AMENDED AND RESTATED SHAREHOLDERS AGREEMENT

Exhibit 10.6

 

AMENDED AND RESTATED

SHAREHOLDERS AGREEMENT

By and between

Mercuria Energy Holding B.V.,

And

Cheniere LNG Services, Inc.

Being the Shareholders of

J & S Cheniere S.A., in Nyon, Switzerland

(the “Company”)

 

TABLE OF CONTENTS

 

 

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AMENDED AND RESTATED

SHAREHOLDERS AGREEMENT

This Amended and Restated SHAREHOLDERS AGREEMENT (“Agreement”) is entered into effective as of May 8, 2007 (the “ Effective Date ”) by and among:

 

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Mercuria Energy Holding B.V. , a Netherlands corporation, of Koningslaan 112, 3583 GV Utrecht, Netherlands (“ Mercuria ”); and

 

2.

Cheniere LNG Services, Inc. , a Delaware corporation, of 717 Texas Avenue, Suite 3100, Houston, Texas 77002 United States of America (“ Cheniere ”).

being the sole shareholders of:

J & S Cheniere S.A. , a Swiss corporation ( société anonyme ), or if applicable as set out below, a Swiss limited liability company ( SARL ), of Route de Saint-Cergue 9, P.O. Box 1216, 1260 Nyon, Switzerland (the “ Company ”).

WHEREAS , effective December 23, 2003, the Company, j&s Group S.A. and Cheniere LNG Services, Inc. entered into an original Shareholders Agreement with, and as the sole shareholders of, the Company;

WHEREAS, J&S Group S.A. (“J&S Group”) subsequently transferred, with the approval of Cheniere, its entire ownership in its shares of the Company Stock and its right, title and interests under the original Shareholder Agreement to J&S Energy Holding B.V. (“J&S Holding”), a subsidiary of J&S Group;

WHEREAS, J&S Energy Holding B.V. has been renamed Mercuria Energy Holding B.V.;

WHEREAS, Cheniere, as soon as practicable after the effectiveness of this Agreement, will transfer to Cheniere International Investments, B.V. (“ Cheniere BV” ), an affiliate of Cheniere, its entire ownership in its shares of the Company Stock and its right, title and interests hereunder, and Mercuria acknowledges and approves such assignment and transfer;

WHEREAS , upon effectiveness of this Agreement, the original Shareholders Agreement is terminated which is also acknowledged by the Company by way of executing this Agreement to that end;

WHEREAS , as the sole shareholders of the Company, Mercuria and Cheniere desire to change the legal form of the Company into a Swiss limited liability company ( SARL ) and to enter into this Agreement to amend and restate in full the original Shareholders Agreement;

NOW THEREFORE , in consideration of the mutual promises set forth herein and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged the parties agree as follows:

 

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Article 1

Definitions

Section 1.1 Definitions As used in this Agreement, the following terms shall have the following meanings:

“ Act ” means the Swiss Code of Obligations dated 30 March 1911, as it may be amended from time to time.

“ Affiliate ” (including the terms “Affiliated” and “Affiliated with”) means, with respect to any Person: (i) any other Person, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with such Person; (ii) any other Person with respect to which such Person possesses the right to exercise, directly or indirectly, through one or more intermediaries, forty percent (40%) or more of the voting rights attributable to the ownership interests of such other Person; or (iii) any other Person with respect to which such Person is entitled to receive, directly or indirectly, through one or more intermediaries, forty percent (40%) or more of all dividends or distributions, as applicable, paid by such Person. As used in the preceding sentence, the term “control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, directly or indirectly, through one or more intermediaries, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“ Agreement ” means this Amended and Restated Shareholders Agreement of the Company, as amended and in effect from time to time.

“ Articles of Incorporation ” means the articles of incorporation of the Company, as they may be amended from time to time.

"Board of Directors" has the meaning set forth in Section 2.3(c) hereof.

“ Business ” has the meaning set forth in Section 7.3(a)(i) hereof.

“ Business Day ” means any day other than a Saturday, a Sunday or other day on which commercial banks in the Canton of Vaud, Switzerland, Larnaca, Cyprus and Houston, Texas are authorized or required to close under applicable laws.

“ Buyout ” has the meaning set forth in Section 3.2(b) hereof.

“ Buyout Notice ” has the meaning set forth in Section 3.2(b) hereof.

“ Cash Available for Distribution ” means, as of any date, and in each instance as proposed by the Board of Directors and, if and to the extent required under the Act or the Articles of Incorporation, decided by the Shareholders' meeting of the Company in its conclusive and sole discretion, the amount equal to the remainder of: (i) all Company cash and cash equivalents; minus (ii) all amounts to be retained to fund expenses, capital investments and other expenditures then owing or committed to by the Company, and further; minus (iii) all amounts to be retained to fund further reserves that may be necessary or appropriate; provided, however, that the respective distribution and/or, as the case may be; repayment of Shareholder Loans complies with the relevant provisions of the Act, the Articles of Incorporation and this Agreement.

“ Change of Control ” means, with respect to Cheniere Energy, either one of the following: (i) the date on which the Incumbent Directors cease to constitute a majority of the Board of Directors of Cheniere

 

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Energy; or (ii) the date on which any Person acquires more than forty percent (40%) of the outstanding voting common stock of Cheniere Energy, other than with the consent of the Board of Directors of Cheniere Energy; or (iii) the date on which Cheniere Energy is merged or consolidated with another entity and, as a result of such merger or consolidation, fifty percent (50%) or less of the outstanding voting securities of the surviving or resulting entity is owned directly or indirectly in the aggregate by the holders of the outstanding voting securities of Cheniere Energy immediately prior to such merger or consolidation.

“ Cheniere BV ” has the meaning set forth in the recitals hereto.

“ Cheniere Energy ” means Cheniere Energy, Inc., a Delaware corporation, the ultimate parent of Cheniere.

“ Company ” means J & S Cheniere S.A., a Swiss corporation ( société anonyme ), or, if applicable, a Swiss limited liability company ( SARL ).

“ Contribution ” has the meaning set forth in Section 2.3(d) hereof.

“ 2006 Financial Statements ” has the meaning set forth in Section 7.3(a)(vi) hereof.

“ Effective Date ” has the meaning set forth in the preamble hereto.

“ Governmental Authority ” means each nation, state, kingdom, department, region, province, county, canton, municipality or other political subdivision, and any agency, authority, court, department, commission, board, bureau or instrumentality of any of them.

“ Incumbent Directors ” means Persons constituting the Board of Directors of Cheniere Energy on the Effective Date and any Person becoming a director of Cheniere Energy after the Effective Date whose election or nomination is (or was) approved in advance by a vote of at least a majority of the Incumbent Directors or whose nomination for election is (or was) approved in advance by a nominating committee composed of Incumbent Directors.

“ Initiating Shareholder ” has the meaning set forth in Section 3.2(b) hereof.

“ LNG Business Opportunities ” has the meaning set forth in Section 5.2(d) hereof.

“ Offer ” means a bona fide written cash purchase offer from a third-party purchaser who is not an Affiliate of the seller, which offer is payable fully in cash and not seller-financed and is otherwise in compliance with the requirements of Section 3.2(a).

“ Offering Shareholder ” has the meaning set forth in Section 3.2(a) hereof.

"Officers" has the meaning set forth in Section 5.1(b) hereof.

“ Person ” means any individual, general or limited partnership, corporation, limited liability company, executor, administrator or estate, association, trustee or trust or other entity.

“Pre-existing Loan ” means the principal amount of the loan from Mercuria or its predecessors to the Company outstanding immediately prior to the Effective Date (computed without interest), in an amount not to exceed USD $15.9 million and the repayment of which is waived pursuant to Section 2.1(a).

 

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“ Requirements of a Governmental Authority ” means any law, statute, common law obligation, ordinance, order, requirement, restriction, rule, writ, injunction, decree, demand or regulation of or imposed by a Governmental Authority.

“ Responding Shareholder ” has the meaning set forth in Section 3.2(b) hereof.

“ Response Notice ” has the meaning set forth in Section 3.2(b) hereof.

“ Sale Notice ” has the meaning set forth in Section 3.2(a) hereof.

“ SEC ” has the meaning set forth in Section 5.3(a)(i) hereof.

“ Shareholders ” means, collectively, Mercuria and Cheniere.

“ Shareholder Loans ” means shareholder loans, which might be subordinated from time to time, made to the Company by the Shareholders, the repayment terms of which shall be duly approved by the Board of Directors of the Company.

“ Shares ” means those shares of Stock held by Mercuria and Cheniere on the Effective Date.

“ Special Distributions ” has the meaning set forth in Section 3.2(b)(i) hereof.

“ Stock ” means all of the outstanding shares of capital stock of the Company, in the form of a SA or, if applicable, a SARL .

“ Transfer ” means any assignment, transfer or other disposition (whether voluntarily, involuntarily or by operation of law).

“ US GAAP ” has the meaning set forth in Section 5.3(a)(i) hereof.

Section 1.2 Currency

Subject to any express provisions in this Agreement to the contrary, all payments, advances and contributions of capital to be made by a Shareholder to or on behalf of the Company or any other Shareholder shall be made in lawful money of the United States of America, which shall at the time of payment be legal tender for payment of all debts and dues, public and private and in funds available for immediate credit to the recipient’s account. The books and records of the Company shall be maintained in Swiss Francs in accordance with Swiss law and regulations.

Article 2

Shareholding, Budgets, Contributions and Distributions

Section 2.1 Shareholding

(a) Mercuria shall ensure that, not later than and as of the Effective Date, the Company’s net equity shall be equal to at least CHF 100,000 (one hundred thousand Swiss Francs). To that end, Mercuria shall, in particular, release the Company from, and waive, (i) the Pre-existing Loan, (ii) any accrued interest on the Pre-existing Loan, and (iii) any other amounts otherwise advanced or loaned to the Company by Mercuria or its predecessors, in each case outstanding immediately prior to the Effective Date, in view of the financial reorganization of the Company.

 

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(b) Mercuria shall indemnify, and hold harmless, Cheniere if and to the extent that the net equity of the Company, as of the Effective Date, does not amount to CHF 100,000 (one hundred thousand Swiss Francs). In addition, taxes, if any, arising from the recapitalization measure(s) shall be borne by the Company and the requirements for CHF 100,000 of net equity shall apply to the Company after payment of any such taxes.

(c) The total number of Shares outstanding as of the Effective Date consists solely of one hundred (100) Shares of par value CHF 1,000 (one thousand Swiss Francs) each. With effect as of the Effective Date, Mercuria hereby agrees to transfer and convey to Cheniere, in exchange for CHF 29,000 (twenty nine thousand Swiss Francs), twenty-nine (29) Shares of the Company, free of all liens, claims and encumbrances, so that Mercuria will have sole ownership and control of fifty-one (51) Shares and Cheniere will have sole ownership and control of forty-nine (49) Shares. Mercuria agrees to execute such documents of transfer concurrent with the execution of this Agreement and take such additional actions as may be required to convey the afore-mentioned twenty nine (29) Shares of the Company to Cheniere with effect as of the Effective Date.

Section 2.2 Conversion into SARL

The Shareholders undertake to initiate and take, and cause their representatives on the Board of Directors to initiate and take, all actions as may be reasonably necessary to convert the Company into a SARL pursuant to the Swiss Merger Act as soon as practicable. At the request of Cheniere, the Shareholders agree to cause the Company to make certain elections under Section 301.77701-2 of the regulations to United States Internal Revenue Code of 1986, as amended.

Section 2.3 Budgets, Contributions and Capital

(a) Attached as Exhibit 2.3 is a copy of the budget for calendar year 2007 (which includes the advance by each Shareholder in the form of a Shareholder Loan in the amount of USD 25 million) which budget is hereby approved by the Shareholders. Subsequent annual budgets will be approved in accordance with the provisions of Section 5.2(c). If the Shareholders' approval of an annual budget is required in accordance with Section 5.2(c), within thirty (30) Business Days after such Shareholder approval, each Shareholder shall each make a Contribution to the Company, on a pro-rata basis, in accordance with Section 2.3(d) below

(b) Within seven (7) Business Days after the Effective Date, Mercuria and Cheniere shall take, and shall each cause their representatives on the Board of Directors to take, the following action:

(i) each of Cheniere and Mercuria shall advance to the Company, in the form of a Shareholder Loan, the amount of USD 25 million, in immediately available funds, for the sole purpose of funding the obligations relating to the time charters of the two K-Line LNG vessels. The combined USD 50 million Shareholder Loans will be used to collateralize the required letter of credit under the existing agreements with K-Line;

(ii) the Parties acknowledge and agree that their respective Shareholder Loans made pursuant to Clause (i) above shall be returned to Cheniere and Mercuria upon the satisfaction of all the obligations under the time charter agreements with K-Line. The provisions of Section 2.4 shall not apply to repayments of the Shareholder Loans under this Section 2.3(ii).

