall Street Journal
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ceases or fails to publish such a rate, the prime rate (or an equivalent
thereof) in the United States for corporate loans determined as the
average of the rates referred to as prime rate, base rate or the
equivalent thereof, quoted by Chase Manhattan Bank, Citibank and Bank of
New York, or any successor thereof, for short term corporate loans in New
York on the applicable date; plus (b) *** percent (***%). The Base Rate
shall change as and when the underlying components thereof change, without
notice to any Person.
1.13 "British Thermal Unit" or "BTU" means the amount of heat required to raise
the temperature of one (1) avoirdupois pound of pure water from 59.0
degrees Fahrenheit to 60.0 degrees Fahrenheit at an absolute pressure of
14.696 pounds per square inch.
1.14 "Budgeted FOC" means fixed operating costs (including maintenance capital)
pursuant to the Operating Budget (as such term is defined under that
certain Stockholders Agreement dated as of the date hereof between
Freeport LNG-GP, Inc., a Delaware corporation, Xxxxxxx X. Xxxxx and
Customer, as amended from time to time); (a) any insurance proceeds
(including proceeds from business interruption insurance) received by FLNG
which have the effect of offsetting fixed operating costs, (b) any bonuses
paid to employees of FLNG to the extent that such bonuses are based on or
attributable to distributions to any of FLNG's limited partners, (c) any
New Taxes and New Regulatory Costs borne by FLNG pursuant to Section 4.4,
(d) any permitting, engineering, development, financing, design and
environmental remediation costs paid to third parties which costs are
directly related to the development of any modification that significantly
expands the Freeport Facility; (e) Awards; and (f) all indemnities,
liabilities, and other damages arising from any arbitral award, expert
determination, judgment, or settlement payable by FLNG to any Indemnitee
(as defined in the Partnership Agreement of FLNG). For the avoidance of
doubt, Budgeted FOC shall not include capital expenditures (other than
maintenance capital) and debt service incurred by FLNG.
1.15 "Build-Up Period" means the period of time commencing on the Commercial
Start Date and ending on the day prior to the Plateau Inception Date.
1.16 "Business Day" means any day other than a weekend day or U.S. Federal
banking holiday in Houston, Texas.
1.17 "C Ratio" means the ratio that the Customer Actual Capacity bears to the
Aggregate Actual Capacity.
1.18 "Cargo" means a quantity of LNG expressed in MMBTU carried by an LNG
Vessel in relation to which FLNG will render Services hereunder.
1.19 "Central Time" means Central Time Zone, as adjusted for Daylight Saving
Time and Standard Time.
1.20 "Claims" shall have the meaning set forth in Section 10.2 of this
Agreement.
1.21 "Commercial Start Date" shall have the meaning set forth in Section 7.2.
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1.22 "Contract Year" means each annual period starting on October 1 and ending
on September 30 during the Term of this Agreement; provided, however, that
(a) the first Contract Year shall commence on the Commercial Start Date
and end on the following September 30, and (b) the last Contract Year
shall commence on October 1 immediately preceding the last day of the Term
and end on the last day of the Term as set forth in Section 7.1.
1.23 "Crest Contract" means that certain Settlement and Purchase Agreement
dated as of June 14, 2001 by and among Cheniere Energy, Inc., a Delaware
corporation, CXY Corporation, a Texas corporation, Crest Energy, L.L.C., a
Texas limited liability company, Crest Investment Company, a Texas
corporation, FLT, and Xxxxx Xxxxxx.
1.24 "Crest Installment" shall have the meaning set forth in Section
4.1(a)(i)d.
1.25 "Crest Payment" means the amount estimated to be payable by FLT for the
following month pursuant to Section 1.03(a) of the Crest Contract.
1.26 "Crest Reconciliation" shall have the meaning set forth in Section
4.1(a)(i)d.
1.27 "Cubic Meter" means a volume equal to the volume of a cube each edge of
which is one (1) meter.
1.28 "Customer" means [ConocoPhillips _______], unless and until substituted in
whole by an assignee by novation in accordance with Article 19, whereupon
such assignee shall become Customer for all purposes.
1.29 "Customer Actual Capacity" means the aggregate quantity of LNG received at
the Freeport Facility for the account of Customer in a Contract Year.
1.30 "Customer LNG Receipt Schedule" shall have the meaning set forth in
Section 5.1(f).
1.31 "Customer's LNG" means, for the purposes of Services, LNG received at the
Receipt Point for Customer's account.
1.32 "Customer's Inventory" means, at any given time, the quantity in MMBTUs
that represents LNG and Gas (whether or not such Gas is Regasified LNG or
Gas derived or produced from sources other than Regasified LNG) held for
Customer's account. For the avoidance of doubt, Customer's Inventory shall
be determined after deduction of Retainage in accordance with Sections
3.1(b)(ii) and 4.2.
1.33 "***" shall have the meaning set forth in Section 4.1(a)(i)a.
1.34 "***" shall have the meaning set forth in Section 4.1(a)(i)a.
1.35 "Delivery Point" means the point of interconnect between the Freeport
Facility Pipeline and a Downstream Pipeline at Xxxxxxxx Ridge, Texas.
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1.36 "Dispute" means any dispute, controversy or claim (of any and every kind
or type, whether based on contract, tort, statute, regulation, or
otherwise) arising out of, relating to, or connected with this Agreement,
including any dispute as to the construction, validity, interpretation,
termination, enforceability or breach of this Agreement, as well as any
dispute over arbitrability or jurisdiction.
1.37 "Downstream Pipeline" means all Gas pipelines downstream of the Delivery
Point which transport Gas from the Freeport Facility.
1.38 "Effective Date" means the date set forth in the preamble of this
Agreement.
1.39 "Expected Receipt Quantity" means, with respect to a given Cargo,
Customer's reasonable estimate of the quantity of LNG (in MMBTUs) that
such Cargo is expected to unload at the Freeport Facility, taking into
consideration (a) the expected composition of the Cargo anticipated to be
loaded at the Loading Port, (b) the expected loaded volume of such Cargo,
(c) the natural boil-off, and fuel gas used by the vessel in excess of
natural boil-off, expected during shipment of the Cargo, (d) the
anticipated time required from the commencement of loading of such Cargo
to the completion of unloading of such Cargo and (e) the anticipated
quantity of heel to be retained by such Cargo. For purposes of this
Agreement, the term "Expected Receipt Quantity" shall be the estimate set
forth in the notice delivered pursuant to Section 5.1(b)(ii), as may be
subsequently amended pursuant to Section 9.4(a).
1.40 "Excess Reception Fee" shall have the meaning set forth in Section 4.1(c).
1.41 "Fee" shall have the meaning set forth in Section 4.1.
1.42 "FERC" means the Federal Energy Regulatory Commission or a successor
regulatory agency.
1.43 "FLNG" means Freeport LNG Development, L.P., unless and until substituted
by an assignee by novation in accordance with Article 19, whereupon such
assignee shall become FLNG for all purposes.
1.44 "FLNG Component" shall have the meaning set forth in Section 4.1(a)(i)b.
1.45 "FLT" means Freeport LNG Terminal, LLC, a Delaware limited liability
company, and its successors and assigns.
1.46 "FOC Installment" shall have the meaning set forth in Section 4.1(a)(i)c.
1.47 "FOC Ratio" means the ratio calculated for any given Contract Year,
determined as follows:
(a) the sum of the Maximum LNG Reception Quantity for such Contract Year
plus any quantities of LNG received under Section 3.1(d) in excess of
the Maximum LNG Reception Quantity (the "Customer Contracted
Capacity"); divided by
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(b) the Aggregate Contracted Capacity;
provided, however, that for each Contract Year during the Build-up Period
such ratio shall in no event exceed two thirds (2/3).
1.48 "FOC Reconciliation" shall have the meaning set forth in Section
4.1(a)(i)c.
1.49 "Force Majeure" shall have the meaning set forth in Section 17.1.
1.50 "for Customer", "for Customer's account", "on behalf of Customer" or other
phrases containing similar wording shall include LNG delivered to the
Freeport Facility at Customer's direction or LNG delivered to the Freeport
Facility by a Temporary Customer, as the context may require, as well as
Customer's Inventory derived therefrom.
1.51 "Freeport Facility" means the following FLNG facilities in Freeport, Texas
used to provide Services hereunder, as such facilities will be constructed
and modified from time to time in accordance with this Agreement: (a) the
LNG receiving terminal facility as further described in Section 8.1(b)
(including the port, berthing and unloading facilities, LNG storage
facilities, and regasification facilities, together with equipment and
facilities related thereto); and (b) the Freeport Facility Pipeline.
1.52 "Freeport Facility Lease" means that certain Ground Lease and Development
Agreement between Brazos River Harbor Navigation District of Brazoria
County, Texas and FLNG dated as of December 12, 2002, as amended from time
to time.
1.53 "Freeport Facility Marine Operations Manual" shall have the meaning set
forth in Section 9.2.
1.54 "Freeport Facility Pipeline" means the pipeline approximately nine (9)
miles in length and at least thirty-six (36) inches with a maximum
allowable operating pressure of no less than 1440 psig which is
constructed and operated as a part of the Freeport Facility to (a)
interconnect with one or more Downstream Pipelines at Xxxxxxxx Xxxxx,
Xxxxx and (b) transport to the Delivery Point either Regasified LNG and/or
Gas stored in one or more Gas Storage Facilities.
1.55 "Freeport Services Manual" shall have the meaning set forth in Section
3.5.
1.56 "***" means the internet based computer system used by FLNG to communicate
with Customer and Other Customers regarding the scheduling of LNG
terminalling services at the Freeport Facility.
1.57 "Gas" means any hydrocarbon or mixture of hydrocarbons consisting
predominantly of methane which is in a gaseous state.
1.58 "Gas Storage Facility" means an underground Gas storage facility near
Xxxxxxxx Ridge, Texas owned, operated, contracted or otherwise made
available to FLNG or one or more
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of its Affiliates for the purposes of storing Gas solely for the account
of Customer and Other Customers.
1.59 "Governmental Authority" means, in respect of any country, any national,
regional, state, or local government, any subdivision, agency, commission
or authority thereof (including any maritime authorities, port authority
or any quasi-governmental agency) having jurisdiction over a Party, the
Freeport Facility, a Gas Storage Facility, Customer's Inventory, an LNG
Vessel, a Transporter, or a Downstream Pipeline, as the case may be, and
acting within its legal authority.
1.60 "GPA" shall have the meaning set forth in Annex I.
1.61 "Gross Heating Value" means the quantity of heat expressed in BTUs
produced by the complete combustion in air of one (1) cubic foot of
anhydrous gas, at a temperature of 60.0 degrees Fahrenheit and at an
absolute pressure of 14.696 pounds per square inch, with the air at the
same temperature and pressure as the gas, after cooling the products of
the combustion to the initial temperature of the gas and air, and after
condensation of the water formed by combustion.
1.62 "Guarantee" means the Guarantee executed and dated as of the date hereof
given by Guarantor to FLNG guaranteeing the obligations of Customer under
this Agreement, a true and correct copy of which is attached as Exhibit A.
[NOTE: PROVISIONS REGARDING GUARANTEE TO BE DELETED IF CONOCOPHILLIPS
COMPANY EXECUTES THIS AGREEMENT AS CUSTOMER]
1.63 "Guarantor" means ConocoPhillips Company, a Delaware corporation.
1.64 "Xxxxx Hub Price" shall mean, with respect to any month, the final
settlement price in dollars per MMBTU for the NYMEX Xxxxx Hub Natural Gas
futures contract for Gas to be delivered during such month, such final
price to be based upon the last trading day for the contract for such
month; provided, however that if the publication which contains the NYMEX
Xxxxx Hub Natural Gas futures contract settlement prices ceases to be
published for any reason, the Parties shall select a comparable index to
be used in its place that maintains the intent and economic effect of the
original index.
1.65 "Incremental Costs" shall have the meaning set forth in Section 4.1(b).
1.66 "International LNG Terminal Standards" means, to the extent not
inconsistent with the express requirements of this Agreement, the
international standards and practices applicable to the design, equipment,
operation or maintenance of LNG receiving and regasification terminals,
established by the following (such standards to apply in the following
order of priority): (i) a Governmental Authority having jurisdiction over
FLNG; (ii) the Society of International Gas Tanker and Terminal Operators
("SIGTTO"); and (iii) any other internationally recognized
non-governmental agency or organization with whose standards and practices
it is customary for Reasonable and Prudent Operators of LNG receiving and
regasification terminals to comply. In the event of a conflict between any
of the priorities noted above, the priority with the lowest roman numeral
noted above shall prevail.
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1.67 "International LNG Vessel Standards" means, to the extent not inconsistent
with the expressed requirements of this Agreement, the international
standards and practices applicable to the ownership, design, equipment,
operation or maintenance of LNG vessels established by the following (such
standards to apply in the following order of priority): (i) a Governmental
Authority; (ii) the International Maritime Organization; (iii) SIGTTO; and
(iv) any other internationally recognized non-governmental agency or
organization with whose standards and practices it customary for
Reasonable and Prudent Operators of LNG vessels to comply. In the event of
a conflict between any of the priorities noted above, the priority with
the lowest roman numeral noted above shall prevail.
1.68 "Liabilities" means all liabilities, costs, claims, disputes, demands,
suits, legal or administrative proceedings, judgments, damages, losses and
expenses (including reasonable attorneys' fees and other reasonable costs
of litigation or defense), and any and all fines, penalties and
assessments of, or responsibilities to, Governmental Authorities.
1.69 "Liquids" means liquid hydrocarbons capable of being extracted from LNG at
the Freeport Facility, consisting predominately of ethane, propane, butane
and longer-chain hydrocarbons.
1.70 "Loading Port" means the port at which a Cargo is loaded on board an LNG
Vessel.
1.71 "Loan Agreement" means that certain Loan Agreement executed as of the date
hereof between FLNG and [INSERT NAME OF COP LENDER], as in effect on the
date hereof.
1.72 "LNG" means Gas in a liquid state at or below its boiling point at a
pressure of approximately one (1) atmosphere.
1.73 "LNG Suppliers" means, in relation to performance of the obligations of
FLNG and Customer under this Agreement, those Persons who agree in writing
pursuant to an LNG purchase and sale agreement to supply or sell LNG to
Customer or a Temporary Customer for delivery to the Freeport Facility.
1.74 "LNG Supply Project" means a Person (other than Customer or an Affiliate
of Customer) engaged in supplying LNG originating from ***, provided that
Customer or its Affiliate directly or indirectly controls more than ***
percent (***%) of the voting rights in such Person.
1.75 "LNG Vessel" means an ocean-going vessel suitable for transporting LNG
that Customer, a Temporary Customer, or an LNG Supplier uses for
transportation of LNG to the Freeport Facility.
1.76 "Major Customer" means Customer and any Other Customer whose terminal use
agreement entitles such Other Customer to berth, unload and deliver at the
Freeport Facility quantities of LNG greater than *** MMBTUs per Contract
Year for a contractual term of at least *** years.
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1.77 "Major Customer Allocation Priority" shall have the meaning set forth in
Section 17.7.
1.78 "*** " shall have the meaning set forth in Section 3.3(b).
1.79 "Maximum LNG Reception Quantity" means 390,550,000 MMBTUs per Contract
Year; provided, that:
(a) during the Build-Up Period, the Maximum LNG Reception Quantity shall
be *** MMBTUs, provided that for the first Contract Year, the Maximum
LNG Reception Quantity shall be prorated based upon the ratio that
the number of days during such Contract Year bears to three hundred
sixty-five (365); and
(b) for the last Contract Year, the Maximum LNG Reception Quantity shall
be prorated based upon the ratio that the number of days during such
Contract Year bears to three hundred sixty-five (365).
1.80 "*** " shall have the meaning set forth in Section 3.3(c).
1.81 "MMBTU" means 1,000,000 BTUs.
1.82 "Non-Major Customer" means any Other Customer other than a Major Customer.
1.83 "NOR Window" shall have the meaning set forth in Section 9.5(b)(ii).
1.84 "Notice of Readiness" or "NOR" shall have the meaning set forth in Section
9.5.
1.85 "Other Customers" means, from time to time, Persons (other than Customer
and Temporary Customers) purchasing LNG terminalling services from FLNG
similar to the Services.
1.86 "Party" and "Parties" means FLNG and Customer, and their respective
successors and assigns.
1.87 "Payment Period" shall have the meaning set forth in Section 4.1.
1.88 "Peaking Gas" shall have the meaning set forth in Section 3.1(b)(iii).
1.89 "Person" means any individual, corporation, partnership, trust,
unincorporated organization or other legal entity, including any
Governmental Authority.
1.90 "Pilot" means any Person engaged by Transporter to come onboard an LNG
Vessel to assist the master in pilotage, mooring and unmooring of such LNG
Vessel and to assist in coordinating the unloading of LNG at the Freeport
Facility.
1.91 "Pipeline Standards" means, to the extent not inconsistent with the
express requirements of this Agreement, the standards and practices
applicable to the design, equipment, operation or maintenance of Gas
pipelines, established by the following (such standards to apply in the
following order of priority): (i) a Governmental Authority having
jurisdiction over FLNG; and (ii) any other nationally recognized
non-
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governmental agency or organization with whose standards and practices it
is customary for Reasonable and Prudent Operators of U.S. Gas pipelines to
comply. In the event of a conflict between any of the priorities noted
above, the priority with the lowest roman numeral noted above shall
prevail.
1.92 "Plateau Inception Date" means October 1, 2009.
1.93 "Port Charges" means all charges of whatsoever nature (including rates,
tolls, and dues of every description) in respect of an LNG Vessel entering
or leaving the Freeport Facility, including charges imposed by fire boats,
tugs and escort vessels, the U.S. Coast Guard, a Pilot, and any other
Person assisting an LNG Vessel to enter or leave the Freeport Facility.
For purposes of this Agreement, the term "Port Charges" shall include Port
Use Fees and Thru-put Fees (as such terms are defined under the Freeport
Facility Lease) but shall exclude the Initial Bonus Payment, Base Rent,
the Additional Rent and any shortfall in the Thru-Put Guaranty Payment (as
such terms are defined under the Freeport Facility Lease).
1.94 "psig" means pounds per square inch gauge.
1.95 "Reasonable and Prudent Operator" means a Person seeking in good faith to
perform its contractual obligations, and in so doing, and in the general
conduct of its undertaking, exercising that degree of skill, diligence,
prudence and foresight which would reasonably and ordinarily be expected
from a skilled and experienced operator engaged in the same type of
undertaking under the same or similar circumstances and conditions.
1.96 "Receipt Point" means the point at the Freeport Facility at which the
flange coupling of the Freeport Facility's receiving line joins the flange
coupling of the LNG unloading manifold on board an LNG Vessel.
1.97 "Regasified LNG" means Gas derived from the conversion of LNG (received by
FLNG at the Receipt Point) from its liquid state to a gaseous state.
1.98 "Release Notice" shall have the meaning set forth in Section 6.2(b)(i)c.
1.99 "Reservation Fee" shall have the meaning set forth in Section 4.1(a).
1.100 "Retainage" shall have the meaning set forth in Section 4.2.
1.101 "Scheduled Unloading Window" means, for any applicable Contract Year, an
Unloading Window allocated either to Customer or any Other Customer
pursuant to Article 5.
1.102 "Scheduling Period" means a Contract Year plus the three (3) month period
immediately following such Contract Year.
1.103 "Scheduling Representative" means the individual appointed by Customer in
accordance with Section 5.4.
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1.104 "Services" shall have the meaning set forth in Section 2.1, as expanded
from time to time in accordance with Section 2.2.
1.105 "Services Quantity" shall have the meaning set forth in Section 3.1(b).
1.106 "Services Unavailability" shall have the meaning set forth in Section 4.3.
1.107 "Sole Opinion" means an opinion, judgment or discretion of a Party that is
not intended to be capable of being challenged in any legal or arbitral
proceeding whatsoever.
1.108 "Standard Cubic Foot" means the quantity of Gas, free of water vapor,
occupying a volume of one (1) Actual Cubic Foot at a temperature of 60.0
degrees Fahrenheit and at an absolute pressure of 14.696 pounds per square
inch. For purposes of this Section 1.108, "Actual Cubic Foot" means a
volume equal to the volume of a cube whose edge is one (1) foot.
1.109 "Storage" means the retention by FLNG of Customer's Inventory for a period
of time in tanks or other facilities at the Freeport Facility (including
the Freeport Facility Pipeline) or in a Gas Storage Facility.
1.110 "Substantial Completion" means completion of the Freeport Facility so that
it is ready to be used for its intended purpose, with (a) the contractor
under the engineering, construction and procurement contract for the
Freeport Facility having achieved all minimum acceptance requirements for
"Substantial Completion" under such contract and (b) all Approvals
necessary to commence operations of the Freeport Facility having been
received by FLNG.
1.111 "Taxes" means all customs, taxes, royalties, excises, fees, duties,
levies, sales and use taxes and value added taxes, charges and all other
assessments, which may now or hereafter be levied or imposed, directly or
indirectly, by a Governmental Authority, except Port Charges.
1.112 "Temporary Customer" shall have the meaning set forth in Section 6.2(a).
1.113 "Temporary Release" shall have the meaning set forth in Section 6.2(a).
1.114 "Temporary Release Inventory" means, at any given time, the quantity in
MMBTUs that represents (a) the LNG received at the Receipt Point for
Temporary Customer's account; and (b) Gas, whether or not such Gas is
Regasified LNG or Gas derived or produced from sources other than
Regasified LNG, held for Temporary Customer's account.
1.115 "Term" shall have the meaning set forth in Section 7.1.
1.116 "Transporter" means any Person who owns or operates an LNG Vessel.
1.117 "Unloading Window" means a forty-eight (48) hour window starting at 6:00
a.m., Central Time on a specified day and ending forty-eight (48)
consecutive hours thereafter
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during which FLNG would make available berthing and LNG unloading services
at the Freeport Facility to either Customer or one of the Other Customers.
ARTICLE 2
SERVICES AND SCOPE
2.1 Services to be Provided by FLNG
During the Term and subject to the provisions of this Agreement, FLNG
shall, acting as a Reasonable and Prudent Operator, make available the
following services to Customer (such available services being herein
referred to as the "Services") in the manner set forth in Article 3:
(a) the berthing of LNG Vessels at the Freeport Facility;
(b) the unloading and receipt of LNG from LNG Vessels at the Receipt
Point;
(c) the regasifying of LNG held in Storage;
(d) Storage of Customer's Inventory;
(e) the transportation and delivery of Gas in the Freeport Facility
Pipeline to the Delivery Point (it being acknowledged that FLNG may,
at its option, cause Gas to be redelivered to Customer from sources
other than Regasified LNG); and
(f) other activities directly related to performance by FLNG of the
foregoing.
2.2 Additional Services
From time to time during the Term, the representatives of FLNG and
Customer may supplement this Agreement in accordance with Section 26.1 to
provide that FLNG will also make available services to Customer in
addition to the Services set forth in Section 2.1 (including bunkering
services).
2.3 Activities Outside Scope of this Agreement
For greater certainty, the Parties confirm that the following activities,
inter alia, are not Services provided by FLNG to Customer and, therefore,
such activities are outside of the scope of this Agreement:
(a) harbor, mooring and escort services, including those relating to
tugs, service boats, fire boats, and other escort vessels;
(b) the construction, operation, ownership, maintenance, repair and
removal of facilities downstream of the Delivery Point;
(c) the transportation of Gas beyond the Delivery Point;
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(d) the marketing of Gas and all activities related thereto; and
(e) the removal, marketing and transportation of Liquids and all
activities related thereto. For the avoidance of doubt, FLNG reserves
the right to separate and/or extract Liquids from LNG upstream of the
Delivery Point, provided that such separation does not result in Gas
failing to meet the quality specifications at the Delivery Point
required under Section 11.3.
ARTICLE 3
SALE AND PURCHASE OF SERVICES
3.1 Services Quantity
(a) Purchase and Sale of Services. During each Contract Year, FLNG
shall make available to Customer, and Customer shall purchase and pay
for (in respect of the Payment Period) an amount equal to the Fee, the
Services Quantity.
(b) Services Quantity. The quantity of Services (the "Services
Quantity") FLNG shall make available to Customer during a Contract
Year, and for which Customer shall purchase and pay for (in respect of
the Payment Period) pursuant to Section 3.1(a), shall consist of the
following:
(i) Unloading of LNG. FLNG shall make the Freeport Facility
available during Unloading Windows to allow berthing, unloading
and receipt of Customer's LNG in a quantity up to the Maximum LNG
Reception Quantity;
(ii) Storage of Customers' Inventory. FLNG shall cause Customer's
Inventory, net of Retainage, to be held temporarily in Storage
until redelivered in accordance with Section 3.1(b)(iii) below;
and
(iii) Redelivery of Gas at Delivery Point. Subject to the
provisions of this Agreement, including Sections 3.3(a), 3.3(b)
and 3.3(c), FLNG shall, on a daily basis, make Gas from
Customer's Inventory available to Customer at the Delivery Point
at the rate nominated by Customer pursuant to Section 5.2(c),
which nominated rate shall be no less than the *** and no more
than the ***; provided, however, that FLNG shall, on a daily
basis, make Gas in excess of the *** ("Peaking Gas") available to
Customer at the Delivery Point in the quantities determined
pursuant to Sections 5.2(a) and 5.2(b)(iv), but subject to the
allocation under Section 3.3(d).
(c) Expiration of Services Quantity. Notwithstanding any other term
or condition of this Agreement but subject to Section 10.7, if
Customer does not use any portion of the Services Quantity made
available to Customer pursuant to the terms of this Agreement,
including any portion of the Services Quantity not used in
13
connection with a Temporary Release, Customer's right to such unused
portion of the Services Quantity shall expire.
(d) Excess Reception. Notwithstanding the provisions of Section
3.1(b)(i), FLNG may, in its Sole Opinion, allow berthing, unloading
and receipt of Customer's LNG in quantities in excess of the Maximum
LNG Reception Quantity. Any such reception by FLNG of quantities in
excess of the Maximum LNG Reception Quantity shall be subject to the
Parties' prior agreement upon a temporary increase in the *** for a
specified period of time in order to allow Customer to receive
redelivery of such excess quantities within a reasonable time. The
berthing, unloading and receipt of such quantities in excess of the
Maximum LNG Reception Quantity shall not be construed to alter or
release the obligations of the Parties under this Agreement except
that Customer shall pay the Excess Reception Fee for such excess
quantities and except as otherwise provided in the preceding sentence.
