Exhibit 10.2

 

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*** indicates material has been omitted pursuant to a Confidential Treatment
Request filed with the Securities and Exchange Commission.  A complete copy of
this agreement has been filed with the Securities and Exchange Commission.

 

 

CREDIT AGREEMENT

 

among

 

FREEPORT LNG DEVELOPMENT, L.P.,
as Borrower,

 

FREEPORT LNG-GP, INC.,
as General Partner

 

CONOCOPHILLIPS COMPANY,
as Lender,

 

VARIOUS FINANCIAL INSTITUTIONS,
from time to time a party hereto as Lenders,

 

CONOCOPHILLIPS COMPANY,
as Administrative Agent,

 

and

 

CONOCOPHILLIPS COMPANY,
as Collateral Agent

 

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Dated as of July 2, 2004

 

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FREEPORT LNG RECEIVING, STORAGE AND REGASIFICATION TERMINAL

 

 

 

Table of Contents

 

ARTICLE 1.

DEFINITIONS AND RULES OF INTERPRETATION

 

 

 

 

1.1

Defined Terms

 

1.2

Rules of Interpretation

 

1.3

Accounting Principles

 

 

 

 

ARTICLE 2.

AMOUNTS AND TERMS OF CREDIT FACILITY

 

 

 

 

2.1

The Construction Loan Facility

 

2.2

The Term Loan Facility

 

2.3

Notice of Borrowing

 

2.4

Pro Rata Borrowings; Availability

 

2.5

Minimum Amount and Maximum Number of Borrowings, etc.

 

2.6

Disbursement of Funds

 

2.7

Evidence of Obligations and Notes

 

2.8

Interest on Loans

 

2.9

Ranking

 

2.10

Taxes

 

2.11

Tax Reporting

 

2.12

Increased Costs and Reduction of Return

 

2.13

Funding Losses

 

2.14

Survival

 

2.15

Supplemental Costs and TPS Loans

 

2.16

Expansion Loans

 

2.17

TPS Secured Parties and Expansion Secured Parties

 

2.18

Certain Costs Recoverable by Borrower; Obligations of the Borrower

 

 

 

 

ARTICLE 3.

CONDITIONS PRECEDENT

 

 

 

 

3.1

Conditions to Closing and Construction Loans During Initial Period

 

3.2

Construction Loans After Initial Period

 

3.3

The Conversion Date

 

3.4

No Failure to Satisfy Condition

 

3.5

Administrative Agent Rights

 

3.6

Conditions to Initial Tranche B Construction Loan

 

 

 

 

ARTICLE 4.

REPRESENTATIONS, WARRANTIES AND AGREEMENTS

 

 

 

 

4.1

Organization

 

4.2

Authority and Consents.

 

4.3

Capitalization; Debt; Investments.

 

4.4

Financial Condition.

 

4.5

Legal Matters; Labor Disputes

 

4.6

Necessary Approvals.

 

4.7

Use of Proceeds; Margin Stock.

 

4.8

ERISA

 

4.9

Taxes; Tax Status.

 

4.10

Investment Company Act

 

 

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4.11

Regulation

 

4.12

Title; Security Documents.

 

4.13

Environmental Matters

 

4.14

Subsidiaries; Capital Stock Ownership

 

4.15

Intellectual Property

 

4.16

Project Documents.

 

4.17

No Default; Force Majeure

 

4.18

Compliance with Applicable Laws and Necessary Approvals

 

4.19

Disclosure.

 

4.20

Utilities, etc

 

4.21

Transactions with Affiliates

 

4.22

Single-Purpose Entity; Phase 1 Additions; Location of Business

 

 

 

 

ARTICLE 5.

COVENANTS.

 

 

 

 

5.1

Financial Statements and Other Information

 

5.2

Other Notices

 

5.3

Conduct of Business; Title to Assets

 

5.4

Compliance with Applicable Laws; Legal Matters

 

5.5

Payment of Taxes, Tax Status etc.

 

5.6

Books and Records; Financial Management; Auditors.

 

5.7

Inspection.

 

5.8

Governmental Approvals; Maintenance of Certain Rights

 

5.9

Insurance.

 

5.10

Events of Loss; Project Document Claims and Performance Liquidated Damages.

 

5.11

Application of Loss Proceeds; Expropriation Event.

 

5.12

Limitation on Liens

 

5.13

Guarantees; Debt

 

5.14

Leases

 

5.15

Single Purpose Entity of the Borrower and General Partner; Subsidiaries and
Investments; Phase 1 Additions

 

5.16

Restricted Payments

 

5.17

Hedging Agreements

 

5.18

Certain Security Interest Matters

 

5.19

Transactions with Affiliates; Expansion

 

5.20

Use of Proceeds; Accounts; Construction Budget.

 

5.21

Project Construction; Maintenance.

 

5.22

Performance of Project Documents

 

5.23

Operating Budget; Account Agreement; Phase 1 Addition Expenses.

 

5.24

Fundamental Changes.

 

5.25

Amendment of Transaction Documents; Material Additional Project Documents;
Change Orders; etc.

 

5.26

Environmental Compliance

 

5.27

Completion; Construction Contracts; Performance Tests.

 

5.28

ERISA

 

5.29

Certain Restrictive Agreements

 

5.30

Security Documents.

 

 

ii

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5.31

Prepayment of Debt

 

5.32

Transfers of Capital Stock in the Borrower and its Subsidiaries

 

5.33

Payment of Project Costs with Project Revenues

 

5.34

Investment Company Act; PUHCA

 

5.35

Further Assurances

 

 

 

 

ARTICLE 6.

PAYMENT PROVISIONS; FEES.

 

 

 

 

6.1

Repayment of Principal; Interest; Reduction of Commitment.

 

6.2

Voluntary Prepayments

 

6.3

Mandatory Prepayments

 

6.4

Term Loan Maturity Date

 

6.5

Method and Place of Payment.

 

6.6

Application of Payments; Sharing.

 

 

 

 

ARTICLE 7.

EVENTS OF DEFAULT AND REMEDIES.

 

 

 

 

7.1

Events of Default

 

7.2

Acceleration.

 

7.3

Other Remedies

 

7.4

No Default or Event of Default

 

7.5

Administrative Agent Rights

 

 

 

 

ARTICLE 8.

THE AGENTS.

 

 

 

 

8.1

Appointment and Authorization.

 

8.2

Delegation of Duties

 

8.3

Liability of the Agents

 

8.4

Reliance by the Agents

 

8.5

Notice of Default.

 

8.6

Credit Decision

 

8.7

Indemnification of Agents.

 

8.8

Agents in Individual Capacities; Other Business with the Borrower

 

8.9

Successor Agents.

 

8.10

Withholding Tax.

 

 

 

 

ARTICLE 9.

MISCELLANEOUS.

 

 

 

 

9.1

COSTS AND EXPENSES

 

9.2

INDEMNITY

 

9.3

Notices.

 

9.4

Benefit of Agreement; Assignment by Borrower

 

9.5

No Waiver; Remedies Cumulative

 

9.6

No Third Party Beneficiaries

 

9.7

Confidentiality

 

9.8

No Immunity

 

9.9

Counterparts

 

9.10

Amendment or Waiver.

 

9.11

Assignments by Lenders, Participations, etc.

 

9.12

Survival

 

 

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9.13

WAIVER OF JURY TRIAL

 

9.14

Right of Set-off

 

9.15

Severability

 

9.16

Domicile of Loans

 

9.17

Limitation of Recourse.

 

9.18

Governing Law; Submission to Jurisdiction.

 

9.19

Reinstatement

 

9.20

Complete Agreement

 

9.21

Maximum Interest Rate

 

 

Appendices

 

 

 

Appendix A:

Defined Terms and Rules of Interpretation

 

 

Appendix B:

Intercreditor Arrangement Between Secured Parties and TPS Secured Parties:
Summary of Terms and Conditions

 

 

Appendix C:

Insurance Provisions

 

 

 

 

 

 

Schedules

 

 

 

Schedule 4.2:

Financing-Related Filings, Etc.