 

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The Shareholders agree to promptly enter into appropriate note or loan agreements, bearing market rates of interest, to reflect the Shareholder Loans contemplated by this Section 2,3(b),

(c) If any LNG Business Opportunity, duly approved by the Company board of directors (the “ Board of Directors ”), or, if applicable, the authorized Officers of the Company) requires additional Company capital in the form of cash contributions, shareholder loans, guaranties, letters of credit or any other agreed form of financing contribution (beyond that provided in an approved annual budget), such LNG Business Opportunities and the related additional capital requirement shall be subject to the prior unanimous written approval of the Shareholders prior to the commitment to such LNG Business Opportunities.

(d) The Shareholders shall fund their respective approved monetary obligations pursuant to Section 2.3 in the form of any of the following, as may be mutually agreed (the “ Contribution ”): (i) cash contributions to the Company; (ii) subordinated Shareholder Loans on terms that are no less favorable to the Company then could be obtained from third-party sources; (iii) guaranties; (iv) standby letters of credit or other collateral; or (v) a combination of any of the foregoing.

(e) Each Shareholder shall be responsible for a portion of each component of such Contribution or any approved budget (other than the Shareholder Loans referred to in Section 2.3(b) on a pro-rata basis, based on the number of Shares owned. As of the Effective Date, such pro-rata sharing of each approved Contribution or budget is forty nine percent (49%) Cheniere and fifty one percent (51%) Mercuria. In the event a Shareholder fails to make its Contribution in accordance with this Section 2.3(e), the provisions of Section 3.2(b) shall apply.

Section 2.4 Distributions

(a) Cheniere and Mercuria agree that distributions of Cash Available for Distribution shall be made by the Company in the following priority:

(i) Mercuria shall be entitled to first receive a special distribution of dividend payments and/or, in the event of a liquidation of the Company, a special distribution of any liquidation proceeds on the Stock, held by Mercuria and Cheniere, until Mercuria has received an amount equal to the Pre-existing Loan;

(ii) upon the satisfaction of the requirements of clause (i) above, Cheniere shall be entitled to receive a special distribution of dividend payments and/or, in the event of a liquidation of the Company, a special distribution of any liquidation proceeds on the Stock, held by Mercuria and Cheniere, until Cheniere has received an aggregate gross amount of USD 10 million; and

(iii) upon satisfaction of clause (ii) above, all further Cash Available for Distribution shall be distributed to the Shareholders on a pro-rata basis, based on the number of Shares owned.

(b) In order to implement the special distributions as set out in Section 2.4(a): Cheniere assigns herewith its entitlements to future dividend payments and/or, in the event of a liquidation of the Company, to the special distribution of any liquidation proceeds from the Company on the Stock, held by Cheniere, to Mercuria (and Mercuria accepts herewith such assignment) until Mercuria has received, together with payments on Stock, held by Mercuria, an amount equal to the Pre-existing Loan; and Mercuria assigns herewith, upon the satisfaction of the requirements of clause (i) of Section 2.4(a), its entitlements to future dividend payments and/or, in the event of a liquidation of the Company,

 

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to the special distribution of any liquidation proceeds from the Company on the Stock, held by Mercuria, to Cheniere (and Cheniere accepts herewith such assignment) until Cheniere has received, together with payments on Stock, held by Cheniere, an aggregate gross amount of USD 10 million. Upon written request, each Shareholder agrees, as further evidence and assurance, to execute an appropriate dividend assignment agreement and related documents as may be reasonably requested by the other Shareholder to implement the contractual entitlements described in this Section 2.4 and to reclaim any Swiss withholding taxes levied on the payment of dividends or, as the case may be, of liquidation proceeds.

Article 3

Restrictions on Transfers, Issuances, Repurchases or Other Changes in the Stock

Section 3.1 General Restrictions

(a) No Shareholder may Transfer or otherwise directly or indirectly dispose of any Stock or any interest therein except pursuant to an Offer, and in the case of a Transfer pursuant to an Offer, such Transfer shall only be permitted after the Offering Shareholder has complied with all of the provisions of this Article 3, including, without limitation, making an offer to sell such Stock to the other Shareholder. For the avoidance of doubt, no partial Transfers of Shares shall be allowed.

(b) No Shareholder may directly or indirectly pledge, mortgage, hypothecate or otherwise encumber any of its Stock.

(c) The Company may not issue, repurchase, subdivide, combine or otherwise change in any manner the presently outstanding Stock of the Company without the unanimous written consent of the holders of all of the Stock.

(d) Subject to the provisions of Section 3.2, none of the Shareholders may Transfer or otherwise directly or indirectly dispose of any Stock unless the transferee: (i) first enters into a deed of adherence to be bound by all terms and conditions of this Agreement; and (ii) upon the closing of the Transfer of the Stock, steps into all Shareholder Loans, guaranties, standby letters of credit or other collateral granted to the Company for a portion equal to the number of Shares transferred divided by the total number of Shares outstanding.

(e) Mercuria hereby agrees to approve the Transfer of all of the Shares of the Company held by Cheniere to Cheniere BV, which Shares shall be held subject to the terms of this Agreement, and agrees to recognize Cheniere BV as Cheniere’s successor in interest for all purposes hereunder, without any further compliance with other provisions of this Article 3. All references to Cheniere in this Agreement shall refer to Cheniere BV from and after such transfer.

Section 3.2 Option to Purchase Shares

(a) If a Shareholder desires to sell all, but not less than all, of its Shares pursuant to an Offer (the “ Offering Shareholder ”), then the Offering Shareholder shall provide written notice (the “ Sale Notice ”) including all of the terms and conditions of such Offer (which must be to a single purchaser for an all cash purchase price payable in full at the time of purchase and under which the purchaser shall become a successor party to this Agreement in replacement of the Offering Shareholder at the time of purchase) to the other Shareholder, and the other Shareholder shall have the right and option (but no obligation) to purchase such Shares on the same terms and conditions as set forth in the Offer (subject, as to timing, to the further provisions of this Section 3.2). The other Shareholder’s option hereunder shall expire on the sixtieth (60th) day after receiving the Sale Notice from the Offering

 

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Shareholder. Such option shall be considered as exercised when notice in writing of exercise has been delivered addressed to the Offering Shareholder in accordance with Section 8.1, prior to its expiration. Upon the closing of the sale of the Shares to the other Shareholder or to the party that made the Offer, the purchaser shall deliver the purchase price to the Offering Shareholder in cash in accordance with the provisions of the Offer, and the Offering Shareholder shall deliver the certificate(s) representing the Stock to the purchaser, duly endorsed in blank for Transfer or accompanied by an appropriate stock power, or, if applicable, shall Transfer the stock by public deed or, as the case may be, by a deed in writing to the purchaser, together with all documents necessary for an effective Transfer and shall have affixed to such certificate, or, if applicable, such deed, all required stock transfer stamps, if any, or deposit with the Company at that time sufficient funds to pay for such stamps. The shares of Stock so delivered shall be free and clear of any and all liens, pledges, charges, security interests and other encumbrances other than as imposed by this Agreement. Upon the closing of a sale under this Section 3.2 of the Shares theretofore held by a Shareholder, this Agreement shall apply to the purchaser as successor to and in replacement of the Offering Shareholder fully as if the purchaser had been an original signatory hereto, and all obligations of the Offering Shareholder under this Agreement shall terminate.

(b) If a Shareholder (the “ Initiating Shareholder ”) desires, in accordance with the provisions of Sections 2.3(e), 3.2(c), or 5.1(a), to require either a sale of all of its Shares to the other Shareholder (the “ Responding Shareholder ”) or a purchase of all of the Responding Shareholder’s Shares (in either case, a “ Buyout ”), the Initiating Shareholder shall deliver to the Responding Shareholder in accordance with Section 8.1 a written notice (a “ Buyout Notice ”) setting forth in reasonable detail:

(i) the Initiating Shareholder’s evaluation of the current fair market value of the Stock, and the resulting current fair market value of each Share and the basis for such evaluation, excluding for purposes of this evaluation any special distributions provided for under clauses (i) and (ii) of Section 2.4 (“ Special Distributions ”); and

(ii) the Initiating Shareholder’s offer and commitment to sell its Shares to the Responding Shareholder or to purchase the Shares of the Responding Shareholder, as provided for in this Section 3.2(b).

Within sixty (60) days after receipt of a Buyout Notice, the Responding Shareholder must elect by delivering written notice (a “ Response Notice ”) to the Initiating Shareholder in accordance with Section 8.1 either (x) to sell its Shares to the Initiating Shareholder for the fair market value thereof set forth in the Buyout Notice or (y) to purchase the Shares of the Initiating Shareholder for the fair market value thereof set forth in the Buyout Notice. In the event that the Responding Shareholder fails to deliver timely a proper Response Notice, the Responding Shareholder shall be deemed to have elected to sell its Shares and to have accepted and agreed to the evaluation thereof by the Initiating Shareholder as set forth in the Buyout Notice. The purchase and sale of Shares, as selected by the Responding Shareholder in the Response Notice and at the price set forth by the Initiating Shareholder in the Buyout Notice, shall be closed within thirty (30) days after delivery of the Response Notice. Upon the closing of the sale of the Shares to the other Shareholder, whether under this Section 3.2(b) or Article 4, the purchaser shall deliver the purchase price in cash, and the seller shall deliver the certificate(s) representing the Shares to the purchaser, duly endorsed in blank for Transfer or accompanied by an appropriate stock power or, if applicable, shall transfer the Shares by public deed or, as the case may be, by a deed in writing to the purchaser, together with all documents necessary for an effective Transfer and shall have affixed to such certificate all required stock transfer stamps, if any, or deposit with the Company at that time sufficient funds to pay for such stamps. The Shares so delivered shall be free and clear of any and all liens, pledges, charges, security interests and other encumbrances.

 

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(c) Notwithstanding anything to the contrary contained herein, either Shareholder may initiate a Buyout and may effect a Buyout at any time in accordance with the provisions of Section 3.2(b). In the event both Shareholders initiate a Buyout, the Buyout of the Shareholder who first serves its Buyout Notice on the other shall prevail and control, as measured by the date and time of receipt of such Notice in accordance with Section 8.1.

(d) Except in the case of a sale upon a Change of Control in accordance with Article 4, if any of the Special Distributions provided for in clauses (i), and (ii) of Section 2.4 have not been completed, the remaining balance of the Special Distribution of the selling Shareholder shall remain as a liability of the Company and shall be repaid to the selling Shareholder out of the first cash distributions of the Company until the amount of the applicable Special Distribution has been fully settled by the Company. Each Party hereto acknowledges and agrees that it will be a condition of the purchase and sale of any shares of Stock under any provision of this Section 3.2 and Article 4 that the purchaser (which may be the other Shareholder) shall obtain a release and shall indemnify the selling Shareholder from any and all liabilities arising from any and all shareholder loans, guaranties, letters of credit or any other form of financing previously put in place by the selling Shareholder to collateralize or secure any obligations of the Company. Upon the occurrence of a Change of Control, the provisions of Article 4 shall apply.

Section 3.3 Attempted Transfers Void

Except as provided in this Article 3 or pursuant to Article 4, no Transfer or attempted Transfer of the Shares of any Shareholder or Transfer of any interest in the Shares, whether by absolute or by collateral assignment or otherwise, whether by gift or for valuable consideration, and no matter how conditioned, shall in any manner be effective or binding upon the other Shareholders or the Company, unless made in full compliance with the terms hereof or with the express written consent of all parties hereto.

Section 3.4 After-Acquired Shares

Whenever any Shareholder who is a party to this Agreement acquires additional Shares, such Shares so acquired shall be subject to all of the terms and provisions of this Agreement.

Article 4

Change of Control

Section 4.1 Change of Control of Cheniere

Within five (5) Business Days after a Change of Control that occurs while Cheniere and Mercuria continue to hold their respective forty nine (49) Shares and fifty one (51) Shares, Cheniere shall send a notice (the “ Informational Notice ”) to Mercuria setting forth a statement that a Change of Control has occurred. Mercuria shall thereafter have the right, but not the obligation, to purchase, in cash, the outstanding forty nine (49) Shares held by Cheniere at a price equal to the total contributions made to the Company by Cheniere, whether in the form of loans or cash advances, plus the portion of the USD 10 million Special Distribution remaining unpaid to Cheniere under this Agreement and further adjusted by Cheniere’s share of the undistributed amount of profits or losses incurred by the Company to date. The right to purchase the outstanding Shares held by Cheniere shall terminate ninety (90) days after the delivery of the Information Notice.

 

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In absence of such Information Notice, Mercuria shall be entitled to act as if such notice would have been received and shall have the right to deliver a Buyout Notice to Cheniere within ninety (90) Business Days following any public announcement under applicable SEC regulations.