3.2 Customer's Use of Services Quantity
Customer shall be entitled to use the Services Quantity in whole or in
part by itself, or may contract with one or more third parties for a
Temporary Release of such Services Quantity pursuant to the terms and
conditions of Section 6.2.
3.3 Gas Redelivery
(a) No Pre-Delivery Right. On any given day during a Contract Year,
Customer shall not be entitled to receive quantities of Gas in excess
of Customer's Inventory.
(b) ***. For purposes of this Agreement, the term "***" means the
quotient of (i) the *** divided by (ii) ***.
(c) ***. For purposes of this Agreement, the term "***" means, for
any day in which Customer is nominating pursuant to Section 5.2(c)(a
"Nomination Day"), the lesser of:
(i) the quotient of (a) the sum of (x) ***, plus (y) ***,
divided by (b) the number of days from and including the
Nomination Day until the first day of Customer's next Scheduled
Unloading Window; or
(ii) the "Alternate Minimum Gas Redelivery Amount" as notified
pursuant to Section 5.2(a), such amount being the quotient of:
a. the sum of: (x) *** plus, (y) ***; plus (z) the
aggregate of the following, calculated for each Cargo
expected to arrive in such month at the Freeport Facility
for Customer's account after the twentieth (20/th/) day of
the relevant month: (A) the quantity in MMBTUs of ***
divided by (B) the number of ***, and multiplied by (C) the
number of ***, from and including the last day of the
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applicable Scheduled Unloading Window to and including the
***; divided by
b. ***.
provided, however, if the Expected Receipt Quantity for a particular
Cargo scheduled to be delivered to the Freeport Facility in the
following month exceeds *** MMBTUs, then FLNG shall have the right, in
its notice under Section 5.2(a), to require *** to allow Other
Customers to unload at the Freeport Facility their respective LNG
contractual quantity on a *** over the Contract Year.
(d) Peaking Gas. FLNG shall give due consideration to the notices
provided to it by Customer and Other Customers electing to nominate
quantities of Peaking Gas (the "Nominees") pursuant to Sections 5.2(c)
and 5.2(d) and shall allocate such Peaking Gas among the Nominees as
follows:
(i) First, to each Nominee in an amount not to exceed the lesser
of (a) the quantity of Peaking Gas nominated by such Nominee, and
(b) the product of (x) the quantity of ***, multiplied by (y) a
fraction, the numerator of which is such Nominee's ***, and the
denominator of which is the aggregate *** of all Nominees;
(ii) Second, if any excess quantity of Peaking Gas remains
available, then to each Nominee with unfulfilled nominations for
such Peaking Gas in an amount not to exceed the lesser of (a) the
quantity of Peaking Gas nominated by such Nominee and not
received under the prior allocation, and (b) the product of (x)
the excess quantity of *** multiplied by (y) a fraction, the
numerator of which is the Nominee's ***, and the denominator of
which is the aggregate *** of all Nominees with unfulfilled
nominations for such ***; and
(iii) Third, if any excess quantity of Peaking Gas remains
available, then by repeating the allocation in Section 3.3(d)(ii)
until the entire quantity of Peaking Gas made available by FLNG
has been allocated or all nominations for such Peaking Gas have
been filled.
3.4 Failure to Take Delivery of Gas at Delivery Point
If on any day Customer fails to take redelivery of any Gas at the Delivery
Point at the rate nominated by Customer pursuant to Article 5 and such
failure is for reasons other than the inability of a Downstream Pipeline
to take delivery of Customer's Gas, such inability being not reasonably
within the control of Customer, then FLNG may, at its option, take title
to same free and clear of any Claims, and sell or otherwise dispose of
such Customer's Inventory using good faith efforts to obtain the best
available prices and to minimize costs. Customer shall indemnify, defend
and hold harmless FLNG, its Affiliates, and their respective directors,
officers, members and employees, for the actual
15
and reasonable costs incurred by FLNG as a result of such sale or other
disposition by FLNG. FLNG shall credit to Customer's account the net
proceeds from the sale or other disposition of Customer's Inventory to
which it takes title hereunder, minus transportation costs, third party
charges, and an administrative fee of U.S. $0.05 per MMBTU; provided,
however, that if the amount of the credit exceeds the amount due to FLNG
under the next monthly statement, then FLNG agrees to pay any such excess
amount to Customer within five (5) Business Days after delivery of such
monthly statement.
3.5 Freeport Services Manual
Acting as a Reasonable and Prudent Operator, FLNG shall develop and
maintain a single services manual applicable to Customer and all Other
Customers which contains detailed implementation procedures necessary for
performance of this Agreement and agreements with Other Customers with
regard to the matters set forth in Exhibit B attached hereto (but
excluding the matters governed by the Freeport Facility Marine Operations
Manual). In developing such a manual, FLNG shall provide Customer with a
preliminary draft of the same (the "Preliminary Services Manual"). If
Customer desires to consult with FLNG regarding the contents of the
Preliminary Services Manual, Customer shall, no later than fifteen (15)
days from delivery of said manual by FLNG, request to meet with FLNG by
providing notice thereof to FLNG, and FLNG shall, no later than thirty
(30) days after receipt of such notice, meet with Customer to discuss said
manual. If (a) Customer does not submit the foregoing notice to FLNG on a
timely basis or (b) Customer and FLNG meet pursuant to such a notice and
are able during such meeting to agree upon revisions to the draft, then
such draft, as so revised (and as amended from time to time), shall
constitute the "Freeport Services Manual". If Customer and FLNG meet
pursuant to the foregoing notice and are unable during such meeting to
agree upon revisions to the Preliminary Services Manual, then FLNG shall
determine, while using its reasonable efforts to accommodate Customer's
views, the Freeport Services Manual. In the event FLNG intends to amend
the Freeport Services Manual, then FLNG shall follow the procedure set
forth above in relation to the Preliminary Services Manual. FLNG shall
deliver to Customer and all Other Customers a copy of the Freeport
Services Manual and any amendments thereto promptly after they have been
finalized or amended, as the case may be. Customer shall comply, and shall
cause its Scheduling Representative to comply, with such Freeport Services
Manual in all respects. FLNG will undertake to develop a Freeport Services
Manual that is consistent with this Agreement; however, in the event of a
conflict between the terms of this Agreement and the Freeport Services
Manual, the terms of this Agreement shall control.
ARTICLE 4
COMPENSATION FOR SERVICES
4.1 Fee
Customer shall, as full compensation for the performance by FLNG of its
obligations under this Agreement (including the provision of Peaking Gas),
bear the Retainage and
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pay to FLNG the sum of the following components (such sum collectively
referred to as the "Fee") in respect of the period from the later of the
Commercial Start Date or Substantial Completion until the end of the Term
(the "Payment Period"):
(a) Reservation Fee.
(i) A monthly reservation fee (the "Reservation Fee") consisting
of the following:
a. ***
b. A monthly amount (the "FLNG Component"), calculated as
the product of:
(x) the quotient of the Maximum LNG Reception Quantity
divided by twelve (12); multiplied by
(y) U.S. $0.05;
c. A monthly installment in relation to certain fixed
operating costs of FLNG (the "FOC Installment") that is
subject to adjustment in accordance with a yearly
reconciliation (the "FOC Reconciliation"), wherein the FOC
Installment and the FOC Reconciliation are calculated as
follows:
(x) The FOC Installment shall equal the product of the FOC
Ratio multiplied by the Budgeted FOC for the following
month; and
(y) The FOC Reconciliation shall equal the positive or
negative difference between (i) the product of the FOC
Ratio multiplied by the Actual FOC attributable to the
prior year and (ii) the sum of all FOC Installments
attributable to and paid for the prior year;
d. A monthly installment (the "Crest Installment") that is
subject to adjustment in accordance with a yearly
reconciliation (the "Crest Reconciliation"), wherein the
Crest Installment and the Crest Reconciliation are
calculated as follows:
(x) The Crest Installment shall equal the product of the C
Ratio multiplied by the Crest Payment; and
(y) The Crest Reconciliation shall equal the positive or
negative difference between (i) the product of (a) the
actual amount paid by FLT to Crest Investment Company
under the Crest Contract and attributable to the prior
year multiplied by (b) the C Ratio and (ii) the sum of
all Crest Installments attributable and paid for the
prior year;
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e. A monthly payment equal to all Awards incurred in the
prior month (the "Awards Installment"), but excluding Awards
under LNG terminalling services agreements with Other
Customers;
(ii) The ***, the FLNG Component, the FOC Installment and the
Crest Installment shall be payable monthly in advance. The Awards
Installment shall be payable monthly in arrears. The FOC
Reconciliation and the Crest Reconciliation shall be payable
annually in arrears in March of each year;
(b) Incremental Costs. The following incremental costs (the
"Incremental Costs") payable in arrears:
(i) the actual electric power cost associated with the Services
provided hereunder to Customer, calculated as an amount equal to
the product of (x) all electric power costs incurred at the
Freeport Facility and all Gas Storage Facilities during the
applicable period times (y) a fraction, the numerator of which is
Customer's LNG received at the Freeport Facility during such
period and the denominator of which is the quantity of LNG
received at the Freeport Facility during such period for the
account of Customer and all Other Customers (provided, however,
that FLNG shall use reasonable efforts to (x) minimize all such
electric power costs, and (y) obtain the best commercial rates
for electric services available at the location of the Freeport
Facility given the intended use of the Freeport Facility and its
twenty-four (24) hour operation);
(ii) the actual amount of all reasonable incremental direct
costs, if any, incurred by FLNG for berthing an LNG Vessel after
sunset at the Freeport Facility;
(iii) the actual amount of all reasonable incremental direct
costs, if any, incurred by FLNG when an LNG Vessel arrives more
than three (3) hours after the ETA set forth in the Third Notice
delivered pursuant to Section 9.4(c)(iii), provided that if such
a delay is directly caused by a Governmental Authority or a Force
Majeure, then fifty percent (50%) of such reasonable incremental
direct costs; and
(iv) excess berth fees, if any, under Section 9.9(b)(iii); and
(c) Excess Reception Fee. An excess reception fee (the "Excess
Reception Fee") if, in any Contract Year, FLNG receives quantities of
LNG for Customer's account in excess of the Maximum LNG Reception
Quantity, payable in arrears upon Customer exceeding the Maximum LNG
Reception Quantity. The Excess Reception Fee shall equal an amount
equal to U.S. $*** per MMBTU received by FLNG in excess of the Maximum
LNG Reception Quantity.
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4.2 Retainage
For purposes of this Agreement, the term "Retainage" means the aggregate
of (a) the product of (i) the actual amount of all LNG used as fuel for
the Freeport Facility multiplied by (ii) a fraction, the numerator of
which is Customer Actual Capacity and the denominator of which is
Aggregate Actual Capacity, and (b) Customer's allocable portion of all
other unavoidable actual losses in Gas and LNG inventory at the Freeport
Facility in connection with performance of the Services, including losses
from Gas Storage, such allocable portion to be based on the ratio that the
Customer Actual Capacity for a Contract Year bears to the Aggregate Actual
Capacity for such Contract Year.
4.3 Services Unavailability
If some or all of the Services are unavailable to Customer on any day (or
portion of a day) during the Term as a result of (a) an unexcused failure
of FLNG, (b) Force Majeure, or (c) an unscheduled curtailment or temporary
discontinuation of Services pursuant to Section 18.2 (collectively a
"Services Unavailability"), the Parties agree that the Reservation Fee
shall ***. For the avoidance of doubt, the foregoing is without prejudice
to the fact that Customer shall not be obligated to pay the Reservation
Fee other than in respect of the Payment Period.
4.4 New Regulatory Costs or Taxes
If, subsequent to the Effective Date:
(a) FERC or any other Governmental Authority as a result of change in
law or regulation requires FLNG to incur any material cost not
originally foreseen at the time of this Agreement ("New Regulatory
Costs"); or
(b) any Governmental Authority imposes any new material Taxes on the
Services or increases materially the rate of existing Taxes on the
Services ("New Taxes") other than Taxes on the capital revenue or
income derived by FLNG;
then the Parties shall meet with a view to agreeing on amendments to this
Agreement with respect to the equitable allocation of such New Regulatory
Costs and/or New Taxes by and among the Parties and Other Customers. If
the Parties fail to reach agreement within ninety (90) days of the
commencement of such negotiations, either Party shall have the right
within thirty (30) days thereafter to request arbitration pursuant to
Article 22 to allocate the effect of New Regulatory Costs or New Taxes
between the Parties and Other Customers. The arbitrators shall determine a
method by which the effects thereof may be equitably allocated among the
Parties and the Other Customers. The arbitrators shall be authorized to
modify this Agreement in accordance with their resolution of such
allocation. The terms "equitable allocation" or "equitably allocated"
under this Section 4.4 shall take into account the timing of when FLNG
incurs New Regulatory Costs and/or New Taxes, the portions of LNG
terminalling services contracted by Customer and by Other Customers with
FLNG, the remaining duration of the Term and of the term of the
19
terminal use agreement with each Other Customer, and the useful life of
any capital items installed or upgraded as a result of the event that gave
rise to the New Regulatory Cost or New Tax.
4.5 Services Provided to Other Customers
(a) Identity of Other Customers. FLNG shall from time to time inform
Customer of the identity of all Other Customers who have signed with
FLNG terminal use agreements having a term of at least *** years.
(b) No Representation or Warranty. Customer acknowledges that (a) the
compensation paid by Customer from time to time for Services may be
less than, or more than, the price paid by Other Customers for the
same or similar LNG terminalling services, and (b) FLNG makes no
representations or warranties to Customer in this regard.
(c) Terminal Use Agreements with Other Customers. In its negotiation
of terminal use agreements with Other Customers, FLNG shall use best
efforts to include shipping, scheduling and operational provisions
that are consistent in all material respects with the provisions in
Article 5, Article 8, Article 9, Article 10 and Article 11 herein.
4.6 Relief from Certain Payments for Annual Shortfall
(a) Relief from Payment for Annual Shortfall. If Customer's LNG for a
Contract Year is less than the Maximum LNG Reception Quantity for such
Contract Year, the amounts paid by Customer under Section 4.1(a)(i)
shall be adjusted (pursuant to the provisions of Sections 4.6(b) and
4.6(c)) to relieve Customer from paying U.S. $0.05 on any Annual
Shortfall. For purposes of this Section 4.6, an "Annual Shortfall"
shall mean the positive quantity in MMBTUs resulting after applying
the following formula:
Annual Shortfall = Maximum LNG Reception Amount for
Contract Year - Available LNG for the
Contract Year
(b) Monthly Reduction of FLNG Component. Notwithstanding Section
4.6(a) but subject to Section 4.6(c), Customer shall be entitled to a
reduction in the FLNG Component for any month if Customer delivers a
certificate signed by an authorized representative of Customer
confirming that a Monthly Shortfall occurred in the immediately prior
month (the "QS Month"). For purposes of this Section 4.6(b), a
"Monthly Shortfall" shall mean the positive quantity in MMBTUs
resulting after applying the following formula:
Monthly Shortfall = (Maximum LNG Reception Amount for
Contract Year / 12) - Available LNG
for the QS Month
20
Upon timely receipt of the aforementioned certificate, the FLNG
Component for the QS Month shall be reduced by the product of the
Monthly Shortfall multiplied by U.S.$ 0.05. Such reduction in the FLNG
Component shall be reflected as a credit to Customer in the monthly
statement issued under Section 12.1 as follows: (i) if such
certificate is received on or before the fifth (5/th/) day of the
month immediately following the QS Month, the credit to Customer for
such difference shall be reflected in the next monthly statement
issued by FLNG; or (ii) if such certificate is received after the
fifth (5/th/) day of the month immediately following the QS Month, the
credit to Customer for such difference shall be reflected in the
monthly statement issued by FLNG in the month following the month in
which the certificate was received, provided that such certificate was
received prior to thirty (30) days the end of the Contract Year.
(c) Annual Reconciliation. If one or more reductions in the FLNG
Component occurred during the Contract Year under Section 4.6(b), then
within sixty (60) days after the end of the Contract Year, Customer
shall deliver to FLNG a detailed statement, confirmed by an
independent auditing firm appointed by Customer, of the amount of the
Annual Shortfall. In the event Customer is unable within a reasonable
time to cause an independent auditing firm to issue such a
confirmation for a commercially reasonable price, then Customer shall
not be required to obtain such confirmation but shall make sufficient
information available to FLNG to enable FLNG to determine the accuracy
of such detailed statement. The sum of all FLNG Components for such
prior Contract Year shall be adjusted via a reconciliation (the
"Annual Shortfall Reconciliation"), which shall equal the positive or
negative difference between (i) the sum of all FLNG Components for
such Contract Year (as adjusted pursuant to Section 4.6(b)) and (ii)
the sum of all FLNG Components for such Contract Year which should
have been payable as a result of the Annual Shortfall confirmed by the
independent auditing firm. The Annual Shortfall Reconciliation shall
be reflected as a charge or credit, as the case may be, to Customer in
the monthly statement issued by FLNG under Section 12.1.
(d) Available LNG. For purposes of this Section 4.6, "Available LNG"
means ***
(i) ***
(ii) ***
***. For the purposes of this Section 4.6, quantities of LNG
attributable to a Temporary Release or to an assignment of a portion
of the Services Quantity under Section 19.2 shall be deemed to be
Available LNG. Notwithstanding this Section 4.6(d), Available LNG
shall be deemed to equal the Maximum LNG Reception Amount for each
Contract Year during the Build-Up Period. For the avoidance of doubt,
the above determination of Available LNG shall at all times include
Customer's LNG.
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ARTICLE 5
SCHEDULING
5.1 Customer LNG Receipt Schedule
(a) FLNG Deliverables. Not later than one hundred twenty (120) days
prior to the beginning of each Scheduling Period, FLNG shall provide
to the Scheduling Representative a non-binding written assessment of
the dates of any planned maintenance to or modifications of the
Freeport Facility for such Scheduling Period and the expected impact
of such activities on the availability of Services. FLNG shall use
reasonable efforts to limit the number of days of any planned
maintenance to or modifications of the Freeport Facility.
(b) Notice from Scheduling Representative. Not later than one hundred
five (105) days prior to the beginning of each Scheduling Period, the
Scheduling Representative shall notify FLNG of the following:
(i) a programming schedule for the unloading of (x) up to the
Maximum LNG Reception Quantity over the course of the next
Contract Year as well as (y) up to *** percent (***%) of the
Maximum LNG Reception Quantity for the next succeeding Contract
Year (such percentage to be adjusted to reflect any partial
Contract Year) over the course of the last three months of the
Scheduling Period, which schedule shall specify, for each
Unloading Window, the proposed arrival date (the "Arrival Date")
of the applicable LNG Vessel and which Arrival Date must (x)
result in a delivery pattern whereby deliveries in any given
month do not materially exceed ***, (y) the result in deliveries
in any given month ***, and (z) take into consideration the
planned maintenance and modification dates furnished to Customer
by FLNG as set forth in Section 5.1(a); and
(ii) for each Arrival Date proposed pursuant to Section
5.1(b)(i), the name of the LNG Vessel expected to deliver LNG to
the Freeport Facility (if the identity of the LNG Vessel is known
to Customer at such time), the Expected Receipt Quantity, and the
anticipated quality (expressed in terms of Gross Heating Value)
of the LNG to be delivered at the Receipt Point during the
Scheduling Period.
(c) Notices from Other Customers. Customer acknowledges that Other
Customers will submit similar notices to FLNG regarding the matters
provided for in Section 5.1(b)
(d) Preliminary Receipt Schedule. *** shall take into consideration
the notices that it receives from the Scheduling Representative and
the Other Customers and, not later than ninety (90) days prior to the
beginning of each Scheduling Period, *** shall issue to *** via the
*** (or via an alternative *** if the *** is unavailable) a
preliminary receipt schedule for such Scheduling Period (the "***
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Preliminary Receipt Schedule") In issuing a *** Preliminary Receipt
Schedule for a particular Scheduling Period, *** shall not alter,
absent *** request, any Scheduled Unloading Window allocated to ***
for the last *** months of the Customer LNG Receipt Schedule for the
prior Scheduling Period. Customer may propose to FLNG to change any
such Scheduled Unloading Window, and FLNG agrees to give due
consideration to, and use reasonable efforts to accommodate, such
change. The *** Preliminary Receipt Schedule shall set forth (i) ***
and (ii) *** for purposes of changes pursuant to Section 5.1(h).
(e) Other *** Preliminary Receipt Schedules and Mutual Cooperation.
*** acknowledges that *** will issue to *** via the *** a preliminary
receipt schedule similar to the *** Preliminary Receipt Schedule
described in Section 5.1(d), but customized for each such *** ("***
Preliminary Receipt Schedules"). *** also acknowledges that conflicts
will occur in the preparation of the Preliminary Receipt Schedule and
*** Preliminary Receipt Schedules because of the joint use of the
Freeport Facility among Customer and Other Customers. Accordingly, the
Parties agree to cooperate with each other to resolve any such
conflict.
(f) Consultation; Customer LNG Receipt Schedule. If the Scheduling
Representative desires to consult with *** regarding the contents of
the *** Preliminary Receipt Schedule, the Scheduling Representative
shall, no later than fifteen (15) days from the issuance of the ***
Preliminary Receipt Schedule, request to meet with *** by providing
notice thereof (the "Consultation Notice") to ***, and *** shall, no
later than fifteen (15) days after receipt of the Consultation Notice,
meet with the Scheduling Representative to discuss the *** Preliminary
Receipt Schedule. If (i) the Scheduling Representative does not submit
a Consultation Notice to *** on a timely basis or (ii) the Scheduling
Representative and *** meet pursuant to a Consultation Notice and are
able during such meeting to agree upon revisions to the ***
Preliminary Receipt Schedule, then such *** Preliminary Receipt
Schedule, as so revised (and as updated from time to time for such
Scheduling Period by *** via the ***, such updates to be made in
accordance with this Agreement and the Freeport Services Manual),
shall constitute the "Customer LNG Receipt Schedule". If the
Scheduling Representative and *** meet pursuant to a Consultation
Notice and are unable during such meeting to agree upon revisions to
the *** Preliminary Receipt Schedule, then *** shall determine, while
using its reasonable efforts to accommodate Customer's views, the
Customer LNG Receipt Schedule with the understanding that, for
purposes of such determination, no Major Customer shall be given any
preference in scheduling over any other Major Customer but Major
Customers shall be given preferential consideration in scheduling over
Non-Major Customers. FLNG shall issue via the *** (or via an
alternative *** if the *** is unavailable) the Customer LNG Receipt
Schedule no later than sixty (60) days prior to the first day of the
Scheduling Period. The Customer LNG Receipt Schedule shall set forth
(i) *** and (ii) ***.
23
(g) Other Customer LNG Receipt Schedules. Customer acknowledges that
FLNG shall issue to each Other Customer a final receipt schedule
similar to the Customer LNG Receipt Schedule described in Section
5.1(f) but customized for each such Other Customer (such schedules
referred to as "Other Customer LNG Receipt Schedules").
(h) Adjustment to Scheduling Periods. Upon written request by the
Customer, FLNG shall use reasonable efforts to modify the time periods
expressly set forth in Sections 5.1(a), 5.1(b), 5.1(d), and 5.1(f) to
allow Customer to interface these periods with corresponding time
periods for scheduling agreed upon by Customer and its LNG Suppliers.
For purposes of this Section 5.1(h), FLNG shall be deemed to have used
reasonable efforts if FLNG rejects Customer's request because it
determines, acting as a Reasonable and Prudent Operator, that any such
modification would infringe on the rights of Other Customers.
(i) Customer Changes to Customer LNG Receipt Schedule. The Parties
agree as follows:
(i) Subject to the terms of this Section 5.1(i), at any time
following the issuance of the Customer LNG Receipt Schedule, the
Scheduling Representative may submit to FLNG a written request to
change a Scheduled Unloading Window to an Unloading Window that
is not presently allocated to Customer or Other Customers and
which FLNG is making available to Customer and Other Customers
under the Customer LNG Receipt Schedule (such request to change,
an "Customer Open Window Request"). Customer understands that (x)
Other Customers shall also have the right to submit to FLNG
similar scheduling requests (each an "Other Customer Open Window
Request"), (y) *** and (z) *** as soon as possible but not later
than 5:00 p.m., Central Time of the Business Day following the
date of receipt by FLNG of the applicable Open Window Request.
Upon accepting an Open Window Request, FLNG shall notify Customer
and Other Customers thereof via the *** (or via an alternative
electronic means of transmitting written communications if the
*** is unavailable). Notwithstanding anything herein to the
contrary, Customer shall use its reasonable efforts to keep to a
minimum the number of Customer Open Window Requests it submits to
FLNG.
(ii) Subject to the terms of this Section 5.1(i), at any time
following the issuance of the Customer LNG Receipt Schedule, the
Scheduling Representative may submit to FLNG a written request to
change a Scheduled Unloading Window to a forty-eight (48) hour
period that is unavailable to Customer under the Customer LNG
Receipt Schedule (such change, a "Change Request"). Customer
acknowledges that any Change Request will (x) *** and (y) ***.
Accordingly, FLNG shall ***, any Change Request and shall notify
Customer thereof via the *** (or via an alternative electronic
means of transmitting written communications if the *** is
unavailable) within three (3) Business Days of its receipt of a
24
Change Request. Notwithstanding anything herein to the contrary,
Customer shall use *** to keep to a minimum the number of Change
Requests it submits to FLNG, and FLNG shall use its reasonable
efforts to accommodate Customer's Change Requests.
