Exhibit 10.2

GAS PURCHASE AND SALE AGREEMENT

between

Cheniere LNG Marketing, Inc.,

as Seller,

and

PPM Energy, Inc.,

as Buyer

Dated April 4, 2006

Execution Version

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TABLE OF CONTENTS

 

ARTICLE I    DEFINITIONS AND INTERPRETATION    1 ARTICLE II    TERM    8
ARTICLE III    QUANTITY    8 ARTICLE IV    PRICE    13 ARTICLE V    DELIVERY
POINT    14 ARTICLE VI    TRANSPORTATION    14 ARTICLE VII    QUALITY AND
MEASUREMENT    15 ARTICLE VIII    TERMINATION    16 ARTICLE IX    BILLING,
PAYMENT AND AUDIT    16 ARTICLE X    TITLE, WARRANTY AND INDEMNITY    18
ARTICLE XI    FORCE MAJEURE    18 ARTICLE XII    DEFAULTS AND REMEDIES    22
ARTICLE XIII    DISPUTE RESOLUTION    24 ARTICLE XIV    CREDIT SUPPORT    26
ARTICLE XV    MISCELLANEOUS    27

 

Exhibit A:    Map of Cheniere Creole Trail Pipeline and Cheniere Sabine Pass
Pipeline    Exhibit B:    Form of Increase Notice    Exhibit C:    Buyer
Guarantee    Exhibit D:    Seller Guarantee   

 

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Gas Purchase and Sale Agreement

This Gas Purchase and Sale Agreement (“Agreement”), dated as of this 4th day of
April, 2006 (“Effective Date”) is made by and between PPM Energy, Inc., a
company incorporated under the laws of the state of Oregon (“Buyer”) and
Cheniere LNG Marketing, Inc., a company incorporated under the laws of the state
of Delaware (“Seller”). Buyer or Seller may be referred to herein as “Party” and
collectively Buyer and Seller may be referred to as “Parties.”

RECITALS

WHEREAS, as one facet of its Gas marketing portfolio, Seller intends to purchase
LNG for import into the United States, regasify such LNG into Gas and sell such
Gas in the North American market;

WHEREAS, affiliates of Seller are developing LNG regasification terminals,
including the Sabine Pass LNG Terminal, and are developing Gas pipelines,
including the Cheniere Sabine Pass Pipeline and the Cheniere Creole Trail
Pipeline;

WHEREAS, Seller has or intends to acquire contractual rights to certain LNG
terminalling services (including the regasification of LNG) at the Sabine Pass
LNG Terminal;

WHEREAS, Seller has or intends to acquire transportation rights on the Cheniere
Sabine Pass Pipeline and the Cheniere Creole Trail Pipeline, on the
understanding that deliveries of Gas from the Cheniere Sabine Pass Pipeline will
be able to be made to the Cheniere Creole Trail Pipeline at or upstream of the
Delivery Point(s), thereby allowing regasified LNG from the Sabine Pass LNG
Terminal to be delivered at the Delivery Point(s); and

WHEREAS, subject to the fulfillment of certain conditions (including the
acquisition by Seller of sufficient LNG supply not dedicated to the supply of
Seller’s other customers), Seller desires to sell Gas to Buyer at the Delivery
Point(s) beginning at a minimum quantity of 20,000 MMBtu per day, and
potentially increasing up to a maximum of 600,000 MMBtu per day, and Buyer
desires to purchase such Gas from Seller;

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:

ARTICLE I

DEFINITIONS AND INTERPRETATION

 

A. Capitalized terms defined in this Article I shall have the meanings set forth
below.

“AAA” has the meaning ascribed to the term in Section XIII.A.

“Adjusted Daily Contract Quantity” or “ADCQ” has the meaning ascribed to the
term in Section III.C.1.

 

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“Affiliate” means a Person (other than a Party) that directly or indirectly
controls, is controlled by, or is under common control with a Party to this
Agreement, and for such purposes the terms “control”, “controlled by” and other
derivatives shall mean the direct or indirect ownership of more than fifty
percent (50%) of the voting rights in a Person.

“Aggregate Exposure” means, as of the relevant date of determination, the sum of
(a) the aggregate amount of the Daily Exposure in respect of each day on which
Gas has been delivered to and received by Buyer in accordance with this
Agreement, to the extent that Buyer has not yet been invoiced in accordance with
Article IX in respect of such Gas, and (b) the aggregate amount owing by Buyer
to Seller in respect of Gas delivered to and received by Buyer in accordance
with this Agreement for which Buyer has been invoiced as of such date in
accordance with Article IX.

“Aggregate Exposure Notice” means the notice from Seller to Buyer as required by
Section III.C.1.d. that the Aggregate Exposure exceeds the Guarantee Limitation
Amount, which written notice must be provided to Buyer at least five
(5) Business Days prior to Bid Week for the delivery month.

“Agreement” has the meaning ascribed to the term in the preamble to this
Agreement and includes all Exhibits attached hereto and made a part hereof.

“Bid Week” means the week during which the New York Mercantile Exchange’s Henry
Hub natural gas futures contract for the immediately following month terminates.

“British thermal unit” or “Btu” means the International BTU, which is also
called the Btu (IT).

“Business Day” means any day except Saturday, Sunday or days that New York
Mercantile Exchange, Inc., schedules as holidays.

“Buyer” has the meaning ascribed to the term in the preamble to this Agreement.

“Buyer Guarantee” means the guarantee dated as of the date hereof given by Buyer
Guarantor to Seller guaranteeing the obligations of Buyer under this Agreement,
a true and correct copy of which is attached as Exhibit C.

“Buyer Guarantor” means Scottish Power Finance (US) Inc., Delaware corporation.

“Buyer’s Cumulative Interruption Account” means the cumulative amount of the
positive difference between the Seller’s Non-Performance Payment and the amount
of Seller’s payments to Buyer pursuant to Section III.D.2. over a period of
twenty-four (24) months, the first such period to begin with the Commercial
Start Date; provided, however, that if the Buyer’s Cumulative Interruption
Account balance is reduced pursuant to Section III.B.3.e., Section III.D.2.b. or
Section VIII.B.3., the date of the reduction constitutes the beginning of a new
twenty-four (24) month period.

“Cheniere Creole Trail Pipeline” means that pipeline, a preliminary map of which
is attached as Exhibit A, commencing at or near the future site of the Creole
Trail LNG Terminal and terminating at an interconnection with Columbia Gulf
Transmission Company pipeline.

 

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“Cheniere Sabine Pass Pipeline” means that pipeline, a preliminary map of which
is attached as Exhibit A, commencing at the tailgate of the Sabine Pass LNG
Terminal and terminating approximately sixteen (16) miles east at Johnson Bayou.

“Claims” has the meaning ascribed to it in Section X.C.

“Commercial Start Date” means the first day of the second calendar month
following the later of the date of the commencement of: (a) commercial operation
of the Sabine Pass LNG Terminal; (b) commercial operation of the Cheniere Creole
Trail Pipeline with firm service to the delivery points at the Principal
Pipelines; and (c) the commercial delivery of Gas from the Sabine Pass LNG
Terminal to the Cheniere Creole Trail Pipeline.

“Contract Price” has the meaning ascribed to the term in Section IV.A.1.

“Cover Standard” means that if there is an unexcused failure to take or deliver
any quantity of Gas pursuant to this Agreement, then the performing Party shall
use commercially reasonable efforts to (i) if Buyer is the performing Party,
obtain Gas, (or an alternate fuel if elected by Buyer and replacement Gas is not
available), or (ii) if Seller is the performing Party, sell Gas, in either case,
at a price reasonable for the delivery or production area, as applicable,
consistent with: the amount of notice provided by the nonperforming Party; the
quantities involved; and the anticipated length of failure by the nonperforming
Party.

“Creole Trail LNG Terminal” means the LNG terminal facility in Cameron Parish,
Louisiana capable of performing certain LNG terminalling services, including:
the berthing of LNG vessels; the unloading, receiving and storing of LNG; the
regasification of LNG; and delivery of natural gas to the point of interconnect
between the tailgate of such LNG terminal facility and the Cheniere Creole Trail
Pipeline.

“Daily Contract Quantity” or “DCQ” has the meaning ascribed to the term in
Section III.B.1.

“Daily Exposure” means, as of the relevant date of determination, an amount
equal to the product obtained by multiplying (a) the DCQ in respect of such
date, by (b) the relevant price as determined in accordance with Article IV.

“Defaulting Party” has the meaning ascribed to the term in Section XII.A.

“Delivery Point(s)” has the meaning ascribed to the term in Section V.A.

“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.

“Early Termination Date” has the meaning ascribed to the term in Section XII.C.

“Effective Date” has the meaning ascribed to the term in the preamble to this
Agreement.

“Event of Default” has the meaning ascribed to the term in Section XII.A.

 

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“Excused Party” has the meaning ascribed to the term in Section XI.A.

“Extension Term” has the meaning ascribed to the term in Section II.C.

“FERC” means the Federal Energy Regulatory Commission, or any successor federal
regulatory agency.

“FERC Gas Tariff” means the rate schedules, terms and conditions of service and
other components comprising a natural gas company’s tariff as required to be on
file with FERC and in effect, as it may be modified from time to time.

“Force Majeure” has the meaning ascribed to the term in Section XI.B.

“Gas” means any mixture of hydrocarbons and noncombustible gases in a gaseous
state consisting primarily of methane.

“Gas Day” means a period beginning at 09:00 Central Clock Time and ending at
09:00 Central Clock Time on the following day.

“Gas Quality Standard” has the meaning ascribed to the term in Section VII.A.

“Government Approvals” means all consents, authorizations, licenses, waivers,
permits, approvals and other similar documents from or by any federal, regional,
state, or local government, any subdivision, agency, commission or authority
thereof (including maritime authorities, port authority or any
quasi-governmental agency) having jurisdiction over a Party, the Sabine Pass LNG
Terminal, the Creole Trail LNG Terminal, the Cheniere Sabine Pass Pipeline, the
Cheniere Creole Trail Pipeline, as the case may be, and acting within its legal
authority.

“Guarantee Limitation Amount” has the meaning ascribed to such term in the Buyer
Guarantee.

“Gulf of Mexico” means that body of water located at the southeastern corner of
North America, that is approximately 579,000 square miles, measuring
approximately 995 miles from east to west, 560 miles from north to south and
that is bordered by the United States to the north, Mexico to the west, and the
island of Cuba to the southeast.

“Imbalance Charges” mean any fees, penalties, costs or charges (in cash or in
kind) assessed by a Transporter for failure to satisfy the Transporter’s balance
and/or nomination requirements.

“Increase Notice” has the meaning ascribed to the term in Section III.B.3.

“Initial Term” has the meaning ascribed to the term in Section II.B.

“Interconnect Pipeline” has the meaning ascribed to the term in Section V.A.

“Interruption of LNG Supply” means any act, event or circumstance, not
reasonably within the control of Seller, the effects of which could not be
avoided or remedied by the commercially reasonable efforts of Seller, and which
would not otherwise qualify as Force Majeure hereunder,

 

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that prevents or delays LNG from being delivered to the Sabine Pass LNG
Terminal, including, for greater certainty: (i) breakdown or loss of an LNG
Tanker or its cargo, (ii) interruption of LNG supply from the country from which
Seller sources LNG, including breakdown or loss of any LNG liquefaction
facilities in such country; and (iii) the loss or failure of Seller’s LNG supply
or depletion of reserves of gas used to produce LNG.