Article 5

Company Management

Section 5.1 Board of Directors

(a) In accordance with Swiss laws and regulations, the holder of the fifty-one (51) Shares held by Mercuria as of the Effective Date shall have the right to appoint three (3) members to the Board of Directors of the Company, and the holder of the forty-nine (49) Shares held by Cheniere as of the Effective Date shall have the right to appoint three (3) members to the Board of Directors of the Company. All resolutions, appointments, decisions and other acts permitted or required to be effected by the Board of Directors shall be effective only if approved by: (a) unanimous affirmative vote of all six (6) members at a meeting duly convened; or (b) unanimous written consent of all six (6) members. In the absence of such unanimous approval, no act of the Board of Directors shall be effective. In the event that a stalemate occurs as to any matter proposed to be acted upon by the Board of Directors, the Shareholders may cause such stalemate to be resolved to their mutual accord by their appointed Directors, or else either Shareholder may initiate a Buyout proceeding in accordance with Section 3.2(b). All documents, contracts, commitments, liabilities and statements are not valid unless signed by two (2) Directors one of whom has been appointed by Mercuria and one of whom has been appointed by Cheniere. The Directors will elect one of themselves to serve as the Chairman of the Board of Directors who will chair all of the Board of Directors meetings and the Shareholders meetings.

(b) The Board of Directors shall be responsible for and have sole authority over the following business, decisions and acts of the Company:

(i) appointment of the officers, or if applicable, the managers (the "Officers" ) of the Company and delegations (or changes to delegations) of authority to the various Officers of the Company (each of Mercuria and Cheniere shall have the right but not the obligation to propose that employees of their respective companies be considered for secondment to the Company);

(ii) assignment and approval of risk levels and spending limits of the Company’s officers, employees and agents;

(iii) submission to Shareholders of LNG Business Opportunities;

(iv) proposal to the Shareholders of the amount, if any, of Cash Available for Distribution; and

(v) all other decisions, commitments, expenditures, contracts and business, decisions and acts of the Company other than: (x) those that are within the authorities of Officers of the Company that have already been expressly delegated by the Board of Directors; and (y) those that are immaterial in amount or significance and are approved by an appropriate Officer of the Company.

(c) Any other provisions of this Agreement to the contrary notwithstanding, in the event that any transaction, contract or other relationship is to be entered into between the Company, on the one hand, and a Shareholder or an Affiliate of a Shareholder, on the other

 

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hand, such transaction, contract or other relationship shall not be allowed, authorized or entered into until and unless unanimously approved by the Directors of the Company appointed by the Shareholder that is not (and whose Affiliates are not) proposing to enter into such transaction, contract or other relationship with the Company.

(d) Meetings of the Board of Directors shall be held at the offices of the Company or at such other place as is designated in the call of the meeting of the Board of Directors, provided that a Director may attend by telephone conference or similar communications equipment, in which case the physical presence of such Director is not necessary.

(e) Meetings of the Board of Directors may be called at any time by the Chairman upon the request of any Director for the purpose of taking action upon any matter requiring the vote or authority of the Board of Directors as provided in this Agreement or upon any other matter as to which such vote or authority is deemed by any Director to be necessary or desirable or to be required by applicable law. In any event, regular meetings of the Board of Directors shall be convened at least quarterly in accordance with a schedule fixed in advance by the Board of Directors.

(f) All notices of meetings of the Board of Directors shall be sent or otherwise given to each Director in accordance with Section 5.1(g) not less than five (5) Business Days, unless waived, before the date of the meeting. The notice shall specify: (i) the place, date, and hour of the meeting; and (ii) the general nature of the business to be transacted.

(g) Notice of any meeting of the Board of Directors shall be given personally or by telephone to each Director or sent by telecopy, electronic mail (or similar electronic means), or by an internationally recognized overnight courier, charges prepaid, addressed to the Director at the address of that Director or given by the Director for the purpose of notice. Notice shall be deemed to have been given at the time when delivered.

(h) At any meeting of the Directors, the presence of all six (6) Directors, in person, by telephone conference or similar communication equipment shall constitute a quorum for all purposes.

(i) Any action that may be taken at any meeting of the Board of Directors may be taken without a meeting if a consent in writing setting forth the action so taken is signed by all Directors. Any such written consent may be executed and given by facsimile or similar electronic means.

(j) The Shareholders agree that the Chairman of the Board of Directors shall not have a casting vote in the event of a tie vote of the Directors. The Company, as soon as practicable, shall hold an extraordinary Shareholders meeting to amend its articles of incorporation accordingly.

Section 5.2 Officers and Employees

(a) The Board of Directors may, from time to time, designate one or more Persons to be Officers of the Company. Any Officer so designated shall have such authority and perform such duties as the Board of Directors may, from time to time, delegate to such Officer.

(b) Subject to the approval rights described herein, the business and affairs of the Company shall be managed exclusively under the direction of the Board of Directors, or by or under the direction of one or more Officers pursuant to expressly delegated authority from the Board of Directors of the Company. The power to act for or to bind the Company shall be vested exclusively in the Board of

 

13

Directors of the Company, subject to the Board of Directors’ authority to delegate powers and duties to Officers as set forth herein. Subject to the foregoing and to the extent so expressly delegated by the Board of Directors, the Officers shall have the power and authority to execute and deliver contracts, instruments, filings, notices, certificates, and other documents of whatsoever nature on behalf of the Company. The Officers of the Company shall have power and authority, as expressly delegated to them by the Board of Directors of the Company, to cause the Company to hire employees, except Officers appointed by the Board of Directors, and to cause the Company to pay such employees in their reasonable discretion.

(c) Prior to October 1 of each year during the term of this Agreement, the Officers of the Company shall prepare and submit to the Board of Directors for approval an annual budget for the following year. Notwithstanding anything to the contrary herein: if (i) the proposed annual budget as approved by the Board of Directors; or (ii) any proposed supplement to any annual budget or other Company expenditure authorization, requires, in either case, additional funding or any type of support from the Shareholders, such budget, supplement or expenditure authorization shall require the prior approval of the Shareholders.

(d) The Officers to whom such power and authority is expressly delegated by the Board of Directors shall have discretion to evaluate potential LNG related business opportunities for the Company (“ LNG Business Opportunities ”), including:

(i) chartering and operating LNG vessels;

(ii) obtaining capacity access to regasification terminals and to gas storage facility terminals;

(iii) subject to the prior written approval by the Shareholders of a risk management program and agreed monetary or liability limitations, trading and marketing of LNG and natural gas (including the related hedging of LNG and natural gas) in accordance with such program and limitations; and

(iv) entering into contracts pertinent to and in furtherance of the foregoing.

Upon such Officers’ selection of appropriate LNG Business Opportunities, they shall each time present in writing such LNG Business Opportunities to the Board of Directors for consideration as to whether the Company approves and determines to provide the financing necessary to undertake, perform and complete such LNG Business Opportunities, with such financing and/or capital Contribution decision being determined and unanimously agreed by all Shareholders in accordance with Section 2.3(c). Upon the written decision to finance a proposed LNG Business Opportunities, the Shareholders shall be obligated to provide and, in accordance with Section 2.3(c), continue to provide the financing therefore as so approved .

(e) The initial Officers their respective delegated authorities and approved risk levels and spending limits and the initially approved LNG Business Opportunities and related financial and other authorized commitments, if any, are set forth on Exhibit 5.2(e) attached to and included as part of this Agreement.

Section 5.3 Accounting and Compliance

(a) The Shareholders shall cause the Company to properly prepare and furnish to Cheniere and/or Mercuria, as applicable, at the Company’s expense:

(i) not less than fifteen (15) days prior to the date by which Cheniere Energy must file audited annual financial statements with the United States Securities and Exchange Commission (“ SEC ”), audited annual financial statements of the Company prepared in accordance with United States generally accepted accounting principles and applicable requirements of the SEC (“ US GAAP ”), and, if requested, separate audited statements prepared in accordance with International Financial Reporting Standards (“IFRS”), audited by an independent accounting firm registered with the Public Accounting Oversight Board and approved by the Shareholders;

 

14

(ii) not later than fifteen (15) days prior to the date by which Cheniere Energy must file unaudited interim financial statements with the SEC, unaudited interim financial statements of the Company prepared in accordance with US GAAP and, if requested, separate financial statements prepared in accordance with IFRS;

(iii) not later than sixty (60) days after the Effective Date which is fifteen (15) days prior to the date by which Cheniere Energy must file audited historical financial statements and unaudited historical financial statements of the Company prepared in accordance with US GAAP, if applicable, as a result of any purchase by Cheniere of Shares of Company Stock (including, if applicable, the purchase of twenty-nine (29) Shares as of the Effective Date), such audited and unaudited historical financial statements of the Company prepared in accordance with US GAAP; and

(iv) not less than fifteen (15) days prior to the date by which Cheniere Energy must file any report or disclosure about the same with the SEC or other governmental authorities, any other information about the Company, its business, contracts, employees, liquidity, results of operations, and other matters required to be reported or disclosed by Cheniere to the SEC or other governmental authorities.

Cheniere will notify the Company, as soon as practicable, of the filing dates specified in clauses (i) through (iv) above.

(b) The Shareholders shall cause the Company, at its expense, to assist and cooperate with the Shareholders in complying with their respective applicable securities and other laws and regulations of the United States and elsewhere that may be applicable by reason of each Shareholder’s relationship with the Company, including but not limited to the Sarbanes-Oxley Act and the Foreign Corrupt Practices Act and the Internal Revenue Code of 1986, as amended, including the international boycott provisions therein.

(c) The Shareholders shall cause the Company to maintain its books, records and accounts in accordance with applicable Swiss law and regulations, in a format that will permit audit. It shall maintain its fiscal year as the calendar year. Each Shareholder shall have the right, at its expense, to audit the books and records of the Company, upon prior written notice to the Company and the other Shareholder, and the Company shall provide assistance, support and adequate work space to the auditors sent to perform any such audit.

(d) The Shareholders shall cause the Company, at its expense, to prepare (or have prepared) and timely file all required filings with the Swiss regulatory, governmental and taxing authorities and shall also assist and cooperate with the Shareholders, the Mercuria Group and Cheniere Energy, Inc. in complying with their respective tax filings as may be required in other relevant taxing jurisdictions, including the Netherlands, Cyprus and the United States of America.

 

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Article 6

Shareholder’s Company Meetings

Section 6.1 Place of Meetings

Meetings of Shareholders shall be held at the offices of the Company or at such other place as is designated by the Board of Directors.

Section 6.2 Call of Meetings

Meetings of Shareholders may be called at any time by the Chairman of the Board of Directors for the purpose of taking action upon any matter requiring the vote or authority of the Shareholders as provided in this Agreement or upon any other matter as to which such vote or authority is deemed by any Shareholder, or by the Board of Directors, to be necessary or desirable or to be required by applicable law. The Chairman of the Board of Directors shall call a meeting of the Shareholders upon the request of any Shareholder. In any event, meetings of the Shareholders shall not be more frequent than once per month.

Section 6.3 Notice of Meetings of Shareholders

All notices of meetings of Shareholders shall be sent to each Shareholder in accordance with the Act and Clause 11 of the Articles of Incorporation not less than twenty (20) days or more than ninety (90) days before the date of the meeting. The notice shall specify: (i) the place, date, and hour of the meeting; and (ii) the agenda and the proposals of the Board of Directors as well as those, if any, of the shareholders who requested the convening of the meeting or the inclusion of an item on the agenda. The notice of an ordinary general meeting of shareholders shall also mention that the management report and the auditor’s report are available for the shareholders at the registered office.

Section 6.4 Manner of Giving Notice

Notice of any meeting of Shareholders shall be sent to each Shareholder by registered mail or courier service.

Section 6.5 Quorum; Voting

At any meeting of the Shareholders, the presence of all Shareholders, in person or by proxy, shall constitute a quorum for all purposes.

Section 6.6 Proxies

Each Shareholder entitled to vote or act on any matter at a meeting of Shareholders shall have the right to do so by proxy, provided that an instrument authorizing such a proxy to act is executed by the Shareholder in accordance with articles 689b to 690 of the Act.

Article 7

Representations of the Shareholders

Section 7.1 Investment Intent

Each Shareholder hereby represents and warrants to the Company and the other Shareholder that such Shareholder has acquired its shares of Stock for such Shareholder’s own account, for investment

 

16

purposes only and not with a view to the distribution or resale thereof, in whole or in part, and agrees that it will not Transfer, or offer to Transfer, all or any portion of its Stock in any manner that would violate, or cause the Company to violate, this Agreement or any applicable securities laws.

Section 7.2 Unregistered Stock

Each Shareholder hereby acknowledges that such Shareholder is aware that the Stock (and the offering, issuance and sale thereof to such Shareholder) has not been registered under any applicable securities laws. Each Shareholder further acknowledges that the Company will not, and has no obligation to, recognize any Transfer of all or any part of Stock to any Person except in accordance with this Agreement.