(j) Other Modifications Due to Services Availability. If, for any
Scheduled Unloading Window, Customer is unable, due to a Services
Unavailability, to berth and unload an LNG Vessel, each affected
Scheduled Unloading Window allocated to Customer during such period
shall be ***, to the extent affected. Except as otherwise provided in
Section 5.1(i), the Customer LNG Receipt Schedule shall be considered
firm and shall not be subject to change by FLNG; provided, however,
that FLNG ***, with preference to Major Customers, if such Services
Unavailability caused the *** of one or more Scheduled Unloading
Windows allocated to Customer and/or Other Customers, in order to
maximize efficient usage of the Freeport Facility to assist Customer
and Other Customers to unload quantities of LNG which would otherwise
have been unloaded at the Freeport Facility during such cancelled
Scheduled Unloading Windows. Moreover, in the event of a Services
Unavailability, FLNG shall make reasonable efforts to *** of
redelivery of Gas for Customer and Other Customers to maximize
efficient usage of the Freeport Facility to assist Customer and Other
Customers to *** which would otherwise have been received at the
Delivery Point during such Services Unavailability.
5.2 Gas Delivery Procedure
(a) Preliminary Nomination Schedule. Not later than the fifteenth
(15/th/) day of each month, commencing the month immediately prior to
the Commercial Start Date, FLNG shall provide to the Scheduling
Representative a nomination schedule (the "Preliminary Nomination
Schedule") that sets forth, for each day of the ensuing month, the
following:
(i) the ***; and
(ii) all *** which, at the time of notification of the
Preliminary Nomination Schedule, FLNG acting as a Reasonable and
Prudent Operator *** from the Freeport Facility; provided,
however, that FLNG shall not be obligated to offer or deliver ***
to Customer or Other Customers to the extent that a Reasonable
and Prudent Operator would not obligate itself to do so under
similar circumstances and conditions.
For the avoidance of doubt, FLNG shall be obligated to make available
to Customer the quantities of *** notified in the Preliminary
Nomination Schedule, as allocated pursuant to Section ***.
(b) Daily Records. Commencing on the Commercial Start Date, FLNG
shall, on each Business Day by the time specified in the Freeport
Services Manual, post on
25
the *** for access by Customer certain daily records (the "Daily
Records"), including the following:
(i) Customer's Inventory held as of 11:59 p.m., Central Time on
the day preceding the posting of the Daily Records;
(ii) the estimated quantity of Customer's Inventory expected to
be held in Storage as of 11:59 p.m., Central Time on the Business
Day on which the Daily Records are posted, taking into account
expected receipts and deliveries during such Business Day;
(iii) if applicable, the estimated quantity of Customer's
Inventory expected to be held in Storage as of 11:59 p.m.,
Central Time on any non-Business Day occurring between the
Business Day on which the Daily Records are posted and the next
Business Day, taking into account expected receipts and
deliveries during such Business Days; and
(iv) either (x) the total quantity of ***, if any, which FLNG
acting as a Reasonable and Prudent Operator has determined on
such Business Day will be *** on the Business Day following the
posting of the Daily Records or (y) if such posting falls on a
Business Day that precedes any non-Business Day, the total
quantity of ***, if any, which FLNG acting as a Reasonable and
Prudent Operator has determined on such Business Day ***;
provided, however, that FLNG shall not be obligated to offer or
deliver *** to Customer or Other Customers to the extent that a
Reasonable and Prudent Operator would not obligate itself to do
so under similar circumstances and conditions; provided, however,
that the total quantity posted on the Daily Records may be no
less than those provided pursuant to Section 5.2(a)(ii).
(c) Gas Nomination. Commencing on the Commercial Start Date, the
Scheduling Representative shall, on each Business Day by the time
specified in the Freeport Services Manual, nominate the quantities of
Gas (including Peaking Gas, if available) that Customer desires to be
delivered to it at the Delivery Point on the next Business Day and any
intervening days that are not Business Days (such next day(s)
hereinafter referred to as a "Delivery Date") by providing notice
thereof (the "Nomination Notice") to FLNG. Subject to Section 3.3(a),
the quantities nominated by the Scheduling Representative in a
Nomination Notice shall in no event be less than the *** nor more than
the ***, except in the case of nominations of *** where the Scheduling
Representative must, in the Nomination Notice, request the *** as well
as the quantities of *** requested by Customer for delivery. In the
event FLNG does not receive a Nomination Notice on a timely basis, the
Scheduling Representative shall be deemed to have nominated the ***.
(d) Variations in Daily Redelivery Rates. FLNG shall use reasonable
efforts to designate in the Freeport Services Manual certain blocks of
time during a day on which Customer and Other Customers may elect to
vary the rates by which FLNG
26
is to redeliver Gas nominated for a given day without exceeding the
total quantity of Gas nominated. If FLNG chooses to designate such
blocks of time and Customer desires to vary its rates, Customer shall,
in a Nomination Notice, set forth the specific quantities of Gas to be
redelivered by FLNG during such blocks.
(e) Other Customer Nomination Notices. Customer acknowledges that
Other Customers shall provide to FLNG notices similar to the
Nomination Notice described in Section 5.2(c).
(f) Allocation of ***; *** Notice. Customer understands that if
quantities of *** are made available to Customer and Other Customers
pursuant to Sections 5.2(a) and 5.2(iv), each of Customer and the
Other Customers shall have the option to nominate all or any portion
of such quantities through the notices provided for in Sections 5.2(c)
and 5.2(d). FLNG shall allocate such *** as provided in Section ***
and, for any given day, shall notify Customer of the quantities of ***
allocated to Customer within the time specified in the Freeport
Services Manual.
5.3 Standard
FLNG shall act as a Reasonable and Prudent Operator in performing the
scheduling activities required by this Article 5.
5.4 Scheduling Representative
By no later than one month prior to the Commercial Start Date, Customer
shall appoint an individual to act as Scheduling Representative for the
purposes of this Article 5; provided, however, that Customer shall have
the right to change the identity of the Scheduling Representative at any
time by notice to FLNG. Unless otherwise stated herein, Customer hereby
authorizes the Scheduling Representative to do and perform any and all
acts for and on behalf of Customer with regard to scheduling matters
provided for in this Article 5.
5.5 Scheduling Coordination Among Customer and Other Customers
Customer shall have the right to request FLNG to arrange a joint meeting
with Other Customers with respect to any matter in relation to the
performance of this Article 5. FLNG shall use reasonable efforts to
organize such a meeting, provided that FLNG may elect to include
additional Other Customers if ***. If the Other Customers invited by FLNG
agree to participate in such a joint meeting between Customer, Other
Customers and FLNG, the joint meeting shall be held as soon as possible.
Unless otherwise agreed, any such joint meeting shall be held in Houston,
Texas or by telephone, as appropriate.
27
ARTICLE 6
RELEASE OF SERVICES
6.1 General
Customer may assign (a) all or a part of the Services Quantity as a
Temporary Release in accordance with Section 6.2, or (b) all or a part of
the Services Quantity in accordance with Article 19.
6.2 Temporary Release
(a) General. Customer may from time to time assign part of the
Services Quantity in writing to a third party (a "Temporary Customer")
on a temporary basis for not more than the remainder of the then
existing Scheduling Period (each such partial assignment referred to
herein as a "Temporary Release"). Customer shall have the right to
have ongoing at any given time up to *** Temporary Releases for each
*** MMBTUs of Maximum LNG Reception Quantity.
(b) Conditions. A Temporary Release shall be subject to the following
conditions:
(i) Notice and Consent. No Temporary Release shall be permitted,
or shall become effective, unless and until:
a. The proposed Temporary Release is consistent with the
terms and conditions of this Agreement;
b. The Services Quantity that Customer seeks to assign by
way of a proposed Temporary Release includes only Scheduled
Unloading Windows under the Customer LNG Receipt Schedule;
c. Customer has (x) delivered to FLNG a written notice in
the form set forth in the Freeport Services Manual (a
"Release Notice") disclosing in sufficient detail the terms
and conditions of the proposed Temporary Release relevant to
the Services Quantity for FLNG to be able to carry out its
obligations under this Article 6, including the proposed
effective date and expiration date of the Temporary Release
but excluding any sensitive pricing information related
thereto, and (y) furnished to FLNG all information
reasonably requested by FLNG with respect to such Temporary
Release; and
d. Except as otherwise provided below, FLNG has consented
to the Temporary Release by executing the Release Notice,
such consent not to be unreasonably withheld or delayed;
provided, however, that a Temporary Release to an Affiliate
of Customer or an LNG Supply Project that complies in all
respects with the
28
provisions of Sections 6.2(b)(i)a through 6.2(b)(i)c shall
not require the consent of FLNG.
(ii) Temporary Releases for Subsequent Scheduling Periods.
Notwithstanding the requirement in Section 6.2(a) that a proposed
Temporary Release relate to the then existing Scheduling Period,
in order to assist Customer in its long-term business planning,
Customer shall be entitled to submit to FLNG from time to time
Temporary Releases for subsequent Scheduling Periods. Subject to
the same consent rights (if any) set forth in Section Section
6.2(b)(i)d, FLNG shall execute a Release Notice for such
Temporary Release for a subsequent Scheduling Period.
(iii) Authorization. Following the execution by FLNG of the
Release Notice, FLNG shall be authorized to perform the specified
portion of the Services Quantity for Temporary Customer, subject
to the provisions of this Agreement. In relation to a Temporary
Release, Temporary Customer shall be fully authorized to act on
behalf of Customer, and FLNG shall be entitled to rely on the
nominations, notices and other submissions communicated to FLNG
by the Temporary Customer in relation to the Temporary Release as
if such nominations, notices and other submissions had been made
by Customer itself. In the event of a conflict between the terms
of the nominations, notices and other submissions issued by the
Temporary Customer in relation to the Temporary Release and those
issued by Customer, the terms issued by Customer shall control.
(iv) No Effect on ***. For the avoidance of doubt, a Temporary
Release shall in no event increase the ***.
(v) Performance. Commencing on the Release Date and continuing
through the expiration or termination of the Temporary Release,
(i) FLNG shall perform the Services assigned to Temporary
Customer under the Temporary Release, and (ii) Customer shall
cause Temporary Customer to perform, for the benefit of FLNG, all
requirements and obligations of Customer under this Agreement in
relation to the Temporary Release.
(vi) Expiration of Temporary Release. Except as otherwise
provided herein, FLNG shall render Services to Temporary Customer
for the period set forth in the Temporary Release (such period
herein referred to as the "Temporary Term"). Customer shall
ensure that the Temporary Release Inventory is reduced to zero
(0) MMBTUs as of the last day of the Temporary Term. In the event
that the Temporary Release Inventory is not reduced to zero (0)
MMBTU on last day of the Temporary Term, the Temporary Release
Inventory remaining thereafter shall be deemed solely as
Customer's Inventory.
(vii) Remedial Actions. In the event Temporary Customer's actions
are inconsistent with the requirements of this Agreement, FLNG
shall provide
29
written notice thereof to Customer. Customer shall (x) inform
FLNG within five (5) days of its receipt of FLNG's notice of the
remedial actions it intends to take to cause Temporary Customer's
actions to be consistent with the requirements of this Agreement,
and (y) cause Temporary Customer to be in compliance herewith
within thirty (30) days after delivery of FLNG's notice. In the
event Customer is unable to cause Temporary Customer to be in
compliance herewith, FLNG may terminate the Temporary Release by
written notice to Customer.
(viii) Customer Responsibility. Customer shall ensure that each
Temporary Release is performed in a manner consistent with the
Release Notice and the terms and provisions of this Agreement.
Notwithstanding anything in this Article 6 to the contrary, FLNG
shall invoice Customer in accordance with the provisions of
Section 12.1 for the Fee attributable to a Temporary Release, and
Customer shall pay, or cause to be paid, the Fee attributable to
a Temporary Release. No Temporary Release or anything in this
Section 6.2 shall relieve Customer of any responsibility or
liability under this Agreement. Customer shall remain liable to
FLNG for all obligations of Customer and Temporary Customer in
connection with any Temporary Release, and in this regard
Customer shall be fully responsible to FLNG for the performance
of the Temporary Release.
(ix) No Third Party Beneficiary. A Temporary Customer is not
intended to be, and shall not be construed to be, a third-party
beneficiary of this Agreement, nor shall a Temporary Release, or
anything contained in this Agreement, create any contractual or
quasi-contractual relationship or obligation between any
Temporary Customer and FLNG.
ARTICLE 7
TERM
7.1 Term
(a) Initial Term. Subject to the provisions of this Agreement, the
term of this Agreement (the "Term") shall consist of the Initial Term
and, if applicable, any Extension Term. The initial term of this
Agreement (the "Initial Term") shall commence on the later of the
Effective Date or the Commercial Start Date, and shall continue
thereafter until February 28, 2033 (the day on which the initial term
of the Freeport Facility Lease expires).
(b) Extensions. Except as otherwise provided herein, at the
expiration of the Initial Term, Customer shall have the right to up to
six (6) additional ten (10) year extension terms (each an "Extension
Term"), the first of which shall commence on March 1, 2033 and
continue until February 28, 2043. If Customer desires to extend this
Agreement by any Extension Term, Customer must notify FLNG's of its
good faith desire to elect the applicable Extension Term at least four
(4) years
30
prior to the expiration of the then current term. Notwithstanding the
foregoing, Customer shall not have the right to elect an Extension
Term in the event the Freeport Facility Lease is either not in effect
at the time of its election notice or will not be in effect during the
period of any such Extension Term
7.2 Commencement of Deliveries
In accordance with the procedure set forth in this Section 7.2, FLNG shall
notify Customer of the date on which Services for Customer will commence
at the Freeport Facility (the final date so notified being the "Commercial
Start Date"). The Commercial Start Date shall be a date within the period
from April 1, 2007 to March 31, 2008 (such period being the "First Window
Period"). The First Window Period shall be narrowed pursuant to the
following provisions:
(a) No later than December 1, 2006, FLNG shall notify Customer of a
two hundred seventy (270) day window ("Second Window Period") falling
within the First Window Period for the Commercial Start Date; provided
that if FLNG fails to give timely notice of same, the Second Window
Period shall be the latest possible two hundred seventieth (270/th/)
day window period within the First Window Period;
(b) No later than ninety (90) days in advance of the first day of the
Second Window Period, FLNG shall notify Customer of a one hundred
eighty (180) day window ("Third Window Period") falling within the
Second Window Period for the Commercial Start Date; provided that if
FLNG fails to give timely notice of same, the Third Window Period
shall be the latest possible one hundred eighty (180) day window
period within the Second Window Period;
(c) No later than sixty (60) days in advance of the first day of the
Third Window Period, FLNG shall notify Customer of a ninety (90) day
window ("Fourth Window Period") falling within the Third Window Period
for the Commercial Start Date; provided that if FLNG fails to give
timely notice of same, the Fourth Window Period shall be latest
possible ninety (90) day window period within the Third Window Period;
(d) No later than thirty (30) days in advance of the first day of the
Fourth Window Period, FLNG shall notify Customer of a sixty (60) day
window ("Fifth Window Period") falling within the Fourth Window Period
for the Commercial Start Date; provided that if FLNG fails to give
timely notice of same, the Fifth Window Period shall be the latest
possible sixty (60) day period within the Fourth Window Period;
(e) No later than fifteen (15) days in advance of the first day of
the Fifth Window Period, FLNG shall notify Customer of a thirty (30)
day window ("Sixth Window Period") falling within the Fifth Window
Period for the Commercial Start Date; provided that if FLNG fails to
give timely notice of same, the Sixth
31
Window Period shall be the latest possible thirty (30) day period
within the Fifth Window Period;
(f) No later than seven (7) days in advance of the first day of the
Sixth Window Period, FLNG shall notify Customer of a fifteen (15) day
window ("Final Window Period") falling within the Sixth Window Period
for the Commercial Start Date; provided that if FLNG fails to give
timely notice of same, the Final Window Period shall be the latest
possible fifteen (15) day period within the Fifth Window Period; and
(g) No later than three (3) days in advance of the first day of the
Final Window Period, FLNG shall notify Customer of the Commercial
Start Date falling within the Final Window Period; provided that if
FLNG fails to give timely notice of same, the Commercial Start Date
shall be the latest possible day in the Final Window Period.
The Commercial Start Date shall be the date so notified, regardless of
whether any unloading of Customer's LNG at the Freeport Facility actually
occurs on such date.
7.3 Delay Caused by Force Majeure
Should an event of Force Majeure occur that has the effect of delaying the
Commercial Start Date, then the Commercial Start Date shall be postponed
or delayed to fully address the effects of such event.
7.4 Construction Progress Reports
Beginning on April 1, 2004 and every quarter thereafter until the
Commercial Start Date, FLNG shall furnish to Customer an interim progress
report (collectively the "Progress Reports") specifying the progress since
the last report and the expected progress towards completing the
construction, testing and operational start-up of the Freeport Facility.
Each Progress Report shall include the status and progress of all
construction, an update of the construction schedule, and any other
information which Customer has reasonably requested in writing in advance
to enable Customer to evaluate the status and progress of construction,
testing and operational start-up of the Freeport Facility.
ARTICLE 8
FREEPORT FACILITY
8.1 Freeport Facility
(a) Standard of Operation. By the Commercial Start Date, FLNG shall
cause the Freeport Facility to be constructed and commissioned. On and
after the Commercial Start Date, FLNG shall at all times provide,
maintain and operate (or cause to be provided, maintained and
operated) the Freeport Facility in accordance with the following: (i)
International LNG Terminal Standards; and (ii) to the extent not
inconsistent with International LNG Terminal Standards, such good and
prudent practices as are generally followed in the LNG industry by
32
Reasonable and Prudent Operators of LNG receiving and regasification
terminals. On and after the Commercial Start Date, FLNG shall at all
times provide, maintain and operate (or cause to be provided,
maintained and operated) the Freeport Facility Pipeline in accordance
with (i) Pipeline Standards; and (ii) to the extent not inconsistent
with Pipeline Standards, such good and prudent practices as are
generally followed by Reasonable and Prudent Operators of U.S. Gas
pipelines.
(b) Facilities to be Provided. Without limiting Section 8.1(a), the
Freeport Facility shall include the following:
(i) appropriate systems for communications with LNG Vessels;
(ii) berthing facilities capable of receiving an LNG Vessel
having a displacement of no more than 150,000 tonnes, an overall
length of no more than 1,050 feet, a beam of no more than 165
feet, and a draft of no more than 42 feet, which LNG Vessels can
safely reach, fully laden, and safely depart, and at which LNG
Vessels can lie safely berthed and unload safely afloat;
(iii) lighting sufficient to permit unloading operations (other
than berthing or departing berth) by day or by night, to the
extent permitted by Governmental Authorities (it being
acknowledged, however, that FLNG shall in no event be obligated
to allow nighttime berthing operations at the Freeport Facility
if FLNG determines, acting as a Reasonable and Prudent Operator,
that such operations during nighttime hours could pose safety or
operational risks to the Freeport Facility, an LNG Vessel, or a
third party);
(iv) unloading facilities capable of receiving LNG at a rate of
no less than 10,000 Cubic Meters per hour when the pressure at
the Receipt Point is at least 5.6 bars (gauge), with three (3)
unloading arms each having a reasonable operating envelope to
allow for ship movement and manifold strainers of sixty (60)
mesh;
(v) a vapor return line system of sufficient capacity to
transfer to an LNG Vessel quantities of Gas necessary for the
safe unloading of LNG at required rates, pressures and
temperatures;
(vi) facilities allowing ingress and egress between the Freeport
Facility and the LNG Vessel by (x) representatives of
Governmental Authorities for purposes of unloading operations;
and (y) an independent surveyor for purposes of conducting tests
and measurements of LNG on board the LNG Vessel in accordance
with Annex I;
(vii) LNG storage facilities with a total gross capacity of at
least three hundred twenty thousand (320,000) Cubic Meters of
LNG;
00
(xxxx) XXX regasification facilities with a total daily capacity of
at least 1,605,000 MMBTUs; and
(ix) the Freeport Facility Pipeline with a total daily capacity
at the Delivery Point of at least 2,140,000 MMBTUs, with suitable
interconnections with Downstream Pipelines capable of accepting
such volumes.
If FLNG elects, in its Sole Opinion, to also provide Gas Storage
Facilities, such facilities shall be made available in the quantities
determined by FLNG from time to time. In addition, FLNG shall have the
right, but not the obligation, to from time to time expand the
Freeport Facility or to construct or acquire other facilities in order
to perform the Services or any other mode of LNG, Gas, or
energy-related services.
(c) Facilities Not Provided. For the avoidance of doubt, services and
facilities not provided at the Freeport Facility include the
following: (i) facilities and loading lines for liquid or gaseous
nitrogen to service an LNG Vessel; (ii) facilities for providing
bunkers; and (iii) facilities for the handling and delivery to the LNG
Vessel of ship's stores, provisions and spare parts.
8.2 Compatibility of Freeport Facility with LNG Vessels
(a) Freeport Facility. Customer acknowledges that it is familiar with
the general specifications and locations for the LNG berthing and
unloading facilities of the Freeport Facility as of the date hereof.
After the date hereof, Customer shall ensure, at no cost to FLNG
except as set forth in Section 8.2(b), that each of the LNG Vessels is
fully compatible with the Freeport Facility. Should an LNG Vessel fail
materially either to be compatible with the Freeport Facility, or to
be in compliance with the provisions of Article 9, Customer shall not
employ such LNG Vessel until it has been modified to be so compatible
or to so comply.
(b) Modifications. The Parties agree that, after the date hereof,
FLNG shall be entitled to modify the Freeport Facility, its
specifications or the location of the berthing and unloading
facilities in any manner whatsoever, provided that (i) such
modifications do not render the Freeport Facility incompatible with an
LNG Vessel, (ii) such modifications, once finalized, do not reduce the
Services Quantity and (iii) such modifications do not otherwise
conflict with FLNG's obligations under this Agreement. Notwithstanding
the foregoing, FLNG may make such modifications in a manner that would
render it incompatible with an LNG Vessel provided that:
(i) such modification is made pursuant to a change in
International LNG Terminal Standards; or
(ii) the LNG Vessel is capable of being modified to maintain
compatibility with the Freeport Facility and, in connection with
a modification (other than pursuant to paragraph (i) above), FLNG
34
reimburses Customer for the reasonable actual costs incurred by
Customer in causing Transporter to modify the LNG Vessel to
maintain compatibility with the Freeport Facility as so modified;
provided, further, that Customer shall use its reasonable efforts
to minimize costs to be borne by FLNG hereunder, shall notify
FLNG reasonably in advance of the nature and expected cost of all
such LNG Vessel modifications by Transporter, and shall certify
to FLNG the actual amount and detail of all costs incurred for
which such reimbursement from FLNG is requested.
8.3 Customer Inspection Rights
On and after the Commercial Start Date and upon obtaining FLNG's prior
written consent, which consent shall not be unreasonably withheld or
delayed, a reasonable number of Customer's designated representatives
(including LNG Suppliers and Temporary Customers) may from time to time
inspect the operation of the Freeport Facility so long as such inspection
occurs from 8:00 a.m. to 5:00 p.m. on a Business Day. Any such inspection
shall be at Customer's sole risk and expense. Customer (and its designees)
shall carry out any such inspection without any interference with or
hindrance to the safe and efficient operation of the Freeport Facility.
Customer's right to inspect and examine the Freeport Facility shall be
limited to verifying FLNG's compliance with FLNG's obligations under this
Agreement and shall not entitle Customer to make direct requests to FLNG
regarding any aspect of the Freeport Facility. No inspection (or lack
thereof) of the Freeport Facility by Customer hereunder, or any requests
or observations made to FLNG or its representatives by or on behalf of
Customer in connection with any such inspection, shall (a) modify or amend
FLNG's obligations, representations, warranties and covenants under this
Agreement or under any agreement or instrument contemplated by this
Agreement; or (b) constitute an acceptance or waiver by Customer of FLNG's
obligations under this Agreement.
ARTICLE 9
TRANSPORTATION AND UNLOADING
9.1 LNG Vessels
(a) Customer to Cause LNG Vessels to Comply. Customer shall be
responsible for the transportation of LNG from the Loading Port to the
Freeport Facility. In this regard, Customer shall cause each LNG
Vessel to comply with the requirements of this Article 9 in all
respects.
(b) Approvals and Documentation. Each LNG Vessel shall comply with
the regulations of, and obtain all Approvals required by, Governmental
Authorities to enable such LNG Vessel to enter, leave and carry out
all required operations at the Freeport Facility. Each LNG Vessel
shall at all times have on board valid documentation satisfactory to
FLNG evidencing all such Approvals. Each LNG Vessel shall comply fully
with the International Safety Management Code for the
35
Safe Operation of Ships and Pollution Prevention effective July 1,
1998, and at all times be in possession of a valid safety management
certificate.
(c) Fireboats, Escort Vessels and Port Charges. Customer shall
arrange for, or cause the appropriate Person to arrange for, such
number and types of fireboats and escort vessels as are required by
Governmental Authorities to attend the LNG Vessel so as to permit safe
and efficient movement of the LNG Vessel within the maritime safety
areas located in the approaches to and from the Freeport Facility.
Customer shall pay all Port Charges directly to the appropriate
Person.
(d) Requirements. Each LNG Vessel must satisfy the following
requirements:
(i) Specifications. Except as otherwise mutually agreed in
writing by the Parties, each LNG Vessel shall be compatible with
the specifications of the Freeport Facility identified in Section
8.1(b). Notwithstanding the foregoing, in the event an LNG Vessel
is compatible with the specifications set forth in Section 8.1(b)
or otherwise acceptable to FLNG, but a Governmental Authority or
Pilot prohibits or otherwise hinders the utilization of such LNG
Vessel, Customer's obligations under this Agreement shall not be
excused or suspended by reason of Customer's inability (pursuant
to the foregoing) to use such a vessel as an LNG Vessel.
(ii) LNG Vessel Capacity. Except as otherwise agreed in writing
by FLNG, each LNG Vessel shall have an LNG cargo containment
capacity of no less than one hundred twenty thousand (120,000)
Cubic Meters, determined at the time of loading of LNG.
(iii) Condition of the LNG Vessel. Each LNG Vessel shall be (x)
fitted in every way for the safe loading, unloading, handling and
carrying of LNG in bulk at atmospheric pressure; and (y) tight,
staunch, strong and otherwise seaworthy with cargo handling and
storage systems (including instrumentation) necessary for the
safe loading, unloading, handling, carrying and measuring of LNG
in good order and condition. The location of the unloading
manifold shall allow a safe margin for movement of the arms
within the operating envelope.