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

“LNG Tanker” means an ocean-going vessel suitable for transporting LNG.

“LNG Terminals” means the Creole Trail LNG Terminal or the Sabine Pass LNG
Terminal.

“Long-Term LNG Supply Agreement” means an LNG supply agreement entered into by
Seller or its Affiliates for the supply of LNG that meets the following
criteria:

 

  i. the initial term of such agreement is two (2) years or greater;

 

  ii. the volume equates to a delivery rate for regasified LNG equal to or
greater than one hundred thousand (100,000) MMBtu per Gas Day for the entire
initial term of such agreement;

 

  iii. the contract price for the purchase of LNG, as converted into a price per
MMBtu is equivalent to not more than ninety-four percent (94%) of the final
NYMEX settlement price per MMBtu for a delivery month, less $0.32 per MMBtu,
over the remaining Term or the initial term of the LNG supply agreement,
whichever is shorter;

 

  iv. the primary destination of the LNG is the Sabine Pass LNG Terminal;

 

  v. such LNG supply agreement is not a Paired Contract; and

 

  vi. at the time of execution the DCQ is less than the Maximum DCQ.

“Maximum DCQ” means six hundred thousand (600,000) MMBtu per Gas Day, unless
otherwise modified pursuant to Section III.B.4.

“MMBtu” means one million (1,000,000) British thermal units.

“Net Settlement Amount” has the meaning ascribed to the term in Section XII.C.

“Non-Defaulting Party” has the meaning ascribed to the term in Section XII.A.

“Paired Contract” means an LNG supply agreement to the extent that LNG supplied
under such agreement supports Seller’s or its Affiliate’s obligations under one
or more particular regasified LNG sales agreements, each executed by Seller or
its Affiliate prior to the Effective Date, or if not executed prior to the
Effective Date, each executed by Seller or its Affiliate within six (6) months
of the other.

 

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“Party” and “Parties” have the meanings ascribed to the terms in the preamble to
this Agreement.

“Payment Date” means the later of (a) the 25th day of the month following the
month of delivery of Gas; provided Buyer has received the invoice for such month
from Seller, and (b) the 10th day following Buyer’s receipt of an invoice from
Seller.

“Person” means any individual, company, firm, partnership, association or body
corporate.

“Principal Pipelines” means the following pipelines that interconnect with the
Cheniere Creole Trail Pipeline:

 

  i. Transcontinental Gas Pipe Line Corporation (Zone 3);

 

  ii. Tennessee Gas Pipe Line Company;

 

  iii. Florida Gas Transmission Company (Zone 2);

 

  iv. Columbia Gulf Transmission Company; and

 

  v. ANR Pipeline Company,

each as described in the Cheniere Creole Trail Pipeline application for
certificate of authority filed at FERC, and as shown on Exhibit A, subject to
any modifications that may be required or approved by FERC.

“Sabine Pass LNG Terminal” means the LNG terminal facility in Cameron Parish,
Louisiana capable of performing certain LNG terminalling services, including:
the berthing of LNG vessels; the unloading, receiving and storing of LNG; the
regasification of LNG; and the delivery of natural gas to the point of
interconnect between the tailgate of such LNG terminal facility and the Cheniere
Sabine Pass Pipeline.

“Scheduled Maintenance” has the meaning ascribed to the term in Section III.C.3.

“Seller” has the meaning ascribed to the term in the preamble to this Agreement.

“Seller Guarantee” means the guarantee dated as of the date hereof given by
Seller Guarantor to Buyer guaranteeing the obligations of Seller under this
Agreement, a true and correct copy of which is attached as Exhibit D.

“Seller Guarantor” means Cheniere Energy, Inc., a Delaware corporation.

“Seller’s Cumulative Interruption Account” means the cumulative amount of
damages paid by Seller to Buyer pursuant to Section III.D.2. over a period of
twenty-four (24) months, the first such period to begin on the Commercial Start
Date; provided, however, that if the Seller’s Cumulative Interruption Account
balance is reduced pursuant to Section VIII.A.4., the date of the reduction
constitutes the beginning of a new twenty-four (24) month period.

“Seller’s Non-Performance Payment” has the meaning ascribed to the term in
Section III.D.1.

 

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“Spot Price” means the midpoint price listed in the publication “Platt’s Gas
Daily” (or, if no longer published, any successor publication or equivalent
publication as may be mutually agreed to by the Parties), under the listing
applicable to the geographic location closest in proximity to the Delivery
Point(s) for the relevant Gas Day; provided, if there is no single price
published for such location for such Gas Day, but there is published a range of
prices, then the Spot Price shall be the average of such high and low prices. If
no price or range of prices is published for such Gas Day, then the Spot Price
shall be the average of the following: (i) the price (determined as stated
above) for the first Gas Day for which a price or range of prices is published
that next precedes the relevant Gas Day; and (ii) the price (determined as
stated above) for the first Gas Day for which a price or range of prices is
published that next follows the relevant Gas Day.

“Taxes” has the meaning ascribed to the term in Section IV.B.2.

“Term” has the meaning ascribed to the term in Section II.A.

“Transporter” means all Gas pipeline companies acting in the capacity of a
transporter, transporting Gas for Seller or Buyer upstream or downstream,
respectively, of the Delivery Point.

“Tribunal” has the meaning ascribed to the term in Section XIII.B.

 

B. Interpretation

 

  1. Headings. The topical headings used in this Agreement are for convenience
only and shall not be construed as having any substantive significance or as
indicating that all of the provisions of this Agreement relating to any topic
are to be found in any particular Article or that an Article relates only to the
topical heading.

 

  2. Singular and Plural. Reference to the singular includes a reference to the
plural and vice versa.

 

  3. Gender. Reference to any gender includes a reference to all other genders.

 

  4. Article. Unless otherwise provided, reference to any Article, Section or
Exhibit means an Article, Section or Exhibit of this Agreement.

 

  5. Include. The words “include” and “including” shall mean include or
including without limiting the generality of the description preceding such term
and are used in an illustrative sense and not a limiting sense.

 

  6. Time Periods. References to “day,” “month,” “quarter” and “year” shall,
unless otherwise stated or defined, mean a day, month, quarter and year of the
Gregorian calendar, respectively. For the avoidance of doubt, a “day” shall
commence at 24:00 midnight.

 

  7. Currency. References to United States dollars shall be a reference to the
lawful currency from time to time of the United States of America.

 

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  8. Facilities. References to either the Sabine Pass LNG Terminal, the Creole
Trail LNG Terminal, the Cheniere Sabine Pass Pipeline or the Cheniere Creole
Trail Pipeline shall be a reference to such facilities as modified from time to
time.

ARTICLE II

TERM

 

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

 

B. 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 ten (10) years from the Commercial Start Date, unless
terminated earlier in accordance with this Agreement. Seller shall give notice
to Buyer of the Commercial Start Date no later than five (5) days following the
later of the date of commencement of: (a) commercial operations of the Sabine
Pass LNG Terminal, (b) commercial operations of the Cheniere Creole Trail
Pipeline, or (c) the commercial delivery of Gas from the Sabine Pass LNG
Terminal to the Cheniere Creole Trail Pipeline.

 

C. Extension Terms. This Agreement shall extend for a five (5) year period
(“Extension Term”) immediately following the expiration of the Initial Term and
for a second five (5) year Extension Term immediately following the expiration
of the first Extension Term, provided that either Buyer or Seller may terminate
this Agreement effective at the expiration of the then-current Term by providing
written notice to the other Party at least one-hundred twenty (120) days prior
to the expiration of the then-current Term.

ARTICLE III

QUANTITY

 

A. Sale and Purchase Obligations Generally.

 

  1. Seller’s Obligation. Subject to the terms and conditions of this Agreement,
Seller shall make available to Buyer, for purchase at the Delivery Point(s) on
each Gas Day beginning with the Commercial Start Date, an aggregate volume of
Gas equal to the Adjusted Daily Contract Quantity.

 

  2. Buyer’s Obligation. Subject to the terms and conditions of this Agreement,
Buyer shall purchase from Seller at the Delivery Point(s) on each Gas Day
beginning with the Commercial Start Date an aggregate volume of Gas equal to the
Adjusted Daily Contract Quantity. In this regard, Buyer covenants that it is
purchasing Gas principally for resale to its customers and not for consumption
as an end-user.

 

B. Determination of Daily Contract Quantity.

 

  1. Commencing on the Commercial Start Date, the daily contracted quantity to
be purchased and sold hereunder (the “Daily Contract Quantity” or “DCQ”) shall
be zero (0) MMBtu per Gas Day.

 

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  2. If Seller enters into one or more Long-Term LNG Supply Agreements before or
during the Term, the Parties acknowledge that the DCQ shall from time to time be
increased in accordance with Section III.B.3.

 

  a. If Seller enters into a Long-Term LNG Supply Agreement and at the time of
execution of such agreement the DCQ is less than the Maximum DCQ, Seller shall
allocate, by issuing to Buyer an Increase Notice, to Seller’s Gas supply
obligations under this Agreement not less than forty percent (40%) of the LNG
supply to which Seller is entitled under such Long-Term LNG Supply Agreement
until the DCQ equals one hundred thousand (100,000) MMBtu per Gas Day, and
thereafter not less than twenty percent (20%) of the LNG supply to which Seller
is entitled under such Long-Term LNG Supply Agreement, up to the Maximum DCQ.

 

  b. On or before March 1 of each calendar year, Seller shall provide to Buyer a
certificate, executed by an officer of Seller, stating that Seller has reviewed
its and its Affiliates’ LNG supply agreements and that Seller has allocated to
Seller’s Gas supply obligations under this Agreement the proper percentage of
supply of all Long-Term LNG Supply Agreements.

 

  c. Seller shall provide written notice to Buyer within five (5) days of the
Effective Date of all Paired Contracts then executed. After the Effective Date
and during any time that the DCQ is less than the Maximum DCQ, Seller shall
provide written notice to Buyer no later than thirty (30) days after Seller’s
execution of any LNG supply agreement that constitutes, or will constitute, a
Paired Contract, with such written notice (subject to any confidentiality
limitations) identifying the volume of such LNG supply agreement.

 

  3. Seller shall increase the DCQ by providing to Buyer a written notice of
such increase in the DCQ (the “Increase Notice”), as follows:

 

  a. An Increase Notice shall be in substantially the same form as set forth in
Exhibit B attached hereto and shall indicate the increased DCQ, the calendar
month during which the increased DCQ shall first be effective, and the duration
of such increase in the DCQ;

 

  b. Seller shall provide the Increase Notice to Buyer at least ninety (90) days
in advance of the calendar month during which the increased DCQ shall first be
effective, such effective date to be the first day of such calendar month;

 

  c. The duration of the increase in DCQ pursuant to an Increase Notice shall
not exceed the remaining Term. At least one hundred eighty (180) days prior to
the end of the Term, Buyer may request that Seller provide a reconciliation of
which Increase Notices would remain in effect if the then-current Term were
extended pursuant to Section II.C;

 

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  d. The first Increase Notice shall be for at least twenty thousand
(20,000) MMBtu per Gas Day; and

 

  e. At the time Seller issues an Increase Notice, if Buyer’s Cumulative
Interruption Account is greater than $1.0 million, Buyer’s Cumulative
Interruption Account shall revert to zero unless Buyer provides written notice
to Seller within thirty (30) days of the date of such Increase Notice that Buyer
does not accept such Increase Notice. In the event Buyer does not accept such
Increase Notice, the Buyer’s Cumulative Interruption Account shall remain
unaffected and Seller shall have no obligation to deliver to Buyer Gas pursuant
to such Increase Notice.