Section 7.3 Representations and Warranties

(a) Mercuria represents and warrants to Cheniere as of the Effective Date (except as indicated otherwise) that the following is complete, correct and not misleading:

(i) The Company is a corporation duly incorporated and validly existing under the laws of Switzerland, with the power and authority (corporate and other) to own its properties and conduct its business as currently conducted and intended to be conducted (such business hereinafter the “ Business ”).

(ii) Mercuria is duly authorized to enter into and perform its obligations under or in connection with this Agreement.

(iii) The entering into this Agreement and the performance thereof (a) do not breach or affect either wholly or partly the conditions of any of the contracts entered into by the Company or of the contracts to which the Company is subject to; (b) do not lead to the creation of any kind of rights of third parties or of encumbrances upon assets of the Company; (c) do not violate any court judgments or temporary restraining orders issued against Mercuria or the Company; and (d) do not lead to automatic termination of any contracts whatsoever entered into by the Company and do not lead to termination rights of the respective other party to the contract.

(iv) The obligations of Mercuria according to this Agreement are valid, binding and enforceable against it.

(v) There are no supplementary or side agreements between Mercuria and the Company except for this Agreement. Other than disclosed to the other party in writing, there are no intercompany or commercial agreements or similar agreements with, or with respect to, the Company, voting trusts, proxies, sub-participation agreements, silent participation agreements or other agreements or understandings with respect to the voting of any capital stock of, or any shares or interest in, the Company.

(vi) The audited financial statements of the Company for the year ending 31 December 2006 including the notes thereto (hereinafter referred to as the "2006 Financial Statements", attached as Exhibit 7.3(a)(vi)) , have been established in compliance with legal provisions on accounting and with generally accepted accounting principles applied on a consistent basis, and such accounts truly reflect the assets, the equity and reserves, the financial condition and the profitability of the Company as of the date of the accounts. As of 31 December 2006, there have been no material claims or contingent claims of any kind (including

 

17

tax claims) against the Company which would have had to be shown, according to legal provisions and generally accepted accounting principles applied on a consistent basis, in the 2006 Financial Statements but in fact have not been shown in such accounts. Since 31 December 2006, the Business has been carried on in the orderly manner consistent with normal business operation consistent with past practice.

(vii) No governmental, administrative, regulatory, court, arbitration, or other proceedings are pending or, to the best of the Company's knowledge after reasonable and careful inquiry, threatened against the Company.

(viii) The Company has not any outstanding claims, liabilities or indebtedness, contingent or otherwise, whether of a contractual nature or for third party obligations, other than as set forth in the 2006 Financial Statements or referred to herein, other than liabilities of less than CHF 100,000, in the aggregate, incurred subsequent to the 2006 Financial Statements in the ordinary course of business consistent with past practice.

(ix) Exhibit 7.3(ix) attached hereto contains an accurate and complete list of the Company's entire agreements of a value exceeding CHF 100,000 and of all of the Company's agreements with its Shareholders as well as related person therewith, or the members of the Board of Directors. All such agreements are in full force and effect, and the Company is not in material or potential breach of any such agreement. The Company is not a party to any oral or written contract, arrangement, understanding, guaranty, commitment (whether in respect of capital expenditure or otherwise), which involves or could involve, singly or in the aggregate, an obligations or liabilities of CHF 100,000 or more. The Company has not entered into any agreement which requires or may require, or confers any right to require, the sale (whether for cash or otherwise) or the transfer by it of any asset or any securities of the Company. The Company is not a party to any consortium, partnership, un-incorporated association or profit sharing arrangement or agreement. The Company is not in default of any material agreement or arrangement to which it is a party.

(x) The Company has terminated all direct and indirect financial transactions, arrangements or relationships with Mr. Karim Souki, including, without limitation, that certain Consultancy Agreement dated March 1, 2004 between the Company and Investors Administration Services Limited.

(xi) The Company has filed all required Swiss Federal and Cantonal tax returns and those returns properly reflect the income or operating losses generated by the Company. The Company has operated its business in compliance with the terms of the Swiss Tax Ruling received from the Canton de Vaud on November 4, 2004.

(b) Cheniere represents and warrants to Mercuria as of the Effective Date (except as indicated otherwise) that the following is complete, correct and not misleading:

(i) Cheniere is duly authorized to enter into and perform its obligations under or in connection with this Agreement.

(ii) The obligations of Cheniere according to this Agreement are valid, binding and enforceable against it.

(iii) The entering into this Agreement and the performance thereof do not violate any court judgments or temporary restraining orders issued against Cheniere.

 

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(iv) There are no supplementary or side agreements between Cheniere and the Company except for this Agreement. Other than disclosed to the other party in writing, there are no intercompany or commercial agreements or similar agreements with, or with respect to, the Company, voting trusts, proxies, sub-participation agreements, silent participation agreements or other agreements or understandings with respect to the voting of any capital stock of, or any shares or interest in, the Company.

(c) If and to the extent that any representation or warranty set forth in Section 7.3 is breached, incorrect or incomplete in a material respect, the non-complying Party shall immediately, or at the latest within one month after request to this effect, remedy such situation. If a complete remedy is not possible or is not achieved within thirty (30) days of such request, the complying Party shall be compensated by the non-complying Party in cash for the damage suffered due to such breach. The damages shall be the difference in value of the Company’s assets between the represented and/or warranted status and the actual status in the Company or, if such a difference cannot reasonably be determined, the estimated amount of the costs incurred by the Company for bringing about the represented and/or warranted status.

(d) Claims according to this Section 7.3 are to be notified within two (2) months after the underlying facts become known to and fully appreciated by the party. The duty to examine and notify immediately (article 201 of the Act) shall not apply.

Article 8

Miscellaneous Provisions

Section 8.1 Notices

All notices provided for or permitted to be given pursuant to this Agreement must be in writing and shall be sent to or made at the addresses set forth on the signature pages hereto. Any notice given hereunder shall be effective: (a) if given by mail, ten (10) Business Days after depositing the same in the mail addressed to the party to be notified, postpaid and certified with return receipt requested; (b) if sent by express mail or overnight delivery, two (2) Business Days after such notice is sent, postage prepaid; (c) if sent by hand courier service, the day that such notice is delivered; (d) if sent by facsimile, prepaid telegram or telex, at the time that such communication is transmitted and the appropriate confirmation is received by the sender; or (e) if given by other means, when such notice is actually delivered to such party. By giving written notice thereof, each Shareholder shall have the right from time to time to change its address pursuant hereto.

Section 8.2 Assistance of the Company by the Shareholders

(a) The Shareholders acknowledge that the Company and Cheniere Marketing, Inc. (“Cheniere Marketing”): (i) are currently negotiating and propose to enter into an LNG sale and purchase agreement (substantially in the form of Exhibit 8.2(a) with such changes as may be mutually agreed) which will provide for the sale by the Company of up to approximately 200,000 mmbtu/d of LNG to Cheniere Marketing for delivery at the Sabine Pass LNG (such agreement as finally executed, the “SPA”); and (ii) propose to enter a new LNG sale and purchase agreement, substantially similar to the final form of the SPA, for the sale by the Company of up to an additional 200,000 mmbtu/d of LNG to Cheniere Marketing for delivery at the Cheniere’s Corpus Christi LNG receiving terminal. The final form of each SPA will only cover an annual quantity of 78,475,000 mmbtu (the “annual contract quantity”), and will contain a provision that in the event of the sale by either Shareholder of its entire interest in the Company (other than a sale contemplated under Section 4.1 of this Agreement), the Company under each SPA will automatically become contractually committed, on an annual basis, to

 

19

deliver to Cheniere Marketing the annual contract quantity (approximately 200,000 mmbtu/d) of LNG with delivered quantities priced in accordance with the existing pricing provisions contained Exhibit 8.2(a). The respective obligations of the above parties to enter into any of the agreements contemplated by this Section 8.2(a) shall terminate and be without further force and effect: (1) sixty (60) days after the Effective Date, with regard to the LNG sale and purchase agreement contemplated by clause (i) above, and (2), with regard to the agreement contemplated by clause (ii) above, sixty (60) days after receipt of written notification from Cheniere that the Corpus Christi LNG receiving terminal has been approved by the Federal Energy Regulatory Commission and all other approvals and permits have been received which are necessary for the commencement of the construction of such terminal.

(b) Upon execution of any of the agreements contemplated by Section 8.2(a) above, each Shareholder agrees that it and its majority owned affiliates will endeavor in good faith and use reasonable commercial efforts to assist and cooperate with the Company's efforts to obtain sufficient FOB cargoes of LNG to deliver approximately 200,000 mmbtu/d or 400,000 mmbtu/d, as applicable, of LNG to Cheniere Marketing in accordance with the agreements entered into pursuant to Section 8.2(a) above. The foregoing shall not limit Cheniere Marketing’s ability to fully utilize its reserved regasification capacity at any of Cheniere Energy’s applicable LNG receiving terminals in the event that the Company fails to schedule and deliver, on a ratable basis, in accordance with the agreements entered into pursuant to Section 8.2(a) above. The undertaking set forth Section 8.2(a) shall remain in effect during the up-to-10-year terms of (1) the 145,000 cm-capacity LNG vessel chartered by the Company in August 2004 from Kawasaki Kisen Kaisha, Ltd. ("K-Line") and (2) the 154,200 cm-capacity LNG vessel chartered by the Company in August 2004 from a joint venture company established by K-Line, Shoei Kisen Kaisha, Ltd. and others. For avoidance of doubt, it is expressly confirmed that the agreements of each Shareholder in the preceding provisions of this Section 8.2 shall not, and shall not be construed to, require any Shareholder, without its prior consent in accordance with this Agreement (which for this purpose includes an approved budget), to make any further commitment of capital or to incur any actual or contingent liability, cost, expenditure or other obligation of any kind for the benefit of the Company or any third parties, including suppliers, customers, and LNG vessel charter and other contractual counterparties. In the event that either Party sells its entire interest in the Company the foregoing provisions of this Section 8.2(b) shall terminate.

(c) Cheniere (on behalf of Cheniere LNG, Inc.), the Company and Mercuria agree that the provisions in Section 8.2(a) above supersede and replace that certain Option Agreement dated December 23, 2003 between Cheniere LNG, Inc. and the Company, which is hereby terminated, as of the Effective Date.

Section 8.3 Governing Law

This Agreement and the obligations of the Shareholder hereunder shall be construed and enforced in accordance with the laws of Switzerland, including the Act, excluding any conflicts of law rule or principle which might refer such construction to the laws of another jurisdiction.

Section 8.4 Entirety; Amendments

This Agreement constitutes the entire agreement of the Shareholders regarding the subject matter hereof and supersedes the prior shareholders agreement effective prior to the Effective Date. Except as otherwise provided herein, no amendments to this Agreement shall be binding upon any Shareholder unless set forth in a document duly executed by both Shareholders.

 

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Section 8.5 Waiver

No consent or waiver, express or implied, by any Shareholder of any breach or default by the other Shareholder in the performance by the other Shareholder of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such other Shareholder of the same or any other obligation hereunder. Failure on the part of any Shareholder to complain of any act or to declare any other Shareholder or the Company in default, irrespective of how long such failure continues, shall not constitute a waiver of rights hereunder.

Section 8.6 Severability

If any provision of this Agreement or the application thereof to any Person or circumstances shall be invalid or unenforceable to any extent, and such invalidity or unenforceability does not destroy the basis of the bargain between the parties, then the remainder of this Agreement and the application of such provisions to other Persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

Section 8.7 Captions, References

Article and Section headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. Whenever the terms “hereof”, “hereby”, “herein”, or words of similar import are used in this Agreement, they shall be construed as referring to this Agreement in its entirety rather than to a particular Section or provision, unless the context specifically indicates to the contrary. Whenever the words “include” and “including” are used herein, they shall be construed to mean “including, without limitation”. Any reference to a particular “Article” or a “Section” shall be construed as referring to the indicated article or Section of this Agreement unless the context indicates to the contrary.

Section 8.8 Jurisdiction

Each of Mercuria and Cheniere hereby irrevocably submits to the exclusive jurisdiction of the Commercial Court of the Canton of Zurich ( Handelsgericht des Kantons Zürich ), with reserve of appeals to the Swiss Federal Supreme Court ( Schweizerisches Bundesgericht ), to settle any disputes which may arise out of or in connection with this Agreement or the transactions contemplated hereby.

Section 8.9 Binding Effect; Assignment

All the terms of this Agreement shall be binding on and inure to the benefit of the parties, their successors-in-interest and permitted assigns. Rights under this Agreement may be assigned only in conjunction with a Transfer of Stock permitted under this Agreement.

Section 8.10 No Further Relationship

The Shareholders agree that no Shareholder is the agent of any other Shareholder, and no such Person is authorized to take any action on behalf of the other, except as expressly provided in this Agreement.