(iv) Classification Society. Each LNG Vessel shall at all times
be maintained in class with any of the American Bureau of
Shipping, Lloyds Register for Shipping or Det Norske Veritas or
any other classification society that is mutually agreeable to
the Parties.
(v) Construction. Each LNG Vessel shall have been constructed to
all applicable International LNG Vessel Standards (including the
International Code For the Construction and Equipment of Ships
Carrying Liquefied Gases in Bulk).
36
(vi) Operation and Maintenance. Each LNG Vessel shall comply
with, and shall be fully equipped, supplied and maintained to
comply with, all applicable International LNG Vessel Standards.
Unless approved by FLNG in writing, which approval shall not be
unreasonably withheld or delayed, an LNG Vessel shall be
prohibited from engaging in any maintenance, repair or in-water
surveys while berthed at the Freeport Facility. Each LNG Vessel
shall comply fully with the guidelines of any Governmental
Authority of the United States, including the National
Oceanographic and Atmospheric Administration (NOAA), in relation
to actions to avoid strikes in U.S. waters with protected sea
turtles and cetaceans (e.g., whales and other marine mammals) and
with regard to the reporting of any strike by the LNG Vessel
which causes injury to such protected species.
(vii) Crew. The officers and crew of each LNG Vessel shall have
the ability, experience, licenses and training commensurate with
the performance of their duties in accordance with
internationally accepted standards as adopted on first-class
LNG-carrying vessels and as required by Governmental Authorities
and any labor organization having jurisdiction over the LNG
Vessel or her crew. Without in any way limiting the foregoing:
a. all shipboard personnel shall hold valid certificates
of competence in accordance with the requirements of the law
of the flag state of the LNG Vessel and any requirements of
the laws of the United States of America;
b. the master, chief engineer, chief mate and cargo
engineer (and such other officers of the LNG Vessel having
responsibilities associated with the preparation of the LNG
Vessel for unloading) shall be trained and certified to a
standard customary for an operator of a first-class LNG
vessel of the type and tonnage of the LNG Vessel and in
compliance with the International Convention on Standards of
Training, Certification and Watchkeeping for Seafarers,
1978;
c. the master, chief engineer, all cargo engineers, and
all deck officers shall be fluent in written and oral
English and shall maintain all records and provide all
reports with respect to the LNG Vessel in English, and there
shall otherwise be on board sufficient personnel with a good
working knowledge of the English language to enable cargo
handling and unloading to be carried out efficiently and
safely and to enable communications between the LNG Vessel
and those unloading the LNG Vessel to be carried out quickly
and efficiently; and
37
d. none of the LNG Vessel's master, officers or crew
shall, while serving on the LNG Vessel, abuse the use of
drugs or alcohol, and Transporter shall maintain a written
policy to such effect, such policy to meet or exceed the
standards of the Oil Companies International Marine Forum's
Guidelines for the Control of Drugs and Alcohol Aboard Ship,
1995, as amended from time to time. If any master, officer
or crew member abuses the use of drugs or alcohol, such
individual shall be dismissed from service on the LNG
Vessel.
(viii) Communications. Each LNG Vessel shall have communication
equipment complying with applicable regulations of Governmental
Authorities and permitting such LNG Vessel to be in constant
communication with the Freeport Facility and with other vessels
in the area (including fireboats, escort vessels and other
vessels employed in port operations).
(ix) Pumping Time. Provided that the Freeport Facility supplies a
suitable vapor return line meeting the requirements of Section
8.1(b)(v), then:
a. an LNG Vessel with an LNG cargo containment capacity
less than or equal to one hundred forty thousand (140,000)
Cubic Meters shall be capable of unloading LNG in a maximum
of fifteen (15) hours; and
b. an LNG Vessel with an LNG cargo containment capacity
greater than one hundred forty thousand (140,000) Cubic
Meters shall be capable of unloading LNG in the number of
hours derived after applying the following formula:
15 + x = maximum LNG unloading time (in hours)
where:
y = the LNG cargo containment capacity of the LNG
Vessel in excess of 140,000 Cubic Meters; and
x = y/10,000 Cubic Meters
Time for connecting, cooling, stripping and disconnecting, and
cooling of liquid arms shall not be included in the computation
of pumping time.
9.2 Freeport Facility Marine Operations Manual
Acting as a Reasonable and Prudent Operator, FLNG shall develop and
maintain a single marine operations manual that governs activities at the
Freeport Facility, applies to all LNG Vessels and vessels used by Other
Customers, and is consistent with International LNG Vessel Standards (but
excluding the matters governed by the Freeport Services Manual). In
developing such a manual, FLNG shall provide Customer with a preliminary
38
draft of the same (the "Preliminary Marine Operations Manual"). If
Customer desires to consult with FLNG regarding the contents of the
Preliminary Marine Operation Manual, Customer shall, no later than fifteen
(15) days from delivery of said manual by FLNG, request to meet with FLNG
by providing notice thereof to FLNG, and FLNG shall, no later than thirty
(30) days after receipt of such notice, meet with Customer to discuss said
manual. If (a) Customer does not submit the foregoing notice to FLNG on a
timely basis or (b) Customer and FLNG meet pursuant to such a notice and
are able during such meeting to agree upon revisions to the draft, then
such draft, as so revised (and as amended from time to time), shall
constitute the "Freeport Facility Marine Operations Manual". If Customer
and FLNG meet pursuant to the foregoing notice and are unable during such
meeting to agree upon revisions to the Preliminary Marine Operations
Manual, then FLNG shall determine, while using its reasonable efforts to
accommodate Customer, the Freeport Facility Marine Operations Manual. In
the event FLNG intends to amend the Freeport Facility Marine Operations
Manual, then FLNG shall follow the procedure set forth above in relation
to the Preliminary Marine Operations Manual. FLNG shall deliver to
Customer and all Other Customers a copy of the Freeport Facility Marine
Operations Manual and any amendments thereto promptly after they have been
finalized or amended, as the case may be. Customer shall comply, and shall
cause its Scheduling Representative to comply, with such Freeport Facility
Marine Operations Manual in all respects. FLNG will undertake to develop a
Freeport Facility Marine Operations Manual that is consistent with this
Agreement; however, in the event of a conflict between the terms of this
Agreement and the Freeport Facility Marine Operations Manual, the terms of
this Agreement shall control.
9.3 LNG Vessel Inspections; Right to Reject LNG Vessel
(a) Inspections. During the Term, on prior reasonable notice to
Customer, FLNG may, at its sole risk, send its representatives
(including an independent internationally recognized maritime
consultant) to inspect during normal working hours any LNG Vessel as
FLNG may consider necessary to ascertain whether the LNG Vessel
complies with the provisions of this Agreement. FLNG shall bear the
costs and expenses in connection with any inspection conducted
hereunder. Any such inspection may include, as far as is practicable
having regard to the LNG Vessel's operational schedule, examination of
the LNG Vessel's hull, cargo and ballast tanks, machinery, boilers,
auxiliaries and equipment; examination of the LNG Vessel's deck and
engine scrap/rough and fair copy/official log books; review of records
of surveys by the LNG Vessel's classification society and relevant
Governmental Authorities; and review of the LNG Vessel's operating
procedures and performance of surveys, both in port and at sea. Any
inspection carried out pursuant to this Section 9.3(a): (i) shall not
interfere with, or hinder, any LNG Vessel's safe and efficient
construction or operation; and (ii) shall not entitle FLNG or any of
its representatives to make any request or recommendation directly to
Transporter except through Customer. No inspection (or lack thereof)
of an LNG Vessel hereunder shall (i) modify or amend Customer's
obligations, representations, warranties and covenants under this
Agreement or under any agreement or instrument contemplated by this
Agreement; or (ii) constitute an acceptance or waiver by FLNG of
Customer's obligations under this Agreement.
39
(b) Right to Reject LNG Vessel. Without prejudice to any other rights
and remedies arising hereunder or by law or otherwise, FLNG shall have
the right to reject any LNG Vessel that Customer intends to use to
deliver LNG to the Freeport Facility if such LNG Vessel does not
comply materially with the provisions of this Agreement, provided
that:
(i) neither the exercise nor the non-exercise of such right
shall reduce the responsibility of Customer to FLNG in respect of
such vessel and her operation, nor increase FLNG's
responsibilities to Customer or third parties for the same; and
(ii) Customer's obligations under this Agreement shall not be
excused or suspended by reason of Customer's inability (pursuant
to the foregoing) to use a vessel as an LNG Vessel.
9.4 Advance Notices re LNG Vessel and Cargoes
(a) Changes in Expected Receipt Quantity. If, subsequent to issuing
the notice required under Section 5.1(b)(ii) herein, Customer has
reason to foresee a change in the Expected Receipt Quantity for a
particular Arrival Date, Customer shall immediately provide notice
thereof to FLNG and include in such notice Customer's new estimate of
the Expected Receipt Quantity. To the extent such new estimate
increases the Expected Receipt Quantity contained in any prior notice,
FLNG shall use reasonable endeavors to accept such larger quantity but
shall at all times retain the right not to accept such new estimate
if, in its Sole Opinion, such new estimate will result in excess
inventory at the Freeport Facility.
(b) LNG Vessel Nomination. As soon as possible but no later than five
(5) days prior to the scheduled loading date for a Cargo, Customer
shall notify FLNG of the information specified below:
(i) name of LNG Vessel and, in reasonable detail, the age,
dimensions, specifications, operator, safety record, and
condition of such LNG Vessel;
(ii) name of Loading Port;
(iii) expected departure date of LNG Vessel from Loading Port;
(iv) estimated arrival date at the Freeport Facility; and
(v) any changes in the Expected Receipt Quantity since
Customer's prior notice.
Moreover, if the vessel that Customer proposes to use as an LNG Vessel
has not, within the immediately preceding Contract Year, delivered LNG
to the Freeport Facility, Customer shall notify FLNG thereof at least
sixty (60) days prior to the first day of the applicable Scheduled
Unloading Window.
40
(c) LNG Vessel Movements. With respect to each Cargo of LNG to be
delivered hereunder, Customer shall give, or cause the master of the
LNG Vessel to give, to FLNG the following notices:
(i) A first notice ("First Notice"), which shall be sent upon
the departure of the LNG Vessel from the Loading Port and which
shall set forth the time and date that loading was completed, the
volume (expressed in Cubic Meters) of LNG loaded on board the LNG
Vessel, the estimated time of arrival of the LNG Vessel at the
Arrival Location ("ETA"), any operational deficiencies in the LNG
Vessel that may affect its performance at the Freeport Facility
or berth;
(ii) A second notice ("Second Notice"), which shall be sent
ninety-six (96) hours prior to the ETA set forth in the First
Notice, stating the LNG Vessel's then ETA. If, thereafter, such
ETA changes by more than six (6) hours, Customer shall give
promptly, or cause the master of the LNG Vessel to give promptly,
to FLNG notice of the corrected ETA;
(iii) A third notice ("Third Notice"), which shall be sent
twenty-four (24) hours prior to the ETA set forth in the Second
Notice (as corrected), confirming or amending such ETA. If,
thereafter, such ETA changes by more than three (3) hours,
Customer shall give promptly, or cause the master of the LNG
Vessel to give promptly, to FLNG notice of the corrected ETA;
(iv) A fourth notice ("Final Notice"), which shall be sent twelve
(12) hours prior to the ETA set forth in the Third Notice (as
corrected), confirming or amending such ETA. If, thereafter, such
ETA changes by more than one (1) hour, Customer shall give
promptly, or cause the master of the LNG Vessel to give promptly,
to FLNG notice of the corrected ETA; and
(v) An NOR, which shall be given at the time prescribed in
Section 9.5 below.
(d) Characteristics of Cargoes. With the First Notice, Customer shall
notify FLNG, or cause FLNG to be notified, for FLNG's information
only, of the following characteristics of the LNG comprising its Cargo
as determined at the time of loading:
(i) Gross Heating Value per unit;
(ii) molecular percentage of hydrocarbon components and nitrogen;
(iii) average temperature; and
(iv) density at loading.
41
(e) Right to Reject Certain Quantities. Without prejudice to any
other rights and remedies arising hereunder or by law or otherwise,
FLNG shall for any reason (including limitations in LNG Storage) have
the right to reject unloading of any quantities of LNG on board an LNG
Vessel that exceed by more than five percent (5%) the Expected Receipt
Quantity for such Cargo as specified in, whichever applicable, (i) the
notice delivered pursuant to Section 5.1(b)(ii) and utilized by FLNG
for the purposes of determining Customer LNG Receipt Schedule or (ii)
any subsequent notice delivered pursuant to Section 9.4(a) and
accepted by FLNG.
9.5 Notice of Readiness
(a) Issuance. Subject to any applicable restrictions, including any
nighttime transit restrictions imposed by Governmental Authorities or
Pilots or any other reasonable timing restrictions imposed by FLNG,
the master of an LNG Vessel or its agent shall give to FLNG its NOR to
unload (berth or no berth) upon arrival of such LNG Vessel at the
specific location off the Freeport Facility designated for such
purposes in the Freeport Facility Marine Operations Manual (such
location referred to as the "Arrival Location").
(b) Effectiveness. An NOR given under Section 9.5(a) shall become
effective as follows:
(i) For an LNG Vessel arriving at the Arrival Location at any
time before 6:00 a.m., Central Time on the first day of the
Scheduled Unloading Window allocated to such LNG Vessel, an NOR
shall be deemed effective at the earlier of (x) 6:00 a.m.,
Central Time on the first day of such Scheduled Unloading Window;
or (y) the time unloading commences;
(ii) For an LNG Vessel arriving at the Arrival Location at any
time between the period of 6:00 a.m., Central Time on the first
day of the Scheduled Unloading Window allocated to such LNG
Vessel and two (2) hours before sunset, Central Time on the
second day of such Scheduled Unloading Window (such period
referred to as the "NOR Window"), an NOR shall become effective
at the time of its issuance; or
(iii) For an LNG Vessel arriving at the Arrival Location at any
time after the expiration of the NOR Window, an NOR shall become
effective upon FLNG's notice to the LNG Vessel that it is ready
to receive the LNG Vessel at berth.
9.6 Berthing Assignment
(a) General Rule. FLNG shall determine the berthing sequence of all
LNG Vessels and other vessels at the Freeport Facility in order to
ensure compliance with the Customer LNG Receipt Schedule and the Other
Customer LNG Receipt
42
Schedules. If an LNG Vessel arrives not ready to unload for any
reason, FLNG may refuse to allow it to berth.
(b) Timely Arrival. FLNG shall berth an LNG Vessel arriving before or
during its NOR Window at the first opportunity that FLNG determines
such LNG Vessel will not interfere with unloading by any other
scheduled vessel but in no event later than two (2) hours prior to
sunset at the Freeport Facility on the second day of the Scheduled
Unloading Window allocated to such LNG Vessel (hereinafter referred to
as the "Berthing Deadline"); provided, however, that if FLNG does not
berth such LNG Vessel by the Berthing Deadline, Customer's sole
recourse and remedy for FLNG's breach thereof is demurrage pursuant to
Section 9.7(c).
(c) Late Arrival. FLNG shall berth an LNG Vessel arriving after its
NOR Window at the first opportunity that FLNG reasonably determines
such LNG Vessel will not interfere with unloading by any scheduled
vessel.
9.7 Unloading Time
(a) Allotted Unloading Time. The allotted unloading time for each LNG
Vessel ("Allotted Unloading Time") shall be thirty-six (36) hours,
subject to extensions for:
(i) reasons attributable to Customer, a Pilot, a Governmental
Authority, the LNG Vessel or its master, crew, owner or operator;
(ii) Adverse Weather Conditions;
(iii) Force Majeure;
(iv) unscheduled curtailment or temporary discontinuation of
operations at the Freeport Facility in accordance with Section
18.2;
(v) occupancy of the berth by an LNG vessel that arrived at
berth at the Freeport Facility no later than two (2) hours prior
to sunset on the second day of the Scheduled Unloading Window
allocated to such vessel, which shall result in an extension of
no more than nine (9) hours;
(vi) failure to send the Final Notice; and
(vii) nighttime transit restrictions.
(b) Actual Unloading Time. The actual unloading time for each LNG
Vessel ("Actual Unloading Time") shall commence when the NOR is
effective and shall end when the unloading and return lines of the LNG
Vessel are disconnected from the Freeport Facility's unloading and
return lines.
(c) Demurrage at the Freeport Facility. The Parties agree as follows:
43
(i) In the event Actual Unloading Time exceeds Allotted
Unloading Time (including any extension in accordance with
Section 9.7(a)) ("Demurrage Event"), FLNG shall pay to Customer
as liquidated damages demurrage in United States dollars (which
shall be prorated for a portion of a day) determined in
accordance with the rate set out in the following table:
----------------------------------------------------------------------
LNG Vessel Cargo Capacity Demurrage Rate
in $/day
----------------------------------------------------------------------
Less than 120,000 Cubic Meters Rate to be established by
agreement
----------------------------------------------------------------------
120,000 Cubic Meters or greater up to, but $ 55,000
not including, 160,000 Cubic Meters
----------------------------------------------------------------------
160,000 Cubic Meters or greater up to, but $ 65,000
not including, 200,000 Cubic Meters
----------------------------------------------------------------------
200,000 Cubic Meters or greater $ 83,000
----------------------------------------------------------------------
(ii) If a Demurrage Event occurs, Customer shall invoice FLNG for
such demurrage pursuant to Section 12.2.
(d) Excess Boil-Off. If an LNG Vessel is delayed in berthing at the
Freeport Facility and/or commencement of unloading due to an event
occurring at the Freeport Facility and for a reason that would not
result in an extension of Allotted Unloading Time under Section
9.7(a), and if, as a result thereof, the commencement of unloading is
delayed beyond twenty-four (24) hours after the Notice of Readiness is
effective, then, for each full hour by which commencement of unloading
is delayed beyond such twenty-four (24) hour period, FLNG shall pay
Customer as liquidated damages an amount, on account of excess
boil-off, equal to the product of the Xxxxx Hub Price multiplied by
the quantity in MMBTUs equal to 0.125% of the Cargo per day. Customer
shall invoice FLNG for such excess boil-off pursuant to Section 12.2.
9.8 Unloading at the Freeport Facility
(a) Efficiency. FLNG shall cooperate with Transporters (or their
agents) and with the master of each LNG Vessel to facilitate the
continuous and efficient delivery of LNG hereunder.
(b) Vapor Return Line. During unloading of each Cargo of LNG, FLNG
shall return to the LNG Vessel Gas in such quantities as are necessary
for the safe unloading of the LNG at such rates, pressures and
temperatures as may be required by the design of the LNG Vessel, and
such returned Gas shall not be deemed to be volume unloaded for
Customer's account.
44
9.9 LNG Vessel Not Ready for Unloading; Excess Berth Time
(a) Vessel Not Ready for Unloading. If any LNG Vessel, previously
believed to be ready for unloading, is determined to be not ready
after being berthed, FLNG may direct the LNG Vessel's master to vacate
the berth and proceed to anchorage, whether or not other LNG vessels
are awaiting the berth, unless it appears reasonably certain to FLNG
that such LNG Vessel can be made ready without disrupting the overall
unloading schedule of the Freeport Facility or operations of the
Freeport Facility. When an unready LNG Vessel at anchorage becomes
ready for unloading, its master shall notify FLNG. Upon the reberthing
of any LNG Vessel vacated pursuant to this Section 9.9(a), Customer
shall be responsible for any actual costs incurred by FLNG acting as a
Reasonable and Prudent Operator as a result of such LNG Vessel not
being ready for unloading.
(b) Berth Limitations.
(i) An LNG Vessel shall complete unloading and vacate the berth
as soon as possible but not later than the following allowed
berth time:
a. twenty-four (24) hours, in the case of an LNG Vessel
with an LNG cargo containment capacity less than or equal to
one hundred forty thousand (140,000) Cubic Meters; or
b. in accordance with the following formula, in the case
of an LNG Vessel with an LNG cargo containment capacity
greater than one hundred forty thousand (140,000) Cubic
Meters:
24 + x = allowed berth time (in hours)
where:
y = the LNG cargo containment capacity of the
LNG Vessel in excess of 140,000 Cubic
Meters; and
x = y/10,000 Cubic Meters.
Notwithstanding the foregoing, the aforementioned time
restrictions shall be extended for: (a) reasons attributable to
FLNG; (b) reasons attributable to a Pilot or to a Governmental
Authority; (c) Adverse Weather Conditions; (d) Force Majeure; and
(e) nighttime transit restrictions.
(ii) If an LNG Vessel fails to depart at the end of its allowed
berth time, FLNG may direct the LNG Vessel to vacate the berth
and proceed to sea at utmost dispatch.
(iii) If an LNG Vessel fails to vacate the berth after receipt of
FLNG's notice to do so under this Section 9.9, Customer shall
reimburse FLNG for any and all reasonable and actual damages its
incurs as a result thereof, including amounts FLNG becomes
contractually obligated to pay as
45
demurrage to any of the Other Customers or to pay any Other
Customer for excess boil-off.
(iv) In the event an LNG Vessel fails to vacate the berth and
Customer is not taking actions to cause it to vacate the berth,
FLNG may effect such removal at the expense of the Customer.
ARTICLE 10
RECEIPT OF LNG
10.1 Title, Custody and Risk of Loss
(a) Title and Risk of Loss of Customer's Inventory. Subject to
Section 3.3, title and risk of loss with respect to Customer's
Inventory shall remain with Customer even during periods when it is in
the possession and control of FLNG (including while held at a Gas
Storage Facility and as provided in Section 10.5). For the avoidance
of doubt, title and risk of loss with respect to Retainage shall pass
to FLNG at the Receipt Point.
(b) Possession and Control. Possession and control of Customer's LNG
shall pass from Customer to FLNG upon delivery of same at the Receipt
Point. Possession and control of Customer's Inventory shall pass from
FLNG to Customer upon delivery of same at the Delivery Point.
10.2 No Encumbrance
(a) Customer's Covenants. Customer warrants to FLNG that (i) Customer
has title to all of Customer's Inventory, other than to the Temporary
Release Inventory; and (ii) the relevant Temporary Customer has title
to all of the Temporary Release Inventory. Customer covenants that
Customer's Inventory shall remain free of all encumbrances and
Liabilities therefor, and that no circumstances will exist which could
give rise to any Liabilities or encumbrances relating thereto
(collectively, "Claims") other than (i) those that may be caused by
acts or omissions of FLNG or (ii) those arising out of or relating to
an assignment for financing purposes or other security interest for
financing purposes. Customer agrees to fully defend, indemnify and
hold FLNG and its Affiliates harmless against all Claims regarding
Customer's Inventory, including Claims brought by Other Customers,
other than any Claims caused by FLNG's acts or omissions. For purposes
of this Section 10.2(a), the term "encumbrance" shall include any
mortgage, pledge, lien, charge, adverse claim, proprietary right,
assignment by way of security, security interest, title retention,
preferential right or trust arrangement or any other security
agreement or arrangement having the effect of security.
(b) FLNG's Covenants. FLNG covenants that it has the right to deliver
to Customer at the Delivery Point all Gas held for Customer's account
free from all Claims relating thereto caused by FLNG's acts or
omissions. FLNG agrees to
46
fully defend, indemnify and hold Customer and its Affiliates harmless
from and against all Claims regarding Customer's Inventory caused by
the acts or omissions of FLNG and Other Customers.
10.3 Receipt of LNG
The receipt of LNG from an LNG Vessel at the Receipt Point shall be
carried out by use of pumps and other equipment on the LNG Vessel under
such reasonable and customary conditions as are specified in the Freeport
Facility Marine Operations Manual.
10.4 Quality and Measurement of Customer's LNG
Customer's LNG shall be measured and tested in accordance with Annex I.
Customer shall ensure that all LNG delivered at the Receipt Point for
Customer's account shall conform to the following specifications:
(a) Gross Heating Value.
(i) LNG when delivered by Customer to FLNG shall have, in a
gaseous state, a Gross Heating Value of not less than 950 BTU per
Standard Cubic Foot and not more than 1150 BTU per Standard Cubic
Foot.
(ii) If the Gross Heating Value of LNG to be delivered hereunder
is higher than the limits set forth in Section 10.4(a)(i) by
reason of boil-off occurring during an unexcused delay caused by
FLNG in unloading an LNG Vessel of more than thirty (30) hours
after NOR becomes effective, such LNG shall be deemed to have met
the quality specifications of this Agreement regarding Gross
Heating Value.
(b) Components.
(i) The LNG when delivered by Customer to FLNG shall, in a
gaseous state, contain not less than eighty-six (86) molecular
percentage (86 MOL%) of methane (C//1//) and, for the components
and substances listed below, such LNG shall not contain more than
the following:
a. Nitrogen (N//2//), 0.5 MOL%;
b. Ethane (C//2//), 11 MOL%;
c. Propane (C//3//), 3.5 MOL%;
d. Butanes (C//4//) and heavier, 2 MOL%;
e. Pentanes (C//5//) and heavier, .09 MOL%;
47
f. Hydrogen sulfide (H//2//S), .25 grains per 100 Standard
Cubic Feet (.25 grains/100 SCF); and
g. Total sulfur content, 5 grains per 100 Standard Cubic
Feet (5 grains/100 SCF).
(ii) The LNG when delivered by Customer to FLNG shall contain no
water, mercury, active bacteria or bacterial agents (including
sulfate reducing bacteria or acid producing bacteria) and other
contaminants or extraneous material.
10.5 Off-Specification LNG
(a) Refusal of Off-Spec LNG. Without prejudice to any other rights
and remedies of FLNG hereunder, FLNG may refuse to take delivery of
all or part of any LNG not conforming to the quality specifications
set forth in Section 10.4 ("Off-Spec LNG").