 

  4. If, as of October 31, 2010, the DCQ determined pursuant to all Increase
Notices is less than the Maximum DCQ, then either Buyer or Seller may elect to
reduce the Maximum DCQ for the remaining Term to the DCQ in effect as of
October 31, 2010, as follows. Either Party may elect to reduce the Maximum DCQ
by providing written notice to the other Party between October 31, 2010 and
December 31, 2010; provided that if, prior to Buyer notifying Seller of any such
reduction, Seller delivers one or more Increase Notices increasing the DCQ to
the Maximum DCQ, then Buyer may not subsequently reduce the Maximum DCQ.

 

  5. During any period in which the DCQ is less than the Maximum DCQ, Seller
shall provide Buyer once each quarter with Seller’s non-binding estimation of
the likelihood that one or more additional Increase Notices will be provided
hereunder during the next quarter.

 

C. Determination of Adjusted Daily Contract Quantity.

 

  1. For each delivery month, the “Adjusted Daily Contract Quantity” or “ADCQ”
shall be calculated by subtracting from the DCQ for each Gas Day:

 

  a. the quantity of Gas which Buyer is unable to receive because of an event of
Force Majeure affecting either Seller or Buyer;

 

  b. the quantity of Gas which Seller is unable to deliver due to an
Interruption of LNG Supply notified pursuant to Section III.C.2;

 

  c. the quantity of Gas which Seller is unable to deliver due to Scheduled
Maintenance notified pursuant to Section III.C.3.; and

 

  d. the quantity of Gas approximately equal in value, based on the closing
price per MMBtu of Gas on the NYMEX Henry Hub natural gas futures contract for
the delivery month on the date of Seller’s Aggregate Exposure Notice, to the
amount by which the anticipated exposure as of the Payment Date in the
succeeding delivery month exceeds the Guarantee Limitation Amount, provided that
the DCQ shall not be adjusted downward if Buyer reduces the Aggregate Exposure
below the Guarantee Limitation Amount at least two (2) Business Days prior to
Bid Week for the delivery month.

 

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  2. If Seller anticipates that Seller will be unable to deliver Gas to Buyer on
any Gas Day for the following month due to an Interruption of LNG Supply, Seller
shall notify Buyer at least two (2) Business Days prior to the Bid Week for the
delivery month of the estimated amount of the Interruption of LNG Supply. On the
basis of such estimated amount, Seller shall set forth in such notice the ADCQ
for each Gas Day for the following month.

 

  3. Seller shall provide written notice to Buyer on the Commercial Start Date
and no later than sixty (60) days before January 1 of each calendar year
thereafter an estimate of the dates scheduled for maintenance at the Sabine Pass
LNG Terminal and the Cheniere Creole Trail Pipeline for the forthcoming calendar
year (“Scheduled Maintenance”). Seller shall provide written notice no later
than ten (10) days prior to the first day of each calendar quarter (January
1, April 1, July 1 and October 1) of the updated schedule for Scheduled
Maintenance for the remainder of such calendar year. If such estimated dates for
Scheduled Maintenance change, Seller shall notify Buyer within five (5) days of
such changed dates. No later than two (2) Business Days prior to Bid Week for
each delivery month, Seller shall notify Buyer of any volume of Gas that Seller
will not be able to deliver to Buyer for such delivery month due to Scheduled
Maintenance.

 

D. Damages for Failure to Deliver or Receive Gas.

 

  1. In the event that Seller fails to deliver the ADCQ to Buyer on one or more
Gas Days during a delivery month, Buyer shall calculate for each day of such
delivery month (i) the difference, if any, between the purchase price paid by
Buyer utilizing the Cover Standard and the Contract Price, adjusted for
commercially reasonable differences in transportation costs to or from the
Delivery Point(s), multiplied by the difference between the ADCQ and the
quantity actually delivered by Seller during such Gas Day; or (ii) in the event
that Buyer has used commercially reasonable efforts to replace the Gas, and no
such replacement is available, any difference between the Contract Price and the
Spot Price, adjusted for such transportation to the applicable Delivery Point,
multiplied by the difference between the ADCQ and the quantity actually
delivered by Seller and received by Buyer during such Gas Day. In such
calculation, Buyer shall net out the losses and gains from such purchases of
cover Gas. At the end of such delivery month, Buyer shall provide Seller with
the results of such calculation. This amount, if positive, shall be the
“Seller’s Non-Performance Payment”, which (except as provided in Section
III.D.2.) Seller shall pay to Buyer.

 

  2. Without prejudice and subject to Article XI, if Seller is unable to deliver
the ADCQ to Buyer on any Gas Day due to an Interruption of LNG Supply of which
Seller has not notified Buyer pursuant to Section III.C.2 and such inability
lasts for a period of less than seventy-two (72) consecutive hours, Seller shall
pay Seller’s Non-Performance Payment to Buyer. If Seller is unable to deliver
the ADCQ to Buyer on any Gas Day due to such an Interruption of LNG Supply for a
period lasting seventy-two (72) consecutive hours or longer, then:

 

  a. Seller shall notify Buyer of such inability as soon as possible;

 

11

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  b. Seller shall pay to Buyer an amount equal to the lesser of (i) the Seller’s
Non-Performance Payment and (ii) $0.50 per MMBtu multiplied by the deficiency
quantity. The “deficiency quantity” is the difference between the total volume
of Gas that would have been delivered during the month at the ADCQ and the
quantity actually delivered by Seller. The Seller’s Cumulative Interruption
Account shall be increased by the amount of such payment. Buyer may at any time
elect to reduce the Seller’s Cumulative Interruption Account balance to zero by
paying to Seller the balance of the Seller’s Cumulative Interruption Account
pursuant to Article IX.; provided that Buyer’s Cumulative Interruption Account
shall not be increased by any amounts paid by Buyer pursuant to this sentence;
and

 

  c. Buyer’s Cumulative Interruption Account shall be increased by the
difference, if any, between Seller’s Non-Performance Payment and the amount
actually paid by Seller pursuant to Section III.D.2.b. Seller may at any time
elect to reduce the Buyer’s Cumulative Interruption Account balance to zero by
paying to Buyer the balance of the Buyer’s Cumulative Interruption Account
pursuant to Article IX; provided that Seller’s Cumulative Interruption Account
shall not be increased by any amounts paid by Seller pursuant to this sentence.

 

  3. In the event that Buyer fails to receive the ADCQ from Seller on any one or
more Gas Days during a delivery month, then Seller shall calculate for each day
of such delivery month (i) the difference, if any, between the Contract Price
and the price received by Seller utilizing the Cover Standard for the resale of
such Gas, adjusted for commercially reasonable differences in transportation
costs to or from the Delivery Point(s), multiplied by the difference between the
ADCQ and the quantity actually taken by Buyer during such Gas Day; or (ii) in
the event that Seller has used commercially reasonable efforts to sell the Gas
to a third party, and no such sale is available, any difference between the
Contract Price and the Spot Price, adjusted for such transportation to the
applicable Delivery Point, multiplied by the difference between the ADCQ and the
quantity actually delivered by Seller and received by Buyer during such Gas Day.
In such calculation, Seller shall net out the losses and gains from such resale
of Gas. At the end of such delivery month, Seller shall provide Buyer with the
results of such calculation. This amount, if positive, shall be added to Buyer’s
monthly invoice and paid to Seller pursuant to Article IX.

 

  4. For avoidance of doubt, neither Party shall have liability to the other for
failure to deliver or receive Gas due to an event of Force Majeure. Seller shall
have no liability to Buyer for failure to deliver Gas:

 

  a. due to an Interruption of LNG Supply provided that Seller notifies Buyer of
an Interruption of LNG Supply in accordance with Section III.C.2; or

 

12

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  b. due to Scheduled Maintenance provided that Seller notifies Buyer of
Scheduled Maintenance in accordance with Section III.C.3.

 

  5. Imbalance Charges shall not be recovered under this Section III.D, but
Seller and/or Buyer shall be responsible for Imbalance Charges, if any, as
provided in Section VI.D.

 

E. Any amount payable by a Party pursuant to Section III.D shall be treated as
actual, direct damages and shall not be treated as consequential damages or as
loss of income or profits under Section XII.H.

 

F. Any amount payable pursuant to Section III.D shall be credited as an offset,
in the case of amounts payable by Seller, or itemized on an invoice separately,
in the case of amounts payable by Buyer, pursuant to the provisions of Article
IX.

ARTICLE IV

PRICE

 

A. Price of Gas.

 

  1. The price of Gas sold and purchased with respect to any month (the
“Contract Price”) shall be ninety-six percent (96%) of the price in dollars per
MMBtu for the NYMEX Henry Hub Natural Gas futures contract for Gas to be
delivered during such month, such price to be based upon the final settlement
price on the last trading day for the futures contracts for such month, plus ten
cents ($0.10) per MMBtu.

 

  2. If the NYMEX Henry Hub Natural Gas futures contract settlement prices cease
to be published for any reason, or the data is so changed in the basis of
calculation or quantity or type of commodity included therein or otherwise as to
affect materially the validity of the index over time, the Parties shall select
a comparable index to be used in its place that maintains the intent and
economic effect of the original index.

 

B. Taxes.

 

  1. The prices established pursuant to this Article IV are inclusive of all
Taxes levied on Seller or for which Seller is responsible.

 

  2.

Seller shall pay or cause to be paid all taxes, fees, levies, penalties,
licenses or charges imposed by any governmental authority (“Taxes”) on Seller on
or with respect to the Gas prior to the Delivery Point. Buyer shall pay or cause
to be paid all Taxes imposed by any governmental authority on Buyer on or with
respect to the Gas at and after the Delivery Point. If a Party is required to
collect, remit or pay Taxes that are the other Party’s responsibility hereunder,
the Party responsible for such Taxes shall promptly reimburse the other Party
for such Taxes. Any Party entitled to an exemption from any such Taxes or
charges shall furnish the

 

13

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other Party any necessary documentation thereof on or before the date of
delivery of the Gas.

 

  3. Buyer shall provide Seller with information as may be required to allow
Seller to properly file all required federal, state, and local tax reports and
other regulatory filings.

ARTICLE V

DELIVERY POINT

 

A. The delivery point(s) shall be the interconnects between the Cheniere Creole
Trail Pipeline and any Principal Pipeline or other pipeline interconnecting with
the Cheniere Creole Trail Pipeline (each, an “Interconnect Pipeline”) as
nominated by Buyer (the “Delivery Point(s)”)

 

B. Seller shall have the right at the time that Buyer makes its nomination for
the upcoming Gas Day pursuant to Section VI.B. to move any Delivery Point from
the physical interconnection between the Interconnect Pipeline and the Cheniere
Creole Trail Pipeline to the Interconnect Pipeline’s local pooling point, if
applicable; provided, however, if such pooling point(s) are allocated or
curtailed by an Interconnect Pipeline, Seller shall use commercially reasonable
efforts to revert to the Delivery Point(s) nominated by Buyer.

ARTICLE VI

TRANSPORTATION

 

A. Seller shall have sole responsibility for transporting the Gas to the
Delivery Point(s), subject to the following requirements:

 

  1. The arithmetic sum of the delivery quantity nominated for each Delivery
Point on any Gas Day shall not exceed the ADCQ; and

 

  2.