 

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Section 8.11 No Third-Party Beneficiaries

This Agreement is solely for the benefit of the Shareholders, and their respective successors and permitted assigns, and this Agreement shall not otherwise be deemed to confer upon or give to any other third party any remedy, claim, liability, reimbursement, cause of action or other right.

Section 8.12 Counterparts

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which constitute but one agreement.

Executed effective as of the Effective Date.

 

SHAREHOLDERS:		Mercuria Energy Holding B.V.
		By:		/s/ Alain Rappo
		Name:		Alain Rappo
		Title:		Director
		By:		/s/ Anton Klomp
		Name:		Anton Klomp
		Title:		Director
		Address:		Attention: Director
				Koningslaan 112
				3583 GV Utrecht
				Netherlands
				Phone No.: +31 30 608 6131
				Fax No.: +31 30 254 2578
		Cheniere LNG Services, Inc.
		By:		/s/ Charif Souki
		Name:		Charif Souki
		Title:		President
		Address:		Attention: President
				717 Texas Avenue, Suite 3100
				Houston, Texas 77002
				Phone No.: 713-659-1361
				Fax No.: 713- 659- 5459

 

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With respect to the termination of the original Shareholders Agreement only:

 

THE COMPANY:		J & S Cheniere S.A.
		By:		/s/ Jarek Astramowicz
		Name:		Jarek Astramowicz
		Title:		Director
		By:		/s/ Marco Dunand
		Name:		Marco Dunand
		Title:		Director
		Address:		Attention: Director
				Route de St-Cergue No. 9
				P.O. Box 1114
				CH-1260 Nyon
				Switzerland
				Phone No.: +41 22 365 1580
				Fax No.: +41 22 365 1576

 

 

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Exhibit 5.2(e)

J&S CHENIERE S.A.

Delegations of Authorities and Initial Commitments

Delegations of Authorities

 

Notes:

(1)	Approval for all Time Charter, Bunker and Port Charge Invoices

 

(2)	Approval of all office related expenditures

 

(3)	All commitments in excess of authority require Chairman’s approval and if required, the BoD or Shareholders.

Initial Commitments:

Time Charter Party Agreement with K-Line

Time Charter Party Agreement with Trinity

Bunker Fuel invoices for 2 LNG vessels

Port Charge Invoices for 2 LNG vessels

Services Agreement with Investors Administration Services Limited

Office Costs - London

LNG Shipping Solutions retainer

Exhibit 7.3(a)(ix)

J&S Cheniere S.A.

Schedule of Company Agreements

As of December 31, 2006

 

1	LNG Carrier Time Charter Party Agreement between J&S Cheniere and Trinity LNG Transport S.A. date August 2004.

 

2	LNG Carrier Time Charter Party Agreement between J&S Cheniere and “K” Line LNG Transport Co., Ltd. date August 2004.

 

3	Services Agreement with LNG Shipping Solutions (Keith Bainbridge).

 

4	Services Agreement Investors Administration Services Limited. (Karim Souki) - terminated prior to the effective date.

 

5	Master LNG Sale & Purchase Agreements

 

a)

BG LNG Services, Inc

 

b)

Nigeria LNG

 

c)

Oman LNG

 

d)

QatarGas

 

e)

Sonatrach

 

Note:

the above Master Agreements are non-binding until a definitive Confirmation Agreement (specifing: price; volume; delivery dates; load and unloading locations and credit support) has been executed.

Exhibit 8.2(a)

 

LNG SALE AND PURCHASE AGREEMENT

BETWEEN

J & S CHENIERE S.A.

as Seller

AND

CHENIERE MARKETING, INC.

as Buyer

Dated                      , 2007

 

TABLE OF CONTENTS

 

 

i

 

ii

 

iii

LNG SALE AND PURCHASE AGREEMENT

This LNG SALE AND PURCHASE AGREEMENT (this “ Agreement ”), dated as of this [      ] day of [                      ], 2007 (the “ Effective Date ”) is made by and between J&S Cheniere S.A. , a company incorporated under the laws of Switzerland with an office at Route de Saint-Cergue 9, P.O. Box 1114, CH1260, Nyon-Switzerland (“ Seller ”); and Cheniere Marketing, Inc. , a Delaware corporation with a place of business at 717 Texas Avenue, Suite 3100, Houston, Texas, U.S.A. 77002 (“ Buyer ”).

RECITALS

WHEREAS, Seller and Cheniere LNG, Inc., an Affiliate of Buyer, entered into an Option Agreement on December 23, 2003 (the “ Option Agreement ”), and pursuant to such Option Agreement Seller paid Cheniere LNG, Inc. an option payment of one million U.S. dollars ($1,000,000) for certain options relating to the use of LNG terminal facilities in the Gulf Coast of the United States which Affiliates of Buyer intend to construct;

WHEREAS, Cheniere LNG, Inc. and Cheniere LNG Commercial Services, Inc., a Delaware corporation and a wholly owned subsidiary of Cheniere LNG, Inc., entered into a Contribution, Assignment and Assumption Agreement dated December 14, 2004 whereby Cheniere LNG, Inc. assigned all of its right, title and interest in the Option Agreement to Cheniere LNG Commercial Services, Inc.;

WHEREAS, on December 27, 2004, Cheniere LNG Commercial Services, Inc. changed its name to Cheniere LNG, Inc.;

WHEREAS , Cheniere LNG, Inc. and Buyer are Affiliates and share the same ultimate parent entity, Cheniere Energy, Inc;

WHEREAS, pursuant to the terms of the Option Agreement, Seller was granted the right and option to purchase vaporization capacity on the terms and conditions similar to those Terminal Use Agreements in effect for other users of the facilities;

WHEREAS , Affiliates of the Parties have entered into a certain Shareholder Agreement under the terms of which the Option Agreement was cancelled and it was agreed that the Parties would enter into this Agreement in lieu of a Terminal Use Agreement, which shall be applicable pursuant to the terms set forth herein;

WHEREAS, in August of 2004, Seller entered into long-term time charters for two LNG vessels presently under construction, namely Hull No. 1587 to be owned by K-Line LNG Transport Co., Ltd. and Hull No. S2258 to be owned by Trinity LNG Transport S.A. (the “ Chartered LNG Vessels ”);

WHEREAS, Buyer has acquired certain rights to unload LNG at Buyer’s Facility;

 

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WHEREAS, as a means of utilizing the Chartered LNG Vessels, Seller desires to sell, and Buyer desires to purchase, certain firm quantities and certain optional quantities of LNG for importation by Buyer into the United States via Buyer’s Facility; and

WHEREAS, effective as of the Share Buyout as set out in Section 12.4, this Agreement, the entitlement to purchase and sell option quantities of LNG shall terminate and the LNG Quantity shall become a firm commitment pursuant to Section 12.4:

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the Parties hereto and for the mutual covenants contained herein, Buyer and Seller hereby agree as follows:

PART ONE

PRINCIPAL COMMERCIAL TERMS AND CONDITIONS

The Parties hereby incorporate the General Terms and Conditions included as Part Two of this Agreement.

A. Term

 

1.

General . Subject to the provisions of this Agreement, the term of this Agreement (“Term”) shall consist of the Initial Term and, if applicable, any Extension Term.

 

2.

Initial Term . The initial term of this Agreement (“ Initial Term ”) shall commence on the Effective Date and shall continue in full force and effect until the expiration of five (5) years from the Commercial Start Date. For the purposes hereof, the Commercial Start Date (“ Commercial Start Date ”) shall be the date on which Buyer’s Facility is first available for the berthing of LNG vessels, the unloading, receiving and storing of LNG, the regasification of LNG and the transportation of Gas to a Downstream Pipeline. The Commercial Start Date shall be a date within the period that commences on October 1, 2007 and ends on June 30, 2008 (such period being the “ First Window Period ”). The First Window Period shall be narrowed pursuant to the following provisions:

 

a.

No later than six (6) months in advance of the first day of the First Window Period, Buyer shall give Seller written notice of a sixty (60) day period (“ Second Window Period ”) falling within the First Window Period for the Commercial Start Date; provided that if Buyer fails to give timely notice of same, the Second Window Period shall be the latest possible sixty (60) day period within the First Window Period;

 

b.

No later than sixty (60) days in advance of the first day of the Second Window Period, Buyer shall give Seller written notice of a thirty (30) day period (“ Final Window Period ”) falling within the Second Window Period for the Commercial Start Date; provided that if Customer fails to give timely notice of same, the Final Window Period shall be the latest possible thirty (30) day period within the Second Window Period; and

 

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c.

No later than thirty (30) days in advance of the first day of the Final Window Period, Buyer shall give Seller written notice of the Commercial Start Date falling within the Final Window Period; provided that if Buyer fails to give timely notice of the same, the Commercial Start Date shall be the latest possible day in the Final Window Period.

The Commercial Start Date shall be postponed to the extent that an event of Force Majeure has the effect of delaying that date to a later date, as more specifically set forth in Section 10.1.

 

3.

Extension Term . Seller shall have the option of up to three (3) additional five (5) year extension terms (each an “ Extension Term ”). Seller must (a) notify Buyer in writing of its good faith desire to elect the applicable Extension Term at least two (2) years prior to the expiration of the then current Term and (b) no later than one (1) year prior to the expiration of the then current Term send Buyer a binding confirmation (“ Binding Confirmation ”) that the Term is extended by an Extension Term. Upon Seller’s delivery of a Binding Confirmation to Buyer, along with an option payment to Buyer of one million dollars ($1,000,000) per Extension Term exercised, this Agreement will then be automatically extended for the applicable Extension Term.

B. Capacity Conversion

If: Seller terminates this Agreement in accordance with the provisions of Section 12.1, then Buyer shall cause the owner of the Sabine Pass Terminal, upon Seller’s notice of termination, to enter into a Terminal Use Agreement with Seller substantially in the form of Exhibit B attached hereto. The term of such Terminal Use Agreement shall: (i) commence upon the effective date of such Terminal Use Agreement; and (ii) continue through a date coincident with the last day of the Initial Term or any permitted Extension Term hereunder.

C. LNG Quantity

 

1.

General

Subject to Clause C.2, during each Contract Year in the Term, Seller shall sell and deliver, or cause to be delivered, to Buyer and Buyer shall purchase, receive and pay for at the Contract Price, the LNG Quantity.

 

2.

Seller’s Option

Buyer hereby grants Seller the option to establish on an annual basis the specific quantity Seller will have the right to sell and deliver, or caused to be delivered, to Buyer and Buyer is required to purchase and pay for during each Contract Year (such elected quantity being herein referred to as “ LNG Quantity ”) pursuant to the following conditions:

 

a.

The LNG Quantity for a Contract Year shall be an amount elected by Seller pursuant to the monthly notices provided under Section 2.2, such amount for a Contract Year to be no less than the Minimum LNG Quantity and no more than seventy eight million four hundred seventy five thousand (78,475,000) MMBTU (or the pro-rata portion of such amount in the event of a partial Contract Year).

 

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b.

In the event of a Share Buyout, as defined in Section 12.4, the term LNG Quantity shall mean seventy eight million four hundred seventy five thousand (78,475,000) MMBTU (or the pro-rata portion of such amount in the event of a partial Contract Year).

 

c.

Each Contract Year, Seller shall have the right to round-up to a Cargo the amount that would otherwise be a partial Cargo (the additional amount so scheduled and purchased being the “ Round-Up Quantity Adjustment ”).

D. Contract Price

A price (the “ Contract Price ” or “ P ”), applicable to LNG unloaded at Buyer’s Facility (as determined in accordance with Section 7.1), shall be calculated by using the following formula as will be in effect in respect of the relevant month:

P = Henry Hub Price x Cargo x          %

For purposes of this Agreement, Henry Hub Price shall be calculated as follows:

 

(a)

For each MMBTU of LNG unloaded at Buyer’s Facility, the Henry Hub Price shall be in US Dollars per MMBTU equal to the average of the Midpoint prices, in US Dollars per MMBTU published by Gas Daily in its Daily Price Survey for the posting for Louisiana-Onshore South, Henry Hub, for each of the five (5) consecutive following Gas Days commencing on the Initial Gas Day as if each of such five (5) Gas Days had been a flow date (for each Gas Day, the “Floating Index”). For purposes hereof, the “Initial Gas Day” shall mean the first Gas Day that commences after the expiration of the twenty four (24) hour period immediately following the Completion of Unloading.