 

 

Schedule 4.9:

Taxes

 

 

Schedule 5.3(b):

Outstanding Parcels

 

 

Schedule 5.12:

Certain Transaction Documents with Liens

 

 

Schedule 5.19:

Certain Transaction Documents with Affiliates

 

 

Schedule 5.20:

Approved Development and Construction Cost Reimbursements

 

 

 

 

 

 

Exhibits

 

 

 

Exhibit A-1:

Form of Notice of Borrowing

 

 

Exhibit B-1:

Form of Tranche A Construction Note

 

 

Exhibit B-2:

Form of Tranche B Construction Note

 

 

Exhibit B-3:

Form of Tranche A Term Note

 

 

Exhibit B-4:

Form of Tranche B Term Note

 

 

Exhibit C:

Form of Process Agent Letter

 

 

Exhibit D-1:

Form of Construction Requisition

 

 

Exhibit D-2:

Form of Independent Engineer’s Certificate (Drawdowns)

 

 

Exhibit E-1:

Form of Borrower Completion Certificate

 

 

Exhibit E-2:

Form of Independent Engineer Completion Certificate

 

 

Exhibit F:

Form of Consent Agreement

 

 

Exhibit G:

Form of Assignment and Acceptance

 

 

Exhibit H-1:

Form of Officer’s Certificate of the Borrower

 

 

Exhibit H-2:

Form of Officer’s Certificate of Other Entity

 

 

Exhibit I-1:

Form of Quarterly Financial Statements Officer’s Certificate

 

 

Exhibit I-2:

Form of Annual Financial Statements Officer’s Certificate

 

 

Exhibit I-3:

Form of Quarterly Operating Report Officer’s Certificate

 

 

 

 

 

 

Annex

 

 

 

Annex I:

Construction Loan Commitment

 

 

 

iv

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This CREDIT AGREEMENT (this “Agreement”), dated as of July 2, 2004, is among (i)
FREEPORT LNG DEVELOPMENT, L.P., a limited partnership organized and existing
under the laws of the State of Delaware, as the Borrower, (ii) FREEPORT LNG-GP,
INC., a corporation organized under the laws of the State of Delaware, as
General Partner, (iii) CONOCOPHILLIPS COMPANY, a corporation organized under the
laws of the State of Delaware, as Lender, (iv) the financial institutions from
time to time party hereto as Lenders, (v) CONOCOPHILLIPS COMPANY, as
Administrative Agent, and (vi) CONOCOPHILLIPS COMPANY, as Collateral Agent.

 

R E C I T A L S:

 

WHEREAS the Borrower has been formed as a limited partnership under the laws of
the State of Delaware solely to undertake the development, construction,
financing, completion, ownership and operation of a LNG terminal facility
located on Quintana Island, Texas, that is designed to and capable of performing
certain LNG terminalling services, all as more fully described in the Project
Documents;

 

WHEREAS, in order to finance the acquisition, construction and initial operation
of Phase 1 of the Project and certain other costs and expenditures associated
with the development of Phase 1 of the Project and the financing contemplated
herein, the Borrower has requested the Lenders to provide the credit facilities
described herein; and

 

WHEREAS, the Lenders are willing to provide the credit facilities described
herein upon the terms and conditions herein set forth;

 

NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the parties hereto agree as follows:

 

ARTICLE 1.           DEFINITIONS AND RULES OF INTERPRETATION.

 

1.1           Defined Terms.  Except as otherwise expressly provided herein,
capitalized terms used in this Agreement and its Schedules, Exhibits, Appendices
and Annex shall have the respective meanings assigned to such terms in Appendix
A hereto.

 

1.2           Rules of Interpretation.  Except as otherwise expressly provided
herein, the rules of interpretation set forth in Appendix A hereto shall apply
to this Agreement.

 

1.3           Accounting Principles.  Except as otherwise provided in this
Agreement, all computations and determinations as to financial matters, and all
financial statements to be delivered under this Agreement shall be made or
prepared in accordance with GAAP (including principles of consolidation where
appropriate) applied on a consistent basis (except to the extent approved or
required by the independent public accountants certifying such statements and
disclosed therein).

 

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ARTICLE 2.           AMOUNTS AND TERMS OF CREDIT FACILITY.

 

2.1           The Construction Loan Facility

 

(a)           Subject to and upon the terms and conditions set forth herein,
each Lender severally agrees to make, from time to time during the Construction
Loan Availability Period, senior secured loans (each, a “Tranche A Construction
Loan” and, collectively, the “Tranche A Construction Loans”) to the Borrower,
which Tranche A Construction Loans (i) shall be made and maintained in Dollars,
(ii) shall not exceed for any Lender, in aggregate principal amount, that amount
which equals the Tranche A Construction Loan Commitment of such Lender, and
(iii) except to the extent that such Tranche A Construction Loans are converted
into Tranche A Term Loans in accordance with Section 2.2 hereof, shall mature on
the Tranche A Construction Loan Maturity Date.

 

(b)           Subject to and upon the terms and conditions set forth herein,
each Lender severally agrees to make, from time to time during the Construction
Loan Availability Period, senior secured loans (each, a “Tranche B Construction
Loan” and, collectively, the “Tranche B Construction Loans”) to the Borrower,
which Construction Loans (i) shall be made and maintained in Dollars,
(ii) except to the extent that such Tranche B Construction Loans are converted
into Tranche B Term Loans in accordance with Section 2.2 hereof, shall mature on
the Tranche B Construction Loan Maturity Date.

 

(c)           The Construction Loans are available only on the terms and
conditions specified hereunder, and once repaid, in whole or in part, at
maturity or by prepayment, may not be reborrowed in whole or in part.

 

2.2           The Term Loan Facility

 

(a)           Subject to and upon the terms and conditions set forth herein,
each of the Lenders agrees that on the Conversion Date all Tranche A
Construction Loans of such Lender outstanding on such date (after giving effect
to any Borrowing of Tranche A Construction Loans on such date and any prepayment
of Tranche A Construction Loans on such date in accordance herewith) shall
automatically convert into term loans (each, a “Tranche A Term Loan” and,
collectively, the “Tranche A Term Loans”) in an aggregate principal amount not
exceeding such Lender’s Tranche A Term Loan Commitment in effect as of such
date.

 

(b)           Subject to and upon the terms and conditions set forth herein,
each of the Lenders agrees that on the Conversion Date all Tranche B
Construction Loans of such Lender outstanding on such date (after giving effect
to any Borrowing of Tranche B Construction Loans on such date and any prepayment
of Tranche B Construction Loans on such date in accordance herewith) shall
automatically convert into term loans (each, a “Tranche B Term Loan” and,
collectively, the “Tranche B Term Loans”).

 

(c)           Construction Loans that are converted into Term Loans shall not be
deemed to be prepaid, repaid or discharged but shall be deemed to be continued
as Term Loans as provided hereby.  Construction Loans that are not converted
into Term Loans in accordance herewith shall be repaid in accordance with
Section 6.1.

 

2.3           Notice of Borrowing.  Whenever the Borrower desires to make a
Borrowing pursuant to Section 2.1, it shall give written notice to the
Administrative Agent at its Notice Office at least three Business Days prior to
the date of the Borrowing; provided, that any

 

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such notice shall be deemed to have been given on a certain day only if given
before 5:00 p.m. (New York City time).  Each such notice (a “Notice of
Borrowing”) shall be irrevocable and shall be given by the Borrower
substantially in the form of Exhibit A-1 hereto, appropriately completed to
specify (i) the aggregate principal amount of the Tranche A Construction Loans
to be made pursuant to such Borrowing, (ii) the aggregate principal amount of
the Tranche B Construction Loans to be made pursuant to such Borrowing, and
(iii) the date of such Borrowing (which shall be a Business Day not later than
the Conversion Date).  The Administrative Agent shall promptly give each Lender
notice of the proposed Borrowing (which, in the case of at least the Initial
Lender, shall include the aggregate principal amount of the Construction Loans
to be made), the amount of such Lender’s proportionate share thereof, and of the
other matters required by the immediately preceding sentence to be specified in
the Notice of Borrowing.

 

2.4           Pro Rata Borrowings; Availability.  Each Borrowing of Tranche A
Construction Loans shall be incurred contemporaneously and ratably among the
Lenders based upon the amount of their respective Tranche A Construction Loan
Commitments.  Each Borrowing of Tranche B Construction Loans shall be incurred
contemporaneously and ratably among the Lenders based upon the amount of their
respective Tranche B Construction Loan Commitments.  Except for the obligations
of the Initial Lender set forth in Section 2.6, it is agreed that no Lender
shall be responsible for any default by any other Lender of its obligation to
make a Loan hereunder and that each Lender shall be obligated to make the Loans
provided to be made by it hereunder regardless of the failure of any other
Lender to make a Loan hereunder.

 

2.5           Minimum Amount and Maximum Number of Borrowings, etc.

 

(a)           The aggregate principal amount of each Borrowing of Tranche A
Construction Loans and Tranche B Construction Loans, collectively, on a given
Disbursement Date under Section 2.1 shall not be less than the lesser of (i)
$1,000,000 and (ii) the aggregate unused amount of the applicable Construction
Loan Commitments.

 

(b)           Except in the case of Borrowings incurred solely to pay any of the
Obligations set forth in clause (a) or (b) of the definition of Obligations, the
Borrower shall be limited to a maximum of one Borrowing per calendar month.