Buyer’s nomination to Seller for delivery at any Interconnect Pipeline shall not
exceed Buyer’s pro-rata portion of Seller’s delivery capacity to such pipeline.
“Buyer’s pro-rata portion” means the proportion that the ADCQ on any particular
Gas Day bears to Seller’s firm capacity on the Cheniere Creole Trail Pipeline.
“Seller’s delivery capacity to such pipeline” means the product of: (i) Seller’s
share (as a proportion) of firm capacity rights on the Cheniere Creole Trail
Pipeline; and (ii) the firm delivery capacity of the Cheniere Creole Trail
Pipeline to the Interconnect Pipeline. Seller shall provide Buyer with written
notice of “Buyer’s pro-rata portion” and “Seller’s delivery capacity to such
pipeline” before the nomination cycle for the Gas Day beginning on the
Commercial Start Date. To the extent “Buyer’s pro-rata portion” or “Seller’s
delivery capacity to such pipeline” changes, Seller shall provide Buyer with
written notice of such change in advance of the first nomination cycle during
which such change may effect Buyer’s access to Delivery Point(s). If Buyer’s
requested delivery quantity for any Delivery Point exceeds Buyer’s pro-rata
portion of Seller’s delivery capacity at such pipeline as provided in Seller’s
notices to Buyer, Seller shall have no

 

14

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obligation to deliver the excess quantity and Buyer shall be deemed to have
failed to receive such excess quantity.

 

B. Buyer shall have sole responsibility for transporting the Gas from and after
the Delivery Point(s). Buyer shall orally communicate to Seller’s pipeline
scheduling representative (i) the requested Delivery Point(s) and (ii) the
requested delivery quantity for the Gas Day at each Delivery Point no later than
8:30 AM on the day prior to the Gas Day for deliver of such Gas and Buyer shall
confirm such nomination request in writing no later than forty-five (45) minutes
later. Seller shall use commercially reasonable efforts to accommodate Buyer’s
intraday changes to such nominations.

 

C. In addition to meeting the obligations set forth in Section VI.A.2, the
Parties shall coordinate their nomination activities, giving sufficient time to
meet the deadlines of the affected Transporter. Should either Party become aware
that actual deliveries at the Delivery Point(s) are greater or lesser than the
nominated delivery quantity, such Party shall promptly notify the other Party.
The Parties expressly agree that any allocation, reduction, or curtailment of
capacity at a Delivery Point shall constitute an event of Force Majeure. Seller
shall use commercially reasonable efforts to increase, by the amount of the
allocation, reduction, or curtailment, the delivery quantities at other Delivery
Point(s).

 

D. The Parties shall use commercially reasonable efforts to avoid imposition of
any Imbalance Charges. If Buyer or Seller receives an invoice from a Transporter
that includes Imbalance Charges, the Parties shall determine the validity as
well as the cause of such Imbalance Charges. If the Imbalance Charges were
incurred as a result of Buyer’s receipt of quantities of Gas greater than or
less than the Adjusted Daily Contract Quantity, then Buyer shall pay for such
Imbalance Charges or reimburse Seller for such Imbalance Charges paid by Seller.
If the Imbalance Charges were incurred as a result of Seller’s delivery of
quantities of Gas greater than or less than the Adjusted Daily Contract
Quantity, then Seller shall pay for such Imbalance Charges or reimburse Buyer
for such Imbalance Charges paid by Buyer.

ARTICLE VII

QUALITY AND MEASUREMENT

 

A. Quality. Deliveries of Gas by Seller to Buyer at the Delivery Point(s)
pursuant to this Agreement shall meet the pressure, quality and heat content
requirements of the Principal Pipelines as established by the FERC Gas Tariffs
for such pipelines, as may be in effect from time to time (“Gas Quality
Standard”).

 

  1. It is the obligation of Seller to notify Buyer if Gas to be delivered by
Seller to Buyer will not meet the Gas Quality Standard or if Seller has reason
to believe that the Gas will not meet the Gas Quality Standard.

 

  2.

Buyer shall have no obligation to accept, purchase and pay for Gas that does not
meet the Gas Quality Standard. If Buyer knowingly accepts Gas that Seller
notifies Buyer in writing fails to meet the Gas Quality Standard, Buyer shall be
obligated to pay for such Gas, Seller shall have no liability for Claims arising

 

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from such Gas and as to such Gas, Buyer hereby waives all rights under the New
York Uniform Commercial Code for acceptance of non-conforming goods.

 

B. Measurement. All measurements of Gas delivered and sold hereunder shall be in
accordance with the established procedures, as they may be in effect from time
to time, of the receiving pipeline at the Delivery Point(s).

ARTICLE VIII

TERMINATION

 

A. Seller may terminate this Agreement upon thirty (30) days written notice to
Buyer in the event of any of the following:

 

  1. Seller has not received and accepted, in its reasonable discretion, all
Government Approvals necessary to perform its obligations under this Agreement
by June 30, 2008; provided, however, that Seller shall have exercised reasonable
efforts to obtain all such Government Approvals;

 

  2. the Commercial Start Date has not occurred by June 30, 2010; or

 

  3. Seller has not issued the first Increase Notice by October 31, 2010; or

 

  4. Seller’s Cumulative Interruption Account exceeds fifteen million dollars
($15,000,000). If Seller elects not to terminate this Agreement within the
notice period of this Section VIII.A., such right shall expire, and the amount
of Seller’s Cumulative Interruption Account shall be set to zero ($0.00).

 

B. Buyer may terminate this Agreement upon thirty (30) days written notice to
Seller in the event of either of the following:

 

  1. the Commercial Start Date has not occurred by June 30, 2010; or

 

  2. Seller has not issued the first Increase Notice by October 31, 2010; or

 

  3. Buyer’s Cumulative Interruption Account exceeds fifteen million dollars
($15,000,000). If Buyer elects not to terminate this Agreement within the notice
period of this Section VIII.B., such right shall expire, and the amount of
Buyer’s Cumulative Interruption Account shall be set to zero ($0.00).

ARTICLE IX

BILLING, PAYMENT AND AUDIT

 

A.

Seller shall invoice Buyer for Gas delivered and received in the preceding month
and for any other applicable charges, providing supporting documentation
acceptable in industry practice to support the amount charged. Seller shall
calculate the invoice amount for Gas delivered based on a Gas price rounded to
the fourth decimal place. If the actual quantity delivered is not known by the
billing date, billing will be prepared based on the estimated Adjusted Daily
Contract Quantity for such month. The invoiced quantity will then be

 

16

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adjusted to the actual quantity on the following month’s billing or as soon
thereafter as actual delivery information is available.

 

B. Buyer shall remit the amount due under Section IX.A., in immediately
available funds, on or before the Payment Date; provided that if the Payment
Date is not a Business Day, payment is due on the next Business Day following
that date. In the event any payments are due Buyer hereunder, payment to Buyer
shall be made in accordance with this Section IX.B.

 

C. The invoiced Party shall pay the full amount of any disputed invoice without
any deduction or set-off (except as to any deduction or set-off otherwise
allowed under this Agreement), provided that in the case of an obvious error in
computation, the invoiced Party shall pay the correct amount disregarding such
error. If the invoiced Party disputes the amount due, it must provide supporting
documentation acceptable in industry practice to support the amount paid or
disputed. The Parties will endeavor to resolve any Dispute of an invoice within
thirty (30) days after notice of the disputed invoice is given. If it is
ultimately determined that all or a portion of the disputed amount was
incorrectly invoiced and paid by Buyer to Seller, Seller shall pay Buyer that
amount within two Business Days of such determination, along with interest (as
determined in Section IX.D). from and including the original payment date to but
excluding the date payment is made. In the event the Parties are unable to
resolve such Dispute within such period, either Party may refer the Dispute to
arbitration under Article XIII.

 

D. If the invoiced Party fails to remit the full amount payable when due,
interest on the unpaid portion shall accrue from the date due until the date of
payment at a rate equal to the lower of (i) the then-effective prime rate of
interest per annum published under “Money Rates” by The Wall Street Journal,
plus two percentage points; or (ii) the maximum applicable lawful interest rate.

 

E. A Party shall have the right, at its own expense, upon reasonable notice and
at reasonable times, to examine, audit and to obtain copies of the relevant
portion of the books, records, and telephone recordings of the other Party only
to the extent reasonably necessary to verify the accuracy of any statement,
charge, payment, or computation made under this Agreement. This right to
examine, audit, and to obtain copies and recordings shall not be available with
respect to proprietary information not directly relevant to this Agreement. All
invoices and billings shall be conclusively presumed final and accurate and all
associated claims for under- or overpayments shall be deemed waived unless such
invoices or billings are objected to in writing, with adequate explanation
and/or documentation, within two years after the month of Gas delivery. All
retroactive adjustments under Article IX shall be paid in full by the Party
owing payment within thirty days after receipt of notice and substantiation of
such inaccuracy.

 

F.

The Parties shall net all amounts due and owing (including amounts owed from
Seller to Buyer pursuant to Section III.D), and/or past due, arising under the
Agreement such that the Party owing the greater amount shall make a single
payment of the net amount to the other Party in accordance with Article IX. If
the Parties have executed a separate netting

 

17

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agreement, the terms and conditions therein shall prevail to the extent
inconsistent herewith.

ARTICLE X

TITLE, WARRANTY AND INDEMNITY

 

A. Title to the Gas shall pass from Seller to Buyer at the Delivery Point(s).
Seller shall have responsibility for and assume any liability with respect to
the Gas prior to its delivery to Buyer at the Delivery Point(s). Buyer shall
have responsibility for and shall assume any liability with respect to said Gas
at and after its delivery to Buyer at the Delivery Point(s).

 

B. Seller warrants that it will have the right to convey and will transfer good
and merchantable title to all Gas sold hereunder and delivered by it to Buyer,
free and clear of all liens, encumbrances, and claims. EXCEPT AS PROVIDED IN
THIS SECTION X.B ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY
WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE, ARE
DISCLAIMED.

 

C. Seller agrees to indemnify Buyer and save it harmless from all losses,
liabilities or claims including reasonable attorneys’ fees and costs of court
(“Claims”), from any and all Persons, arising from or out of claims of title,
personal injury or property damage from said Gas or other charges thereon which
attach before title passes to Buyer. Buyer agrees to indemnify Seller and save
it harmless from all Claims, from any and all Persons, arising from or out of
claims regarding payment, personal injury or property damage from said Gas or
other charges thereon which attach after title passes to Buyer.

 

D. Notwithstanding the other provisions of this Article X and except in the case
where Buyer knowingly accepts Gas that does not meet the Gas Quality Standard,
as between Seller and Buyer, Seller will be liable for all Claims to the extent
that such arise from the failure of Gas delivered by Seller to meet the Gas
Quality Standard.

ARTICLE XI

FORCE MAJEURE

 

A. Excuse Due to Force Majeure. Neither Seller nor Buyer shall be liable for any
delay or failure in performance hereunder if and to the extent (i) such delay or
failure in performance (except for the performance of any payment obligation) is
a result of Force Majeure, and (ii) the Excused Party satisfies its obligations
under this Article XI. The Party so excused shall be called the “Excused Party.”

 

B.