(b) Notice. Customer shall provide notice to FLNG as soon as
reasonably practicable of any existing or anticipated failure of the
LNG available for delivery to FLNG hereunder to conform to the quality
specifications set forth in Section 10.4, giving details of the nature
and expected magnitude of the variance, the cause of the
non-compliance and the probable duration thereof, including the
Cargoes and Scheduled Unloading Windows to be affected thereby. If so
notified, FLNG shall as soon as possible inform Customer whether it
intends to reject any of such Off-Spec LNG. If FLNG is notified by
Customer prior to the commencement of unloading of a Cargo at the
Freeport Facility that the LNG is Off-Spec LNG and the quantity is
delivered to the Freeport Facility, FLNG shall use reasonable
endeavors to take delivery of any Cargoes which it would otherwise be
entitled to reject; provided, however that FLNG shall be entitled to
delay unloading of Off-Spec LNG for the period of time reasonably
required for FLNG to determine whether it can take delivery of such
Off-Spec LNG pursuant to this Section 10.5(b). Subject to FLNG first
using its reasonable endeavors to take delivery of any Cargoes
containing Off-Spec LNG, FLNG shall:
(i) notify Customer that FLNG will take delivery of some or all
of the affected Cargoes, without prejudice to FLNG's rights and
remedies with respect to such Off-Spec LNG other than FLNG's
right to reject said Cargo; or
(ii) reject all or any of the affected Cargoes.
10.6 Customer's Responsibility and Reimbursement
(a) No Continuing Waiver. Acceptance of Off-Spec LNG shall not
prevent FLNG from refusing future deliveries of Off-Spec LNG. No
waiver by FLNG of any default by Customer of any of the specifications
set forth in this Article 10
48
shall ever operate as a continuing waiver of such specification or as
a waiver of any subsequent default, whether of a like or different
character.
(b) Delivery of a Cargo of Off-Spec LNG. If FLNG accepts delivery of
a Cargo of Off-Spec LNG which it would otherwise be entitled to
reject, Customer shall:
(i) bear the financial responsibility for all reasonable and
actual incremental costs (other than capital costs) and
Liabilities incurred by FLNG or any of FLNG's Affiliates, in each
case acting as a Reasonable and Prudent Operator, in connection
with receiving and treating Off-Spec LNG by such means as are
appropriate, including mixing such Off-Spec LNG with lower
calorific value Gas or injecting nitrogen; and
(ii) indemnify and hold harmless FLNG, its Affiliates and their
respective directors, officers and employees from any and all
Liabilities, including any of same attributable to claims of any
Person (including Temporary Customers) and any Other Customers,
which arise out of, are incident to or result from the
acceptance, handling, disposal or use of Off-Spec LNG.
(c) Extended Delivery of Off-Spec LNG. If (i) Customer notifies FLNG
pursuant to Section 10.5(b) of an anticipated delivery of two (2) or
more Cargoes of Off-Spec LNG and (ii) the Parties agree for FLNG to
incur incremental capital costs in order to accept delivery of such
Cargoes, then Customer shall, in addition to its payment and
indemnification obligations under Section 10.6(b), bear the financial
responsibility for and directly fund, at FLNG's election, all such
incremental capital costs.
10.7 Subsequent Deliveries
Unless otherwise requested by Customer, any quantities of LNG which were,
under the Customer LNG Receipt Schedule, scheduled to be unloaded during
the Contract Year but were actually unloaded at the Freeport Facility
within the first *** days in the following Contract Year shall be, for the
purposes of the Maximum LNG Reception Quantity, deemed to have been
received by FLNG in the Contract Year in which such quantities were
originally scheduled to be unloaded.
ARTICLE 11
REDELIVERY OF GAS
11.1 General
(a) Delivery Point. Subject to Section 3.3(a), the volume of Gas
nominated by Customer for any day pursuant to Section 5.2 shall be
delivered at the Delivery Point.
49
(b) Commingled Stream. Customer acknowledges and agrees that
Customer's Inventory shall be delivered by FLNG in a commingled
stream, including that combined with LNG received by FLNG from
Temporary Customers and any Other Customers. Customer furthers
acknowledges and agrees that Customer shall have no right to receive
Gas of the same quality as Customer's LNG, provided that the
specifications of the commingled Gas stream at the Delivery Point
satisfy the requirements set forth in Section 11.3.
(c) Odorization. FLNG will deliver Customer's Inventory at the
Delivery Point in its natural state without the addition of any
odorizing agent, and FLNG shall not be obligated to add odorizing
agents to any Gas unless required to do so by a Governmental
Authority. FLNG does not assume any responsibility for Liabilities by
reason of the fact that it has not odorized Customer's Inventory prior
to its delivery to Customer.
11.2 Customer's Responsibility
(a) Downstream Arrangements. Customer shall arrange for the purchase
and transportation of Gas by Downstream Pipelines in order to meet its
obligations to take redelivery of Gas in accordance with the
provisions of Section 3.4 at the rates nominated pursuant to Article
5. Customer shall be solely responsible for making all necessary
arrangements with third parties at or downstream of the Delivery Point
to enable FLNG to deliver Gas to Downstream Pipelines on a timely
basis pursuant to the terms and conditions of this Agreement. Customer
shall also be solely responsible for ensuring that all such
arrangements are consistent with the terms and conditions of this
Agreement and shall require all relevant third parties to confirm to
FLNG all of Customer's nominations and scheduling of deliveries of
Gas, such confirmation to be by telephone, electronic transmission, or
other means acceptable to FLNG. Such third-party arrangements shall be
timely communicated to, and coordinated with, FLNG, and FLNG shall
have no liability whatsoever for any failure of any such third party
to provide downstream arrangements. The rules, guidelines, and
policies of a Downstream Pipeline transporting or purchasing any Gas
for or from Customer at the Delivery Point (as may be changed from
time to time by the Downstream Pipeline) shall set forth, among other
things, the manner in which Customer's Inventory is transported from
the Delivery Point. Customer and FLNG recognize that the receipt and
delivery on the Downstream Pipeline's facilities of Gas shall be
subject to the operational procedures of such Downstream Pipeline.
(b) Imbalance Charges. In the event a Downstream Pipeline imposes
scheduling fees, imbalance charges, cash out costs or similar costs,
fees or damages for imbalances ("Imbalance Charges"), Customer shall
be obligated to use its reasonable efforts to avoid imposition of such
Imbalance Charges. Customer shall indemnify and hold harmless FLNG,
its Affiliates and their respective directors, officers and employees
from all Liabilities arising out of, incident to or resulting from any
Imbalance Charge directly resulting from Customer's acts or omissions.
FLNG shall indemnify and hold harmless Customer, its Affiliates and
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their respective directors, officers and employees from all
Liabilities arising out of, incident to or resulting from any
Imbalance Charge directly resulting from FLNG's acts or omissions.
(c) Limitation. Customer shall ensure that its Gas transportation and
sales arrangements are in compliance with all applicable laws and
regulations. In this regard, Customer agrees that it shall transport,
or cause to be transported, Customer's Inventory only into intra-state
Gas pipelines or storage facilities unless otherwise approved by
Governmental Authorities.
11.3 Specifications and Measurement of Gas at the Delivery Point
Gas delivered to Customer at the Delivery Point shall be measured and
tested in accordance with Annex II. FLNG shall ensure that all Gas
delivered at the Delivery Point for Customer's account shall conform to
the following specifications:
(a) Gross Heating Value. Gas when delivered by FLNG to Customer shall
have a Gross Heating Value of not less than 950 BTU per Standard Cubic
Foot and not more than 1150 BTU per Standard Cubic Foot.
(b) Components.
(i) Gas when delivered by FLNG to Customer shall contain not
less than eighty-six (86) molecular percentage (86 MOL%) of
methane (C//1//) and, for the components and substances listed
below, such Gas shall not contain more than the following:
a. Nitrogen (N//2//), three (3) MOL%;
b. Pentanes (C//5//) and heavier, 0.1 MOL%;
c. Hydrogen sulfide (H//2//S), .25 grains per 100 Standard
Cubic Feet (.25 grains/100 SCF);
d. Total sulfur content, 5 grains per 100 Standard Cubic
Feet (5 grains/100 SCF);
e. Oxygen (O//2//), ten (10) parts per million;
f. Carbon dioxide (CO//2//), two (2) MOL%; and
g. Water (H//2//O), seven (7) pounds per one million
(1,000,000) cubic feet.
(ii) Gas when delivered by FLNG to Customer shall contain no
mercury, active bacteria or bacterial agents (including sulfate
reducing bacteria or acid producing bacteria) and other
contaminants or extraneous material.
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(c) Gas Delivery Pressure. Customer's Inventory shall be delivered at
the Delivery Point at the appropriate pipeline pressure; provided,
however, that such pressure shall be at least 1000 psig but shall not
be required to exceed a maximum pressure of 1200 psig.
11.4 Nonconforming Gas
(a) Right to Reject. Customer shall have the right to reject Gas that
does not conform to the specifications set forth in Section 11.3
("Nonconforming Gas") if the failure of such Nonconforming Gas to
satisfy such specifications would (a) be grounds for an operator of a
Downstream Pipeline or a Person under contract with Customer to
purchase such Gas ("Downstream Purchaser") to reject such
Nonconforming Gas or (b) otherwise materially and adversely affect
Customer, in Customer's reasonable opinion.
(b) FLNG Indemnity. If Customer accepts delivery of Non-Conforming
Gas which it would otherwise be entitled to reject, FLNG shall
indemnify and hold harmless Customer, its Affiliates and their
respective directors, officers and employees from any and all
Liabilities, including any of same attributable to claims of any
Person (including Other Customers, a Downstream Pipeline, a Downstream
Purchaser and Temporary Customers), which arise out of, are incident
to or result from the acceptance, handling, disposal or use of
Non-Conforming Gas. If Customer accepts delivery of Non-Conforming Gas
which it would otherwise be entitled to reject, FLNG shall bear the
financial responsibility for all reasonable and actual incremental
costs (other than capital costs) and Liabilities incurred by Customer
or any of Customer's Affiliates, in each case acting as a Reasonable
and Prudent Operator, in connection with accepting delivery of
Non-Conforming Gas.
ARTICLE 12
PAYMENT
12.1 Monthly Statements
Between the first (1/st/) day of each month and the tenth (10th) day of
each month, commencing with the month prior to the Commercial Start Date,
FLNG shall deliver to Customer a statement setting forth the following:
(a) ***;
(b) the FLNG Component for the following month;
(c) the FOC Installment for the following month;
(d) with respect to the March statement, a charge or credit, as
applicable, for the FOC Reconciliation for the prior year;
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(e) the Crest Installment for the following month;
(f) the Awards Installment, if any, for the prior month;
(g) with respect to the March statement, a charge or credit, as
applicable, for the Crest Reconciliation for the prior year;
(h) the Incremental Costs, if any, for the prior month; and
(i) a charge or credit for any adjustment to the FLNG Component made
under Section 4.6.
All statements delivered by FLNG to Customer shall as much as practicable
account separately for the Fee related to each Temporary Release from all
other amounts owed by Customer.
12.2 Other Statements
If any other moneys are due from one Party to the other hereunder and if
provision for the invoicing of that amount due is not made elsewhere in
this Article 12, then the Party to whom such moneys are due shall furnish
a statement therefor to the other Party, along with pertinent information
showing the basis for the calculation thereof.
12.3 Adjustments
If, within ninety (90) days of the issuance of a statement, either Party
acquires information indicating the necessity of an adjustment to such
statement rendered hereunder, then the Party acquiring the information
shall promptly serve on the other Party a written notice setting forth
that information. Unless otherwise provided herein, after obtaining that
information, the Party that prepared the prior statement which by reason
of that information must be adjusted, shall promptly prepare and serve on
the other Party an adjusted statement, showing the necessary payment, the
calculation of the payment amount, and the Party from whom the payment is
owing.
12.4 Payment Due Dates
(a) Due Date for Monthly Statement. Each monthly statement submitted
pursuant to Section 12.1 shall become due and payable on the later of
(i) ten (10) days after delivery by FLNG of such monthly statement or
(ii) the twenty-fifth (25/th/) day of the month in which such monthly
statement was received; provided that if such day is not a Business
Day, it shall become due and payable on the next Business Day.
(b) Due Date for Other Statements. Each statement submitted pursuant
to Section 12.2 shall become due and payable on the thirtieth (30/th/)
day after the date on which it is received; provided that if such
payment due date is not a Business Day, the due date for such payment
shall be extended to the next Business Day. For purposes of this
Section 12.4(b), a facsimile copy of an invoice shall be
53
deemed received by a Party on the next Business Day following the day
on which it was sent.
(c) Interest. If the full amount of any statement is not paid when
due, the unpaid amount thereof shall bear interest at the Base Rate,
compounded annually, from and including the day following the due date
up to and including the date when payment is made.
12.5 Payment
Each Party shall pay, or cause to be paid, in United States dollars in
immediately available funds, all amounts that become due and payable by
such Party pursuant to any statement issued hereunder, to a bank account
or accounts designated by and in accordance with instructions issued by
the other Party. Each payment of any amount owing hereunder shall be in
the full amount due without reduction or offset for any reason (except as
expressly allowed under this Agreement), including Taxes, exchange
charges, or bank transfer charges. Notwithstanding the preceding sentence,
the paying Party shall not be responsible for a designated bank's
disbursement of amounts remitted to such bank, and a deposit in
immediately available funds of the full amount of each statement with such
bank shall constitute full discharge and satisfaction of the statement.
12.6 Nonpayment
The term "Cumulative Delinquency Amount" shall mean, with respect to a
Party, the cumulative amount, expressed in United States dollars, that is
owed by that Party to the other Party under this Agreement and is past
due. Without prejudice to a Party's right of offset, if a Party's failure
to pay when due an amount owing hereunder causes its Cumulative
Delinquency Amount to exceed *** times the sum of the *** and the FOC
Installment, then the Party to which such amount is owed shall have the
right, upon giving thirty (30) days written notice (such notice
hereinafter referred to as the "Delinquency Notice") to the owing Party,
to suspend performance of its obligations under this Agreement until such
amount, with interest in accordance with Section 12.4(c), has been paid in
full; provided, however, that (a) no such suspension of a Party's
obligations under this Section 12.6 shall excuse the owing Party from the
performance of its obligations hereunder, and (b) in the event that FLNG
suspends performance under this Section 12.6, (i) Customer shall continue
to be liable for the Fee pursuant to Article 4, and (ii) FLNG may offer
Customer's unutilized Services Quantity to the Other Customers based on
their proportionate contracted share of such services. If any such
Cumulative Delinquency Amount has not been paid within sixty (60) days
after the issuance of the Delinquency Notice, then the Party to whom such
amount is owed shall have the right, upon not less than thirty (30) days
notice to the other Party, to terminate this Agreement without the
necessity of any further action, unless within that thirty (30) day
period, the Party to which such amount is owed receives payments from or
on behalf of the owing Party equal to the Cumulative Delinquency Amount.
Any such termination shall be without prejudice to any other rights and
remedies of the terminating Party arising hereunder or by law or
otherwise, including the right of such Party to receive payment in respect
of all obligations and claims that arose or accrued prior to such
termination or by reason of such default by the owing Party.
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12.7 Disputed Statements
In the event of disagreement concerning any statement, Customer or FLNG
(as the case may be) shall make provisional payment of the total amount
thereof and shall immediately notify the other Party of the reasons for
such disagreement, except that in the case of an obvious error in
computation, Customer or FLNG (as the case may be) shall pay the correct
amount disregarding such error. Statements may be contested by Customer or
FLNG (as the case may be) only if, within a period of ninety (90) days
after a Party's receipt thereof, Customer or FLNG (as the case may be)
serves on the other Party notice questioning their correctness. If no such
notice is served, statements shall be deemed correct and accepted by both
parties. Promptly after resolution of any Dispute as to a statement, the
amount of any overpayment or underpayment (plus interest as provided in
Section 12.4(c)) shall be paid by FLNG or Customer to the other, as the
case may be.
12.8 Final Settlement
Within sixty (60) days after expiration of the Term, FLNG and Customer
shall determine the amount of any final reconciliation payment. After the
amount of the final settlement has been determined, FLNG shall send a
statement to Customer, or Customer shall send a statement to FLNG, as the
case may be, in United States dollars for amounts due under this Section
12.8, and FLNG or Customer, as the case may be, shall pay such final
statement no later than twenty (20) days after the date of receipt
thereof.
ARTICLE 13
CUSTOMER CREDIT
13.1 Guarantee
As an essential inducement and consideration for entering into this
Agreement, FLNG is relying on the legal, valid, binding and enforceable
nature of the Guarantee given by Guarantor.
13.2 Material Adverse Change
If at any time during the term of this Agreement, a Customer Material
Adverse Change shall occur, FLNG may, in its Sole Opinion and without
prejudice to any other rights or remedies it may have hereunder or in law
or equity, require reasonable further assurances of Customer's
creditworthiness, financial responsibility and ability to perform its
obligations hereunder as a condition of FLNG's further performance under
this Agreement, and Customer shall comply with such further assurances.
FLNG shall notify Customer requiring such assurances, including, in form
and amount reasonably satisfactory to FLNG, any one or more of
prepayments, a letter of credit and/or a bank guarantee. "Customer
Material Adverse Change" for the purposes of this Section 13.2 means
adverse changes, events or effects that have occurred or been threatened
which could reasonably be likely to (a) materially adversely affect the
business, operations, properties, condition (financial or otherwise),
assets or liabilities of Customer and Guarantor taken as a whole; (b)
prevent or materially delay the performance by Customer
55
and Guarantor taken as a whole of their obligations under this Agreement
and the Guarantee; or (c) create a reasonable basis for FLNG to have
serious doubts about the creditworthiness, financial responsibility or
ability to perform by Customer and Guarantor taken as a whole of their
obligations under this Agreement and the Guarantee; provided, however,
that Customer Material Adverse Change shall not include any adverse
change, event or effect on the global energy industry as a whole,
including those impacting energy prices or the value of oil and gas
assets, the risks of which adverse changes are expressly recognized by
FLNG as an assumed risk of entering into transactions of the nature
contemplated by this Agreement. Upon Customer's failure to provide to
FLNG, in form and amount satisfactory in FLNG's reasonable opinion,
assurances of Customer's creditworthiness, financial responsibility and
ability to perform its obligations hereunder within forty-five (45) days
following FLNG's request for such assurance, FLNG may terminate this
Agreement upon notice to Customer given no less than ten (10) days in
advance of the effective date of such termination. [NOTE: THIS PROVISION
TO BE ADJUSTED IF NO GUARANTEE IS ISSUED]
ARTICLE 14
DUTIES, TAXES AND OTHER GOVERNMENTAL CHARGES
In addition to Customer's obligations under Section 4.4, Customer shall be
responsible for and pay, or cause to be paid, all Taxes that may be imposed or
levied on Customer's Inventory (including receipt or redelivery thereof) and the
LNG Vessels. Customer shall reimburse and hold harmless FLNG for any such Taxes
that may be required by law to be remitted by FLNG and shall pay such additional
amount (including Taxes and corresponding interest at the Base Rate) as is
necessary to ensure receipt by FLNG of the full amounts otherwise due to it
under this Agreement. Notwithstanding the foregoing, neither Party shall be
responsible for Taxes on the capital revenue or income derived by the other
Party.
ARTICLE 15
INSURANCE
15.1 FLNG's Insurance
FLNG shall be responsible for obtaining and maintaining (a) insurance for
the Freeport Facility to the extent required by applicable law; and (b)
additional insurance, as is reasonably necessary and available on
reasonable commercial terms, against such other risks and at such levels
as a Reasonable and Prudent Operator of a shared use LNG receiving and
regasification terminal would obtain. FLNG shall obtain such insurance
from a reputable insurer (or insurers) reasonably believed to have
adequate financial reserves. Any insurance policy required pursuant to
this Section 15.1 shall contain a standard waiver of subrogation
endorsement and shall name any Major Customer as an additional insured.
Upon request of Customer, FLNG shall provide to Customer satisfactory
evidence that the insurance required pursuant to this Section 15.1 is in
effect. In any event FLNG shall be required to obtain the following
insurance coverages:
(a) Commercial General Liability Insurance;
56
(b) Worker's Compensation;
(c) All-Risk Property Insurance;
(d) Wharf Owners Liability Insurance; and
(e) Pollution Insurance.
15.2 Customer's Insurance
(a) Loss of Product Insurance. Customer acknowledges that FLNG shall
not at any time be responsible for securing and maintaining loss of
product insurance covering the risk of loss of Customer's Inventory
and that Customer shall be responsible for insuring against such risk.
If Customer elects to obtain loss of product insurance that insures
the physical damage or loss of Customer's Inventory, FLNG shall, upon
request of Customer, provide Customer all documents and information
reasonably necessary to enable Customer to obtain such loss of product
insurance.
(b) LNG Vessel Insurance. Customer shall ensure that insurances are
procured and maintained for each LNG Vessel in accordance with the
following provisions. In all cases, such insurance shall establish
insurance coverages consistent with insurances to the standards which
a shipowner operating reputable LNG vessels, as a Reasonable and
Prudent Operator, should observe in insuring LNG vessels of similar
type, size, age and trade as such LNG Vessel. In this regard:
(i) Hull and Machinery Insurance shall be placed and maintained
with reputable marine underwriters; and
(ii) Protection & Indemnity Insurance ("P&I Insurance") shall be
placed and maintained as an unlimited entry, if such entry is
available, with and subject to and on the basis of the rules of
any of the reputable P&I insurance associations experienced in
providing P&I Insurance for LNG vessels ("Approved Provider").
The terms of the P&I Insurance shall be those of the standard
rules of the Approved Provider, provided that special provisions
resulting from Transporter's acceptance of the Port Liability
Agreement pursuant to Section 15.3 shall be incorporated into the
terms of Transporter's P&I Insurance.
(c) Evidence of Insurance. Prior to the commencement of deliveries to
the Freeport Facility and thereafter at least once each Contract Year,
Customer shall furnish the following evidence of insurance to FLNG in
relation to each LNG Vessel: cover notes, certificates of entry, the
latest rules of the particular Approved Provider, and detailed written
information concerning all required insurance policies. The receipt of
such information shall not impose any obligation on FLNG.
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15.3 Port Liability Agreement
(a) Form. By no later than ***, the Parties shall agree on a form of
"Port Liability Agreement" to be signed by each Transporter, such
agreement to govern the Transporter's liability for damage to the
Freeport Facility caused by the LNG Vessel. The Port Liability
Agreement shall include:
(i) ***; and
(ii) Transporter's obligation to obtain the agreement of its
Protection and Indemnity Association to cover the liabilities
provided for in the Port Liability Agreement.
Upon the Parties agreeing upon the form of "Port Liability Agreement",
this Agreement shall be amended to incorporate such form by reference.
(b) Right to Reject. In the event a Transporter fails to execute a
Port Liability Agreement, FLNG shall have the right under this Section
9.3(b) to reject Transporter's LNG Vessel until such time as the Port
Liability Agreement is executed; provided, however, that FLNG shall
not reject an LNG Vessel if Customer demonstrates that Transporter's
failure to execute a Port Liability Agreement was due to Transporter's
inability to obtain P&I Insurance on commercially reasonably terms for
the liabilities provided for in the Port Liability Agreement.
ARTICLE 16
LIABILITIES
16.1 Limitation of Liability of FLNG
In no case shall the Liabilities of FLNG arising out of, relating to, or
connected with an Event under this Agreement exceed *** times the sum of
the *** and the FOC Installment; provided, however, that the foregoing
limitation shall not apply to Liabilities caused by the Gross
Negligence/Willful Misconduct of FLNG. For purposes of this Section 16.1,
an "Event" means any occurrence or series of occurrences having the same
origin, and "Gross Negligence/Willful Misconduct" means any act or failure
to act (whether sole, joint or concurrent) by FLNG which was intended to
cause, or which was in reckless disregard of or wanton indifference to,
harmful consequences FLNG knew, or should have known, such act or failure
would have on the safety or property of another Person.
16.2 Consequential Loss or Damage
No Party shall be liable to the other Party for or in respect of:
58
(a) any consequential loss or damage, except to the extent provided
in Sections 3.4, 6.2(b)(viii), 8.2(b)(ii), 9.9, 10.6, 11.2(b), 11.4
and 15.3 of this Agreement;
(b) loss of profits or business interruption to the extent such
amounts do not constitute consequential loss or damage; or
(c) any special, incidental or punitive damages,
suffered or incurred by the other Party or any Person resulting from
breach of or failure to perform this Agreement or the breach of any
representation or warranty hereunder, whether express or implied, and
whether such damages are claimed under breach of warranty, breach of
contract, tort, or other theory or cause of action at law or in equity,
except to the extent such damages have been awarded to a third party and
are subject to allocation between or among the parties to the Dispute. For
purposes of this Agreement, any amounts payable by Customer to its Gas
purchasers or Gas suppliers for replacement Gas or other similar
Liabilities shall be deemed to be a consequential loss or damage.
16.3 Parties' Liability; Relationship of Shareholders
Customer's sole recourse and remedy under this Agreement for a breach
hereof or a default hereunder shall be against FLNG and its assets. Except
as otherwise provided herein, FLNG's sole recourse and remedy under this
Agreement shall be against Customer and its assets for a breach hereof or
a default hereunder.
16.4 Liability for Personal Injury
Notwithstanding any other provisions of this Agreement, no indemnity set
forth in Sections 3.4, 10.2, 10.6 and 11.4 of this Agreement shall apply
to claims or damages for personal injury, illness or wrongful death.
ARTICLE 17
FORCE MAJEURE
17.1 Events of Force Majeure
Neither Party shall be liable to the other for any delay or failure in
performance hereunder if and to the extent such delay or failure is a
result of Force Majeure. Subject to the provision of this Article 17, the
term "Force Majeure" shall mean any act, event, or circumstance that is
not reasonably within the control of and that prevents or delays a
performance by a Party. Nothing in this Article 17 shall be construed to
require a Party to observe a higher standard of conduct than that required
of a Reasonable and Prudent Operator as a condition to claiming the
existence of Force Majeure.