 

2.6           Disbursement of Funds.  Subject to the terms and conditions
hereof, no later than 5:00 p.m. (New York City time) on the Borrowing date
specified in each Notice of Borrowing, each Lender will make available, through
such Lender’s Applicable Lending Office, its pro rata portion of the aggregate
amount of the Loans requested to be made on such date, in Dollars and in
immediately available funds at the Payment Office of the Administrative Agent,
and the Administrative Agent will deposit the aggregate of the amounts so made
available by the Lenders into the Construction Account.  Unless the
Administrative Agent shall have been notified by any Lender prior to the
applicable date of the Borrowing that such Lender does not intend to make
available to the Administrative Agent such Lender’s portion of the Borrowing on
such date, the Administrative Agent may assume that such Lender has made such
amount available to the Administrative Agent on such date, and the
Administrative Agent may (but shall have no obligation to), in reliance upon
such assumption, make available to the Borrower a corresponding amount.  If such
corresponding amount is not in fact made available to the Administrative Agent
by such Defaulting Lender, the Administrative Agent shall be entitled to

 

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recover such corresponding amount from such Defaulting Lender on demand.  If
such Defaulting Lender does not immediately pay such corresponding amount
forthwith upon the Administrative Agent’s demand therefor, the Administrative
Agent shall promptly notify the Initial Lender, and the Initial Lender shall
immediately pay such corresponding amount to the Administrative Agent.  The
Administrative Agent shall also be entitled to recover on demand from such
Defaulting Lender interest on such corresponding amount in respect of each day
from the date such corresponding amount was made available by the Administrative
Agent to the Borrower until the date such corresponding amount is recovered by
the Administrative Agent.  If (a) the Administrative Agent does not intend to
make available to the Borrower such corresponding amount, (b) the Administrative
Agent shall have been notified by any Lender prior to the applicable date of the
Borrowing that such Lender does not intend to make available to the
Administrative Agent such Lender’s portion of the Borrowing on such date, or
(c) any Lender does not make available to the Administrative Agent such Lender’s
portion of the Borrowing, the Administrative Agent shall immediately notify the
Initial Lender, and the Initial Lender shall make available to the
Administrative Agent such corresponding amount.  The Initial Lender shall be
entitled to recover such corresponding amount made available by it under this
Section 2.6 from such Defaulting Lender on demand.  The Initial Lender shall
also be entitled to recover on demand from such Defaulting Lender, interest on
such corresponding amount made available by the Initial Lender under this
Section 2.6 in respect of each day from the date such corresponding amount was
made available by the Initial Lender to the Administrative Agent until the date
such corresponding amount is recovered by the Initial Lender.  Until full
recovery by the Initial Lender of such corresponding amount made available by it
under this Section 2.6, the Initial Lender shall be entitled to all of the
rights and remedies of such Defaulting Lender under the Credit Agreement to the
extent such advance has not been recovered by the Initial Lender.  Any amount
the Administrative Agent receives from the Initial Lender in excess of the
amount required to make available to the Administrative Agent the aggregate
principal amount of the Construction Loans to be made on such date shall
immediately be returned to the Initial Lender.  Nothing in this Section 2.6
shall be deemed to relieve any Lender from its obligation to make a Loan
hereunder or to prejudice any rights which the Borrower may have against any
Lender as a result of any failure by such Lender to make Loans hereunder.

 

2.7           Evidence of Obligations and Notes

 

(a)           Each Lender will maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
as a result of the Loans of such Lender, including the Class, Type, amounts of
principal, interest and other amounts payable and paid to such Lender from time
to time under this Agreement and the Notes.  The entries made by each Lender
shall constitute conclusive evidence of the existence and amounts of the Loans
and other Obligations therein recorded, in the absence of manifest error;
provided, however, that the failure of any Lender to maintain account or
accounts, or any error therein, shall not in any manner affect the obligations
of the Borrower to repay or pay the Loan made by such Lender, accrued interest
thereon and the other Obligations owed to such Lender hereunder in accordance
with the terms of this Agreement and the Notes.  Each Lender shall advise the
Borrower promptly of the outstanding principal hereunder owed to such Lender
upon written request therefor.  If any amounts paid by the Borrower pursuant to
the Notes issued pursuant hereto are insufficient to repay or pay the principal
amount of all outstanding Loans, all accrued

 

4

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and unpaid interest thereon and all other Obligations, the Borrower shall be
responsible for the deficiency.

 

(b)           The Borrower’s obligation to pay the principal of, and interest
on, the Loans made by each Lender shall be evidenced by

 

(1)         in the case of Tranche A Construction Loans, a promissory note duly
executed and delivered by the Borrower substantially in the form of Exhibit B-1
hereto with blanks appropriately completed in conformity herewith (each, a
“Tranche A Construction Note” and, collectively, the “Tranche A Construction
Notes”),

 

(2)         in the case of Tranche B Construction Loans, a promissory note duly
executed and delivered by the Borrower substantially in the form of Exhibit B-2
hereto with blanks appropriately completed in conformity herewith (each, a
“Tranche B Construction Note” and, collectively, the “Tranche B Construction
Notes”),

 

(3)         in the case of Tranche A Term Loans, a promissory note duly executed
and delivered by the Borrower substantially in the form of Exhibit B-3 hereto
with blanks appropriately completed in conformity herewith (each, a “Tranche A
Term Note” and, collectively, the “Tranche A Term Notes”), and

 

(4)         in the case of Tranche B Term Loans, a promissory note duly executed
and delivered by the Borrower substantially in the form of Exhibit B-4 hereto
with blanks appropriately completed in conformity herewith (each, a “Tranche B
Term Note” and, collectively, the “Tranche B Term Notes”).

 

Each of the promissory notes referred to in this Section 2.7(b) are herein
referred to individually as a “Note” and, collectively, as the “Notes”.

 

(c)           The Tranche A Construction Note issued to each Lender shall (i) be
payable to the order of such Lender, (ii) be dated the Closing Date, (iii)
evidence the principal amount of Tranche A Construction Loans outstanding from
time to time, (iv) mature on the Tranche A Construction Loan Maturity Date, (v)
bear interest as provided in this Agreement, and (vi) be entitled to the
benefits of this Agreement.  The Tranche B Construction Note issued to each
Lender shall (i) be payable to the order of such Lender, (ii) be dated the
Closing Date, (iii) evidence the principal amount of Tranche B Construction
Loans outstanding from time to time, (iv) mature on the Tranche B Construction
Loan Maturity Date, (v) bear interest as provided in this Agreement, and (vi) be
entitled to the benefits of this Agreement.  The Tranche A Term Note issued to
each Lender shall (i) be payable to the order of such Lender, (ii) be dated the
Conversion Date, (iii) be in a stated principal amount equal to the Tranche A
Term Loans of such Lender, (iv) mature on the Tranche A Term Loan Maturity Date,
(v) bear interest as provided in this Agreement and (vi) be entitled to the
benefits of this Agreement.  The Tranche B Term Note issued to each Lender shall
(i) be payable to the order of such Lender, (ii) be dated the Conversion Date,
(iii) be in a stated principal amount equal to the Tranche B Term Loans of such
Lender, (iv) mature on the Tranche B Term Loan Maturity Date, (v) bear interest
as provided in this Agreement and (vi) be entitled to the benefits of this
Agreement.

 

5

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(d)           Each Lender will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the schedule attached thereto (or any
continuation thereof) the outstanding principal amount of Loans evidenced
thereby.  Failure to make such notation shall not affect the Borrower’s
obligations in respect of such Loans.

 

2.8           Interest on Loans

 

(a)           The Borrower agrees to pay interest in respect of the aggregate
outstanding principal amount of each Tranche A Construction Loan from the date
the proceeds thereof are made available to the Borrower until the maturity of
such Tranche A Construction Loan (whether by acceleration or otherwise) at a
rate per annum that is equal to the Tranche A Rate.  The Borrower agrees to pay
interest in respect of the aggregate outstanding principal amount of each
Tranche B Construction Loan from the date the proceeds thereof are made
available to the Borrower until the maturity of such Tranche B Construction Loan
(whether by acceleration or otherwise) at a rate per annum that is equal to the
Tranche B Rate.  Interest after the Term Date shall be paid in accordance with
Section 6.1.

 

(b)           Upon the occurrence and during the continuance of an Event of
Default, the aggregate outstanding amount of the Loans will bear interest at a
rate (the “Default Rate”) that is equal to the sum of (i) *** per annum and (ii)
in the case of Tranche A Loans, the greater of (A) the Tranche A Rate and
(B) the Prime Rate and in the case of Tranche B Loans, the Tranche B Rate.

 

(c)           Accrued (and theretofore unpaid) interest shall be payable in
respect of each Construction Loan, monthly in arrears on the last Business Day
of each month and on any repayment or prepayment (on the amount repaid or
prepaid) at maturity (whether by acceleration or otherwise) and, after such
maturity, on demand.  Notwithstanding the foregoing, interest payable in
accordance with Section 2.8(b) shall be payable as provided therein.