Events of Force Majeure. “Force Majeure” shall mean any act, event or
circumstance, whether of the kind described herein or otherwise, that is not
reasonably within the control of, does not result from the fault or negligence
of, and would not have been avoided or overcome by the exercise of reasonable
diligence by, the Party claiming Force Majeure, such Party having observed a
standard of conduct that is consistent with a reasonable and prudent operator,
and that prevents or delays in whole or in part such Party’s performance of any
one or more of its obligations under this Agreement. It may

 

18

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include circumstances of the following kind, provided that such circumstances
satisfy the definition of Force Majeure set forth above:

 

  1. physical events such as acts of God, landslides, lightning, atmospheric
disturbance, earthquakes, fires, storms or storm warnings, such as hurricanes,
tornados, floods, washouts, explosions, and weather related events, including
events that impede the unloading of LNG or impede the delivery of regasified LNG
to the Delivery Point(s) or the receipt and transportation of Gas away from the
Delivery Point(s);

 

  2. storms, storm warnings, hurricanes, or other weather related events that
delay or impede the entry of an LNG Tanker into the Gulf of Mexico, or the
transit of an LNG Tanker within the Gulf of Mexico to an LNG Terminal;

 

  3. acts of others such as strikes, lockouts or other industrial disturbances,
riots, sabotage, insurrections, wars, invasions, embargos, terrorism or threat
thereof, blockade, acts of public enemies or civil disturbances;

 

  4. acts of governmental authorities having jurisdiction, including the
issuance or promulgation of any court order, law, statute, ordinance,
regulation, or policy having the effect of law, the effect of which would
prevent, delay or make unlawful a Party’s performance hereunder, or would
require such Party to take measures which are unreasonable in the circumstances;

 

  5. breakdown, accident to, or destruction of facilities or equipment or lines
of pipe (including the LNG Terminals), except when such breakdown or destruction
is due to normal wear and tear, failure to properly maintain such facilities or
equipment or to adequately stock spare repair parts;

 

  6. inability to obtain, or suspension, termination, adverse modification,
interruption, or inability to renew, any servitude, right of way, easement,
permit, license, consent, authorization, or approval of any governmental
authority;

 

  7. events affecting the ability of the LNG Terminals to offload, store, and
regasify LNG, including unplanned curtailments and unplanned maintenance and
governmental actions such as are necessary for compliance with any court order,
law, status, ordinance, regulation or policy having the effect of law
promulgated by a governmental authority having jurisdiction; and

 

  8. any other event of Force Majeure that excuses the performance of the Person
providing LNG terminalling services to Seller at the LNG Terminals, if and to
the extent that it is of a kind or character that, if it had happened to a
Party, would have come within the definition of Force Majeure under this Article
XI.

 

  9.

For greater certainty, an act, event or circumstance which primarily affects a
third party (including an affiliate of a Party) which prevents, impedes or
delays Seller’s or Buyer’s performance hereunder, shall constitute Force Majeure
hereunder as to Seller or Buyer (as appropriate) if and to the extent that it is
of a kind or character

 

19

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that, if it had happened to a Party, would have come within the definition of
Force Majeure under this Article XI.

 

C. Events Not Constituting Force Majeure. Notwithstanding the other provisions
of this Article XI, Force Majeure shall not include:

 

  1. breakdown of an LNG Tanker (whether or not otherwise constituting a Force
Majeure) prior to it reaching the pilot boarding station at the LNG Terminals;

 

  2. storms, storm warnings, hurricanes, and other weather related events that
delay or impede the transit of an LNG Tanker that is not excused pursuant to
Section XI.B.2;

 

  3. any event (whether or not otherwise constituting a Force Majeure) that
affects the liquefaction facilities or country from which Seller sources LNG,
including the loss of Seller’s LNG supply or depletion of reserves of gas used
to produce such LNG supply;

 

  4. the non-availability or lack of funds or failure to pay money when due;

 

  5. the withdrawal, denial or expiration of or failure to obtain any
governmental approval of any national or local governmental authority, agency or
entity acting for or on behalf thereof, caused by the affected Person’s
(i) actions, including a violation of or breach of the terms and conditions of
any existing governmental approval or other requirement of law, or
(ii) inactions, including the failure to apply for or follow the necessary
procedures to obtain any governmental approval or request, acquire or take all
necessary actions to obtain the renewal or reissuance of the same, in either
event, only if the affected Person knew or should have known, after due inquiry
and the exercise of endeavors expected by a reasonable and prudent operator,
that such action or inaction, as the case may be, would have caused the
withdrawal, denial or expiration of, non-renewal or non-issuance of any
governmental approval; or

 

  6. economic hardship, including Seller’s ability to sell Gas at a higher or
more advantageous price than the price for Gas sold under this Agreement, or
Buyer’s ability to purchase Gas at a lower or more advantageous price than the
price for Gas purchased under this Agreement.

 

D. Notice; Resumption of Normal Performance.

 

  1.

Immediately upon the occurrence of an event of Force Majeure that may delay or
has delayed or prevented, or may or will delay or prevent, the performance by
the Excused Party of any of its obligations hereunder, the Excused Party shall
give notice thereof (promptly confirmed in writing if originally given orally,
but in no event later than three (3) Business Days after the occurrence of such
event) to the other Party describing such event and stating each of such Party’s
obligations hereunder which such Party may, has been or will be delayed or
prevented from performing, and (either in the original or in supplemental
notices) stating: (i) its

 

20

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good faith estimate of the likely duration of the Force Majeure event and of the
period during which performance may be suspended or reduced, including to the
extent known or ascertainable, the estimated extent of such reduction in
performance; and (ii) the particulars of the program to be implemented and any
corrective measures already undertaken to ensure full resumption of normal
performance hereunder. The Excused Party shall provide, from time to time as
warranted, updates to the notices provided in this Section XI.D.1.

 

  2. In order to ensure resumption of normal performance of this Agreement
within the shortest practicable time, the Excused Party shall take all measures
to this end which are commercially reasonable in the circumstances, taking into
account the consequences resulting from such event of Force Majeure. To the
extent that the Excused Party fails to use commercially reasonable efforts to
overcome or mitigate the effects of such events of Force Majeure, it shall not
be excused for any delay or failure in performance that would have been avoided
by using such commercially reasonable efforts. Prior to resumption of normal
performance, the Parties shall continue to perform their obligations under this
Agreement to the extent not excused or prevented by such event of Force Majeure.

 

  3. Upon request of the non-excused Party given no sooner than the second
Business Day after the Excused Party’s notice of Force Majeure, the Excused
Party shall forthwith use all reasonable efforts to give or procure access for
representatives of the non-excused Party to examine the scene of the event which
gave rise to the claim of Force Majeure, and such access shall be at the expense
of the non-excused Party.

 

E. Seller’s Rights Upon Buyer’s Force Majeure. If Buyer has a claim of Force
Majeure and is rendered wholly or partially unable to accept deliveries of Gas
under this Agreement, Seller may enter into gas sales agreements with third
persons for the quantity of Gas Buyer would have been obligated to take
hereunder except for the relevant Force Majeure events, but for a term no longer
than the expected duration of the Force Majeure as contained in the notice
delivered to Seller. Upon resumption of Buyer’s ability to perform under this
Agreement, Seller shall continue to be excused for failure to deliver Gas to
Buyer to the extent resulting from Seller’s obligations under such third party
agreements until such third party agreements are required to be terminated in
accordance with the following: if the estimated duration of Force Majeure, as
stated in the notice provided by Buyer pursuant to Section IX.D.1 is less than
one hundred eighty (180) days, Seller shall use reasonable efforts, but shall
not be required, to terminate such sales prior to the end of the period stated
in the notice if the actual period of Force Majeure ends prior to such date. In
the event that the estimated duration of Force Majeure, as stated in the notice
provided by Buyer pursuant to Section IX.D.1 is greater than one hundred eighty
(180) days, Seller shall terminate such sales on no less than ninety (90) days
notice from Buyer of the end of the period of Force Majeure, and shall use
reasonable efforts, but shall not be required, to terminate such sales on such
lesser notice as Buyer may provide. The ninety (90) day notice may not be given
by Buyer to Seller prior to ninety (90) days from the start of the Force Majeure
event, unless agreed to by Seller.

 

21

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F. Settlement of Industrial Disturbances. Settlement of strikes, lockouts or
other industrial disturbances shall be entirely within the discretion of the
Party experiencing such situations and nothing herein shall require such Party
to settle industrial disputes by yielding to demands made on it when it
considers such action inadvisable.

 

G. Extended Force Majeure. If a Force Majeure event affecting the total DCQ
lasts for twenty-four (24) consecutive months and the Parties do not foresee
that the Force Majeure situation will be resolved in the foreseeable future,
either Party shall have the right to terminate this Agreement by notice to the
other Party. If a Force Majeure event affecting a portion of the DCQ lasts for
twenty-four (24) consecutive months and the Parties do not foresee that the
Force Majeure situation will be resolved in the foreseeable future, either Party
shall have the right to reduce the DCQ by a corresponding amount by notice to
the other Party.

ARTICLE XII

DEFAULTS AND REMEDIES

 

A. In the event (each an “Event of Default”) either Party (the “Defaulting
Party”) shall:

 

  1. fail to receive, in the case of Buyer, Gas in accordance with the terms of
this Agreement on fifteen (15) days in a twelve-month period;

 

  2. breach a material representation or warranty if such breach is not remedied
within five (5) Business Days after written notice of such breach is given to
the Defaulting Party;

 

  3. fail to make when due any payment required under this Agreement if such
failure is not remedied within five (5) Business Days after written notice of
such failure is given to the Defaulting Party;

 

  4. make an assignment or any general arrangement for the benefit of creditors;

 

  5. file a petition or otherwise commence, authorize, or acquiesce in the
commencement of a proceeding or case under any bankruptcy or similar law for the
protection of creditors, or have such petition filed or proceeding commenced
against it that is not dismissed within sixty (60) days;

 

  6. otherwise become bankrupt or insolvent (however evidenced);

 

  7. be unable to pay its debts as they fall due; or

 

  8. have a receiver, provisional liquidator, conservator, custodian, trustee or
other similar official appointed with respect to it or substantially all of its
assets that is not dismissed within sixty (60) days,

then the other Party (the “Non-Defaulting Party”) shall have the right, at its
sole election, to immediately withhold and/or suspend deliveries or payments
upon two (2) days notice, in addition to any and all other remedies available
hereunder.

 

22

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B. It shall also be an Event of Default, with Buyer being the Defaulting Party,
if the Buyer Guarantor:

 

  1. suspends payment of its debts or is unable to pay its or their debts;

 

  2. passes a resolution, commences proceedings or has proceedings commenced
against it (which are not stayed within twenty-one (21) days of service thereof
on the Buyer Guarantor) in the nature of bankruptcy or reorganization resulting
from insolvency or for its liquidation or for the appointment of a receiver,
trustee in bankruptcy or liquidator of its undertaking or assets; or

 

  3. enters into any composition or scheme or arrangement with its creditors,

unless, within ten (10) Business Days of such Event of Default, a replacement
Buyer Guarantee reasonably acceptable to Seller is executed and delivered to the
Seller.

 

C. If an Event of Default has occurred and is continuing, the Non-Defaulting
Party shall have the right, by written notice to the Defaulting Party, to
designate a day, no earlier than the day such notice is given and no later than
twenty (20) days after such notice is given, as an early termination date (the
“Early Termination Date”), on which date, all of the rights and obligations of
each Party pursuant to this Agreement shall terminate.

 

D. The Non-Defaulting Party shall net or aggregate, as appropriate, any and all
amounts owing between the Parties under this Agreement so that all such amounts
are netted or aggregated to a single liquidated amount payable by one Party to
the other (the “Net Settlement Amount”).