 

(b)

If a Market Disruption Event has occurred with respect the Floating Index for any of the five (5) Gas Days used in calculating the Contract Price, then the Parties shall negotiate in good faith to agree on a replacement component for the Floating Index for the affected Gas Day, and if the Parties have not so agreed on or before the second Business Day following the affected Gas Day then the replacement component for the Floating Index for the affected Gas Day(s) shall be determined within the next two (2) following Business Days with each Party obtaining, in good faith and from non-affiliated market participants in the relevant market, two quotes for prices of Gas for the affected Gas Day of a similar quality and quantity in the geographical location closest in proximity to Buyer’s Facility and averaging

 

iv

the four (4) quotes. If either Party fails to provide two (2) quotes, then the average of the other Party’s two (2) quotes shall determine the replacement component for the Floating Price. “Market Disruption Event” means, with respect to the specified index, any of the following events: (a) the failure of the index publisher to announce or publish information necessary for determining the Floating Index; (b) the temporary or permanent discontinuance or unavailability of the index; or (c) the agreement by both Parties that a material change in the formula for or the method of determining the Floating Index has occurred. For the purposes of the calculation of a replacement component for the Floating Index, all numbers shall be rounded to three (3) decimal places. If the fourth decimal number is five (5) or greater, then the third decimal number shall be increased by one, and if the fourth decimal number is less than five (5), then the third decimal number shall remain unchanged. The replacement component will be used to calculate the Contract Price for the Gas Days for which it was determined to apply.

E. Performance by Buyer

Buyer shall have the right to cause any operational duties of Buyer hereunder to be performed by an Affiliate of Buyer. For the avoidance of doubt, it is the intent of the Parties that this provision shall be limited to routine operational duties of Buyer and that in no event shall Buyer have the right to assign payment or other financial obligations under this Agreement except as specifically set forth in Section 11.1. Furthermore, wherever Buyer is obligated pursuant to this Agreement to cause the Buyer’s Facility, or the owner of Buyer’s Facility (including the Sabine Pass Terminal), as applicable, to perform or refrain from performing a certain action, such obligation of the Buyer shall be qualified in its entirety by Buyer’s contractual rights pursuant to Buyer, to the extent of its rights under the terminal use agreement with the Affiliate which owns Buyer’s Facility. Notwithstanding any other provision of this Agreement to the contrary, in all of the cases described in the immediately preceding sentence, Buyer , shall use commercially reasonable efforts to enforce its rights under the applicable terminal use agreement in order to cause the Buyer’s Facility, or the owner of Buyer’s Facility (including the Sabine Pass Terminal), as applicable, to perform or refrain from performing such action in accordance with the terms of this Agreement such Affiliate to perform the duties or obligations under this Agreement required to be performed by Buyer’s Facility.

F. Notices

Pursuant to Article 17, the Parties have designated the following addresses for purposes of notices:

 

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J&S Cheniere S.A. Route de Saint-Cergue 9 P.O. Box 1114, CH1260 Nyon Switzerland Attention:                                  Fax:                                               Telephone:		Cheniere Marketing, Inc. 717 Texas Avenue, Suite 3100 Houston, Texas 77002 Attention: President Fax: (713) 659-5459 Telephone: (713) 659-1361

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.

 

 

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PART TWO

GENERAL TERMS AND CONDITIONS

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	“ AAA ” shall have the meaning set forth in Section 14.1(b).

 

1.2

“ Adverse Weather Conditions ” means weather and sea conditions actually experienced at or near Buyer’s 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 a 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 thereof shall mean the direct or indirect ownership of fifty percent (50%) or more of the voting rights in a Person.

 

1.4	“ Agreement ” means this agreement (including Part One and Part Two hereof), 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.

 

1.5	“ Allotted Unloading Time ” shall have the meaning set forth in Section 5.6.

 

1.6	“ Annual Delivery Program ” shall have the meaning set forth in Section 2.1(g).

 

1.7	“ Approvals ” means all consents, authorizations, licenses, waivers, permits, approvals and other similar documents from or by a Governmental Authority.

 

1.8	“ Available Unloading Date ” means at any time an Unloading Date at Buyer’s Facility that is not a Scheduled Unloading Date for Seller or any other Terminal User at that berth.

 

1.9

“ Bankrupt ” means a Person that: (i) is dissolved, other than pursuant to a consolidation, amalgamation or merger; (ii) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (iii) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (iv) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation; (v) has a resolution passed for its winding-up, official management or liquidation, other

 

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than pursuant to a consolidation, amalgamation or merger; (vi) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for all or substantially all of its assets; (vii) has a secured party take possession of all or substantially all of its assets, or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all of its assets; (viii) causes or is subject to an event with respect to it which, under applicable law has an analogous effect to any of the events specified in clauses (i) through (vii) above, inclusive; or (ix) takes any action in furtherance of, or indicating its consent to, approve or acquiescence in any of the foregoing acts.

 

1.10

“ Base Rate ” means: the lesser of (i) the applicable LIBOR rate of interest, as adjusted from time to time, plus one percent (1%), and (ii) the maximum rate of interest permitted by applicable law. “LIBOR”, as of the date of determination, means the London Interbank Offered Rate for one-month U.S. dollar deposits appearing on Page 3750 of the Telerate screen (or any successor page) at approximately 11:00 a.m. (London time). In the event that such rate does not appear on Page 3750 of the Telerate screen (or otherwise on such screen), LIBOR shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates. LIBOR shall be established on the first day on which a determination of the Base Rate is to be made under this Agreement and shall be adjusted daily based on the LIBOR quotes made available through the foregoing sources. If LIBOR quotes are not generally available, “Base Rate” shall mean, as of the date of any determination, the weighted average of the rate on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers as published by the Federal Reserve Bank of New York.

 

1.11	“ Binding Confirmation ” shall have the meaning set forth in Clause A.3.

 

1.12

“ British Thermal Unit ” or “ BTU ” means the amount of heat required to raise the temperature of one (1) avoirdupois pound of pure water from fifty-nine (59) degrees Fahrenheit to sixty (60) degrees Fahrenheit at an absolute pressure of fourteen decimal six nine six (14.696) pounds per square inch.

 

1.13	“ 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 of America, are legally required or authorized to close.

 

1.14	“ Buyer ” means the Party identified as Buyer in the preamble to this Agreement and its permitted successors and assigns.

 

1.15

“ Buyer’s Facility ” means either the Sabine Pass Terminal currently under development in western Cameron Parish, Louisiana by Sabine Pass LNG L.P., an Affiliate of Buyer, with whom Buyer has a terminal use agreement in place, or Sabine Pass LNG, L.P. which owns the Sabine Pass Terminal, as the context may require.

 

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1.16	“ Buyer’s Website ” means the website of Buyer’s Facility (or, in the case that the website of Buyer’s Facility is unavailable, an alternative electronic means of transmitting written communication with respect to Buyer’s Facility).

 

1.17	“ Cargo ” means the quantity of LNG expressed in MMBTU to be transported on an LNG Vessel and purchased and sold pursuant to the terms of this Agreement.

 

1.18	“ Central Time ” means U.S. Central Time Zone, as adjusted for Daylight Saving Time and Standard Time.

 

1.19

“ Change in Control ” means, with respect to Cheniere Energy: (i) the date on which the incumbent directors cease to constitute a majority of the board of directors of Cheniere Energy; (ii) the date on which any Person acquires more than forty percent (40%) of the outstanding voting common stock of Cheniere Energy, other than with the consent of the board of directors of Cheniere Energy; or (iii) the date on which Cheniere Energy is merged or consolidated with another entity and, as a result of such merger or consolidation, fifty percent (50%) or less of the outstanding voting securities of the surviving or resulting entity is owned directly or indirectly in the aggregate by the holders of the outstanding voting securities of Cheniere Energy immediately prior to such merger or consolidation. For purposes of this Agreement, incumbent directors means Persons constituting the board of directors of Cheniere Energy on the Effective Date and any Person becoming a director of Cheniere Energy after the Effective Date whose election or nomination is (or was) approved in advance by a vote of at least a majority of the then incumbent directors or whose nomination for election is (or was) approved in advance by a nominating committee composed of the then incumbent directors.

 

1.20	“ Chartered LNG Vessels ” shall have the meaning set forth in the Recitals.

 

1.21	“ Commercial Start Date ” shall have the meaning set forth in Clause A.2.

 

1.22	“ Completion of Unloading ” means, in respect of a Cargo, the disconnection of the flange coupling of the discharge manifold of an LNG Vessel from the flange coupling on the unloading line at Buyer’s Facility following unloading of the LNG Vessel and completion of final gauging.

 

1.23	“ Consultation Notice ” shall have the meaning set forth in Section 2.1(h).

 

1.24	“ Control ” means the direct or indirect ownership of fifty percent (50%) or more of the voting rights in a Person.

 

1.25	“ Contract Price ” shall have the meaning set forth in Clause D.

 

1.26

“ Contract Year ” means each annual period starting on January 1 and ending on December 31 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 December 31; and (b) the last Contract Year shall commence on January 1 immediately preceding the last day of the Term and end on the last day of the Term as set forth in Clause A.

 

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1.27	“ Cubic Foot ” means a volume equal to the volume of a cube each edge of which is one (1) foot in length.

 

1.28	“ Cubic Meter ” means a volume equal to the volume of a cube each edge of which is one (1) meter in length.

 

1.29	“ Deemed Contract Price ” shall have the meaning set forth in Section 9.4

 

1.30

“ 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 the applicability of arbitration or jurisdiction.

 

1.31	“ Downstream Pipeline ” means all Gas pipelines with a connection at the delivery point which transport Gas from Buyer’s Facility. For purposes hereof, delivery point means the point of interconnection between the tailgate of the Sabine Pass Terminal and a downstream pipeline.

 

1.32	“ Effective Date ” means the date set forth in the preamble of this Agreement.

 

1.33	“ Estimated Time of Arrival ” or its abbreviation “ ETA ” shall have the meaning set forth in Section 5.3(c)(i).

 

1.34

“ Expected Receipt Quantity ” means, with respect to a given Cargo, Seller’s reasonable estimate of the quantity of LNG (in MMBTU) expected to be unloaded at the Receipt Point, as set forth in the notice delivered pursuant to Sections 2.1(c)(ii) and 2.2(a), as such notice may be subsequently amended pursuant to Section 5.3(a).

 

1.35	“ Extension Term ” shall have the meaning set forth in Clause A.3.

 

1.36	“ Final Window Period ” shall have the meaning set forth in Clause A.2.

 

1.37	“ Firm LNG Quantity ” shall have the meaning set forth in Section 2.2(a).

 

1.38	“ First Window Period ” shall have the meaning set forth in Clause A.2.

 

1.39	“ Force Majeure ” shall have the meaning set forth in Section 10.1.

 

1.40	“ Gas Day ” means the twenty-four hour period beginning one day at 9 a.m. Central Time and ending the following day at 9 a.m. Central Time.

 

1.41

“ 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, Buyer’s Facility, Seller’s Facilities, an LNG Vessel, a Transporter, or a Downstream Pipeline, as the case may be, and acting within its legal authority.

 

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1.42	“ GPA ” shall have the meaning set forth in Annex I.

 

1.43

“ 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 sixty (60) degrees Fahrenheit and an absolute pressure of fourteen decimal six nine six (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.

 

1.44	“ Henry Hub Price ” shall have the meaning set forth in Clause D.

 

1.45	“ Initial Term ” shall have the meaning set forth in Clause A.2.

 

1.46

“ 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, construction, equipment, operation or maintenance of LNG receiving and regasification terminals, established by the following (such standards to apply in the following order of priority): (a) a Governmental Authority having jurisdiction over Buyer’s Facility; (b) the Society of International Gas Tanker and Terminal Operators (“ SIGTTO ”) to the extent adopted by Buyer’s Facility; and (c) any other internationally recognized non-governmental agency or organization with whose standards and practices it is customary for a Reasonable and Prudent Person operating LNG receiving and regasification terminals to comply.

 

1.47

“ 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, manning and maintenance of LNG vessels established by the following (such standards to apply in the following order of priority): (a) a Governmental Authority; (b) the International Maritime Organization; (c) SIGTTO; and (d) any other internationally recognized non-governmental agency or organization with whose standards and practices it is customary for a Reasonable and Prudent Person operating LNG vessels to comply.

 

1.48

“ Liabilities ” means all liabilities, costs, claims, disputes, demands, arbitrations, suits, legal or administrative proceedings, judgments, damages, losses and expenses (including reasonable attorneys’ fees and other reasonable costs of arbitration, litigation or defense), and any and all fines, penalties and assessments of, or responsibilities to, Governmental Authorities.

 

1.49	“ Liquefied Natural Gas ” or “ LNG ” means processed Natural Gas in a liquid state, at or below its boiling point and at a pressure of approximately one (1) atmosphere.

 

1.50	“ LNG Quantity ” shall have the meaning set forth in Clause C.2.

 

1.51	“ LNG Vessel ” means an ocean-going vessel suitable for transporting LNG that Seller uses for transportation of LNG to Buyer’s Facility.

 

1.52	“ Loading Port ” means the port at which a Cargo is loaded on board an LNG Vessel.

 

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1.53	“ Measurement Dispute ” shall have the meaning set forth in Section 14.2(a).