 

2.9           Ranking.  The Loans will be senior secured Debt of the Borrower
ranking pari passu in right of payment with all other existing and future senior
Debt of the Borrower, and senior in right of payment to all existing and future
Debt of the Borrower that is designated as subordinate or junior in right of
payment to the Loans.

 

2.10         Taxes

 

(a)           Any and all payments by the Borrower to any Lender or Agent under
this Agreement and any other Financing Document shall be made free and clear of,
and without deduction or withholding for, any Taxes.

 

(b)           The Borrower agrees to indemnify and hold harmless each Lender and
each Agent for the full amount of Taxes (including any Taxes imposed by any
jurisdiction on amounts payable under this section) paid by any such Lender or
Agent and any liability (including penalties, interest, additions to Tax and
expenses) arising from or with respect to the Loans, whether or not such Taxes
were correctly or legally asserted.  Payment under this indemnification shall be
made within 30 days after the date the affected Lender or Agent makes written
demand on Borrower therefor; provided, however, that if such Taxes are paid by
any

 

6

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Lender or Agent prior to Conversion, then payment under this indemnification
shall not be due until COP Shipper makes its first Debt Service Installment
payment.

 

(c)           On or after Conversion, if the Borrower shall be required by
Applicable Law to deduct or withhold for any Taxes from or in respect of any sum
payable hereunder or under any other Financing Document to any Lender or Agent,
then:

 

(1)         the sum payable shall be increased as necessary so that after making
all required deductions and withholdings (including deductions and withholdings
applicable to additional sums payable under this section) such Lender or Agent,
as the case may be, receives an amount equal to the sum it would have received
had no such deductions or withholdings been made;

 

(2)         the Borrower shall make such deductions and withholdings;

 

(3)         the Borrower shall pay the full amount deducted or withheld to the
relevant taxing authority or other Government Authority in accordance with
Applicable Law; and

 

(4)         the Borrower shall also pay to each Lender and Agent for the account
of such Lender or Agent, as the case may be, at the time interest is paid, all
additional amounts specified by the respective Lender or Agent as necessary to
preserve the after-tax yield it would have received if such Taxes had not been
imposed.

 

(d)           Within 30 days after the date of any payment by the Borrower of
Taxes, the Borrower shall furnish the Administrative Agent the original or a
certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to the Administrative Agent.

 

(e)           If the Borrower is required to pay additional amounts to or for
the account of any Lender pursuant to Section 2.10(c), then such Lender, may (or
at the request of the Borrower and at the reasonable expense of the Borrower
shall) use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Applicable Lending Office so as
to eliminate any such additional payment by the Borrower that may thereafter
accrue, if in the judgment of such Lender such change is not otherwise
disadvantageous to such Lender.  Payment of expenses incurred under this
Section 2.10(e) shall be made within 30 days after the date the affected Lender
or Agent makes written demand on the Borrower therefor; provided, however, that
if such expenses are paid or incurred by any Lender or Agent prior to Conversion
then payment under this Section 2.10(e) shall not be due until COP Shipper makes
its first Debt Service Installment payment.

 

(f)            Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by Applicable
Law, such properly completed and executed documentation prescribed by Applicable
Law or reasonably requested by the Borrower at the Borrower’s expense as will
permit such

 

7

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payments to be made without withholding Tax or withholding or at a reduced rate
(unless doing so in the judgment of such Lender is not otherwise disadvantageous
to such Lender).

 

(g)           Neither the Administrative Agent nor any Lender shall be required
to make available its Tax returns (or any other information relating to its
Taxes which it deems confidential) to the Borrower or any other Person.

 

2.11         Tax Reporting.  The Borrower and each of the Lenders shall report
the Loans as loan transactions for federal income tax purposes.

 

2.12         Increased Costs and Reduction of Return

 

(a)           If any Lender determines that, due to either (i) the introduction
of or any change in Applicable Law occurring or becoming effective after the
date hereof, or (ii) the compliance by such Lender with any guideline or request
from any central bank or other Governmental Authority promulgated, issued or
becoming effective after the date hereof (whether or not having the force of
Applicable Law), there shall be any increase in the cost to such Lender of
agreeing to make or making, funding or maintaining any Loans, then the Borrower
shall be liable for, and shall from time to time, upon written demand (with a
copy of such demand to be sent to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender, additional amounts as are
sufficient to compensate such Lender for such increased costs.  Payment under
this Section 2.12(a) shall be made within 30 days after the date the affected
Lender or Agent makes written demand on Borrower therefor; provided, however,
that if such increased costs are paid by any Lender or Agent prior to
Conversion, then payment under this Section 2.12(a) shall not be due until COP
Shipper makes its first Debt Service Installment.

 

(b)           If any Lender shall have determined that (i) the introduction of
any Capital Adequacy Regulation after the date hereof, (ii) any change in any
Capital Adequacy Regulation occurring or becoming effective after the date
hereof, (iii) any change in the interpretation, construction or administration
of any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation, construction or administration
thereof occurring or becoming effective after the date hereof, or (iv)
compliance after the date hereof by such Lender (or its Applicable Lending
Office) or any corporation controlling such Lender with any Capital Adequacy
Regulation, affects or would affect the amount of capital required or expected
to be maintained by such Lender or any entity controlling such Lender and
(taking into consideration such Lender’s or such entity’s policies with respect
to capital adequacy and the return on capital that such Lender determines it
would have achieved but for the occurrence of any event described in the
foregoing clauses (i) through (iv)) determines that the amount of such capital
required or expected to be maintained is increased as a consequence of its
Commitment, Loans, credits or obligations under this Agreement, then, upon
demand of such Lender to the Borrower through the Administrative Agent, the
Borrower shall pay to such Lender, from time to time as specified in writing by
such Lender, additional amounts sufficient to compensate such Lender for the
effect of such increase.  Payment under this Section 2.12(b) shall be made
within 30 days after the date the affected Lender or Agent makes written demand
on Borrower therefor; provided, however, that if such additional amounts are
paid by any Lender or Agent prior to

 

8

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Conversion, then payment under this Section 2.12(b) shall not be due until COP
Shipper makes its first Debt Service Installment payment.

 

(c)           Before making demand upon the Borrower under Section 2.12(a), the
affected Lender shall designate a different Applicable Lending Office with
respect to its Loans if such designation will avoid the need for making such
demand and will not, in the judgment of such Lender, be illegal or otherwise
disadvantageous to such Lender.

 

(d)           Failure or delay on the part of any Lender to demand compensation
pursuant to this Section 2.12 shall not constitute a waiver of such Lender’s
right to demand such compensation.

 

2.13         Funding Losses.  The Borrower shall reimburse each Lender and hold
each Lender harmless from any loss or expense that the Lender may sustain or
incur as a consequence of:

 

(a)           the failure of the Borrower to make on a timely basis any
scheduled payment of principal of any Loan except if such failure is not an
Event of Default;

 

(b)           the failure of the Borrower to borrow a Construction Loan after
the Borrower has given (or is deemed to have given) a Notice of Borrowing or to
effect the Conversion in accordance herewith;

 

(c)           the prepayment or repayment (including pursuant to ARTICLE 6) or
other payment (including after acceleration thereof) of a Loan on a day other
than the scheduled payment date for such amount; and

 

(d)           the failure of the Borrower to make any prepayment in accordance
with Section 6.2.

 

2.14         Survival.  The agreements and obligations of the Borrower in
Sections 2.10 through 2.13 shall survive the payment of the Loans, the Notes and
all other Obligations.

 

2.15         Supplemental Costs and TPS Loans

 

(a)           If Supplemental Costs are required to be paid or reimbursed, the
Borrower shall provide or cause to be provided financing for *** of such
Supplemental Costs (in each case upon terms and conditions, and pursuant to
documentation, not inconsistent with the Financing Documents) by either:

 

(1)         causing capital calls to be made on the Limited Partners and the
proceeds of such capital calls to be deposited into the Supplemental Reserve
Account, provided that such capital call obligations shall be supported by
Acceptable Credit Support to the extent not funded timely by deposits of the
proceeds of such capital calls into the Supplemental Reserve Account; or

 

9

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(2)         entering into a credit facility with an Eligible Institution
containing a commitment to fund the TPS Loans with the proceeds thereof to be
used for Supplemental Costs.  The TPS Loans, if any, will be arranged by the
General Partner; or

 

(3)         availing itself of the Tranche B Construction Loan Commitment,
subject to the terms of this Agreement.

 

(b)           The TPS Loans shall be made under a separate facility or separate
facilities.  The Borrower may have more than one facility for TPS Loans subject
to intercreditor arrangements acceptable to the Administrative Agent in its sole
discretion.  In accordance with the commitments of the Lenders and the financing
obtained under Section 2.15(a), Borrower undertakes that each request for
payment or reimbursement of Supplemental Costs shall be simultaneously funded
one half from the Tranche A Commitments (subject to satisfaction of the
requirements under the Financing Documents) and one half from either the
Tranche B Commitments or the other financing contemplated under Section 2.15(a).