 

E. If any obligation that is to be included in any netting, aggregation or
setoff pursuant to Section XII.D is unascertained, the Non-Defaulting Party may
in good faith estimate that obligation and net, aggregate or setoff, as
applicable, in respect of the estimate, subject to the Non-Defaulting Party
accounting to the Defaulting Party when the obligation is ascertained. Any
amount not then due which is included in any netting, aggregation or setoff
pursuant to Section XII.D shall be discounted to net present value in a
commercially reasonable manner determined by the Non-Defaulting Party.

 

F. As soon as practicable after a liquidation, notice shall be given by the
Non-Defaulting Party to the Defaulting Party of the Net Settlement Amount, and
whether the Net Settlement Amount is due to or due from the Non-Defaulting
Party. The notice shall include a written statement explaining in reasonable
detail the calculation of such amount, provided that failure to give such notice
shall not affect the validity or enforceability of the liquidation or give rise
to any claim by the Defaulting Party against the Non-Defaulting Party. The Net
Settlement Amount shall be paid by the close of business on the second Business
Day following such notice, which date shall not be earlier than the Early
Termination Date. Interest on any unpaid portion of the Net Settlement Amount
shall accrue from the date due until the date of payment at a rate equal to the
lower of (i) the then-effective prime rate of interest per annum published under
“Money Rates” by The Wall Street Journal, plus two percentage points; or
(ii) the maximum applicable lawful interest rate.

 

23

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G. The expiry or termination of this Agreement shall not: (i) relieve either
Party from any obligations to the other Party incurred or arising prior to the
date of such expiry or termination; (ii) or extinguish any rights of either
Party accrued in respect of periods prior to the expiry or termination of this
Agreement or (iii) effect a Party’s claim for damages against the other Party on
account of the other Party’s breach or default of this Agreement.

 

H. NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE,
EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION
DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR
OTHERWISE.

 

I. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON
REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES
RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE
BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. WHERE REMEDIES OR DAMAGES
ARE SPECIFICALLY ESTABLISHED IN THIS AGREEMENT, SUCH REMEDIES OR DAMAGES SHALL
CONSTITUTE THE SOLE AND EXCLUSIVE REMEDY FOR SUCH EVENT(S). TO THE EXTENT ANY
DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE
THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE
OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE DAMAGES CALCULATED
HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS.

ARTICLE XIII

DISPUTE RESOLUTION

 

A. Any Dispute shall be settled by arbitration administered by the American
Arbitration Association (“AAA”) under its Commercial Arbitration Rules (as then
in effect), provided, however, that insofar as any of the provisions of this
Article XIII are inconsistent with the Commercial Arbitration Rules, the
provisions of this Article XIII shall prevail.

 

B. The arbitral tribunal (“Tribunal”) shall consist of three (3) arbitrators.
Each Party shall appoint one (1) arbitrator within thirty (30) days of the
filing of the arbitration, and the two arbitrators so appointed shall select the
presiding arbitrator within thirty (30) days after the latter of the two
arbitrators has been appointed by the Parties. If a Party fails to appoint its
Party-appointed arbitrator or if the two Party-appointed arbitrators cannot
reach an agreement on the presiding arbitrator within the applicable time
period, then the AAA shall serve as the appointing authority, and shall appoint
the remainder of the three arbitrators not yet appointed. All three arbitrators
shall be impartial and independent.

 

C. Unless otherwise expressly agreed in writing by all parties to the Dispute,
the place of arbitration shall be Houston, Texas.

 

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D. Unless otherwise expressly agreed in writing by all parties to the Dispute,
the Tribunal shall strictly apply the law governing this Agreement. Where the
measure, nature, scope or type of damages for a claim is expressly limited by
the terms of this Agreement, the Tribunal shall have no discretion to award
damages beyond those express limitations.

 

E. The Tribunal shall conduct the arbitration as expeditiously as possible, and
shall take all reasonable measures to render the award within six (6) months of
the date that the presiding arbitrator is appointed. If the award is not
rendered within this (6) six month period, the Tribunal will still have
jurisdiction over the Dispute. The award shall (i) be rendered in writing,
(ii) state the legal grounds and reasoning for its decision, and (iii) provide
for a monetary award immediately payable in United States dollars.

 

F. All notices required for any arbitration proceeding shall be deemed properly
given if given in accordance with Section XV.F. The Parties further agree that
service of process for any action to enforce an arbitral award may be
accomplished according to the procedures of Section XV.F, as well as any other
procedure authorized by law.

 

G. The Tribunal is authorized to allocate the costs of the arbitration in its
award, including: (a) the fees and expenses of the arbitrators; (b) the costs of
assistance required by the Tribunal, including any experts; (c) the fees and
expenses of the administrator; (d) the reasonable costs for legal representation
of a successful Party, including expert fees; and (e) any such costs incurred in
connection with an application for interim or emergency relief. The costs of the
arbitration proceedings, including attorneys’ fees, shall be borne in the manner
determined by the Tribunal.

 

H. The Tribunal shall have the discretion to award pre-award and post-award
interest from the date of any default or other breach of this Agreement until
the arbitral award is paid in full.

 

I. The award shall, as between the Parties, be final and entitled to all of the
protections and benefits of a final judgment, e.g., res judicata (claim
preclusion) and collateral estoppel (issue preclusion), as to all claims,
including compulsory counterclaims, that were or could have been presented to
the arbitrators. The award shall not be reviewable by or appealable to any
court; provided, however, that the award may be corrected or interpreted
pursuant to the Commercial Arbitration Rules.

 

J. Any arbitration pursuant to this Article XIII (including a settlement
resulting from an arbitral award, documents exchanged or produced during an
arbitration proceeding, and memorials, briefs or other documents prepared for
the arbitration) shall be confidential and may not be disclosed by the Parties,
their employees, officers, directors, counsel, consultants, and expert
witnesses, except to the extent necessary to enforce this Article XIII or any
arbitration award, to enforce other rights of a party to a dispute resolved
pursuant to this Article XIII, or as required by law; provided, however, that
breach of this confidentiality provision shall not void any settlement, or
award.

 

K.

Each Party shall have the right to petition any court for the issuance of any
restraining order, other equitable relief or interim measure (i) prior to the
constitution of the Tribunal

 

25

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(and thereafter as necessary to enforce the Tribunal’s rulings); or (ii) in the
absence of the jurisdiction of the Tribunal to rule on interim measures in a
given jurisdiction. FOR PURPOSES OF THIS SECTION XIII K, EACH OF THE PARTIES
IRREVOCABLY CONSENTS AND SUBMITS UNCONDITIONALLY TO THE NON-EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF TEXAS, UNITED STATES OF AMERICA, AND IRREVOCABLY WAIVES ANY PRESENT OR
FUTURE OBJECTION TO SUCH VENUE FOR SUCH PURPOSES.

 

L. A Party’s breach of this Agreement shall not affect this agreement to
arbitrate. Moreover, the Parties’ obligations under this arbitration provision
are enforceable even after this Agreement has terminated. The invalidity or
unenforceability of any provision of this agreement to arbitrate shall not
affect the validity or enforceability of the Parties’ obligation to submit their
claims to binding arbitration or the other provisions of this agreement to
arbitrate.

ARTICLE XIV

CREDIT SUPPORT

 

A. Generally. Each Party shall deliver to the other Party credit support
according to the terms of this Article XIV.

 

B. Seller Credit Support. Seller shall provide on the date of this Agreement,
and cause to be maintained until the delivery of the first invoice pursuant to
Article IX of this Agreement, a Seller Guarantee in an amount equal to
$5,000,000. Buyer is relying on the legal, valid, binding and enforceable nature
of the Seller Guarantee as an essential inducement and consideration for
entering into this Agreement.

 

C. Buyer Credit Support.

 

  1. Buyer shall provide on the date of this Agreement, and cause to be
maintained throughout the Term, a Buyer Guarantee in an amount available to be
drawn thereunder equal at any time and from time to time to the Guarantee
Limitation Amount. Seller is relying on the legal, valid, binding and
enforceable nature of the Buyer Guarantee as an essential inducement and
consideration for entering into this Agreement.

 

  2. At any time, Buyer may elect to reduce the amount of the Aggregate Exposure
by making payment to Seller of all or part of amounts invoiced prior to the
Payment Date hereunder. Buyer shall notify Seller of its intention to make
payments prior to the Payment Date at least two (2) Business Days prior to Bid
Week for the delivery month.

 

26

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ARTICLE XV

MISCELLANEOUS

 

A. This Agreement shall be binding upon and inure to the benefit of the
successors, assigns, personal representatives, and heirs of the respective
Parties hereto, and the covenants, conditions, rights and obligations of this
Agreement shall run for the Term.

 

B. Either Party may assign this Agreement to a third party, including Buyer to a
creditworthy third party, in whole or in part, provided that such Party obtained
the prior written consent of the non-assigning Party, which consent will not be
unreasonably withheld or delayed; provided, either Party may (i) transfer, sell,
pledge, encumber, or assign this Agreement or the accounts, revenues, or
proceeds hereof in connection with any financing or other financial
arrangements, or (ii) transfer its interest to any parent or affiliate by
assignment, merger or otherwise without the prior approval of the other Party.
Upon any such assignment, transfer and assumption, the transferor shall remain
principally liable for and shall not be relieved of or discharged from any
obligations hereunder.

 

C. If any provision in this Agreement is determined to be invalid, void or
unenforceable by any court having jurisdiction, such determination shall not
invalidate, void, or make unenforceable any other provision, agreement or
covenant of this Agreement.

 

D. No waiver of any breach of this Agreement shall be held to be a waiver of any
other or subsequent breach.

 

E. This Agreement sets forth all understandings between the Parties respecting
the rights and obligations of the Parties pursuant to this Agreement, and any
prior contracts, understandings and representations, whether oral or written,
relating to the rights and obligations pursuant to this Agreement are merged
into and superseded by this Agreement. This Agreement may be amended only by a
writing executed by both Parties.

 

F. Notices.

 

  1. All notices and other communications to Buyer or Seller shall be in writing
and shall be electronically communicated, hand delivered or sent by overnight
courier to either Party hereto at the addresses as provided in this Section
XV.F:

All communications intended for Buyer shall be sent to:

PPM Energy Inc.

20333 State Highway 249

Suite 310

Houston, Texas 77070

For Exercising Provisions Under this Contract Agreement:

Attention: Todd A. Blackford

 

27

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Fax Number: 281-379-7444

email: todd.blackford@ppmenergy.com

For Monthly and Daily Scheduling Under this Contract Agreement:

Attention: Zarin Imam or designee

Fax Number 281-379-7444

email: zarin.imam@ppmenergy.com

All communications intended for Seller shall be sent to:

Cheniere LNG Marketing, Inc.

717 Texas Avenue, Suite 3100

Houston, Texas 77002

Attention: Davis Thames

Fax Number: 713-659-5459

email: dthames@cheniere.com

or at any other address of which either of the foregoing shall have notified the
other in any manner prescribed in this Section XV.

 

  2. For all purposes of this Agreement, a notice or communication will be
deemed effective:

 

  a. if delivered by hand or sent by overnight courier, on the day it is
delivered, or unless (i) that day is not a Business Day or (ii) if delivered
after the close of business on Business Day, then on the next succeeding
Business Day; and

 

  b. if sent by facsimile transmission, on the date transmitted, provided that
oral or written confirmation of receipt is obtained by the sender unless the
date of transmission and confirmation is not a Business Day, in which case on
the next succeeding Business Day.