 

1.54	“ Minimum LNG Quantity ” means one (1) standard Cargo per Contract Year. For purposes hereof, one (1) Cargo shall be equivalent to no less than 3,200,000 MMBTU.

 

1.55	“ MMBTU ” means one million (1,000,000) BTU.

 

1.56	“ Natural Gas ” or “ Gas ” means any hydrocarbon or mixture of hydrocarbons consisting predominantly of methane which is in a gaseous state.

 

1.57	“ Notice of Readiness ” or “ NOR ” shall have the meaning set forth in Section 5.4.

 

1.58	“ Off-Spec LNG ” shall have the meaning set forth in Section 6.2(a).

 

1.59	“ Option Agreement ” shall have the meaning set forth in the Recitals.

 

1.60	“ Party ” and “ Parties ” means Buyer and Seller, and their respective successors and permitted assigns.

 

1.61	“ Person ” means any individual, sole proprietorship, corporation, trust, company, voluntary association, partnership, joint venture, limited liability company, unincorporated organization, institution, Governmental Authority or any other legal entity.

 

1.62	“ Pilot ” means any Person engaged by Transporter to come on board an LNG Vessel to assist the master in pilotage, berthing and unberthing of such LNG Vessel.

 

1.63	“ Pilot Boarding Station ” shall have the meaning set forth in Section 5.4(a).

 

1.64

“ Port Charges ” means, except as hereafter provided, all charges of whatsoever nature (including rates, tolls, and dues of every description) incurred in respect of an LNG Vessel entering or leaving Buyer’s 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 Buyer’s Facility. Port Charges shall not include: (i) costs associated with the clearing of customs at the Receipt Point, including all duties, taxes and other charges payable upon importation of a Cargo; (ii) charges and fees that are incurred on or after the Receipt Point; or (iii) charges or fees that relate to the use of Buyer’s Facility after the Receipt Point.

 

1.65	“ Port Liability Agreement ” shall mean the Port Liability Agreement substantially in the form of Exhibit A.

 

1.66	“ Proposed Unloading Date ” shall have the meaning set forth in Section 2.1(c)(i).

 

1.67	“ psig ” means pounds per square inch gauge.

 

1.68	“ Reasonable and Prudent Person ” means a Person seeking in good faith to perform its contractual obligations, and in so doing, and in the general conduct of its undertaking,

 

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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.

 

1.69	“ Receipt Point ” means the point at which the flange coupling of Buyer’s Facility receiving line joins the flange coupling of the LNG unloading manifold on board an LNG Vessel.

 

1.70	“ Round-Up Quantity Adjustment ” shall have the meaning set forth in Clause C.2c.

 

1.71	“ Rules ” shall have the meaning set forth in Section 14.1(b).

 

1.72	“ Sabine Pass Terminal ” means the LNG terminal facility, along the Sabine Neches Waterway under construction by Sabine Pass LNG L.P. in western Cameron Parish, Louisiana.

 

1.73	“ Scheduled Unloading Date ” means, for any applicable Contract Year, an Unloading Date that is allocated either to Seller or any Terminal User pursuant to Section 2.1.

 

1.74	“ Scheduling Representative ” means the individual appointed by Seller in accordance with Section 2.3.

 

1.75	“ Second Window Period ” shall have the meaning set forth in Clause A.2.

 

1.76	“ Seller ” means the Party identified as Seller in the preamble to this Agreement and its permitted successors and assigns.

 

1.77

“ Seller’s Facilities ” means the Natural Gas production facilities, pipelines and utilities, Natural Gas treatment, liquefaction and related facilities (including gas gathering pipelines and gas pipelines connecting Natural Gas production facilities to the liquefaction and related facilities), LNG storage facilities and berthing and loading port facilities where Seller will load LNG to make deliveries of LNG in accordance with this Agreement, whether or not owned and/or controlled by Seller.

 

1.78	“ Seller’s Preliminary Receipt Schedule ” shall have the meaning set forth in Section 2.1(g).

 

1.79	“ Seller Unloading Date Change Request ” shall have the meaning set forth in Section 2.2(c).

 

1.80	“ Standard Cubic Foot ” or “ SCF ” means the quantity of Natural Gas, free of water vapor, occupying a volume of one (1) Cubic Foot at a temperature of sixty (60) degrees Fahrenheit and at an absolute pressure of fourteen decimal six nine six (14.696) pounds per square inch.

 

1.81	“ Taxes ” means all customs, taxes, royalties, excises, fees, duties, levies, sales and use taxes, ad valorem taxes, property taxes and value added taxes, charges and all other assessments, including payments in lieu of taxes, which may now or hereafter be enacted,

 

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levied or imposed, directly or indirectly, by a Governmental Authority, except Port Charges and taxes based on income, revenues, gross receipts or net worth and all state and local franchise, license, occupation and similar taxes required for the maintenance of corporate existence or to maintain good standing that are assessed against a Party.

 

1.82	“ Term ” shall have the meaning set forth in Clause A.1.

 

1.83	“ Terminal User ” means any Person with a contractual right to receive LNG terminalling services from Buyer’s Facility. For avoidance of doubt, Buyer may be a Terminal User with respect to any quantity other than the LNG Quantity.

 

1.84	“Terminal Use Agreement” means the Terminal Use Agreement in the form set forth in Exhibit B.

 

1.85	“ Three Month Unloading Schedule ” shall have the meaning set forth in Section 2.2(b).

 

1.86	“ Transporter ” means any Person who owns or operates an LNG Vessel.

 

1.87	“ Tribunal ” shall have the meaning set forth in Section 14.1(c).

 

1.88

“ Unloading Date ” means a twenty-four (24) hour window starting at 6:00 a.m., Central Time on a specified day and ending twenty-four (24) consecutive hours thereafter during which Buyer would make available berthing and LNG unloading services at Buyer’s Facility to either Seller or one of the Terminal Users.

 

1.89	“ Unloading Date Change Request ” shall have the meaning set forth in Section 2.2(c).

 

1.90	“ Unloading Services Unavailability ” shall have the meaning set forth in Section2.2(d).

ARTICLE 2

DELIVERY SCHEDULE

 

2.1	Annual Delivery Program

Procedures for the receipt of LNG at the Receipt Point will be in accordance with the following, as well as any additional procedures generally applicable to Terminal Users at Buyer’s Facility:

 

(a)

Seller’s Initial Notice of LNG Quantity . Not later than one hundred and twenty (120) days prior to the beginning of each Contract Year, Seller shall provide Buyer its initial non-binding good faith estimate of the LNG Quantity for the following Contract Year.

 

(b)

Buyer Deliverables . Not later than one hundred and five (105) days prior to the beginning of each Contract Year, Buyer shall provide to the Scheduling Representative: (i) a non-binding written assessment of the dates of any planned maintenance to or modifications of Buyer’s Facility for such Contract Year and the expected impact of such activities on the availability of services; and (ii) a

 

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preliminary programming schedule nominated by Terminal Users of Buyer’s Facility. Buyer shall cause Buyer’s Facility to use reasonable endeavors, while acting as a Reasonable and Prudent Person, to limit the number of days of any planned maintenance to or modifications of Buyer’s Facility, so that the number of days for any planned maintenance to or modifications of a Buyer’s Facility shall not exceed three (3) consecutive or ten (10) cumulative days in any Contract Year.

 

(c)

Notice from Scheduling Representative . Not later than ninety five (95) days prior to the beginning of each Contract Year, the Scheduling Representative shall provide Buyer with the following:

 

(i)

a programming schedule for the unloading of Seller’s LNG Quantity over the course of the next Contract Year, which schedule shall specify, for each Cargo to be delivered to the Receipt Point, the proposed unloading date (the “ Proposed Unloading Date ”) of the applicable LNG Vessel and which schedule must result in a delivery pattern whereby: (a) deliveries are reasonably ratable over the Contract Year; (b) deliveries take into consideration the planned maintenance and modification dates furnished to Seller by Buyer as set forth in Section 2.1(b); and (c) deliveries shall not be scheduled so as to utilize both unloading berths at Buyer’s Facility simultaneously; and

 

(ii)

for each Proposed Unloading Date proposed pursuant to Section 2.1(c)(i), the name of the LNG Vessel expected to deliver LNG to Buyer’s Facility (if the identity of the LNG Vessel is known to Seller at such time), the Expected Receipt Quantity, and the anticipated Gross Heating Value of the LNG to be delivered.

 

(d)

Notices from Terminal Users . Seller acknowledges that Terminal Users will submit similar notices to Buyer regarding the matters provided for in Section 2.1(c). Seller further acknowledges that: (i) other Terminal Users may have priority over Seller with regard to the allocated annual schedule for the receipt and delivery of LNG at Buyer’s Facility; and (ii) in the event of a conflict between the proposed annual schedule submitted by Seller pursuant to this Section 2.1 for Buyer’s Facility and similar annual schedules submitted by other Terminal Users for Buyer’s Facility, the annual schedules by such other Terminal Users for Buyer’s Facility may have priority.

 

(e)

Seller Preliminary Receipt Schedule . Seller acknowledges that Buyer’s Facility shall take into consideration the notices that it receives from the Scheduling Representative and the Terminal Users. Not later than ninety (90) days prior to the beginning of each Contract Year, Buyer shall issue to Seller via Buyer’s Website a preliminary receipt schedule for such Contract Year (the “ Seller Preliminary Receipt Schedule ”) showing a “ Scheduled Unloading Date ” for the LNG Vessel carrying each of Seller’s scheduled Cargoes, which schedule must result in a delivery pattern in which: (i) deliveries are reasonably ratable over the Contract

 

9

Year; (ii) Buyer’s Facility’s planned maintenance and modification dates are reflected; and (iii) deliveries are not scheduled so as to utilize both unloading berths Buyer’s Facility simultaneously. Seller may propose to Buyer to change any such Scheduled Unloading Date, and Buyer agrees to give due consideration to, and use reasonable efforts to cause Buyer’s Facility to accommodate, such change.

 

(f)

Preliminary Receipt Schedules and Mutual Cooperation . Seller acknowledges that Buyer’s Facility will issue to each Terminal User via the Buyer’s Website a preliminary receipt schedule similar to the Seller Preliminary Receipt Schedule described in Section 2.1(e), but customized for each such Terminal User. Seller also acknowledges that conflicts will occur in the preparation of the Seller Preliminary Receipt Schedule and other preliminary receipt schedules because of the joint use of Buyer’s Facility among the Terminal Users. Accordingly, Seller agrees to reasonably cooperate with Buyer to assist Buyer in resolving any such conflict to the extent such cooperation does not result in material additional costs to Seller or unduly adversely impact the services provided to Seller hereunder.

 

(g)

Consultation; Annual Delivery Program . If the Scheduling Representative desires to consult with Buyer regarding the contents of the Seller Preliminary Receipt Schedule, the Scheduling Representative shall, no later than fifteen (15) days from the issuance of the Seller Preliminary Receipt Schedule, request to meet with Buyer by providing notice thereof (a “ Consultation Notice ”) to Buyer, and Buyer shall, no later than fifteen (15) days after receipt of the Consultation Notice, meet with the Scheduling Representative to discuss the Seller Preliminary Receipt Schedule. If: (i) the Scheduling Representative does not submit a Consultation Notice to Buyer on a timely basis; or (ii) the Scheduling Representative and Buyer meet pursuant to a Consultation Notice and are able during such meeting to agree upon revisions to the Seller Preliminary Receipt Schedule, then such Seller Preliminary Receipt Schedule, as so revised (and as updated from time to time for such Contract Year in accordance with the provisions of this Agreement by Buyer via Buyer’s Website), together with the planned maintenance and modification dates selected by Buyer, shall constitute the “ Annual Delivery Program ”. If the Scheduling Representative and Buyer meet pursuant to a Consultation Notice and are unable during such meeting to agree upon revisions to the Seller Preliminary Receipt Schedule, then Buyer shall determine, while using its reasonable efforts to accommodate Seller’s views, the Annual Delivery Program. Such Annual Delivery Program shall, to the extent practicable, result in a delivery pattern in which: (i) deliveries are reasonably ratable over the Contract Year; (ii) Buyer’s Facility’s planned maintenance and modification dates are reflected; and (iii) deliveries are not scheduled so as to utilize both unloading berths at Buyer’s Facility simultaneously. Buyer shall issue via the Buyer’s Website) the Annual Delivery Program no later than sixty (60) days prior to the first day of the Contract Year.

 

(h)

Terminal Users Annual Delivery Programs . Seller acknowledges that Buyer’s Facility shall issue to each Terminal User a final receipt schedule similar to the Annual Delivery Program described in Section 2.1(g) but customized for each such Terminal User.