 

(c)           On the Project Completion Date, the obligations of the General
Partner, the Limited Partners, the Borrower, and the TPS Lenders to enter into
or provide such Supplemental Cost financing contemplated by this Section 2.15
shall terminate.

 

(d)           If any existing Acceptable Credit Support ceases to constitute
Acceptable Credit Support or is not renewed at least 30 days before it is
scheduled to expire, substitute Acceptable Credit Support meeting the
requirements thereof shall be provided within three Business Days of such event
or the Collateral Agent shall immediately be entitled to draw on such Acceptable
Credit Support and deposit the proceeds thereof into the Supplemental Reserve
Account for the benefit of the Secured Parties.  Any letter of credit or
guarantee constituting Acceptable Credit Support shall expressly provide for
such right of the Collateral Agent.

 

(e)           The TPS Financing Documents shall contain terms not inconsistent
with the Financing Documents, including that the terms of such Debt provide to
the Lenders (i) notice of any default under such Debt at the same time such
notice is delivered to the Borrower or any TPS Secured Party and the right to
cure such default on the same terms and conditions as those available to the
Borrower, and (ii) the right to purchase such Debt at any time at a cash price
equal to the aggregate principal and accrued and unpaid interest outstanding
plus a make whole amount, if any, whereupon the TPS Lenders (and their
representatives) shall assign to the Lenders or their representatives all of
their claims, liens and other Property in connection with such Debt (A) without
recourse or warranty (other than that the assignor is the legal and beneficial
owner of the interest being assigned and that such interest is free and clear of
any adverse claim) and (B) as may be contemplated in the intercreditor agreement
between the Secured Parties and the TPS Secured Parties.

 

(f)            The Borrower and each of the TPS Lenders shall report the TPS
Loans as loan transactions for federal income tax purposes.

 

10

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(g)           The TPS Obligations may, at the sole option of the General
Partner, be secured by the following (subject to any applicable Permitted Liens
and without recourse to or warranty by the Lenders or any of their Affiliates):

 

(1)         a first priority Lien on the COP Royalty,

 

(2)         a first priority Lien on all or any portion of the Non-COP TUAs,
including amounts payable (and other obligations performable) by each of the
Non-COP Shippers thereunder,

 

(3)         a first priority Lien on the TPS Accounts;

 

(4)         a Lien of equal and ratable priority with that of the Collateral
Agent:

 

(A)          in the Loss Proceeds Account and the Loss Proceeds from insurance
and an Expropriation Event and the Delay Liquidated Damages and Performance
Liquidated Damages but subject as to percentage interests to an intercreditor
agreement between the TPS Lenders and the Lenders; and

 

(B)           in any Shared Accounts to the extent proceeds of the TPS Loans are
transferred into such Accounts and used therein in a manner similar to the
proceeds of the Loans;

 

(C)           the Supplemental Reserve Account; and/or

 

(5)         a second priority Lien granted by the Collateral Agent in the
Borrower’s interest in the Accounts other than those set forth in
Section 2.15(g)(3) and (4).

 

(h)           The Secured Parties shall have, and shall subordinate, their Liens
in the Property set forth in Section 2.15(g)(1), (2) and (3) in favor of the
Lien securing the TPS Obligations provided for in such clauses.  As a condition
to the initial closing of the TPS Financing Documents, the Secured Parties and
the TPS Secured Parties shall have entered into intercreditor arrangements
contemplated by this Section 2.15(h) and consistent with the terms as attached
in Appendix B that are acceptable to the Secured Parties in their sole
discretion.  Such intercreditor arrangements, may include an intercreditor
agreement or a non-disturbance and recognition agreement, but shall provide
among other matters:

 

(1)         the grant by the Secured Parties to the Non-COP Shippers, and their
successors and assigns, of a non-disturbance and recognition agreement as to
their TUAs;

 

(2)         the recognition by the Secured Parties of the Liens provided for in
this Section 2.15 (and the relative priority thereof) in favor of the TPS
Secured Parties, and their successors and assigns; and

 

(3)         the recognition by the TPS Lenders of the Lien (and the relative
priority thereof) in favor of the Secured Parties, and their successors and
assigns.

 

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2.16         Expansion Loans

 

(a)           The Expansion Obligations may, at Borrower’s option, be secured by
the following  (subject to any applicable Permitted Liens and without recourse
to or warranty by the Lenders or any of their Affiliates): a Lien on (1) the COP
Royalty, and (2) all or some portion of the Non-COP TUAs, including amounts
payable (and other obligations performable) by each Non-COP Shipper thereunder.

 

(b)           As a condition to each initial closing of the Expansion Financing
Documents:

 

(1)         the Secured Parties and the Expansion Secured Parties shall have
entered into intercreditor arrangements acceptable to the Secured Parties in
their sole discretion addressing, among other things, the relative rights,
interests and obligations of such secured parties, including such rights,
interests and obligations with respect of the Borrower and its Affiliates,
Expansion and its Affiliates, the Project and the Phase 2 Projects;

 

(2)         the Expansion Secured Parties shall have entered into
non-disturbance and recognition agreement(s) with the COP Shipper as to the COP
TUA acceptable to the Administrative Agent; and

 

(3)         if requested by the Secured Parties, then the Secured Parties, the
Expansion Secured Parties, the Borrower and Expansion shall have entered into
the Shared Facilities Agreement, if any.

 

Notwithstanding anything to the contrary in any Transaction Document, (A) no
Secured Party shall enter into the Shared Facilities Agreement, if any, without
the prior written consent of the Administrative Agent given or withheld in its
sole discretion and (B) no Borrower Entity shall enter into the Shared
Facilities Agreement, if any, without the prior written consent of the
Administrative Agent given or withheld in its sole discretion.

 

(c)           As a condition to the beginning of each Phase 2 Project, the risks
associated with completion of any Phase 2 Project shall be mitigated through
engineering, procurement and construction arrangements that (A) utilize one or
more internationally reputable construction contractors having significant
experience in the type of work contemplated, who will serve as the primary
contractors responsible for all of the work, (B) are contracted for on terms and
conditions that are substantially similar to those governing the engineering,
procurement and construction of Phase 1 of the Project, including substantially
similar rights and remedies in respect of liabilities and damages for
performance failures and third-party losses and injuries, and appropriate
security for any non-performance damages to be provided by a Person or Persons
(1) having a long term unsecured debt rating of at least “BBB–” by S&P and
“Baa3” by Moody’s and (2) who shall not hold or be the beneficiary of any Liens
on any or all of the Project, any Phase 2 Project or Property of any Borrower
Entity, Expansion or any of Expansion’s Subsidiaries, (C) require such
contractors to provide and maintain construction–related insurances of
substantially similar types, coverages, amounts and provisions as required in
connection with the Project as set out in Section 5.9 and Appendix C, and (D)
are designed so

 

12

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that there could not reasonably be expected to occur a material adverse
interference to the Project’s design, construction, installation, operation,
maintenance in conformity with the Construction Contracts, Good LNG Practices,
Necessary Approvals and Applicable Law or the continuing availability of the
Services Quantity (as used in each of the TUAs (or similar term if such term is
not used therein)) as contemplated by the Financing Documents and the TUAs.

 

(d)           As a condition to each initial closing of the Expansion Financing
Documents:

 

(1)         the Project Completion Date has occurred or the Independent Engineer
has certified that it reasonably expects such date will occur no later than the
Date Certain notwithstanding any and all current or proposed Phase 2 Projects
and Phase 2 Expenditures and Phase 1 Additions;

 

(2)         an Authorized Officer of the Borrower certifies, and the Independent
Engineer, if any, confirms in writing as reasonable (or, if there is no
Independent Engineer, the Administrative Agent shall be reasonably satisfied),
that the engineering, design, procurement, contracting and construction
arrangements in respect of the related Phase 2 Project will (A) utilize one or
more internationally reputable construction contractors having significant
experience in the type of work contemplated, who will serve as the primary
contractors responsible for all of the work, (B) be contracted for on terms and
conditions that are substantially similar to those governing the engineering,
procurement and construction of Phase 1 of the Project, including substantially
similar rights and remedies in respect of liabilities and damages for
performance failures and third-party losses and injuries, and appropriate
security for any non-performance damages to be provided by a Person or Persons
(1) having a long term unsecured debt rating of at least “BBB–” by S&P and
“Baa3” by Moody’s and (2) who shall not hold or be the beneficiary of any Liens
on any or all of the Project, any Phase 2 Project or Property of any Borrower
Entity, Expansion or any of its Subsidiaries, (C) require such contractors to
provide and maintain construction–related insurances of substantially similar
types, coverages, amounts and provisions as required in connection with the
Project as set out in Section 5.9 and Appendix C, and (D) be designed so that
there could not reasonably be expected to occur a material adverse interference
to the Project’s design, construction, installation, operation, maintenance in
conformity with the Construction Contracts, Good LNG Practices, Necessary
Approvals and Applicable Law or the continuing availability of the Services
Quantity (as used in each of the TUAs (or similar term if such term is not used
therein)) as contemplated by the Financing Documents and the TUAs.