 

G. The interpretation and performance of this Agreement shall be governed by the
laws of New York, excluding, however, any conflict of laws rule which would
apply the law of another jurisdiction.

 

H. The interpretation of this Agreement shall exclude any rights under
legislative provisions conferring rights under a contract to Persons not a party
to that contract. Nothing in this Agreement shall otherwise be construed to
create any duty to, or standard of care with reference to, or any obligations or
liability to, any Person other than a Party.

 

I.

Each Party to this Agreement represents and warrants that it has full and
complete authority to enter into and perform this Agreement. Each Person who
executes this

 

28

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Agreement on behalf of either Party represents and warrants that such Person has
full and complete authority to do so and that such Party will be bound thereby.

 

J. The headings and subheadings contained in this Agreement are used solely for
convenience and do not constitute a part of this Agreement between the Parties
and shall not be used to construe or interpret the provisions of this Agreement.

 

K. Neither Party shall disclose directly or indirectly without the prior written
consent of the other Party the terms of this Agreement to a third party (other
than the employees, lenders, counsel, accountants and other agents of the Party,
or prospective purchasers of all or substantially all of a Party’s assets or of
any rights under this Agreement, provided such Persons shall have agreed to keep
such terms confidential) except (i) in order to comply with any applicable law,
order, regulation, or exchange rule, (ii) to the extent necessary for the
enforcement of this Agreement, or (iii) to the extent such information is
delivered to such third party for the sole purpose of calculating a published
index. Each Party shall notify the other Party of any proceeding of which it is
aware which may result in disclosure of the terms of this Agreement (other than
as permitted hereunder) and use reasonable efforts to prevent or limit the
disclosure. The existence of this Agreement is not subject to this
confidentiality obligation. The terms of this Agreement shall be kept
confidential by the Parties hereto for one (1) year from the expiration of the
Term. Each Party acknowledges that the other may be required, from time to time,
to make disclosures and press releases and applicable filings with the
Securities and Exchange Commission in accordance with applicable securities laws
that such Party believes in good faith are required by applicable law or the
rules of any stock exchange. Each Party acknowledges that the other may be
required from time to time to make filings in compliance with applicable
securities laws, including a copy of this Agreement. Each Party agrees that such
disclosures shall not be a breach of this Agreement.

 

L. In the event that disclosure is required by a governmental body or applicable
law, the Party subject to such requirement may disclose the material terms of
this Agreement to the extent so required, but shall promptly notify the other
Party, prior to disclosure, and shall cooperate (consistent with the disclosing
Party’s legal obligations) with the other Party’s efforts to obtain protective
orders or similar restraints with respect to such disclosure at the expense of
the other Party.

 

M. This Agreement may be executed in any number of counterparts, each of which
shall for all purposes be deemed to be an original; but such counterparts shall
together constitute but one and the same instrument.

 

29

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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.

 

Cheniere LNG Marketing, Inc., as Seller

By:  

/s/ H. Davis Thames

Name:

 

H. Davis Thames

Title:

 

Vice President

PPM Energy, Inc., as Buyer

By:  

/s/ Terry Hudgens

Name:

 

Terry Hudgens

Title:

 

President and CEO

 

30

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Exhibit A

Map of Cheniere Creole Trail Pipeline and Cheniere Sabine Pass Pipeline

LOGO [g51199img_005.jpg]

 

31

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Exhibit B

Form of Increase Notice

INCREASE NOTICE

[Date]

PPM Energy, Inc.

20333 State Hwy 249

Suite 310

Houston, Texas 77070

Attn: _________________________

Sirs:

Pursuant to Section III.B.3 of that certain Gas Purchase Agreement dated as of
[            ] by and between Cheniere LNG Marketing, Inc. (“Cheniere”), as
Seller, and PPM Energy, Inc, as Buyer, (as amended, supplemented or otherwise
modified from time to time, the “Agreement”), Cheniere hereby issues an Increase
Notice under the Agreement, as follows:

 

  a. The incremental increase to the DCQ is: _______________________.

 

  b. Increase is effective 1st Day of: ______________________.

 

  c. Increase to be effective until final Day of: _______________________.

Pursuant to Section III.B.3.e of the Agreement, if Buyer elects to reject this
Increase Notice, then Buyer must provide written notice to Cheniere within 30
days of the date of this Increase Notice.

Delivery of an executed counterpart of this Increase Notice by telecopier shall
be effective as delivery of an original executed counterpart of this Increase
Notice.

 

CHENIERE LNG MARKETING, INC.

By:

    

Name:

    

Title:

    

 

32

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Exhibit C

BUYER GUARANTEE

 

33

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Exhibit C

BUYER GUARANTEE

THIS GUARANTY, dated as of April 4, 2006, is issued by Scottish Power Finance
(US), Inc., a Delaware corporation, (“Guarantor”) in favor of Cheniere LNG
Marketing, Inc., a Delaware corporation (“Guaranteed Party”). PPM Energy, Inc.,
an Oregon corporation, (“Obligor”) is a wholly owned subsidiary of Guarantor.

RECITALS

A. Obligor and Guaranteed Party have entered into that certain Gas Purchase and
Sale Agreement, dated as of April 4, 2006 (the “Agreement”).

B. This Guaranty is delivered to Guaranteed Party by Guarantor pursuant to the
Agreement.

AGREEMENT

1. Guaranty.

A. Guaranty of Obligations Under the Agreement. For value received, Guarantor
hereby absolutely, unconditionally and irrevocably, subject to the express terms
hereof, guarantees the payment when due of all payment obligations, whether now
in existence or hereafter arising, by Obligor to Guaranteed Party pursuant to
the Agreement (the “Obligations”). This Guaranty is one of performance and not
of collection and shall apply regardless of whether recovery of all such
Obligations may be or become discharged or uncollectible in any bankruptcy,
insolvency or other similar proceeding, or otherwise unenforceable.

B. Maximum Guaranteed Amount. Notwithstanding anything to the contrary herein,
Guarantor’s aggregate obligation to Guaranteed Party hereunder in no event shall
exceed the following amounts as designated (as applicable):

 

  (i) if the senior unsecured credit of Guarantor is rated “BBB+” or greater by
S&P or “Baa1” or greater by Moody’s, provided that if Guarantor’s senior
unsecured credit is rated by both S & P and Moody’s, then the lower rating shall
be applicable for purposes of this provision: One Hundred Million Dollars
(U.S.$100,000,000);

 

  (ii) if the senior unsecured credit of Guarantor is rated no lower than “BBB-”
by S&P and “Baa3” by Moody’s, provided that if Guarantor’s senior unsecured
credit is rated by both S & P and Moody’s, then the lower rating shall be
applicable for purposes of this provision: Fifty Million Dollars
(U.S.$50,000,000); or

--------------------------------------------------------------------------------

  (iii) otherwise, zero (U.S. $0.00),

(the applicable amount being the “Guarantee Limitation Amount”), including costs
and expenses incurred by Guaranteed Party in enforcing this Guaranty, and shall
not either individually or in the aggregate be greater or different in character
or extent than the obligations of Obligor to Guaranteed Party under the terms of
the Agreement. IN NO EVENT SHALL GUARANTOR BE SUBJECT TO ANY CONSEQUENTIAL,
EXEMPLARY, EQUITABLE, LOSS OF PROFITS, PUNITIVE, TORT OR OTHER SIMILAR DAMAGES.

2. Payment; Currency. All sums payable by Guarantor hereunder shall be made in
freely transferable and immediately available funds and shall be made in the
currency in which the Obligations were due. If Obligor fails to pay any
Obligation when due, the Guarantor will pay that Obligation directly to
Guaranteed Party within five (5) days after written notice to Guarantor by
Guaranteed Party. The written notice shall provide a reasonable description of
the amount of the Obligation and explanation of why such amount is due.

3. Waiver of Defenses. Except as set forth above, Guarantor hereby waives notice
of acceptance of this Guaranty and of the Obligations and any action taken with
regard thereto, and waives presentment, demand for payment, protest, notice of
dishonor or non-payment of the Obligations, suit, or the taking of and failing
to take other action by Guaranteed Party against Obligor, Guarantor or others
and waives any defense of a surety. Without limitation, Guaranteed Party may at
any time and from time to time without notice to or consent of Guarantor and
without impairing or releasing the obligations of Guarantor hereunder: (a) make
any change to the terms of the Obligations; (b) take or fail to take any action
of any kind in respect of any security for the Obligations; (c) exercise or
refrain from exercising any rights against Obligor or others in respect of the
Obligations or (d) compromise or subordinate the Obligations, including any
security therefor. Notwithstanding the foregoing, Guarantor shall be entitled to
assert rights, setoffs, counterclaims and other defenses which Obligor may have
to performance of any of the Obligations, other than defenses based upon lack of
authority of Obligor to enter into and/or perform its obligations under the
Agreement or any insolvency, bankruptcy, reorganization, arrangement,
composition, liquidation, dissolution or similar proceeding with respect to
Obligor.

4. Term. This Guaranty shall continue in full force and effect until the end of
the Term (as defined in the Agreement). Guarantor further agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time payment, or any part thereof, of any Obligation is rescinded or must
otherwise be restored or returned due to bankruptcy or insolvency laws or
otherwise. Guaranteed party shall return this original executed document to
Guarantor within twenty (20) days of termination of this Guaranty.

5. Subrogation. Until all Obligations are indefeasibly performed in full, but
subject to Section 6 hereof, Guarantor hereby waives all rights of subrogation,
reimbursement, contribution and indemnity from Obligor with respect to this
Guaranty

 

2

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and any collateral held therefor, and Guarantor hereby subordinates all rights
under any debts owing from Obligor to Guarantor, whether now existing or
hereafter arising, to the prior payment of the Obligations.

6. Expenses. Whether or not legal action is instituted, Guarantor agrees to
reimburse Guaranteed Party on written demand for all reasonable attorneys’ fees
and all other reasonable costs and expenses incurred by Guaranteed Party in
enforcing its rights under this Guaranty. Notwithstanding the foregoing, the
Guarantor shall have no obligation to pay any such costs or expenses if, in any
action or proceeding brought by Guaranteed Party giving rise to a demand for
payment of such costs or expenses, it is finally adjudicated that the Guarantor
is not liable to make payment under Section 2.1 hereof.

7. Assignment. Guarantor may not assign its rights or delegate its obligations
under this Guaranty in whole or part without written consent of Guaranteed Party
(which consent shall not be unreasonably withheld, conditioned or delayed). Upon
any such delegation and assumption of obligations, Guarantor shall be relieved
of and fully discharged from all obligations hereunder, whether such obligations
arose before or after such delegation and assumption.

8. Non-Waiver. The failure of Guaranteed Party to enforce any provisions of this
Guaranty at any time or for any period of time shall not be construed to be a
waiver of any such provision or the right thereafter to enforce same. All
remedies of Guaranteed Party under this Guaranty shall be cumulative and shall
be in addition to any other remedy now or hereafter existing at law or in
equity. The terms and provisions hereof may not be waived, altered, modified or
amended except in a writing executed by Guarantor and Guaranteed Party.