 

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(i)

Adjustment to Schedules . Upon written request by Seller, Buyer shall cause Buyer’s Facility to use reasonable efforts to modify the time periods expressly set forth in Sections 2.1(e) and 2.1(g) to allow Seller to interface these periods with corresponding time periods for scheduling agreed upon by Seller and its LNG suppliers. For purposes of this Section 2.1, Buyer’s Facility shall be deemed to have used reasonable efforts if Buyer’s Facility rejects Seller’s request because it determines, acting as a Reasonable and Prudent Person, that any such modification would infringe on the contractual rights of Terminal Users.

 

(j)

Available Unloading Dates . Throughout the Contract Year, Buyer shall cause Buyer’s Facility to maintain on the Buyer’s Website a current list of Available Unloading Dates.

 

2.2	Three Month Unloading Schedules

 

(a)

Seller’s Election of Firm LNG Quantity . Not later than the first (1st) day of each month in a Contract Year, Seller shall deliver to Buyer its election of the LNG Quantity to be sold and delivered during the next three months (the “ Firm LNG Quantity ”), such quantity to be not in excess of that established in the Annual Delivery Program. Such election shall propose Seller’s projected delivery dates for each of the next three (3) months and the Expected Receipt Quantity of each such shipment. In the case of the first month of deliveries hereunder, or any other month that does not immediately follow a prior delivery month, the Parties will mutually agree to an appropriate time period for Seller’s election of the Firm LNG Quantity.

 

(b)

Three Month Unloading Schedules . After the first election made by Seller of the Firm LNG Quantity pursuant to Section 2.2(a), not later than the twentieth (20th) day of each month, Buyer shall deliver to Seller a final three-month forward plan of delivery of the Firm LNG Quantity (“ Three Month Unloading Schedule ”). The Three Month Unloading Schedule shall reflect to the extent operationally practicable Seller’s proposed Three Month Unloading Schedule and the Firm LNG Quantity as elected in prior Three Month Unloading Schedules.

 

(c)

Seller Changes to the Annual Delivery Program or Three Month Unloading Schedule . At any time following the issuance of the Annual Delivery Program and any applicable Three Month Unloading Schedule, Seller’s Scheduling Representative may submit to Buyer a written request to change a Scheduled Unloading Date to any Available Unloading Date (such request to change, a “ Seller Unloading Date Change Request ”). Seller understands that: (a) Terminal Users shall also have the right to submit to Buyer’s Facility similar scheduling requests; (b) Buyer shall have no obligation to consult with the Scheduling Representative, Seller, or Terminal Users regarding any Seller Unloading Date Change Request or Terminal User unloading date change request

 

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(collectively, “ Unloading Date Change Requests ”); and (c) Seller acknowledges that Buyer’s Facility shall accept any Unloading Date Change Request on a first-come, first-served basis. Upon accepting a Seller Unloading Date Change Request, Buyer shall notify Seller via the Buyer’s Website as soon as practical but not later than 5:00 p.m. Central Time of the day following the date of receipt by Buyer of the applicable Unloading Date Change Request. Notwithstanding anything herein to the contrary, Seller shall use its reasonable efforts to keep to a minimum the number of Seller Unloading Date Change Requests it submits to Buyer.

 

(d)

Other Modifications to the Annual Deliver Program or Three Month Unloading Schedule . If Seller is unable to berth during its Scheduled Unloading Date due to a Force Majeure event (an “ Unloading Services Unavailability ”), each affected Scheduled Unloading Date allocated to Seller during such period shall be cancelled, to the extent affected; provided, however, that in the event of an Unloading Services Unavailability causing the cancellation of one or more Scheduled Unloading Dates allocated to Seller and/or Terminal Users, Buyer shall make reasonable efforts to cause Buyer’s Facility to change the Three Month Unloading Schedule and Annual Delivery Programs of Terminal Users in order to maximize efficient usage of Buyer’s Facility to assist Seller and Terminal Users to unload quantities of LNG which would otherwise have been unloaded at Buyer’s Facility during such cancelled Scheduled Unloading Dates

 

(e)

Buyer’s Terminal Designation . For each Scheduled Unloading Date allocated to Seller hereunder, Buyer, in its sole discretion shall have the right up to and including the fifth (5th) day prior to such Scheduled Unloading Date to designate in writing to Seller an alternate facility with which Buyer has a terminal use agreement in place other than that to which receipt was preliminarily scheduled in accordance with this Article 2; provided that, Buyer agrees to reimburse Seller for any additional transportation costs arising as a result of such deviation to an alternate facility in the U.S. Gulf Coast. Thereafter, Seller shall be obligated to deliver such Cargo to such alternate Buyer’s facility.

 

2.3	Scheduling Representative

By no later than six (6) months prior to the Commercial Start Date, Seller shall appoint an individual to act as Scheduling Representative for the purposes of this Article 2; provided, however, that Seller shall have the right to change its appointed Scheduling Representative at any time by notice to Buyer. Unless otherwise stated herein, Seller hereby authorizes the Scheduling Representative to do and perform any and all acts for and on behalf of Seller with regard to scheduling matters provided for in this Article 2.

 

2.4	Scheduling Priorities

The Parties acknowledge that Buyer’s Facility has entered into an agreement with Total LNG USA, Inc. (“TOTAL”) that grants TOTAL certain scheduling priorities for LNG unloading at Buyer’s Facility. Subject to such rights granted to TOTAL, Buyer confirms that its contractual scheduling rights for LNG unloading at Buyer’s Facility [are not inferior to the contractual rights of other Terminal Users at Buyer’s Facility]

 

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ARTICLE 3

TRANSFER OF TITLE AND RISK OF LOSS

 

3.1

Other

Seller warrants that it will have the right to convey and will transfer good and merchantable title to all LNG sold hereunder, and covenants that it will have the right to sell the same. Seller warrants that LNG sold hereunder will be free from liens, encumbrances, adverse claims and proprietary rights at the passing of title and that no circumstances will then exist which could give rise to any such encumbrances, adverse claims or proprietary rights other than those that may be caused by acts or omissions of Buyer.

 

3.2	Title and Risk of Loss

Title to the LNG sold and purchased under this Agreement will transfer automatically to Buyer at the international transfer receipt point to be located outside of the jurisdictional waters of the United States, without the need for any particular action on the +the part of either Party. Notwithstanding the foregoing, risk of loss to the LNG sold and purchased under this Agreement will transfer automatically to Buyer at the Receipt Point, without the need for any particular action on the part of either Party.

ARTICLE 4

BUYER’S FACILITY

 

4.1	Standard of Operation

On and after the Commercial Start Date, Buyer shall cause Buyer’s Facility to be provided, maintained and operated in accordance with the following: (a) all Approvals required by Governmental Authorities; (b) International LNG Terminal Standards; and (c) to the extent not inconsistent with International LNG Terminal Standards, such good and prudent practices as are generally followed in the LNG industry by a Reasonable and Prudent Person operating LNG receiving and regasification terminals.

 

4.2	Facilities to be Provided

Subject to Section 4.1, the terminal use agreement between Buyer and Buyer’s Facility shall include the following:

 

(a)

appropriate systems for communications with LNG Vessels;

 

(b)

unloading berths, which LNG Vessels can safely reach, fully laden, and safely depart, and at which LNG Vessels can lie safely berthed and unload safely afloat;

 

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(c)

lighting sufficient to permit berthing, unberthing and unloading operations by day or by night, to the extent permitted by Governmental Authorities and Pilots (it being acknowledged, however, that Buyer’s Facility shall in no event be obligated to allow nighttime berthing operations at Buyer’s Facility if Buyer’s Facility determines, acting as a Reasonable and Prudent Person, that such operations during nighttime hours could pose safety or operational risks to Buyer’s Facility, an LNG Vessel, or a third party);

 

(d)

unloading facilities capable of receiving LNG at a rate of up to an average of 12,000 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;

 

(e)

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 the required rates, pressures and temperatures;

 

(f)

facilities allowing ingress and egress between Buyer’s Facility and the LNG Vessel by: (i) representatives of Governmental Authorities for purposes of unloading operations; and (ii) an independent surveyor for purposes of conducting tests and measurements of LNG on board the LNG Vessel in accordance with Annex I;

 

(g)

LNG storage facilities with a total gross capacity sufficient for the purposes of this Agreement;

 

(h)

LNG regasification facilities sufficient for the purposes of this Agreement; and

 

(i)

piping, flange and mooring equipment necessary to discharge Cargo.

 

4.3	Facilities Not Provided

Services and facilities not provided at Buyer’s Facility include the following: (a) facilities and loading lines for liquid or gaseous nitrogen to service an LNG Vessel; (b) facilities for providing bunkers; and (c) facilities for the handling and delivery to the LNG Vessel of ship’s stores, provisions and spare parts.

ARTICLE 5

TRANSPORTATION AND UNLOADING

 

5.1	LNG Vessels

 

(a)

General . Seller shall be responsible for the transportation of LNG from the Loading Port to the Receipt Point. In this regard, Seller shall cause each LNG Vessel to comply with the requirements of this Article 5 in all respects.

 

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(b)

Approvals and Documentation . Each LNG Vessel shall comply with the regulations of and obtain all Approvals to enable such LNG Vessel to enter, leave and carry out all required operations at Buyer’s Facility. Each LNG Vessel shall at all times have on board valid documentation evidencing all such Approvals. Each LNG Vessel shall comply fully with the International Safety Management Code for the 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)

Tugs, Fireboats and Escort Vessels . Seller shall arrange for, or cause the appropriate Person to arrange for, such number and types of tugs, 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 Buyer’s Facility.

 

(d)

LNG Vessel Requirements . Each LNG Vessel must satisfy the following requirements:

 

(i)

General . Except as otherwise agreed in writing by Buyer, each LNG Vessel shall:

 

a.

have a displacement of no more than 166,600 tonnes, an overall length of no more than 1,140 feet, a beam of no more than 175 feet, and a draft of no more than 40 feet; and

 

b.

be otherwise fully compatible (including in relation to displacement, length, beam and draft) with Buyer’s Facility. Notwithstanding the foregoing, in the event an LNG Vessel is compatible with Buyer’s Facility, but a Governmental Authority or Pilot prohibits or otherwise hinders the utilization of such LNG Vessel, Seller’s transportation obligations under this Agreement shall not be excused or suspended by reason of Seller’s inability (pursuant to the foregoing) to use such vessel as an LNG Vessel.

Buyer shall nevertheless, make reasonable efforts to accept a nonconforming LNG Vessel if such acceptance would not create a contractual, safety or operational hardship for Buyer’s Facility. Seller will provide Buyer with design specifications for the Chartered LNG Vessels and the Parties shall cooperate to determine that the Chartered LNG Vessels are physically compatible with Buyer’s Facility.

 

(ii)

LNG Vessel Capacity . Except as otherwise agreed in writing by Buyer, each LNG Vessel shall have an LNG cargo containment capacity of no less than eighty seven thousand six hundred (87,600) Cubic Meters.

 

(iii)

Condition of the LNG Vessel . Each LNG Vessel shall be, in accordance with International LNG Vessel Standards: (a) fitted in every way for the safe loading, unloading, handling and carrying of LNG in bulk at atmospheric pressure; and (b) tight, staunch, strong and otherwise

 

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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 following: American Bureau of Shipping, Lloyd’s Register for Shipping, Bureau Veritas, Germanischer Lloyd, NKK, 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).

 

(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 Buyer’s Facility in writing, an LNG Vessel shall be prohibited from engaging in any maintenance, repair or in-water surveys while berthed at Buyer’s Facility, other than minor housekeeping repairs that do not materially affect the operation of the LNG Vessel. 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 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, 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.

 

(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 Buyer’s Facility and with other vessels in the area (including fireboats, escort vessels and other vessels employed in port operations).

 

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(ix)

Pumping Time . Provided that Buyer’s Facility supplies a suitable vapor return line meeting the requirements of Section 4.2(e), 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:

x = y/12,000 Cubic Meters; and

y = the LNG cargo containment capacity of the LNG Vessel in excess of 140,000 Cubic Meters.

Time for connecting, cooling, stripping and disconnecting, and cooling of liquid arms shall not be included in the computation of pumping time.

 

5.2	LNG Vessel Inspections; Right to Reject LNG Vessel

 

(a)

Inspections . During the Term, on prior reasonable notice to Seller, Buyer’s Facility acting as a Reasonable and Prudent Person 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 Buyer’s Facility may consider necessary to ascertain whether the LNG Vessel complies with the provisions of this Agreement. Buyer’s Facility 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 5.2(a): (i) shall not interfere with, or hinder, any LNG Vessel’s safe and efficient construction or operation; and (ii) shall not entitle Buyer’s Facility or any of its representatives to make any request or recommendation directly to Transporter except through Seller. No inspection (or lack thereof) of an LNG Vessel hereunder shall: (x) modify or amend Seller’s obligations, representations, warranties and covenants under this Agreement or under any agreement or instrument contemplated by this Agreement; or (y) constitute an acceptance or waiver by Buyer or B