 

(3)         The Administrative Agent shall be reasonably satisfied that the
Shared Facilities Agreement, if any, any related intercreditor agreement between
any Secured Parties and any Expansion Secured Parties, and the other operating
agreements and arrangements in respect of the financing and operation of the
Phase 2 Project, including any required insurances and operating standards and
requirements, are designed so that there could not reasonably be expected to
occur a material adverse interference to the Project’s design, construction,
installation, operation, maintenance in conformity with the Construction
Contracts, Good LNG Practices, Necessary Approvals and Applicable

 

13

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Law or the continuing availability of the Services Quantity (as used in each of
the TUAs (or similar term if such term is not used therein)) as contemplated by
the Financing Documents and the TUAs.

 

(4)         The Expansion Financing Documents shall contain terms not
inconsistent with the Financing Documents, including that the terms of such Debt
provide to the Lenders (i) notice of any default under such Debt at the same
time such notice is delivered to the Borrower or any Expansion Secured Party,
and (ii) the right to purchase such Debt at any time at a cash price equal to
the aggregate principal and accrued and unpaid interest outstanding plus a make
whole amount, if any, whereupon the Expansion Lenders (and their
representatives) shall assign to the Lenders or their representatives all of
their claims, liens and other Property in connection with such Debt (A) without
recourse or warranty (other than that the assignor is the legal and beneficial
owner of the interest being assigned and that such interest is free and clear of
any adverse claim) and (B) as may be contemplated in the intercreditor agreement
between the Secured Parties and the Expansion Secured Parties.

 

2.17         TPS Secured Parties and Expansion Secured Parties.  Each of the TPS
Secured Parties and Expansion Secured Parties and each participant of a TPS Loan
or Expansion Loan shall be an Eligible Institution.

 

2.18         Certain Costs Recoverable by Borrower; Obligations of the
Borrower.  Subject to Section 9.1 and 9.2, the parties hereto acknowledge and
agree that the costs, expenses, fees or scheduled interest on the Loans and
incidental costs relating to the administration (but not enforcement) of the
Loans shall be recoverable by the Borrower under the COP TUA as set forth
therein provided that they are not the result of Defaults or Events of Default
under the Credit Agreement.

 

ARTICLE 3.           CONDITIONS PRECEDENT.

 

3.1           Conditions to Closing and Construction Loans During Initial
Period.  Prior to the earlier to occur of (i) the initial satisfaction of all
conditions set forth in Section 3.2 and (ii) *** (the “Initial Period”), the
obligation of any Lender to make any Construction Loan on any Disbursement Date
shall be subject to the conditions precedent that, both immediately prior to the
making of each such Construction Loan and also after giving effect thereto on
and as of such Disbursement Date and to the application of proceeds therefrom,
as though made on and as of such Disbursement Date, unless such condition is
waived by the Administrative Agent in writing:

 

(a)           Transaction Documents.  (1) Each of the Transaction Documents to
which either ConocoPhillips or COP Shipper is a party or which is to be in
effect on the Closing Date (or Disbursement Date as the case may be), except the
Non-COP TUA between Borrower and The Dow Chemical Company dated March 1, 2004,
shall have been duly authorized, executed and delivered to the Administrative
Agent by each party thereto.  Each Lender shall have received an original of
each such Transaction Document to which it is a party executed by all parties
thereto, its Note, and a copy of all other Transaction Documents.

 

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(2)         (A) The Borrower is not in default in the performance, observance or
fulfilment of any of its obligations, covenants or conditions contained in any
of the Project Documents in full force and effect and, to the best of the
Borrower’s knowledge, no Project Participant (other than the Borrower, any
Shipper and any Non Smith LP, and solely as a party to the Shared Facilities
Agreement, if any, Expansion) is in default in the performance, observance or
fulfilment of any of its material obligations, covenants or conditions contained
therein unless such default could not reasonably be expected to have a Material
Adverse Effect, (B) each Project Document (other than the TUAs, the Construction
Contracts and EPC Guaranty as disclosed to the Administrative Agent) to be in
full force and effect on the Closing Date or such Disbursement Date, as
applicable, is in full force and effect unless such failure could not reasonably
be expected to have a Material Adverse Effect, (C) the copy of each such Project
Document contemplated by Section 3.1(a)(2)(B) has been delivered to the
Administrative Agent and is true, correct and complete on such date, and
(D) except as delivered to the Administrative Agent pursuant to
Section 3.1(a)(2)(C), there are no agreements, side letters or other documents
to which the Borrower is a party that have the effect of modifying or
supplementing in any respect any of the respective rights or obligations of the
Borrower or any Project Participant under any of the Project Documents, all of
the foregoing (A) - (D) being certified by an Authorized Officer of the Borrower
as set forth in a certificate dated the Closing Date and delivered to the
Administrative Agent in the form attached hereto as Exhibit H-1.

 

(b)           Notes.  The Borrower shall have duly authorized and executed a
Construction Note for the account of each Lender.  Each such Construction Note
shall be appropriately completed with the name of the payee and date thereof
inserted therein.  Each Construction Note shall be delivered by the Borrower to
the Administrative Agent.

 

(c)           Charter Documents.  The Administrative Agent shall have received
the following documents, each certified as indicated below:

 

(1)         (A) a certificate as to the good standing of each Borrower Entity
from the Secretary of State of its jurisdiction of organization, and (B) a
certificate of authority for each such entity to transact business in Texas from
the Secretary of State of the State of Texas, in each case dated as of a date no
earlier than 30 days prior to the Closing Date; and

 

(2)         a certificate of an Authorized Officer of the Borrower, dated the
Closing Date, in the form attached hereto as Exhibit H-1, with appropriate
insertions, together with a copy of the Partnership Agreement referred to in
such certificate.

 

(d)           Insurance.  The Administrative Agent shall have received evidence
of insurance, certified by a broker licensed to do business in Texas, with
respect to each policy of insurance required to be in effect pursuant to
Section 5.9 hereof and the designation of the Collateral Agent as loss payee
thereunder to the extent required by Section 5.9 hereof but solely to the extent
reasonably required by the Administrative Agent.  In addition, the
Administrative Agent shall have received a report from the Insurance Advisor
stating that, in its opinion, all insurance policies required to be maintained
(or caused to be maintained) by the Borrower

 

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pursuant to Section 5.9 hereof have been obtained and are in full force and
effect on the Closing Date, such insurance policies comply in all material
respects with the requirements of Section 5.9 hereof, and the insurance coverage
required by Section 5.9 hereof is comparable in all material respects, including
policy limits and deductibles, to insurance carried by responsible owners and
operators of Property similar to the Project, in each case only to the extent
reasonably required by the Administrative Agent as contemplated by the proviso
to Section 5.9.

 

(e)           Satisfaction of Certain Section 3.2 Conditions for Disbursement
Dates.  For each Disbursement Date during the Initial Period (but not on the
Closing Date unless also a Disbursement Date), the conditions set forth in
Sections 3.2(a) (other than Section 3.2(a)(1)(B)) and 3.2(f) are satisfied.

 

(f)            FERC Approval.

 

(1)         The FERC Approval has been duly obtained or made, was validly issued
or executed and delivered, is in full force and effect, and is held in the name
of the Borrower;

 

(2)         The Administrative Agent shall have received an original (or copy
certified by an Authorized Officer of the Borrower to be a true and complete
copy) of the FERC Approval.

 

(3)         There shall have been no change in any Applicable Law or the FERC
Approval previously delivered under Section 3.1(f)(2) and no issuance of any
order, writ, injunction or decree of any Governmental Authority or arbitral
tribunal or change in any third party consent or waiver, which, in either such
case, could reasonably be expected to have a Material Adverse Effect;

 

(g)           Construction Budget and Drawdown Schedule.  Such Construction Loan
shall be in accordance with the Construction Budget and the Drawdown Schedule.

 

(h)           Preceding Closings.

 

(1)         The Site Leases shall be in full force and effect and all other
documents necessary to establish control of the Land in the Borrower and the
Site Lessee, together with all easements and rights-of-way (other than the
easements for the pipeline to Stratton Ridge, Texas) necessary for the
construction and operation of the Project and title (other than title to the
Outstanding Parcels to the extent Section 5.3(b) permits such matters to remain
outstanding after the Closing Date and Permitted Title Defects) to the Land,
shall be in full force and effect and reasonably satisfactory in all respects to
the Administrative Agent, and the Borrower shall have caused the Deed of Trust
and Memoranda of Site Lease to be duly recorded in accordance with Applicable
Law;

 

(2)         The other transactions contemplated by Section 2.2 of the Omnibus
Agreement shall have become effective;

 

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(3)         The COP TUA, the Stockholders Agreement and the Stock Purchase
Agreement shall have been executed and delivered by all parties thereto and
shall be in full force and effect; and

 

(4)         The closing under the Stock Purchase Agreement shall have occurred.