17.2 Limitation on Scope of Force Majeure Protection
***
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17.3 Notice
A Force Majeure event shall take effect at the moment such an event or
circumstance occurs. Upon the occurrence of a Force Majeure that prevents,
interferes with or delays the performance by FLNG or Customer, in whole or
in part, of any of its obligations hereunder, the party affected shall
give notice thereof to the other party describing such event and stating
the obligations the performance of which are affected (either in the
original or in supplemental notices) and stating, as applicable:
(a) the estimated period during which performance may be prevented,
interfered with or delayed, including, to the extent known or
ascertainable, the estimated extent of such reduction in performance;
(b) the particulars of the program to be implemented to resume normal
performance hereunder;
(c) the anticipated portion of the Services Quantity for a Contract
Year that will not be made available or received, as the case may be,
by reason of Force Majeure; and
(d) where Section 17.7 applies, the quantity of Services that FLNG
reasonably expects to allocate to Customer.
Such notices shall thereafter be updated at least monthly during the
period of such claimed Force Majeure specifying the actions being taken to
remedy the circumstances causing such Force Majeure.
17.4 Measures
In order to resume normal performance of this Agreement within the
shortest time practicable, the party affected by the Force Majeure shall
take all measures to this end which are reasonable under the
circumstances, taking into account the consequences resulting from such
event of Force Majeure. Prior to resumption of normal performance, the
Parties shall continue to perform its obligations under this Agreement to
the extent not excused by such event of Force Majeure.
17.5 No Extension of Term
The Term shall not be extended as a result of or by the duration of an
event of Force Majeure.
17.6 Settlement of Industrial Disturbances
Settlement of strikes, lockouts, or other industrial disturbances shall be
entirely within the discretion of the party experiencing such situations,
and nothing herein shall require such party to settle industrial disputes
by yielding to demands made on it when it considers such action
inadvisable.
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17.7 Allocation of Services
If, as a result of an event of Force Majeure, FLNG is unable to meet its
contractual obligations to Customer and any Other Customers under LNG
terminal use agreements, FLNG shall allocate the available capability of
the Freeport Facility to perform activities similar to the Services in the
following order of priority (such allocation herein referred to as the
"Major Customer Allocation Priority"):
(a) first among Major Customers only, based on the ratio that the Maximum
LNG Reception Quantity bears to the Aggregate Contracted Capacity for
the remainder of such Contract Year (but including Major Customers
only); and
(b) then the remaining capability, if any, among Non-Major Customers
based on the same ratio (but including Non-Major Customers only).
ARTICLE 18
CURTAILMENT OF SERVICES OR
TEMPORARY DISCONTINUATION OF SERVICES
18.1 Scheduled Curtailment or Temporary Discontinuation of Services
To the extent that FLNG has notified Customer in connection with the
preparation of the Customer LNG Receipt Schedule of maintenance to or
modification of the Freeport Facility, FLNG shall, in addition to the
rights set forth in Section 18.2, have the right to curtail or temporarily
discontinue the Services, in whole or in part due to such maintenance or
modification. During the period of such curtailment or temporary
discontinuation of Services, FLNG shall, from time to time, use reasonable
endeavors to update Customer on the expected progress towards completing
the maintenance or modification, whichever applicable. For purposes of
this Section 18.1, a curtailment of or temporary discontinuation of
Services shall mean any curtailment or temporary discontinuation lasting
no more than three (3) consecutive days. Notwithstanding the foregoing,
FLNG agrees that, for purposes of this Section 18.1, neither a curtailment
or temporary discontinuation of Services shall reduce FLNG's obligations
to allow berthing, unloading and receipt of Customer's LNG in a quantity
up to the Maximum LNG Reception Quantity.
18.2 Unscheduled Curtailment or Temporary Discontinuation of Services
FLNG shall have the right to curtail or temporarily discontinue the
Services, in whole or in part, at any time in order to (a) repair the
Freeport Facility or (b) protect persons and property, including the
Freeport Facility, from harm or damage due to operational or safety
conditions. FLNG shall use reasonable endeavors to provide Customer a
notice of curtailment or temporary discontinuation as is reasonable under
the circumstances, and such notice may be issued for a specific period of
time or until further notice is given. If, as a result of any unscheduled
curtailment or temporary discontinuation of Services pursuant to this
Section 18.2, FLNG is unable to meet its contractual obligations to
Customer and any Other Customers under LNG terminal use agreements, FLNG
shall
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allocate the available capability of the Freeport Facility to perform
activities similar to the Services in accordance with the Major Customer
Allocation Priority. If a curtailment or temporary discontinuation of
Services occurs under this Section 18.2, FLNG may direct Customer to
adjust receipts of LNG and deliveries of Customer's Inventory, as the case
may be, with preference given to Major Customers. Notwithstanding the
foregoing, FLNG shall have no responsibility to inform Transporters, LNG
Vessels, Downstream Pipelines, LNG Suppliers, or any other Persons
involved in the transaction as to such curtailment or temporary
discontinuation of Services.
ARTICLE 19
ASSIGNMENT
19.1 Restrictions on Assignment
(a) Consent of Other Party Required. Except as otherwise provided in
this Article 19, neither this Agreement nor any rights or obligations
hereunder may be assigned by any Party without the prior written
consent of the other Party, which consent shall not be unreasonably
withheld. For greater certainty, a Temporary Release under Section 6.2
shall not be regarded as an assignment under this Article 19.
(b) Obligation of Assignee. If consent is granted pursuant to Section
19.1(a) or in the case of an assignment permitted under Section 19.2
(other than Sections 19.2(c) and 19.2(d)), the assignee to such
assignment must, as a condition to such assignment, deliver to the
non-assigning Party its written undertaking to be bound by and perform
all obligations of the assignor under this Agreement.
19.2 Permitted Assignments
(a) Affiliates of FLNG. Notwithstanding the provisions of Section
19.1, FLNG may freely assign all of its rights under this Agreement to
an Affiliate, upon notice to, but without requiring the consent of,
Customer.
(b) Affiliates of Customer. Notwithstanding the provisions of Section
19.1, Customer may freely assign all of its rights under this
Agreement to (i) an Affiliate upon notice to, but without requiring
the consent of, FLNG and (ii) an LNG Supply Project upon the written
consent of FLNG, which consent shall not be unreasonably withheld.
(c) Financing.
(i) Notwithstanding the provisions of Section 19.1, FLNG shall
be entitled to assign, mortgage, or pledge all or any of its
rights, interests, and benefits hereunder to secure payment of
any indebtedness incurred or to be incurred in connection with
the construction and term financing of the Freeport Facility, and
Customer shall provide to the lenders to whom such indebtedness
is owed a consent to assignment or similar document in form
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and substance customary for similar financing transactions and
agreed by such lenders and Customer.
(ii) Notwithstanding the provisions of Section 19.1, Customer
shall be entitled to assign, mortgage, or pledge all or any of
its rights, interests, and benefits hereunder to secure payment
of any indebtedness incurred or to be incurred, and FLNG shall
provide to the lenders to whom such indebtedness is owed a
consent to assignment or similar document in form and substance
customary for similar financing transactions and agreed by such
lenders and FLNG.
(d) Partial Assignments for Periods of *** Years or More.
Notwithstanding the provisions of Section 19.1 and subject to the
provisions of this Section 19.2(d), Customer shall under this Section
19.2(d) be entitled to assign all or a part of its right to use the
Services Quantity for a period that is no less than *** years (a
"Partial Assignment") if such Partial Assignment is for a Maximum LNG
Reception Quantity of no less than *** MMBTUs per Contract Year and is
to:
(i) an Affiliate upon notice to, but without requiring the
consent of, FLNG;
(ii) an LNG Supply Project upon the written consent of FLNG,
which consent shall not be unreasonably withheld; or
(iii) any other Person upon the written consent of FLNG, which
consent shall not be unreasonably withheld;
Any Partial Assignment is subject to (a) the assignee executing a
terminal use agreement with FLNG (a "Parallel TUA"); and (b) Customer
agreeing to appropriate modifications to the Gas redelivery provisions
of this Agreement to ensure that FLNG is at all times capable of
performing this Agreement and the Parallel TUA and appropriate
modifications to the quantity provisions to reflect such assignment.
The terms of the Parallel TUA shall be substantially the same as the
terms of this Agreement except to the extent necessary to reflect the
differences necessary to implement the Partial Assignment. For the
avoidance of doubt, Customer shall have no obligation or liability
under the Parallel TUA and the assignor shall be relieved of all
rights and obligations hereunder to the extent of the assignment from
and after the effective date of the assignment.
19.3 Assignment as Novation
An assignment under this Article 19 (except those permitted in Sections
19.2(c) and (d)) shall not serve as a novation of this Agreement unless
and until, but shall serve as a novation if:
(a) the assignee delivers to the non-assigning Party its written
undertaking to be bound by and perform all obligations of the assignor
under this Agreement, as if it were the assignor; and
63
(b) and, in the case of Customer, assignee having demonstrated to
FLNG that its creditworthiness (including credit support from an
irrevocable letter of credit, a parent guarantee or other security) at
the time of the assignment is the same or better than the
creditworthiness of Customer and Guarantor, taken as a whole, or is
otherwise acceptable to FLNG.
In the event of a novation, the assignee shall be deemed to be a Party to
this Agreement for all purposes with respect to rights and obligations
pertaining to operations hereunder from and after the effective date of
the assignment and the assignor shall be relieved of all rights and
obligations hereunder from and after the effective date of the assignment.
Notwithstanding Section 19.1(b), in the event of a novation, the Guarantee
shall remain in effect only in relation to rights and obligations of
Customer hereunder arising prior to the effective date of the novation.
ARTICLE 20
TERMINATION
20.1 Early Termination Events
(a) General. If during the period of construction of the Freeport
Facility, Customer reasonably determines that Substantial Completion
will not occur by ***, then Customer may terminate this Agreement
(such termination referred to as an "Early Termination Event")
pursuant to the other provisions of this Article 20.
(b) Notice. Upon the occurrence of an Early Termination Event,
Customer shall give notice thereof to FLNG.
(c) Cure. At any time after the expiration of a period of thirty (30)
days after Customer gives notice of an Early Termination Event
pursuant to Section 20.1(b), Customer may terminate this Agreement
with immediate effect by giving notice of such termination to FLNG;
provided, however, that Customer may not terminate this Agreement if
the circumstances constituting the Early Termination Event have been
fully remedied or have ceased to apply.
20.2 Termination Relating to Guarantee
In addition to any other rights FLNG may have under this Agreement or
otherwise, FLNG may, in its Sole Opinion, elect to terminate this
Agreement by notice to Customer if the Guarantee ceases to be in full
force and effect or the Guarantor:
(a) suspends payment of its debts or is unable to pay its debts
and such suspension;
(b) passes a resolution, commences proceedings or has proceedings
commenced against it (which are not stayed within sixty (60) days of
service thereof on Guarantor) in the nature of bankruptcy or
reorganization resulting from
64
insolvency or for its liquidation or for the appointment of a
receiver, trustee in bankruptcy or liquidator of its undertaking or
assets; or
(c) enters into any composition or scheme or arrangement with its
creditors;
provided that Customer has not provided credit support reasonably
acceptable to FLNG within thirty (30) days following the delivery of
FLNG's notice.
20.3 Other Termination Provisions
This Agreement is also subject to the termination provisions provided in
Section 12.6 and Article 13.
20.4 Consequences of Termination
Termination of this Agreement under this Article 20 or any other provision
of this Agreement shall be without prejudice to any other rights and
remedies of either Party arising hereunder or by law or otherwise which
arose or accrued prior to or as a result of such termination or by reason
of default of either Party.
ARTICLE 21
APPLICABLE LAW
The substantive laws of the State of New York, United States of America,
exclusive of any conflicts of laws principles that could require the application
of any other law, shall govern this Agreement for all purposes, including the
resolution of all Disputes between or among the Parties.
ARTICLE 22
DISPUTE RESOLUTION
22.1 Dispute Resolution
(a) Arbitration. Any Dispute shall be exclusively and definitively
resolved through final and binding arbitration, it being the intention
of the Parties that this is a broad form arbitration agreement
designed to encompass all possible Disputes.
(b) Rules. The arbitration shall be conducted in accordance with
the International Arbitration Rules (the "Rules") of the American
Arbitration ("AAA") (as then in effect).
(c) Number of Arbitrators. Three (3) arbitrators shall conduct the
arbitration, unless the Parties to the Dispute agree to a sole
arbitrator within thirty (30) days after the filing of the
arbitration. For greater certainty, for purposes of this Section
22.1(c), the filing of the arbitration means the date on which the
claimant's request for arbitration is received by the other Parties to
the Dispute.
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(d) Method of Appointment of the Arbitrators.
If the arbitration is to be conducted by three (3) arbitrators and
there are only two (2) Parties to the Dispute, then each Party to the
Dispute shall appoint one (1) arbitrator within thirty (30) days of
the filing of the arbitration, and the two arbitrators so appointed
shall select the presiding arbitrator within thirty (30) days after
the latter of the two arbitrators has been appointed by the Parties to
the Dispute. If a Party to the Dispute fails to appoint its
Party-appointed arbitrator or if the two Party-appointed arbitrators
cannot reach an agreement on the presiding arbitrator within the
applicable time period, then the AAA shall serve as the appointing
authority, and shall appoint the remainder of the three arbitrators
not yet appointed. If the arbitration is to be conducted by three
arbitrators and there are more than two parties to the Dispute, then
within thirty (30) days of the filing of the arbitration, all
claimants shall jointly appoint one arbitrator and all respondents
shall jointly appoint one arbitrator, and the two arbitrators so
appointed shall select the presiding arbitrator within thirty (30)
days after the latter of the two arbitrators has been appointed by the
parties to the Dispute. If either all claimants or all respondents
fail to make a joint appointment of an arbitrator or if the
party-appointed arbitrators cannot reach an agreement on the presiding
arbitrator within the applicable time period, then the AAA as the
appointing authority shall appoint the remainder of the three
arbitrators not yet appointed.
(e) Consolidation. If the Parties initiate multiple arbitration
proceedings, the subject matters of which are related by common
questions of law or fact and which could result in conflicting awards
or obligations, then all such proceedings may be consolidated into a
single arbitral proceeding.
(f) Place of Arbitration. Unless otherwise agreed by all Parties to
the Dispute, the place of arbitration shall be Houston, Texas.
(g) Language. The arbitration proceedings shall be conducted in the
English language, and the arbitrators shall be fluent in the English
language.
(h) Entry of Judgment. The award of the arbitral tribunal shall be
final and binding. Judgment on the award of the arbitral tribunal may
be entered and enforced by any court of competent jurisdiction.
(i) Notice. All notices required for any arbitration proceeding shall
be deemed properly given if sent in accordance with Article 25.
(j) Qualifications and Conduct of the Arbitrators. All arbitrators
shall be and remain at all times wholly impartial, and, once
appointed, no arbitrator shall have any ex parte communications with
any of the parties to the Dispute concerning the arbitration or the
underlying Dispute other than communications directly concerning the
selection of the presiding arbitrator, where applicable.
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(k) Interim Measures. Any party to the Dispute may apply to a court
for interim measures (i) prior to the constitution of the arbitral
tribunal (and thereafter as necessary to enforce the arbitral
tribunal's rulings); or (ii) in the absence of the jurisdiction of the
arbitral tribunal to rule on interim measures in a given jurisdiction.
The Parties agree that seeking and obtaining such interim measures
shall not waive the right to arbitration. The arbitrators (or in an
emergency the presiding arbitrator acting alone in the event one or
more of the other arbitrators is unable to be involved in a timely
fashion) may grant interim measures including injunctions, attachments
and conservation orders in appropriate circumstances, which measures
may be immediately enforced by court order. Hearings on requests for
interim measures may be held in person, by telephone, by video
conference or by other means that permit the parties to the Dispute to
present evidence and arguments.
(l) Costs and Attorneys' Fees. The arbitral tribunal is authorized to
award costs and attorneys' fees and to allocate them between the
parties to the Dispute. The costs of the arbitration proceedings,
including attorneys' fees, shall be borne in the manner determined by
the arbitral tribunal.
(m) Interest. The award shall include interest, as determined by the
arbitral award, from the date of any default or other breach of this
Agreement until the arbitral award is paid in full. Interest shall
accrue from day to day at the Base Rate.
(n) Currency of Award. The arbitral award shall be made and payable
in United States Dollars, free of any tax or other deduction.
(o) Waiver of Challenge to Decision or Award. To the extent permitted
by law, the Parties hereby waive any right to appeal from or challenge
any arbitral decision or award, or to oppose enforcement of any such
decision or award before a court or any governmental authority, except
with respect to the limited grounds for modification or
non-enforcement provided by any applicable arbitration statute or
treaty.
(p) Confidentiality. Any arbitration or expert determination relating
to a Dispute (including a settlement resulting from an arbitral award,
documents exchanged or produced during an arbitration proceeding, and
memorials, briefs or other documents prepared for the arbitration)
shall be confidential and may not be disclosed by the parties, their
employees, officers, directors, counsel, consultants, and expert
witnesses, except (in accordance with Article 23) to the extent
necessary to enforce this Section 22.1 or any arbitration award, to
enforce other rights of a party to the Dispute, or as required by law;
provided, however, that breach of this confidentiality provision shall
not void any settlement, expert determination or award.
22.2 Expert Determination
For any decision referred to an expert under Annex I or Annex II, the
Parties hereby agree that such decision shall be conducted expeditiously
by an expert selected
67
unanimously by the Parties to the Dispute. The expert is not an arbitrator
of the Dispute and shall not be deemed to be acting in an arbitral
capacity. The Party desiring an expert determination shall give the other
Party to the Dispute notice of the request for such determination. If the
parties to the Dispute are unable to agree upon an expert within ten (10)
days after receipt of the notice of request for an expert determination,
then, upon the request of any of the parties to the Dispute, the
International Centre for Expertise of the International Chamber of
Commerce shall appoint such expert and shall administer such expert
determination through the ICC's Rules for Expertise. The expert shall be
and remain at all times wholly impartial, and, once appointed, the expert
shall have no ex parte communications with any of the Parties to the
Dispute concerning the expert determination or the underlying Dispute.
Both Parties agree to cooperate fully in the expeditious conduct of such
expert determination and to provide the expert with access to all
facilities, books, records, documents, information and personnel necessary
to make a fully informed decision in an expeditious manner. Before issuing
a final decision, the expert shall issue a draft report and allow the
parties to the Dispute to comment on it. The expert shall endeavor to
resolve the Dispute within thirty (30) days (but no later than sixty (60)
days) after his appointment, taking into account the circumstances
requiring an expeditious resolution of the matter in dispute. The expert's
decision shall be final and binding on the Parties.
ARTICLE 23
CONFIDENTIALITY
23.1 Confidentiality Obligation
Except as otherwise expressly provided in Section 4.5(a), neither this
Agreement nor information or documents that come into the possession of a
Party by means of the other Party in connection with the performance of
this Agreement may be used or communicated to Persons (other than the
Parties) without the mutual written agreement of the Parties, except that
either Party shall have the right to disclose such information or
documents without obtaining the other Party's prior consent in any of the
situations described below:
(a) accountants, other professional consultants or underwriters,
provided such disclosure is solely to assist the purpose for which the
aforesaid were so engaged and further provided that such Persons agree
to hold such information or documents under terms of confidentiality
equivalent to this Section 23.1, and for the benefit of the Parties;
(b) bona fide prospective purchasers of all or a part of a Party's or
its Affiliate's business, bona fide prospective assignees of all or
part of a Party's interest in this Agreement, or providers of finance
to either Party in relation to this Agreement or the Freeport
Facility, provided that such Persons agree to hold such information or
documents under terms of confidentiality equivalent to this Section
23.1, and for the benefit of the Parties;
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(c) to legal counsel, provided such disclosure is solely to assist
the purpose for which the aforesaid were so engaged;
(d) if required by any court of law or any law, rule, or regulation,
or if requested by a Governmental Authority having or asserting
jurisdiction over a Party and having or asserting authority to require
such disclosure in accordance with that authority, or pursuant to the
rules of any recognized stock exchange or agency established in
connection therewith;
(e) to the operator of a Gas Storage Facility, to Temporary
Customers, to LNG Suppliers and to any of the purchasers under the
Customer's Gas sales contracts from Customer's Inventory, in each case
only to the extent required for the administration of such contracts,
and provided that such Persons agree to hold such information or
documents under terms of confidentiality equivalent to this Section
23.1, and for the benefit of the Parties;
(f) to its Affiliates, its shareholders partners, or its
shareholders' and partners' Affiliates, provided that such recipient
entity has a bona fide business need for such information and agrees
to hold such information or documents under terms of confidentiality
equivalent to this Section 23.1;
(g) to any Government Authorities to the extent such disclosure
assists FLNG and Customer in obtaining Approvals;
(h) to an Expert in connection with the resolution of a Dispute
pursuant to Section 22.2 or to an arbitration tribunal in connection
with the resolution of a Dispute under Section 22.1;
(i) to the extent any such information or document has entered the
public domain other than through the fault or negligence of the Party
making the disclosure; and
(j) to Other Customers by FLNG only in order to allow FLNG to perform
its obligations under Section 4.5(c) herein.
Notwithstanding the foregoing, Customer acknowledges and agrees that
certain providers of finance to FLNG as well as FLNG's shareholders and
partners may disclose this Agreement and information or documents
disclosed pursuant to this Section 23.1 if required by any court of law or
any law, rule, or regulation, or if requested by a Governmental Authority
having or asserting jurisdiction over such Persons and having or asserting
authority to require such disclosure in accordance with that authority, or
pursuant to the rules of any recognized stock exchange or agency
established in connection therewith. In addition, notwithstanding the
foregoing, except as reasonably necessary to comply with applicable
securities laws, the Parties (and each employee, representative, or other
agent of the Parties) may (i) consult any tax advisor regarding the U.S.
federal income tax treatment or tax structure of the transactions
contemplated by this Agreement, and (ii) disclose to any and all Persons,
without limitation of any kind, the U.S. federal income tax treatment and
tax structure of the transactions contemplated by this Agreement and all
materials of any kind (including opinions or other tax analyses)
69
that are provided to the taxpayer relating to such tax treatment and tax
structure; provided that clause (ii) shall not apply until the earliest of
(x) the date of the public announcement of discussions relating to this
Agreement, (y) the date of the public announcement of this Agreement or
(z) the date of the execution of this Agreement, with or without
conditions. For this purpose, "tax structure" is limited to any facts
relevant to the U.S. federal income tax treatment of the transactions
contemplated by this Agreement and does not include information relating
to the identity of the Parties.
23.2 Public Announcements
(a) General. Neither Party may issue or make any public announcement,
press release or statement regarding this Agreement unless, prior to
the release of the public announcement, press release or statement,
such Party furnishes the other Party with a copy of such announcement,
press release or statement, and obtains the approval of the other
Party; provided that, notwithstanding any failure to obtain such
approval, no Party shall be prohibited from issuing or making any such
public announcement, press release or statement if it is necessary to
do so in order to comply with the applicable laws, rules or
regulations of any Governmental Authority, legal proceedings or stock
exchange having jurisdiction over such Party.
(b) FLNG Promotional Materials. Notwithstanding any provision in this
Section 23.2(a) to the contrary, FLNG may, with the consent of
Customer not to be unreasonably withheld, use the following in
external announcements and publications: (i) information concerning
the signing of this Agreement; (ii) the general nature of the
Services; and (iii) the general nature of Customer's involvement in
the Freeport Facility project.
ARTICLE 24
REPRESENTATIONS AND WARRANTIES
24.1 Representations and Warranties of Customer
As of the date hereof and until the expiration of this Agreement, Customer
represents, undertakes and warrants that:
(a) Customer is and shall remain duly organized and in good standing
under the laws of its country of incorporation, duly qualified to do
business in those jurisdictions where the nature of its activities or
property requires such qualification and to perform its obligations
under this Agreement;
(b) Customer has taken all necessary action to authorize the
execution, delivery and performance of its obligations hereunder;
(c) Customer has not retained, employed or used any broker or
intermediary in connection with the negotiation of this Agreement and
has no obligation to any
70
third party by way of commissions, finder's fees or similar fees with
respect to the execution of this Agreement; and
(d) neither the execution, delivery nor performance of this
Agreement, nor the consummation of any action contemplated herein,
conflicts or will conflict with, results or will result in a breach
of, or constitutes or will constitute a default under, any provision
of Customer's constitutive instruments or any law, judgment, order,
decree, rule or regulation of any court, administrative agency or
other instrumentality of any Governmental Authority or of any other
agreement or instrument to which Customer is a party.
24.2 Representations and Warranties of FLNG
As of the date hereof and until the expiration of this Agreement, FLNG
represents, undertakes and warrants that:
(a) FLNG is and shall remain duly organized and in good standing
under the laws of Delaware, duly qualified to do business in those
jurisdictions where the nature of its activities or property requires
such qualification and to perform its obligations under this
Agreement;
(b) FLNG has taken all necessary action to authorize the execution,
delivery and performance of its obligations hereunder;
(c) FLNG has not retained, employed or used any broker or
intermediary in connection with the negotiation of this Agreement and
has no obligation to any third party by way of commissions, finder's
fees or similar fees with respect to the execution of this Agreement;
and
(d) neither the execution, delivery nor performance of this
Agreement, nor the consummation of any action contemplated herein,
conflicts or will conflict with, results or will result in a breach
of, or constitutes or will constitute a default under, any provision
of FLNG's constitutive instruments or any law, judgment, order,
decree, rule or regulation of any court, administrative agency or
other instrumentality of any Governmental Authority or of any other
agreement or instrument to which FLNG is a party.
ARTICLE 25
NOTICES
Except as otherwise specifically provided, all notices authorized or required
between the Parties by any of the provisions of this Agreement shall be in
writing (in English) and delivered in person or by courier service or by any
electronic means of transmitting written communications which provides written
confirmation of complete transmission, and addressed to such Party. Oral
communication does not constitute notice for purposes of this Agreement, and
e-mail addresses and telephone numbers for the Parties are listed below as a
matter of convenience only. The foregoing notwithstanding, notices given from
LNG Vessels at sea may be given by radio, and notices required under Article 5
may be given by e-mail. A notice given under any provision
71
of this Agreement shall be deemed delivered only when received by the Party to
whom such notice is directed, and the time for such Party to deliver any notice
in response to such originating notice shall run from the date the originating
notice is received. "Received" for purposes of this Article 25 shall mean actual
delivery of the notice to the address of the Party specified hereunder or, in
the event notice was given by radio from an LNG Vessel at sea, actual receipt of
the communication by radio, or to be thereafter notified in accordance with this
Article 25. Each Party shall have the right to change its address at any time
and/or designate that copies of all such notices be directed to another Person
at another address, by giving written notice thereof to the other Party.