9. Entire Agreement. Guarantor covenants that it will take actions under the
Guarantee and Support Agreement entered into between Guarantor and ScottishPower
plc (“Parent”), dated as of December 12, 2005 (the “Support Agreement”) to make
demand on Parent pursuant to the terms of the Support Agreement and to provide
Guaranteed Party with copies of notices which directly relate to the Guarantor
received and made under the Support Agreement. Any payment obligation under this
Guaranty is, if unpaid by Guarantor, an Obligation under the Support Agreement
and Guaranteed Party would be an “Obligee” under the Support Agreement.
Guaranteed Party is specifically relying on the Support Agreement and the
foregoing representation in accepting this Guaranty and entering into
transactions giving rise to the Obligations. Except as otherwise set forth in
this Section 9, this Guaranty and the Agreement are the entire and only
agreements between Guarantor and Guaranteed Party with respect to the guaranty
of the Obligations of Obligor by Guarantor. All agreements or undertakings
heretofore or contemporaneously made, which are not set forth herein, are
superseded hereby.

10. Notice. Any demand for payment, notice, request, instruction, correspondence
or other document to be given hereunder by Guarantor or by Guaranteed Party
shall be in writing and shall be deemed received (a) if given personally, when
received, (b) if mailed by certified mail (postage prepaid and return receipt
requested),

 

3

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five days after deposit in the U.S. mails, (c) if given by facsimile, when
transmitted with confirmed transmission or (d) if given via overnight express
courier service, when received or personally delivered, in each case with
charges prepaid and addressed as follows (or such other address as either
Guarantor or Guaranteed Party shall specify in a notice delivered to the other
in accordance with this Section):

If to Guarantor:

Scottish Power Finance (US), Inc.

1125 NW Couch, Suite 700

Portland, Oregon 97209

Attn: Treasurer/Credit Manager

If to Guaranteed Party:

Cheniere LNG Marketing, Inc.

c/o Cheniere Energy, Inc.

717 Texas Ave., Suite 3100

Houston, Texas 77002

Attn: Treasurer

11. Counterparts. This Guaranty may be executed in counterparts, each of which
when executed and delivered shall constitute one and the same instrument.

12. Governing Law; Jurisdiction. This Guaranty shall be governed by and
construed in accordance with the laws of the state of New York without giving
effect to principles of conflicts of law. Guarantor and Guaranteed Party agree
to the exclusive jurisdiction of any federal district court located in Harris
County, Texas over any disputes arising or relating to this Guaranty.

13. Further Assurances. Guarantor shall cause to be promptly and duly taken,
executed and acknowledged and delivered, such further documents and instruments
as Guaranteed Party may from time to time reasonably request in order to carry
out the intent and purposes of this Guaranty.

14. Limitation on Liability. Except as specifically provided in this Guaranty,
Guaranteed Party shall have no claim, remedy or right to proceed against any
past, present or future stockholder, partner, member, director or officer
thereof for the payment of any of the Obligations, as the case may be, or any
claim arising out of any agreement, certificate, representation, covenant or
warranty made by Obligor in the Agreement.

[SIGNATURE PAGE FOLLOWS]

 

4

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IN WITNESS WHEREOF, the Guarantor has executed and delivered this Guaranty as of
the date first set forth above.

 

Scottish Power Finance (US), Inc., a Delaware corporation

By:

    

Name:

 

Title:

 

 

Acknowledged and agreed: Cheniere LNG Marketing, Inc.

By:

    

Name:

 

Title

 

 

5

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Exhibit D

SELLER GUARANTEE

 

34

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Exhibit D

SELLER GUARANTEE

THIS GUARANTY, dated as of April 4, 2006, is issued by Cheniere Energy, Inc., a
Delaware corporation (“Guarantor”) in favor of PPM Energy, Inc., an Oregon
corporation (“Guaranteed Party”). Cheniere LNG Marketing, Inc., a Delaware
corporation, (“Obligor”) is a wholly owned subsidiary of Guarantor.

RECITALS

A. Obligor and Guaranteed Party have entered into that certain Gas Purchase and
Sale Agreement, dated as of April 4, 2006 (the “Agreement”).

B. This Guaranty is delivered to Guaranteed Party by Guarantor pursuant to the
Agreement.

AGREEMENT

1. Guaranty.

A. Guaranty of Obligations Under the Agreement. For value received, Guarantor
hereby absolutely, unconditionally and irrevocably, subject to the express terms
hereof, guarantees the payment when due of all payment obligations, whether now
in existence or hereafter arising, by Obligor to Guaranteed Party pursuant to
the Agreement (the “Obligations”). This Guaranty is one of performance and not
of collection and shall apply regardless of whether recovery of all such
Obligations may be or become discharged or uncollectible in any bankruptcy,
insolvency or other similar proceeding, or otherwise unenforceable.

B. Maximum Guaranteed Amount. Notwithstanding anything to the contrary herein,
Guarantor’s aggregate obligation to Guaranteed Party hereunder in no event shall
exceed the following amounts as designated (as applicable):

 

  (i) prior to the delivery of the first invoice under Article IX of the
Agreement, Five Million Dollars (U.S. $5,000,000); or

 

  (ii) after delivery of the first invoice under Article IX of the Agreement,
zero (U.S. $0.00),

including costs and expenses incurred by Guaranteed Party in enforcing this
Guaranty, and shall not either individually or in the aggregate be greater or
different in character or extent than the obligations of Obligor to Guaranteed
Party under the terms of the Agreement. IN NO EVENT SHALL GUARANTOR BE SUBJECT
TO ANY CONSEQUENTIAL, EXEMPLARY, EQUITABLE, LOSS OF PROFITS, PUNITIVE, TORT OR
OTHER SIMILAR DAMAGES.

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2. Payment; Currency. All sums payable by Guarantor hereunder shall be made in
freely transferable and immediately available funds and shall be made in the
currency in which the Obligations were due. If Obligor fails to pay any
Obligation when due, the Guarantor will pay that Obligation directly to
Guaranteed Party within five (5) days after written notice to Guarantor by
Guaranteed Party. The written notice shall provide a reasonable description of
the amount of the Obligation and explanation of why such amount is due.

3. Waiver of Defenses. Except as set forth above, Guarantor hereby waives notice
of acceptance of this Guaranty and of the Obligations and any action taken with
regard thereto, and waives presentment, demand for payment, protest, notice of
dishonor or non-payment of the Obligations, suit, or the taking of and failing
to take other action by Guaranteed Party against Obligor, Guarantor or others
and waives any defense of a surety. Without limitation, Guaranteed Party may at
any time and from time to time without notice to or consent of Guarantor and
without impairing or releasing the obligations of Guarantor hereunder: (a) make
any change to the terms of the Obligations; (b) take or fail to take any action
of any kind in respect of any security for the Obligations; (c) exercise or
refrain from exercising any rights against Obligor or others in respect of the
Obligations or (d) compromise or subordinate the Obligations, including any
security therefor. Notwithstanding the foregoing, Guarantor shall be entitled to
assert rights, setoffs, counterclaims and other defenses which Obligor may have
to performance of any of the Obligations, other than defenses based upon lack of
authority of Obligor to enter into and/or perform its obligations under the
Agreement or any insolvency, bankruptcy, reorganization, arrangement,
composition, liquidation, dissolution or similar proceeding with respect to
Obligor.

4. Term. This Guaranty shall continue in full force and effect until the end of
the Term (as defined in the Agreement). Guarantor further agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time payment, or any part thereof, of any Obligation is rescinded or must
otherwise be restored or returned due to bankruptcy or insolvency laws or
otherwise. Guaranteed party shall return this original executed document to
Guarantor within twenty (20) days of termination of this Guaranty.

5. Subrogation. Until all Obligations are indefeasibly performed in full, but
subject to Section 6 hereof, Guarantor hereby waives all rights of subrogation,
reimbursement, contribution and indemnity from Obligor with respect to this
Guaranty and any collateral held therefor, and Guarantor hereby subordinates all
rights under any debts owing from Obligor to Guarantor, whether now existing or
hereafter arising, to the prior payment of the Obligations.

6. Expenses. Whether or not legal action is instituted, Guarantor agrees to
reimburse Guaranteed Party on written demand for all reasonable attorneys’ fees
and all other reasonable costs and expenses incurred by Guaranteed Party in
enforcing its rights under this Guaranty. Notwithstanding the foregoing, the
Guarantor shall have no obligation to pay any such costs or expenses if, in any
action or proceeding brought by

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Guaranteed Party giving rise to a demand for payment of such costs or expenses,
it is finally adjudicated that the Guarantor is not liable to make payment under
Section 2.1 hereof.

7. Assignment. Guarantor may not assign its rights or delegate its obligations
under this Guaranty in whole or part without written consent of Guaranteed Party
(which consent shall not be unreasonably withheld, conditioned or delayed). Upon
any such delegation and assumption of obligations, Guarantor shall be relieved
of and fully discharged from all obligations hereunder, whether such obligations
arose before or after such delegation and assumption.

8. Non-Waiver. The failure of Guaranteed Party to enforce any provisions of this
Guaranty at any time or for any period of time shall not be construed to be a
waiver of any such provision or the right thereafter to enforce same. All
remedies of Guaranteed Party under this Guaranty shall be cumulative and shall
be in addition to any other remedy now or hereafter existing at law or in
equity. The terms and provisions hereof may not be waived, altered, modified or
amended except in a writing executed by Guarantor and Guaranteed Party.

9. Entire Agreement. This Guaranty and the Agreement are the entire and only
agreements between Guarantor and Guaranteed Party with respect to the guaranty
of the Obligations of Obligor by Guarantor. All agreements or undertakings
heretofore or contemporaneously made, which are not set forth herein, are
superseded hereby.

10. Notice. Any demand for payment, notice, request, instruction, correspondence
or other document to be given hereunder by Guarantor or by Guaranteed Party
shall be in writing and shall be deemed received (a) if given personally, when
received, (b) if mailed by certified mail (postage prepaid and return receipt
requested), five days after deposit in the U.S. mails, (c) if given by
facsimile, when transmitted with confirmed transmission or (d) if given via
overnight express courier service, when received or personally delivered, in
each case with charges prepaid and addressed as follows (or such other address
as either Guarantor or Guaranteed Party shall specify in a notice delivered to
the other in accordance with this Section):

If to Guarantor:

Cheniere Energy, Inc.

717 Texas Ave., Suite 3100

Houston, Texas 77002

Attn: Treasurer

If to Guaranteed Party:

PPM Energy, Inc.

1125 NW Couch, Suite 700

Portland, Oregon 97209

Attn: Legal

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11. Counterparts. This Guaranty may be executed in counterparts, each of which
when executed and delivered shall constitute one and the same instrument.

12. Governing Law; Jurisdiction. This Guaranty shall be governed by and
construed in accordance with the laws of the state of New York without giving
effect to principles of conflicts of law. Guarantor and Guaranteed Party agree
to the exclusive jurisdiction of any federal district court located in Harris
County, Texas over any disputes arising or relating to this Guaranty.

13. Further Assurances. Guarantor shall cause to be promptly and duly taken,
executed and acknowledged and delivered, such further documents and instruments
as Guaranteed Party may from time to time reasonably request in order to carry
out the intent and purposes of this Guaranty.

14. Limitation on Liability. Except as specifically provided in this Guaranty,
Guaranteed Party shall have no claim, remedy or right to proceed against any
past, present or future stockholder, partner, member, director or officer
thereof for the payment of any of the Obligations, as the case may be, or any
claim arising out of any agreement, certificate, representation, covenant or
warranty made by Obligor in the Agreement.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Guarantor has executed and delivered this Guaranty as of
the date first set forth above.

 

Cheniere Energy, Inc.

By:

    

Name:

 

Title:

 

 

Acknowledged and agreed: PPM Energy, Inc.

By:

    

Name:

 

Title