 

(i)            Filings, Registrations and Recordings.  Any document required to
be filed, registered, notarized or recorded in order to create and perfect the
Lien on the Collateral as first priority Liens (subject to Permitted Liens)
shall have been properly filed, registered, notarized or recorded in each office
in each jurisdiction in which such filings, registrations, notarizations and
recordations are required, and any other action required in the judgment of the
Administrative Agent to perfect such Liens as such first priority Liens (subject
to Permitted Liens) shall have been effected, and the Collateral Agent shall
have received acknowledgment copies or other evidence satisfactory to it that
all necessary filing, registration, notarization, recording and other fees and
all taxes and expenses related to such filings, registrations, notarizations and
recordings have been paid in full.

 

(j)            Security Documents.  The Collateral Agent shall have received
such documents as are necessary to perfect the interests of the Secured Parties
in and to the Collateral covered by the Security Agreement with the priority
contemplated thereby.  Consent Agreements for the TUA with The DOW Chemical
Corporation and any other Project Document to be in full force and effect on the
Closing Date or such Disbursement Date, as applicable, requested by the
Administrative Agent shall have been duly authorized, executed and delivered to
the Administrative Agent.

 

(k)           Searches.  On the Closing Date, Administrative Agent shall have
received satisfactory reports of UCC, tax lien, judgment and/or litigation
searches (collectively, the “UCC Searches”) conducted by a search firm
reasonably acceptable to Administrative Agent with respect to the Collateral and
each Borrower Entity in Harris County, Brazoria County, the State of Texas, the
state jurisdiction of organization of such entity and any locations specified by
the Administrative Agent and copies of any financing statements or other
publicly filed record listed on such reports.

 

(l)            Borrower’s Certificate.  (A) The representations and warranties
of the Borrower contained in Article IV hereof and the representations and
warranties of the Borrower contained in each of the other Financing Documents to
which the Borrower is a party are true and correct in all material respects on
and as of the Closing Date (or, if made solely as of an earlier date, were true
and correct as of such earlier date), (B) all Financing Documents are in full
force and effect under the terms and conditions set forth in such Financing
Documents, and (C) no Default or Event of Default has occurred and is continuing
and (D) all conditions set forth in Section 3.1 have been satisfied except as
expressly set forth in such certificate, all of the foregoing (A) - (D) being
certified by an Authorized Officer of the Borrower as set forth in a certificate
dated the Closing Date, in the form attached hereto as Exhibit H-1, and
delivered to the Administrative Agent on the Closing Date.

 

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(m)          Financial Information, etc.

 

(1)         On the Closing Date, the Administrative Agent shall have received
copies of the most recent unaudited or, if available, audited consolidated
statements from the Borrower together with a certificate from the chief
financial officer or other Authorized Officer of such Person, dated the Closing
Date, to the effect that, to the best of such officer’s knowledge, (A) such
financial statements are true, complete and correct in all material respects and
(B) there has been no material adverse change in the financial condition,
operations, Property, or business of such Person since the date of such
financial statements.

 

(2)         The Administrative Agent shall have received such other financial,
business and other information regarding the Project Participants as the
Administrative Agent shall have reasonably requested.

 

(n)           Base Case Projections; Drawdown Schedule; Budgets.  The
Administrative Agent shall have received from the Borrower (A) the Base Case
Projections, (B) the Construction Budget, and (C) the Drawdown Schedule, all of
the foregoing in clauses (A) - (C) as reasonably satisfactory to the
Administrative Agent.

 

(o)           Process Agent.  The Administrative Agent shall have received a
copy of a letter from Corporation Service Company accepting its appointment as
process agent in New York for each Borrower Entity in substantially the form of
Exhibit C hereto.

 

(p)           Legal Opinions.  On the Closing Date, the Administrative Agent
shall have received original counterparts of legal opinions dated the Closing
Date and addressed to each Secured Party in form, scope and substance
satisfactory to the Administrative Agent of (1) Brownstein Hyatt & Farber, P.C.
and Dewey Ballantine LLP, each as counsel to the Borrower and General Partner,
and (2) counsel to the Brazos River Authority that is satisfactory to the
Administrative Agent.

 

(q)           Investment Company; Public Utility.  Neither the Lenders nor any
Borrower Entity shall be subject to regulation by reason of the transactions
contemplated by the Transaction Documents as:

 

(1)         an “investment company,” or company “controlled” by an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter”
for, an “investment company,” as such terms are defined in the Investment
Company Act of 1940, as amended, or

 

(2)         a “holding company,” or an “affiliate” of a “holding company,” or a
“subsidiary company” of a “holding company,” or a “public utility company” or an
“associate company” of any of the foregoing, within the meaning of the Public
Utility Holding Company Act of 1935, as amended or

 

(3)         subject to regulation under any Applicable Law relating to public
utilities, gas utilities, public service corporations or similar entities.

 

(r)            Material Adverse Effect.  (i) No event shall have occurred and no
condition shall exist that has had or could reasonably be expected to have a
Material Adverse

 

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Effect and (ii) no material adverse change shall have occurred in the business,
operations or condition (financial or otherwise) of any Borrower Entity or any
provider of financing (whether debt or equity, contingent or otherwise) for
Supplemental Costs, other than the Initial Lender, (and any Acceptable Credit
Support Issuer) which could reasonably be expected to have a Material Adverse
Effect);

 

(s)           Title Insurance; Survey etc.  On the Closing Date, the Borrower
shall have obtained

 

(1)         a leasehold mortgagee policy of title insurance (the “Title
Insurance”) covering the Land, in favor of the Collateral Agent, for the benefit
of the Secured Parties, that (A) insures the validity and priority of the Lien
created under the Deed of Trust in an amount not less than $2,000,000, and (B)
is otherwise in form as contemplated by Commitment for Title Insurance issued by
the Title Insurance Company issued June 28, 2004 (with an effective date of
June 13, 2004) (the “Commitment”), but which contains no reference to any
matters in Schedule C of the Commitment except that Schedule B may contain
exceptions for the Outstanding Parcels to the extent Section 5.3(b) hereof
permits such matters to remain outstanding after the Closing Date, and with the
standard printed exceptions in Schedule B amended or deleted as indicated in the
Commitment and additionally as follows:  (i) exception 2. shall be deleted
except for “shortages in area”; (ii) exception 3. shall omit the reference to
subsequent taxes or assessments for prior years, and shall be supplemented to
include the following additional sentence:  “Company insures that standby fees,
taxes and assessments by any taxing authority for the year 2004 are not yet due
and payable.”; (iii) the following shall be added to Schedule B:  “Section 13 of
the Conditions and Stipulations of this Policy is hereby deleted.”; and (iv)
exception 8 shall be deleted; and

 

(2)         an ALTA survey of recent date of the Land certified to the
Collateral Agent, the Title Insurance Company and the Borrower, which survey
shall be in form and substance satisfactory to the Administrative Agent and the
Title Insurance Company.

 

(t)            Title Continuation Report; Survey.  (1) After the EPC Contract
has been entered into, for any Disbursement Date occurring in any January,
April, July or October the Borrower shall have delivered to the Administrative
Agent a title continuation report from the Title Insurance Company to such
Disbursement Date, in form and substance satisfactory to the Administrative
Agent, setting forth no additional exceptions other than Permitted Title
Defects, and (2) in the case of the first Disbursement Date that is at least 60
days after the foundations of the Facility have been completed, the Borrower
shall have delivered to the Administrative Agent an updated survey of the
Mortgaged Property, certified to the Collateral Agent, for the benefit of the
Secured Parties, the Title Insurance Company and the Borrower, showing the
Project.  In the case any Phase 2 Project has commenced or been completed on the
Land, such survey shall include such parts of a Phase 2 Project(s) on the Land
and, to the extent reasonably possible, indicated as part of a Phase 2 Project. 
Such survey shall be in form and substance satisfactory to the Administrative
Agent and the Title Insurance Company, and shall disclose no easements, rights
of way or encumbrances, other than Permitted Liens.

 

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(u)           EPC Contract Closing Documents  On or prior to the first
Disbursement Date after the EPC Contract has been entered into, the
Administrative Agent shall have received the agreements and other documents as
contemplated in Section 5.27(f); provided however, if the EPC Contract is
entered into on a Disbursement Date, then the Administrative Agent shall have
received such agreements and documents on such Disbursement Date.

 

(v)           Additional Matters.  All partnership and other proceedings, and
all documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Transaction Documents
shall be satisfactory in form and substance to the Administrative Agent, and the
Administrative Agent shall have received such other documents, certificates, and
instruments relating to this Agreement or any other Transaction Document or the
transactions contemplated hereby or thereby as the Administrative Agent shall
have reasonably requested, in each case in form and substance satisfactory to
the Administrative Agent.