FREEPORT LNG DEVELOPMENT L.P. [CONOCOPHILLIPS ____________]
Attention: President Attention: General Manager, LNG
0000 Xxxxx Xxxxxx, Xxxxx 000 600 North Dairy Ashford
Houston, Texas 77002-4310 Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Email: xxxxxxxxx@xxxxxxxxxxx.xxx Email: xxxxx.x.xxxxxx@xxxxxxxxxxxxxx.xxx
Telephone: (000) 000-0000 Telephone: (000) 000-0000
ARTICLE 26
MISCELLANEOUS
26.1 Amendments
This Agreement may not be amended, modified, varied or supplemented except
by an instrument in writing signed by FLNG and Customer.
26.2 Approvals
After satisfaction of the Conditions Precedent, each Party shall use
reasonable endeavors to maintain in force all Approvals necessary for its
performance under this Agreement. Customer and FLNG shall cooperate fully
with each other wherever necessary for this purpose.
26.3 Successors and Assigns
This Agreement shall inure to the benefit of and be binding upon the
respective successors and permitted assigns of the Parties.
26.4 Waiver
No failure to exercise or delay in exercising any right or remedy arising
from this Agreement shall operate or be construed as a waiver of such
right or remedy. Performance of any condition or obligation to be
performed hereunder shall not be deemed to have been waived or postponed
except by an instrument in writing signed by the Party who is claimed to
have granted such waiver or postponement. No waiver by either Party shall
operate or be construed as a waiver in respect of any failure or default
72
not expressly identified by such written waiver, whether of a similar or
different character, and whether occurring before or after that waiver.
26.5 No Third Party Beneficiaries
The interpretation of this Agreement shall exclude any rights under
legislative provisions conferring rights under a contract to Persons not a
party to that contract. Nothing in this Agreement shall otherwise be
construed to create any duty to, or standard of care with reference to, or
any liability to, any Person other than a Party.
26.6 Rules of Construction
(a) Drafting. Each provision of this Agreement shall be construed
as though all Parties participated equally in the drafting of the
same. Consequently, the Parties acknowledge and agree that any rule of
construction that a document is to be construed against the drafting
party shall not be applicable to this Agreement.
(b) Priority.
(i) In the event of a conflict between the terms of this
Agreement excluding Annexes I and II and Exhibits A and B (the
"Base Agreement") and the terms of Annexes I and II and Exhibits
A and B, all terms of the Base Agreement shall take precedence
over Annexes I and II and Exhibits A and B.
(ii) In the event that any conflict arises between this
Agreement and the Freeport Facility Marine Operations Manual,
this Agreement shall prevail. In the event that any conflict
arises between this Agreement and the Freeport Services Manual,
this Agreement shall prevail.
26.7 Survival of Rights
Any termination or expiration of this Agreement shall be without prejudice
to any rights, remedies, obligations and liabilities which may have
accrued to a Party pursuant to this Agreement or otherwise under
applicable law. All rights or remedies which may have accrued to the
benefit of either Party (and any of this Agreement's provisions necessary
for the exercise of such accrued rights or remedies) prior to the
termination or expiration of this Agreement shall survive such termination
or expiration. Furthermore, the provisions of Article 12, Article 14,
Article 16, Article 21, Article 22, Article 23, Article 25, and Article 26
shall survive the termination or expiration of this Agreement.
26.8 Rights and Remedies
Except where this Agreement expressly provides to the contrary, the rights
and remedies contained in this Agreement are cumulative and not exclusive
of any rights and remedies provided by law.
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26.9 Interpretation
(a) Headings. The topical headings used in this Agreement are for
convenience only and shall not be construed as having any substantive
significance or as indicating that all of the provisions of this
Agreement relating to any topic are to be found in any particular
Article.
(b) Singular and Plural. Reference to the singular includes a
reference to the plural and vice versa.
(c) Gender. Reference to any gender includes a reference to all
other genders.
(d) Article. Unless otherwise provided, reference to any Article,
Section, Schedule, Annex or Exhibit means an Article, Section,
Schedule, Annex or Exhibit of this Agreement.
(e) Include. The words "include" and "including" shall mean
include or including without limiting the generality of the
description preceding such term and are used in an illustrative sense
and not a limiting sense.
(f) Time Periods. References to "day," "month," "quarter" and
"year" shall, unless otherwise stated or defined, mean a day, month,
quarter and year of the Gregorian calendar, respectively. For the
avoidance of doubt, a "day" shall commence at 24:00 midnight.
(g) Statutory References. Unless the context otherwise requires,
any reference to a statutory provision is a reference to such
provision as amended or re-enacted or as modified by other statutory
provisions from time to time and includes subsequent legislation and
regulations made under the relevant statute
(h) Currency. References to United States dollars shall be a
reference to the lawful currency from time to time of the United
States of America.
26.10 Disclaimer of Agency
The rights, duties, obligations and liabilities of the Parties under this
Agreement shall be individual, not joint or collective. It is not the
intention of the Parties to create, nor shall this Agreement be deemed or
construed to create, a partnership, joint venture or other association or
a trust. This Agreement shall not be deemed or construed to authorize any
Party to act as an agent, servant or employee for the other Party for any
purpose whatsoever except as explicitly set forth in this Agreement. In
their relations with each other under this Agreement, the Parties shall
not be considered fiduciaries.
26.11 No Sovereign Immunity
Any Party that now or hereafter has a right to claim sovereign immunity
for itself or any of its assets hereby waives any such immunity to the
fullest extent permitted by the laws of any applicable jurisdiction. This
waiver includes immunity from (i) any expert
74
determination or arbitration proceeding commenced pursuant to this
Agreement; (ii) any judicial, administrative or other proceedings to aid
the expert determination or arbitration commenced pursuant to this
Agreement; and (iii) any effort to confirm, enforce, or execute any
decision, settlement, award, judgment, service of process, execution order
or attachment (including pre-judgment attachment) that results from an
expert determination, mediation, arbitration or any judicial or
administrative proceedings commenced pursuant to this Agreement. Each
Party acknowledges that its rights and obligations hereunder are of a
commercial and not a governmental nature.
26.12 Severance of Invalid Provisions
If and for so long as any provision of this Agreement shall be deemed to
be judged invalid for any reason whatsoever, such invalidity shall not
affect the validity or operation of any other provision of this Agreement
except only so far as shall be necessary to give effect to the
construction of such invalidity, and any such invalid provision shall be
deemed severed from this Agreement without affecting the validity of the
balance of this Agreement.
26.13 Compliance with Laws
In performance of their respective obligations under this Agreement, each
Party agrees to comply with all applicable laws, statutes, rules,
regulations, judgments, decrees, injunctions, writs and orders, and all
interpretations thereof, of all Governmental Authorities having
jurisdiction over such Party.
26.14 Conflicts of Interest
FLNG shall avoid any conflict between its own interests and the interests
of Customer in relation to obtaining LNG terminalling services from the
Freeport Facility. In this regard, FLNG shall not become one of the Other
Customers during the Term hereof unless Customer has first consented in
writing (such consent not to be unreasonably withheld or delayed) to such
expanded business role by FLNG. For the avoidance of doubt, in no event
shall (a) any of FLNG's joint venture partners or affiliated entities of
any kind be restricted from becoming one of the Other Customers during the
Term hereof; or (b) any partner, shareholder, member, or other equity
owner of FLNG be restricted from becoming one of the Other Customers
during the Term hereof. Except as provided above, the Parties and their
Affiliates are free to engage or invest (directly or indirectly) in an
unlimited number of activities or businesses, any one or more of which may
be related to or in competition with the business activities contemplated
under this Agreement, without having or incurring any obligation to offer
any interest in such business activities to the other Party.
26.15 Expenses
Each Party shall be responsible for and bear all of its own costs and
expenses incurred in connection with the preparation and negotiation of
this Agreement.
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26.16 Scope
This Agreement constitutes the entire agreement between the Parties
relating to the subject matter hereof and supersedes and replaces any
provisions on the same subject contained in any other agreement between
the Parties, whether written or oral, prior to the date of the original
execution hereof.
26.17 Counterpart Execution
This Agreement may be executed in any number of counterparts and each such
counterpart shall be deemed an original Agreement for all purposes;
provided that no Party shall be bound to this Agreement unless and until
both Parties have executed a counterpart. For purposes of assembling all
counterparts into one document, Customer is authorized to detach the
signature page from one or more counterparts and, after signature thereof
by the respective Party, attach each signed signature page to a
counterpart.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
duly executed and signed by its duly authorized officer as of the Effective
Date.
FREEPORT LNG DEVELOPMENT, L.P.
By: Freeport LNG-GP, Inc., its General
Partner
By:
--------------------------------
Xxxxxxx X. Xxxxx
Chief Executive Officer
[CONOCOPHILLIPS ____________]
By:
------------------------------------
Name:
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Title:
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76
ANNEX I
MEASUREMENTS AND TESTS FOR LNG AT RECEIPT POINT
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Parties to Supply Devices
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General. Unless otherwise agreed, Customer and FLNG shall supply equipment
and conform to procedures that are in accordance with the latest
appropriate International Organization for Standards ("ISO")
documents.
Customer Devices. Customer or Customer's agent shall supply, operate and
maintain, or cause to be supplied, operated and maintained, suitable
gauging devices for the liquid level in LNG tanks of the LNG Vessels,
pressure and temperature measuring devices, and any other measurement
or testing devices which are incorporated in the structure of LNG
vessels or customarily maintained on board ship.
FLNG Devices. FLNG shall supply, operate and maintain, or cause to be
supplied, operated and maintained, devices required for collecting
samples and for determining quality and composition of the LNG and any
other measurement or testing devices which are necessary to perform
the measurement and testing required hereunder at the Freeport
Facility.
Dispute. Any Dispute arising under this Annex I shall be submitted to an
Expert under Section 22.2.
Selection of Devices
--------------------
All devices provided for in this Annex I shall be approved by FLNG, acting
as a Reasonable and Prudent Operator. The required degree of accuracy
(which shall in any case be within the permissible tolerances defined
herein and in the applicable standards referenced herein) of such devices
selected shall be mutually agreed upon by Customer and FLNG. In advance of
the use of any device, the Party providing such device shall cause tests to
be carried out to verify that such device has the required degree of
accuracy.
Verification of Accuracy and Correction for Error
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Accuracy. Accuracy of devices used shall be tested and verified at the
request of either Party, including the request by a Party to verify
accuracy of its own devices. Each Party shall have the right to
inspect at any time the measurement devices installed by the other
Party, provided that the other Party is notified in advance. Testing
shall be performed only when both Parties are represented, or have
received adequate advance notice thereof, using methods recommended by
the manufacturer or any other method agreed to by FLNG and Customer.
At the request of any Party hereto, any test shall be witnessed and
verified by an independent surveyor mutually agreed upon by Customer
and FLNG. Permissible
tolerances shall be as defined herein or as defined in the applicable
standards referenced herein.
Inaccuracy. Inaccuracy of a device exceeding the permissible tolerances
shall require correction of previous recordings, and computations made
on the basis of those recordings, to zero error with respect to any
period which is definitely known or agreed upon by the Parties as well
as adjustment of the device. All invoices issued during such period
shall be amended accordingly to reflect such correction, and an
adjustment in payment shall be made between Customer and FLNG. If the
period of error is neither known nor agreed upon, and there is no
evidence as to the duration of such period of error, corrections shall
be made and invoices amended for each receipt of LNG made during the
last half of the period since the date of the most recent calibration
of the inaccurate device. However, the provisions of this Paragraph 5
shall not be applied to require the modification of any invoice that
has become final pursuant to Section 12.7.
Costs and Expenses of Test Verification. All costs and expenses for testing
and verifying FLNG's measurement devices shall be borne by FLNG, and
all costs and expenses for testing and verifying Customer's
measurement devices shall be borne by Customer. The fees and charges
of independent surveyors for measurements and calculations shall be
borne directly by Customer.
Tank Gauge Tables of LNG Vessels
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Initial Calibration. Customer shall provide FLNG or its designee, or cause
FLNG or its designee to be provided, with a certified copy of tank
gauge tables for each tank of each LNG Vessel verified by a competent
impartial authority or authorities mutually agreed upon by the
Parties. Such tables shall include correction tables for list, trim,
tank contraction and any other items requiring such tables for
accuracy of gauging.
Presence of Representatives. FLNG and Customer shall each have the right to
have representatives present at the time each LNG tank on each LNG
Vessel is volumetrically calibrated.
Recalibration. If the LNG tanks of any LNG Vessel suffer distortion of such
nature as to create a reasonable doubt regarding the validity of the
tank gauge tables described herein (or any subsequent calibration
provided for herein), Customer or Customer's agent shall recalibrate
the damaged tanks, and the vessel shall not be employed as an LNG
Vessel hereunder until appropriate corrections are made. If mutually
agreed between Customer and FLNG representatives, recalibration of
damaged tanks can be deferred until the next time when such damaged
tanks are warmed for any reason, and any corrections to the prior tank
gauge tables will be made from the time the distortion occurred. If
the time of the distortion cannot be ascertained, the Parties shall
mutually agree on the time period for retrospective adjustments.
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Accuracy of Measurement
-----------------------
All measuring equipment must be maintained, calibrated and tested in
accordance with the manufacturer's recommendations. In the absence of a
manufacturer's recommendation, the minimum frequency of calibration shall
be 180 days, unless otherwise mutually agreed between the Parties.
Documentation of all tests and calibrations will be made available by the
Party performing the same to the other Party. Acceptable accuracy and
performance tolerances will be:
Temperature: +/- 0.2 degrees Celsius at - 160 degrees Celsius
Pressure: +/- 2% of the calibrated span of the measuring
device
Level Gauge: +/- 5 millimeter
Level Gauge
Systems Comparison: +/- 5 millimeter
Gauging and Measuring LNG Volumes Delivered
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Gauge Tables. Upon FLNG's representative and the independent surveyor's, if
present, arriving on board the LNG Vessel prior to the commencement of
or during unloading, Customer or Customer's representative shall make
available to them a certified copy of tank gauge tables for each tank
of the LNG Vessel.
Gauges. Volumes of LNG delivered pursuant to this Agreement shall be
determined by gauging the LNG in the tanks of the LNG Vessels before
and after unloading. Each LNG Vessel's tank shall be equipped with two
sets of level gauges, each set utilizing a different measurement
principle. Comparison of the two systems, designated as Primary and
Secondary Measurement Systems, shall be performed from time to time to
ensure compliance with the acceptable performance tolerances stated
herein.
Gauging Process. Gauging the liquid in the tanks of the LNG Vessels and
measuring of liquid temperature, vapor temperature and vapor pressure
in each LNG tank, trim and list of the LNG Vessels, and atmospheric
pressure shall be performed, or caused to be performed, by Customer
before and after unloading. FLNG's representative shall have the right
to be present while all measurements are performed and shall verify
the accuracy and acceptability of all such measurements. The first
gauging and measurements shall be made immediately before the
commencement of unloading. The second gauging and measurements shall
take place immediately after the completion of unloading. The liquid
level in the LNG Vessel before and after the unloading shall be
determined by at least two separate tank gaugings to be conducted at
least 15 minutes apart.
Records. Copies of gauging and measurement records shall be furnished to
FLNG immediately upon completion of unloading.
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Gauging Liquid Level of LNG. The level of the LNG in each LNG tank of the
LNG Vessel shall be gauged by means of the primary gauging device
installed in the LNG Vessel for that purpose. The level of the LNG in
each tank shall be logged or printed.
Determination of Temperature. The temperature of the LNG and of the vapor
space in each tank shall be measured by means of a sufficient number
of properly located temperature measuring devices to permit the
determination of average temperature. Temperatures shall be measured
at the same time as the liquid level measurements and shall be logged
or printed.
Determination of Pressure. The pressure of the vapor in each LNG tank shall
be determined by means of pressure measuring devices installed in each
LNG tank of the LNG Vessels. The atmospheric pressure shall be
determined by readings from the standard barometer installed in the
LNG Vessels. Pressures shall be measured at the same time as the
liquid level measurements, and shall be logged or printed.
Determination of Density. The LNG density shall be calculated using the
method described within ISO 6578-91, Refrigerated hydrocarbon liquids
- Static measurement. This method shall be updated to conform to any
official published revision of that document. Should any improved
data, method of calculation or direct measurement device become
available which is acceptable to both Buyer and Seller, such improved
data, method or device shall then be used. If density is determined by
measurements, the results shall be measured at the same time as the
liquid level measurements and shall be logged or printed.
Samples for Quality Analysis
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General. Flow proportional representative liquid samples shall be collected
from an appropriate point located as close as practical to the
unloading line starting two hours after the beginning of transfer and
ending two hours before the end of transfer. Samples taken when
biphasic or overheated LNG is suspected to be in the main transfer
line will be disregarded. These incremental samples will be passed
through a vaporizer, and samples of the vaporized liquid will be
analyzed. The resulting analyses, which are proportional to time, will
be mathematically flow rate weighted to yield an analysis that is
representative of the unloaded Cargo. This flow rate weighted analysis
shall be used for all appropriate calculations associated with the
delivered Cargo. Should the automatic sampling system fail during the
unloading, manual samples shall be collected and analyzed for
accounting purposes.
Manual Samples. Prior to the end of the unloading cycle, two spot samples
shall be collected from the vaporizer. Spot samples shall be collected
in accordance with Gas Processors Association ("GPA") Standard 2166 -
Methods for Obtaining Gas Samples for Analysis by Gas Chromatography -
or by other mutually agreeable methods. The samples shall be properly
labeled and then distributed to Customer
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and FLNG. FLNG shall retain one sample for a period of 30 days, unless
the analysis is in dispute. If the analysis is in dispute, the sample
will be retained until the dispute is resolved.
Sampling and analysis methods and procedures that differ from the
above may be employed with the mutual agreement of the Parties.
Quality Analysis
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Certification and Deviation. Chromatograph calibration gasses shall be
provided and their composition certified by an independent third
party. From time to time, deviation checks shall be performed to
verify the accuracy of the gas composition mole percentages and
resulting calculated physical properties. Analyses of a sample of test
gas of known composition resulting when procedures that are in
accordance with the above mentioned standards have been applied will
be considered as acceptable if the resulting calculated Gross Real
Heating Value is within +/- 0.3% of the known Gross Real Heating Value
of the test gas sample. If the deviation exceeds the tolerance stated,
the Gross Real Heating Value, Relative Density and Compressibility
previously calculated will be corrected immediately. Previous analyses
will be corrected to the point where the error occurred, if this can
be positively identified to the satisfaction of both Parties.
Otherwise it shall be assumed that the drift has been linear since the
last recalibration and correction shall be based on this assumption.
GPA Standard 2261. All samples shall be analyzed by FLNG to determine the
molar fraction of the hydrocarbon and other components in the sample
by gas chromatography using a mutually agreed method in accordance
with GPA Standard 2261 - Method of Analysis for Gas and Similar
Gaseous Mixtures by Gas Chromatography, current as of January 1, 1990
and as periodically updated or as otherwise mutually agreed by the
Parties. If better standards for analysis are subsequently adopted by
GPA or other recognized competent impartial authority, upon mutual
agreement of Customer and FLNG, they shall be substituted for the
standard then in use, but such substitution shall not take place
retroactively. A calibration of the chromatograph or other analytical
instrument used shall be performed by FLNG immediately prior to the
analysis of the sample of LNG delivered. FLNG shall give advance
notice to Customer of the time FLNG intends to conduct a calibration
thereof, and Customer shall have the right to have a representative
present at each such calibration; provided, however, FLNG will not be
obligated to defer or reschedule any calibration in order to permit
the representative of Customer to be present.
GPA Standard 2377 and 2265. FLNG shall determine the presence of Hydrogen
Sulfide (H2S) by use of GPA Standard 2377 - Test of Hydrogen Sulfide
and Carbon Dioxide in Gas Using Length of Stain Tubes. If necessary,
the concentration of H2S and total sulfur will be determined using one
or more of the following methods as is appropriate: gas
chromatography, Gas Processors Standard 2265 - Standard for
Determination of Hydrogen Sulfide and Mercaptan Sulfur in Gas
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(Cadmium sulfate - Iodometric Titration Method) or any other method
that is mutually acceptable.
Operating Procedures
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Notice. Prior to conducting operations for measurement, gauging, sampling
and analysis provided in this Annex I, the Party responsible for such
operations shall notify the appropriate representatives of the other
Party, allowing such representatives reasonable opportunity to be
present for all operations and computations; provided that the absence
of the other Party's representative after notification and opportunity
to attend shall not prevent any operations and computations from being
performed.
Independent Surveyor. At the request of either Party any measurement,
gauging, sampling and analysis shall be witnessed and verified by an
independent surveyor mutually agreed upon by Customer and FLNG. The
results of such surveyor's verifications shall be made available
promptly to each Party.
Preservation of Records. All records of measurement and the computed
results shall be preserved by the Party responsible for taking the
same, or causing the same to be taken, and made available to the other
Party for a period of not less than three (3) years after such
measurement and computation.
Quantities Delivered
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Calculation of MMBTU Quantities. The quantity of MMBTUs delivered shall be
calculated by FLNG and verified by Customer. Either Party may, at its
own expense, require the measurements and calculations and/or their
verification by an independent surveyor, mutually agreed upon by the
Parties. Consent to an independent surveyor proposed by a Party shall
not be unreasonably withheld by the other Party.
Determination of Gross Real Heating Value. All component values shall be in
accordance with the latest revision of ISO 6578 and the latest
revision of the reference standards therein.
Determination of Volume of LNG Unloaded.
(i) The LNG volume in the tanks of the LNG Vessel before and after
unloading shall be determined by gauging on the basis of the
tank gauge tables provided for in Paragraph 6. The volume of
LNG remaining in the tanks after unloading of the LNG Vessel
shall be subtracted from the volume before unloading and the
resulting volume shall be taken as the volume of the LNG
delivered from the LNG Vessel.
(ii) Gas returned to the LNG Vessel during unloading shall not be
deemed to be volume unloaded for Customer's account.
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(iii) If failure of the primary gauging and measuring devices of an
LNG Vessel should make it impossible to determine the LNG
volume, the volume of LNG unloaded shall be determined by
gauging the liquid level using the secondary gauging and
measurement devices. If an LNG Vessel is not so equipped, the
volume of LNG delivered shall be determined by gauging the
liquid level in FLNG's onshore LNG storage tanks immediately
before and after unloading the LNG Vessel, and such volume
shall have added to it an estimated LNG volume, agreed upon by
the Parties, for boil-off from such tanks during the unloading
of such LNG Vessel and have added to it the volume of any LNG
that has been pumped from the LNG Vessel's tanks during
unloading. FLNG shall provide Customer, or cause Customer to
be provided with, a certified copy of tank gauge tables for
each onshore LNG tank which is to be used for this purpose,
such tables to be verified by a competent impartial authority.
Determination of Quantities Unloaded. The quantities of MMBTUs sold and
delivered shall be computed by FLNG by means of the following formula:
Q = [(V//L1// - V//L2//) - V//G//] * D//L2// * HV//L2//
Where:
Q: represents the quantity of MMBTUs unloaded
V//L1//: represents the volume of LNG in Cubic Meters on board the
vessel prior to unloading.
V//L2//: represents the volume of LNG in Cubic Meters on board the
vessel after unloading.
V//G//: represents the volume of Gas in Cubic Meters returned to the
vessel during unloading.
D//L2//: represents the density value of the unloaded LNG in
kilograms per Cubic Meter.
HV//L2//: represents the Gross Real Heating Value of the LNG unloaded
from the vessel in BTUs per kilogram.
The units used and reported for Mass and Gross Real Heating Value will
be kilograms and BTUs/kilogram respectively. The reference conditions
for the determination of the BTUs received by FLNG are:
Temperature: 15.56DEG. Celsius
Atmospheric Pressure: 14.69 psia
The Parties consider that, at the time this Agreement is executed, the
above formula represents the industry standard for determining the
quantities of BTUs
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received by FLNG. If the industry standard changes during the term of
this Agreement, the Parties will consult on changes needed to adjust
the formula to the then-current industry standard. If the parties are
unable to agree on such changes, either Party may refer the matter to
an Expert for determination under Section 22.2.
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ANNEX II
MEASUREMENTS AND TESTS FOR GAS AT DELIVERY POINT
1. Applicability. The measurement procedures in this Annex II shall apply to
the measurement of Gas delivered by FLNG for Customer's Account at the
Delivery Point.
2. Unit of Measurement. All Gas delivered at the Delivery Point shall be
measured in MMBTUs.
3. Metering.
(a) Metering Equipment. FLNG shall supply, operate and maintain (or cause
to be supplied, operated and maintained at or near the Delivery Point)
the following:
i) meters with redundancy and other equipment as is necessary to
accurately measure the volume of Gas delivered at the Delivery
Point hereunder;
ii) devices for collecting samples and for determining the quality
and composition of Gas delivered at the Delivery Point hereunder;
and
iii) and any other measurement or testing devices which are necessary
to perform the measurement and testing required hereunder at the
Delivery Point
(collectively, the "Downstream Metering Equipment"). The Downstream
Metering Equipment shall be designed and installed in accordance with
the current recommendations of the American Gas Association, Report
No. 3.
(b) Check Measurement Equipment and Access. Customer may, at Customer's
expense, install and operate, at or near the Downstream Metering
Equipment, check measuring equipment similar to the Downstream
Metering Equipment to monitor the accuracy of the measurements made by
the Downstream Metering Equipment. Such check metering equipment will
be installed and operated by Customer so that it does not unreasonably
interfere with the operation of the Downstream Metering Equipment or
the Freeport Facility Pipeline.
(c) General. A pressure transmitter shall be installed on each meter tube
to measure the static pressure at the plane of the upstream
differential pressure tapping. The temperature of the flowing Gas
shall be measured on each meter tube by a platinum resistance
thermometer installed in a thermowell so that the probe tip is in the
center one-third of the pipe. Each meter run shall be provided with a
dedicated microprocessor-based flow computer system powered by an
appropriate back-up power supply.
(d) Measuring and Density Standards. Gas shall be measured by orifice
meters or other mutually agreeable measuring devices. Orifice meters
shall be constructed
and operated, Gas shall be measured, and properties shall be
determined in accordance with American Gas Association, Report No. 3
and any subsequent modification and amendment thereof. The
compressibility and density shall be calculated in accordance with the
latest revision of the American Gas Association, Report No. 3.
Metering equipment shall include the use of flange connections and,
where necessary, flow conditioners, straightening vanes, and pulsation
dampening devices. Meter tubes shall be of a design incorporating
suitable access for periodic internal inspection, including access for
internal inspection of the upstream side of the flow conditioner.
Electronic gas measurement with a continuous readout of pressure,
temperature, and Gas flow rate shall be used. The differential low
flow cut-off point shall be set at a value no greater than 0.1 percent
of the calibrated range. Mechanical pressure, differential pressure,
and temperature chart recorders shall be used as primary backup for
the electronic gas measurement. All computations shall be made as
prescribed in the above cited standard.
(e) Ultrasonic Metering Standard. All ultrasonic metering shall comply
with the American Gas Association, Report No. 9 and any subsequent
modification and amendment thereof.
4. Determination of Gross Heating Value.
(a) GPA 2261 and 2145. The heating value of the Gas delivered by FLNG at
the Delivery Point shall be determined by gas chromatograph. The
composition of the Gas shall be continuously measured by on-line
chromatographs. The Gross Heating Value of the Gas shall be calculated
using results from the on-line chromatograph. The chromatographs will
analyze all hydrocarbon components, up to and including at least the
Nonanes+ group, and inerts having a concentration of greater than
0.002 mol percent. The determination of Gas composition shall be in
accordance with the GPA Standard 2261 - Analysis for Natural Gas and
Similar Gaseous Mixtures by Gas Chromatography. All physical
properties used in quality and quantity calculations shall be based on
these compositional analyses and the component values published in GPA
2145, or the latest revision thereof. Water vapor content shall be
included in the component analyses. The sample analysis cycle time
shall be less than 6 minutes. The maximum response time from sample
probe to analyzer shall be four minutes. In the event of failure of
the on-line Gas chromatograph, chromatograph analysis of samples
collected proportional to the flow through the meters shall be used.
Auto-calibration of the Gas chromatograph shall be conducted on a
weekly basis or as otherwise mutually agreed by the Parties.
(b) GPA 2145. Back-up composite samples of the flowing Gas shall be
obtained weekly to be used for relative density (specific gravity),
Gross Heating Value, and compressibility factors in case of electronic
failure. Composite sampling of the flowing stream shall be by use of a
mutually agreeable continuous sampler, designed and installed to
sample proportionally to the flow rate. The end point of each
composite sample chromatographic analysis shall be the Nonane+
fraction,
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and values for this fraction shall be based on the C9 value in the
latest revision of GPA Standard 2145 - Table of Physical Constants of
Paraffin Hydrocarbons and Other Components of Natural Gas. All
component values shall be in accordance with such standard.
(c) Quarterly Deviation Checks. Monthly gas chromatograph deviation checks
shall be made on Gas composition mole percentages and resulting Gross
Heating Value. Analyses of a sample of test Gas of known composition
resulting when procedures that are in accordance with the above
mentioned standards have been applied will be considered as acceptable
if the resulting calculated Gross Heating Value is within plus or
minus 5 BTU per Standard Cubic Foot of the known Gross Heating Value.
If the deviation exceeds the tolerance stated, Gross Heating Value,
relative density, and compressibility previously calculated will be
corrected immediately. Previous analyses will be corrected to the
point where the error occurred. If the point that the error occurred
cannot be determined, previous analyses will be corrected for one-half
the period since the last verification test, not to exceed a
correction period of six months.
(d) Corrections for Water Content. The heating value on a dry basis for
Gas containing water shall be corrected in accordance with standards
followed by the American Gas Association. Moisture content of flowing
Gas shall be determined as often as found necessary in real practice
by use of a mutually acceptable calculation or test instrument, which
could include a Meco Moisture Analyzer.
5. Operating Procedures
(a) Notice. Prior to conducting operations for measurement, calibration,
sampling and analysis provided in Annex II, the Party responsible for
such operations shall notify the appropriate representatives of the
other Party, allowing such representatives reasonable opportunity to
be present for all operations and computations; provided that the
absence of the other Party's representative after notification and
opportunity to attend shall not prevent any operations and
computations from being performed.
(b) Independent Surveyor. At the request of either Party any measurement,
calibration, sampling and analysis shall be witnessed and verified by
an independent surveyor mutually agreed upon by Customer and FLNG. The
results of such surveyor's verifications shall be made available
promptly to each Party.
(c) Preservation of Records. All records of measurement and the computed
results shall be preserved by the Party responsible for taking the
same, or causing the same to be taken, and made available to the other
Party for a period of not less than three (3) years after such
measurement and computation.
6. Verification. At least once each month, and in addition, from time to time
upon at least two weeks prior written notice by either Party to the other,
FLNG shall verify or cause to be verified the accuracy of the Downstream
Metering Equipment. When as a result of
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such test any of the Downstream Metering Equipment is found to be out of
calibration by no more than 1% when compared to the manufacturer's
specifications for such equipment, no adjustment shall be made to the Fee.
If the testing of the Downstream Metering Equipment demonstrates that any
meter is out of calibration by more than 1% when compared to the
manufacturer's specifications for such equipment, the applicable Downstream
Metering Equipment reading for the actual period during which out of
calibration measurements were made shall be estimated as follows, in
descending order of priority:
(a) by using the registration of any check meter or meters if installed
and accurately registering;
(b) by correcting the error if the percentage of error is ascertainable by
calibration, test, or mathematical calculation; or
(c) by estimating the quantity of delivery by measuring deliveries during
prior periods under similar conditions when any meter was registering
accurately.
If the actual period that such equipment has been out of calibration cannot
be determined to the mutual satisfaction of FLNG and Customer, the
adjustment shall be for a period equal to one-half of the time elapsed
since the most recent test. The previous payments made by Customer to FLNG
for this period shall be subtracted from the amount of payments that are
calculated to have been owed under this Agreement. The difference (which
may be a positive or negative amount) shall be added to the next monthly
statement pursuant to Section 12.2.
7. Costs. The cost of the monthly testing and calibration of the Downstream
Metering Equipment shall be borne by FLNG. The cost of any testing and
calibration of the Downstream Metering Equipment beyond the monthly test
permitted above shall also be paid by FLNG, unless the request to test any
of the Downstream Metering Equipment is made by Customer and the results of
such test requested by Customer demonstrate that the Downstream Metering
Equipment is less than 1% out of calibration, in which case the cost of
such testing and calibration shall be for Customer's account. Each Party
shall comply with any reasonable request of the other Party concerning the
sealing of the Downstream Metering Equipment, the presence of a
representative of Customer when the seals are broken and tests are
conducted, and other matters affecting the accuracy, testing and
calibration of the Downstream Metering Equipment.
8. Disputes. Any Dispute arising under this Annex II shall be submitted to an
Expert under Section 22.2.
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EXHIBIT A
GUARANTEE
This GUARANTEE (this "Guarantee"), dated as of [___________], 2004, is made
by CONOCOPHILLIPS COMPANY, a Delaware corporation ("Guarantor"), in favor of
FREEPORT LNG DEVELOPMENT, L.P., a Delaware limited partnership ("FLNG," and,
together with Guarantor, each a "Party" and, collectively, the "Parties").
Capitalized terms used, but not otherwise defined, herein shall have the
respective meanings ascribed to such terms in the Agreement (as defined below).
RECITALS
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WHEREAS, FLNG has agreed to enter into the LNG Terminal Use Agreement dated
as of the date hereof, with [COP LNG] ("Subsidiary"), a subsidiary of Guarantor,
(the "Agreement"), which is hereby incorporated by reference in this Guarantee
and made a part hereof.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereby agree as follows:
1. Guarantee.
(a) On the terms and subject to the conditions contained herein, Guarantor
hereby absolutely, unconditionally and irrevocably guarantees, to and for the
benefit of FLNG, the full and punctual performance and payment, as and when each
such payment or performance becomes due (whether at the stated due date, by
acceleration or otherwise), by or on behalf of Subsidiary of any and all
obligations or amounts owed by Subsidiary to FLNG in connection with and to the
extent provided for in the Agreement (the "Guaranteed Obligations"). The
Guaranteed Obligations of Guarantor hereunder are direct and primary
obligations.
(b) This Guarantee is an absolute, unconditional, present, and continuing
guarantee of performance and payment, and not of collection, is in no way
conditioned or contingent upon any attempt to collect from or enforce
performance or payment by Subsidiary or upon any other event, contingency or
circumstance whatsoever, and shall remain in full force and effect and be
binding upon and against Guarantor and its successors and assigns (and shall
inure to the benefit of FLNG and its successors, endorsees, transferees, and
assigns) without regard to the validity or enforceability of the Agreement. If,
for any reason, Subsidiary shall fail or be unable duly, punctually, and fully
to perform or pay, as and when such performance or payment is due, any of the
Guaranteed Obligations, Guarantor shall promptly perform or pay, or cause to be
performed or paid, such Guaranteed Obligations.
(c) Guarantor agrees that any award or judgment resulting from any
arbitration between Subsidiary and FLNG under the Agreement shall be conclusive
and binding on Guarantor for purposes of determining Guarantor's obligations
under this Guarantee.
(d) Guarantor further agrees to pay to FLNG any and all costs, expenses
(including, without limitation, all reasonable fees and disbursements of
counsel), and damages which may be paid or incurred by FLNG in enforcing any
rights with respect to this Guarantee, including, without limitation, collecting
against Guarantor under this Guarantee.
2. Obligations Absolute and Unconditional, Continuing; Etc. Guarantor agrees
that the obligations of Guarantor set forth in this Guarantee shall be direct
obligations of Guarantor, and such obligations shall be absolute, irrevocable
and unconditional, shall not be subject to any counterclaim, set-off, deduction,
diminution, abatement, recoupment, suspension, deferment, reduction or defense
(other than full and strict compliance with its obligations hereunder) based
upon any claim Guarantor or any other Person may have against FLNG or any other
Person and shall remain in full force and effect without regard to and shall not
be released, discharged or in any way affected or impaired by, any circumstance
or condition whatsoever (other than full and strict compliance by Guarantor with
its obligations hereunder) (whether or not Guarantor shall have any knowledge or
notice thereof), including, without limitation: (i) any amendment or
modification of or supplement to or other change in the Agreement or any other
document, including, without limitation, any renewal, extension, acceleration or
other changes to payment terms thereunder; (ii) any failure, omission or delay
on the part of FLNG or any other Person to confirm or comply with any term of
the Agreement or any other document, (iii) any waiver, consent, extension,
indulgence, compromise, release or other action or inaction under or in respect
of the Agreement or any other document or any obligation or liability of FLNG or
any other Person, or any exercise or non-exercise of any right, remedy, power,
or privilege under or in respect of any such instrument or agreement or any such
obligation or liability; (iv) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, liquidation, or similar proceeding with respect to
FLNG, Subsidiary or any other Person or any of their respective properties, or
any action taken by any trustee or receiver or by any court in any such
proceeding; (v) any discharge, termination, cancellation, frustration,
irregularity, invalidity or unenforceability, in whole or in part, of the
Agreement or any other document or any term or provision thereof; (vi) any
merger or consolidation of Guarantor, Subsidiary, or any other Person into or
with any other Person or any sale, lease, or transfer of all or any of the
assets of Guarantor, Subsidiary, or any other Person; (vii) any change in the
ownership of Guarantor, Subsidiary, or any other Person; (viii) any winding up
or dissolution of Subsidiary; (ix) to the extent permitted under Applicable Law,
any other occurrence or circumstance whatsoever, whether similar or dissimilar
to the foregoing, which might otherwise constitute a legal or equitable defense
or discharge of the liabilities of guarantor or surety or which might otherwise
limit recourse against Guarantor. The Guaranteed Obligations constitute the full
recourse obligations of Guarantor enforceable against it to the full extent of
all its assets and properties. Without limiting the generality of the foregoing,
Guarantor agrees that repeated and successive demands may be made and recoveries
may be had hereunder as and when, from time to time, Subsidiary shall fail to
perform obligations or pay amounts owed by it under the Agreement and that
notwithstanding the recovery hereunder for or in respect of any given failure to
so comply by Subsidiary under the Agreement, this Guarantee shall remain in full
force and effect and shall apply to each and every subsequent such failure.
3. Reinstatement. Guarantor agrees that this Guarantee shall be automatically
reinstated with respect to any payment made by or on behalf of Subsidiary
pursuant to the Agreement if
2
and to the extent that such payment is rescinded or must be otherwise restored,
whether as a result of any proceedings in bankruptcy or reorganization or
otherwise.
4. Waiver of Demands, Notices; Etc. Guarantor hereby unconditionally waives,
to the extent permitted by Applicable Law: (i) notice of any of the matters
referred to in Section 2 hereof; (ii) all notices which may be required by
Applicable Law, or otherwise, now or hereafter in effect, to preserve any rights
against Guarantor hereunder, including, without limitation, any demand, proof,
or notice of non-payment or non-performance of any Guaranteed Obligation; (iii)
any right to the enforcement, assertion, or exercise of any right, remedy,
power, or privilege under or in respect of the Agreement; (iv) notice of
acceptance of this Guarantee, demand, protest, presentment, notice of failure of
performance or payment, and any requirement of diligence; (v) any requirement to
exhaust any remedies or to mitigate any damages resulting from failure of
performance or payment by Subsidiary under the Agreement or by any other Person
under the terms of the Agreement; and (vi) any other circumstance whatsoever
which might otherwise constitute a legal or equitable discharge, release, or
defense of a guarantor or surety, or which might otherwise limit recourse
against Guarantor.
5. No Subrogation. Notwithstanding any performance, payment or payments made
by Guarantor hereunder (or any set-off or application of funds of Guarantor by
FLNG), Guarantor shall not be entitled to be subrogated to any of the rights of
Subsidiary (or of any rights of FLNG hereunder), or any collateral, security, or
guarantee or right of set-off held by FLNG, for the performance or payment of
the obligations guaranteed hereunder, nor shall Guarantor seek or be entitled to
assert or enforce any right of contribution, reimbursement, indemnity or any
other right to payment from Subsidiary as a result of Guarantor's performance of
its obligations pursuant to this Guarantee until all Guaranteed Obligations are
performed or paid in full. If any amount shall be paid to Guarantor on account
of such subrogation, contribution, reimbursement or indemnity rights at any time
when all of the Guaranteed Obligations and all amounts owing hereunder shall not
have been performed and paid in full, such amount shall be held by Guarantor in
trust for FLNG, segregated from other funds of Guarantor, and shall, forthwith
upon receipt by Guarantor, be turned over to FLNG in the exact form received by
Guarantor (duly endorsed by Guarantor to FLNG, if required), to be applied
against the Guaranteed Obligations, whether or not matured, in such order as
FLNG may determine.
6. Representations and Warranties. Guarantor represents and warrants that:
(a) it is a [corporation] duly organized and validly existing under the
laws of the [Delaware] and has the corporate power and authority to execute,
deliver and carry out the terms and provisions of the Guarantee;
(b) the execution, delivery and performance of this Guarantee will not
conflict with, violate or breach the terms of any agreement of Guarantor;
(c) no authorization, approval, consent or order of, or registration or
filing with, any court or other governmental body having jurisdiction over
Guarantor is required on the part of Guarantor for the execution and delivery of
this Guarantee; and
3
(d) this Guarantee, when executed and delivered, will constitute a valid
and legally binding agreement of Guarantor, except as the enforceability of this
Guarantee may be limited by the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and by general principles of equity as they apply to the Guarantor.
7. Miscellaneous.
(a) This Guarantee shall inure to the benefit of and be binding upon the
Parties hereto and their respective successors and permitted assigns. Guarantor
may not assign or transfer this Guarantee or any rights or obligations hereunder
without FLNG's prior written consent. FLNG may assign this Guarantee, in whole
or part, to any of its Affiliates or co-venturers or to any Person jointly
controlled by FLNG any co-venturers. Furthermore, FLNG may assign, pledge and/or
grant a security interest in this Guarantee to any Lender without Guarantor's
consent. Except as otherwise provided in this Section 7, nothing herein, express
or implied, is intended or shall be construed to confer upon or to give to any
Person other than the Parties hereto any rights, remedies, or other benefits.
(b) This Guarantee shall be governed by, and construed in accordance with,
the laws of the state of Texas, without giving effect to the principles thereof
relating to conflicts of law.
(c) Subject to Section 1(d), the Parties agree that any claim, dispute or
controversy arising out of or relating to this Guarantee (including, without
limitation, the breach, termination or invalidity thereof, and whether arising
out of tort or contract) ("Dispute") shall be decided by litigation. Each Party
hereby consents to personal jurisdiction in any legal action, suit, or
proceeding brought in any court, federal or state, within Xxxxxx, County, Texas,
having subject matter jurisdiction and irrevocably waives, to the fullest extent
permitted by Applicable Law and the laws of the State of Texas, any claim or any
objection it may now or hereafter have, that venue or personal jurisdiction is
not proper with respect to any such legal action, suit, or proceeding brought in
such a court in Xxxxxx County, Texas, 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.
This agreement to litigate is binding upon the Parties, Subsidiary, Subsidiary's
surety (if any) and the successors and permitted assigns of any of them.
(d) No modification or amendment of this Guarantee shall be of any force
or effect unless made in writing, signed by the Parties hereto, and specifying
with particularity the nature and extent of such modification or amendment. This
Guarantee constitutes the entire and only understanding and agreement among the
Parties hereto with respect to the subject matter hereof and cancels and
supersedes any prior negotiations, proposals, representations, understandings,
commitments, communications, or agreements, whether oral or written, with
respect to the subject matter hereof.
(e) All notices, requests and communications to a Party hereunder shall be
in writing (including telecopy and/or fax or similar writing) and shall be sent:
4
If to FLNG:
----------
FREEPORT LNG DEVELOPMENT, L.P.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000-0000
Attn: President
Facsimile: (000) 000-0000
Telephone No: (000) 000-0000
with a copy to:
[____________________________]
[Address]
Attn: [______________________]
Facsimile: [_________________]
Telephone No.: [_____________]
If to Guarantor:
---------------
CONOCOPHILLIPS COMPANY
[Address]
Attn: [______________________]
Facsimile: [_________________]
Telephone No.: [_____________]
with a copy to:
[____________________________]
[Address]
Attn: [______________________]
Facsimile: [_________________]
Telephone No.: [_____________]
or to such other address or telecopy number and with such other copies, as such
Party may hereafter reasonably specify by notice to the other Parties. Each such
notice, request or communication shall be effective upon receipt, provided that
if the day of receipt is not a Business Day then it shall be deemed to have been
received on the next succeeding Business Day.
(f) The headings of the several provisions of this Guarantee are inserted
for convenience only and shall not in any way affect the meaning or construction
of any provision of this Guarantee.
(g) No forbearance or delay by FLNG in asserting rights against Subsidiary
shall affect or impair in any way Guarantor's obligations hereunder or the
rights of FLNG hereunder.
5
(h) This Guarantee may be executed in any number of separate counterparts
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.
6
IN WITNESS WHEREOF, the undersigned have duly executed this Guarantee as of the
date first above written.
CONOCOPHILLIPS COMPANY
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
FREEPORT LNG DEVELOPMENT, L.P.
By: Freeport LNG-GP, Inc., its General
Partner
By:
-------------------------------
Xxxxxxx X. Xxxxx
Chief Executive Officer
7
EXHIBIT B
FREEPORT SERVICES MANUAL
The Freeport Services Manual referred to in Section 3.5 shall be limited to the
following matters and other matters of a similar nature:
1. Details associated with the implementation of Section 5.1 among FLNG,
Customer and Other Customers
2. Details associated with the Gas delivery procedures in Section 5.2
among FLNG, Customer and Other Customers
3. Details associated with the content and format of the ***
4. Form of the Release Notice referred to in Section 6.2(b)(i)c
5. Details associated with the invoicing process under Article 12,
including:
a. Format of invoices (electronic and original)
b. Numbering systems/codes for all invoice-related documents
EXHIBIT E
---------
FORM OF SERVICES QUANTITY INCREASE AGREEMENT
See attached.
EXHIBIT F
---------
FORM OF PARTNERSHIP AMENDMENT
EXHIBIT G
---------
ENVIRONMENTAL INVESTIGATION
1. Review. During the period commencing on the Effective Date and ending ten
(10) days prior to the Closing Date (the "Review Period"), and subject to the
confidentiality provisions of this Agreement, Freeport LNG shall permit COP and
its representatives to have reasonable access to: (i) the Facility Site; and
(ii) the offices, personnel, books and records, and properties of Freeport LNG,
and shall furnish or cause to be furnished to COP such financial and operating
and other data, in each case relating to the Facility Site, as are available and
as COP shall from time to time reasonably request, in order that COP may have a
full opportunity to undertake an environmental assessment of the Facility Site
(the "Review"); provided, that such Review shall be undertaken during normal
business hours and upon at least 24 hours advance notice; and provided, further,
that neither COP nor its representatives shall contact any of the employees,
customers or suppliers of Freeport LNG in connection with the Facility, whether
in person or by telephone mail or other means of communication, without the
specific prior written approval of Freeport LNG.
2. Tests. COP may, as part of the Review, and at its sole cost, risk and
expense, perform such tests as Freeport LNG and COP shall reasonably and
mutually agree in order to determine the condition and integrity of the Facility
Site; provided: (i) such tests shall be undertaken during normal business hours
and upon at least 24 hours advance notice so that Freeport LNG may have the
opportunity to be present and observe such tests; (ii) such tests shall be
conducted in accordance with industry standards by adequately insured, licensed
professionals or contractors selected by COP and approved by Freeport LNG (which
approval shall not be unreasonably delayed, conditioned or withheld), and in a
manner so as not to permanently or materially damage any of the Facility Site
(iii) if any damage is caused, COP shall immediately repair and restore the
damaged portions of the Facility Site to their former condition; (iv) notice of
proposed sampling events shall also be given by COP to the State of Texas; and
(v) soil, groundwater or debris from borehole drilling shall be promptly placed
in drums and removed from the Facility Site within 24 hours. COP SHALL BE
RESPONSIBLE FOR AND SHALL RELEASE, SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS
FREEPORT LNG, ITS SUBSIDIARIES, AFFILIATES, SUCCESSORS, ASSIGNS AND CONTRACTORS
AND THE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS OF EACH OF THEM, FROM AND
AGAINST ANY AND ALL DAMAGES, COSTS AND EXPENSES ARISING FROM OR RELATING TO THE
CONDUCT OF SUCH TESTS (OTHER THAN THE COSTS OF REMEDIATION OF ANY ADVERSE
CONDITION DISCOVERED), INCLUDING, WITHOUT LIMITATION, ANY PERSONAL INJURIES OR
PROPERTY DAMAGE, AND REGARDLESS WHETHER CAUSED BY THE JOINT OR CONTRIBUTORY
NEGLIGENCE OF FREEPORT LNG OR ANY INDEMNIFIED PARTIES, UNLESS CAUSED BY THE SOLE
NEGLIGENCE OR WILLFUL MISCONDUCT OF FREEPORT LNG. Freeport LNG shall have the
right to obtain split samples from any testing performed, and COP shall inform
Freeport LNG of its proposed method for analyzing samples in order that results
may be duplicated. All sampling locations, methods and protocols must be
submitted to Freeport LNG by COP at least two (2) days in advance of the
proposed sampling. Freeport LNG may limit or prohibit sampling in certain areas
or using certain techniques if the sampling method could result in adverse
impact to the remedial activities at the Facility Site. If Freeport LNG
exercises this right of limitation of sampling, it shall discuss with COP as
soon as possible alternative methods for obtaining the required information, and
shall make reasonable attempts to obtain such information and provide it to COP.
COP shall be responsible for compliance with all Environmental Laws relating to
the
gathering, handling, transport, testing and disposal of any samples obtained.
COP shall furnish Freeport LNG with a copy of each report (and all supporting
data) setting forth the results of any test performed by COP promptly after
receipt but in any event not later than the last day of the Review Period and
each such report (and all supporting data) shall be subject to the
confidentiality and non-disclosure obligations of the Nondisclosure Agreement.
COP shall not submit a copy of any report to any Governmental Authority unless
specifically required by applicable Law; and, if so required, COP shall
simultaneously provide to Freeport LNG a copy of any information submitted to
such Governmental Authority.
3. Right to Terminate. If the Review reveals that the Facility
Site is subject to any Material Adverse Environmental Condition or to any
Material Defect (as such terms are defined below), COP shall have the right to
terminate this Agreement prior to the Closing Date. In the event COP does not
terminate this Agreement and the Closing of the Agreement occurs, Freeport LNG
shall remediate such Material Adverse Environmental Condition and/or cure any
Material Defect, and COP acknowledges that all costs, expenses and fees
associated with such remediation shall be paid with the proceeds of the Loan.
For purposes of this Section, the word "remediate," as applied to a Material
Adverse Environmental Condition, shall mean only such remediation to the extent
required by applicable Environmental Laws.
4. Terms. For the purposes of this Exhibit: (i) the term "Material Adverse
Environmental Condition" shall mean (a) the existence of any of the following on
or under the Facility Site at levels that exceed applicable recognized standards
or are in violation of applicable Environmental Law: (1) contamination to
municipal well or drinking water, (2) chlorinated solvents, (3) radioactivity or
(4) MTBE, (b) evidence that the Facility Site has been used as a disposal site
(other than for dredge materials) at levels in violation of applicable
Environmental Law] or (c) any Hazardous Substance condition the estimated cost
of which to remediate is greater than *** Dollars (U.S. $***) in the aggregate;
and (ii) the term "Material Defect" shall mean a defect that has not been
previously disclosed to COP and which would not have been evident during a
walk-through inspection of the Facility Site, that would significantly impair
the operating functions, safety, or use of the Facility and which would cost
more than *** Dollars (U.S. $***) in the aggregate to cure.