 

Unless waived by the Administrative Agent in writing, the acceptance of the
proceeds of each Construction Loan shall constitute a certification by the
Borrower to the Lenders confirming the satisfaction of the conditions set forth
in clauses (a) through (v) of this Section 3.1 upon the making of such
Construction Loan.

 

3.2           Construction Loans After Initial Period.  After the Initial
Period, the obligation of any Lender to make any Construction Loan on any
Disbursement Date shall be subject to the conditions precedent that, both
immediately prior to the making of each such Construction Loan and also after
giving effect thereto on and as of such Disbursement Date and to the application
of proceeds therefrom, as though made on and as of such Disbursement Date,
unless such condition is waived by the Administrative Agent:

 

(a)           Construction Requisitions; Notices of Borrowing.

 

(1)         Not less than ten Business Days prior to such Disbursement Date, the
Administrative Agent shall have received (A) a Construction Requisition dated no
more than 10 Business Days prior to such Disbursement Date executed and
delivered by an Authorized Officer of the Borrower in respect of the
Disbursement of Construction Loans to be made on such Disbursement Date, and (B)
a certificate of the Independent Engineer in respect of such proposed
Requisition in the form attached hereto as Exhibit D-2 whereby the Independent
Engineer shall evidence its approval of the expenditures to be paid with the
Disbursement from each of the Lenders, in each case satisfactory to the
Administrative Agent.

 

(2)         The Administrative Agent shall have received a Notice of Borrowing
pursuant to Section 2.3 in respect of the Disbursement of Construction Loans on
such Disbursement Date.

 

(3)         If Tranche A Loans are to be made for Supplemental Costs on the
Disbursement Date, then simultaneously with (or, if not possible, on the same
day as) the funding of such Tranche A Loans, the financing (whether debt or
equity, contingent

 

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or otherwise) contemplated by Section 2.15(a) shall be utilized to fund the
other *** of the Supplemental Costs contemplated by Section 2.15(a).

 

(b)           Representations and Warranties.  The representations and
warranties of each Borrower Entity or any Equity Pledgor contained in any
Financing Document to which such entity is a party shall be true and correct in
all material respects on and as of such Disbursement Date as if made on and as
of such date (or, if stated to have been made solely as of an earlier date, were
true and correct in all material respects as of such date).

 

(c)           No Default.  No Default or Event of Default shall have occurred
and be continuing.

 

(d)           Necessary Approvals, etc.

 

(1)         All Necessary Approvals have been duly obtained or made, were
validly issued or executed and delivered, are in full force and effect, are
final and not subject to modification, or pending or threatened dispute or
appeal, and are held in the name of the Borrower (unless otherwise disclosed by
the Borrower to the Administrative Agent in a writing referencing
Section 4.6(a)) except those Necessary Approvals that have not been obtained but
will be obtained by the time such approvals are required for the performance by
any Project Participant of any of its obligations respecting the Project and for
which none of the Borrower or the Independent Engineer has any reason to believe
that any such Necessary Approvals will not be obtained in due course prior to
the time required;

 

(2)         All Necessary Approvals obtained or to be obtained in
Section 3.2(d)(1), are (or in the case of those not obtained as set forth
therein will be) free from conditions or requirements at all relevant times, the
compliance with which could reasonably be expected to have a material adverse
effect on the Construction Budget, each Phase 1 Addition Budget for construction
(to the extent not in conflict with the Construction Budget), any construction
schedule, including the Project Schedule, operation, maintenance or ownership of
the Project or which any of the Borrower or the Independent Engineer does not
reasonably expect to be able to satisfy as certified by an Authorized Officer of
the Borrower in a certificate dated the Disbursement Date and delivered to the
Administrative Agent;

 

(3)         The Administrative Agent shall have received (A) originals (or
copies certified by an Authorized Officer of the Borrower to be true and
complete copies) of all of the Necessary Approvals set forth in
Section 3.2(d)(1) other than those not obtained as set forth therein, (B) in the
case of the Necessary Approvals not obtained as set forth therein, satisfactory
assurances that such Necessary Approvals will be obtained by the time when
needed in connection with the construction or operation of the Project, and (C)
if requested, copies (certified by an Authorized Officer of the Borrower to be
true and complete copies) of all applications made for any Governmental
Approvals and all material correspondence received or sent in respect of such
applications; and

 

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(4)         There shall have been no change in any Applicable Law or any
Necessary Approval previously delivered under Section 3.2(d)(3), and no issuance
of any order, writ, injunction or decree of any Governmental Authority or
arbitral tribunal or change in any third party consent or waiver, which, in
either such case, could reasonably be expected to have a Material Adverse
Effect.

 

(e)           Material Adverse Effect.  There shall exist no circumstance, event
or condition which has had or could reasonably be expected to have a Material
Adverse Effect.

 

(f)            Legal Matters.  No Legal Matters nor any Governmental Approval,
pending or threatened, against or affecting (i) any Borrower Entity or Equity
Pledgor or its respective Property or rights in the Project, which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect or
(ii) the Collateral.

 

(g)           Construction Budget and Drawdown Schedule.

 

(1)         Such Construction Loan shall be in accordance with the Construction
Budget and the Drawdown Schedule.

 

(2)         The Administrative Agent shall have received from the Borrower (A)
the Construction Budget and (B) the Drawdown Schedule, each of the foregoing in
clauses (A) and (B) as reasonably satisfactory to the Independent Engineer.

 

(3)         Notwithstanding anything to the contrary in Sections 3.2(g)(1) and
(2), the last Construction Loan shall be in an amount determined by the Borrower
and confirmed by the Independent Engineer as necessary to pay all Project Costs,
including punchlist amounts under the Construction Contracts and other
milestones to be incurred, through the final completion of the Construction
Contracts (including Final Completion under the EPC Contract).

 

(h)           EPC Matters.  The EPC Contract and EPC Guaranty shall each be in
full force and effect as approved by the board of directors of General Partner
in a vote where a majority of the COP Directors voted in favor thereof in all
respects including provisions with respect to scope of work, insurance,
warranties, liquidated damages, completion deadlines, performance standards,
performance testing and subcontractor approvals.

 

(i)            Title Continuation Report; Survey.  (1) For any Disbursement Date
occurring in any January, April, July or October the Borrower shall have
delivered to the Administrative Agent a title continuation report from the Title
Insurance Company to such Disbursement Date, in form and substance satisfactory
to the Administrative Agent, setting forth no additional exceptions other than
Permitted Title Defects, and (2) in the case of the first Disbursement Date that
is at least 60 days after the foundations of the Facility have been completed,
the Borrower shall have delivered to the Administrative Agent an updated survey
of the Mortgaged Property, certified to the Collateral Agent, for the benefit of
the Secured Parties, the Title Insurance Company and the Borrower, showing the
Project.  In the case any Phase 2 Project has commenced or been completed on the
Land, such survey shall include such parts of a Phase 2 Project(s) on the Land
and, to the extent reasonably possible, indicated as part of a Phase 2 Project. 
Such survey shall be in form and substance satisfactory to the Administrative
Agent

 

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and the Title Insurance Company, and shall disclose no easements, rights of way
or encumbrances, other than Permitted Liens.

 

(j)            Construction Progress.  The Borrower shall certify in the
Construction Requisition delivered to the Administrative Agent that (1) based on
current progress and the reasonable evaluation of what can be reasonably
foreseen, Completion will occur on or before the Date Certain and (2) the date
when the Project Completion Date is reasonably expected to occur.

 

(k)           Commencement of Work.  The Administrative Agent shall have
received evidence that the EPC Contractor shall have received and accepted the
Notice to Proceed.

 

(l)            Independent Engineer Certification.  The Independent Engineer
shall have confirmed to the Administrative Agent and the Borrower its agreement
with the certifications and other statements set forth in Sections 3.2(d)(1),
3.2(d)(2), 3.2(g)(2) and 3.2(j) by executing and delivering a certificate in the
form of Exhibit D-2 dated the Disbursement Date.

 

(m)          Utilities.  The Administrative Agent shall have received a
certificate of an Authorized Officer of the Borrower, dated the first
Disbursement Date after the Initial Period, to the effect that, to the knowledge
of the Borrower, all utility services necessary for the construction and
operation of the Project (including gas, potable and raw water supply, storm,
electric, radio, cellular, telephone and sewage services and facilities) have
been committed to the Project (with a true copy of binding agreements (if any)
that evidence the same) by appropriate utilities, authorities or other Persons,
or will be otherwise available to the Borrower in the ordinary course of
business at the appropriate stage of construction or operation of the Project,
in each case on terms consistent with those reflected in the Construction Budget
and the Base Case Projections.

 

(n)           EPC Contract Closing Documents.  On or prior to the first
Disbursement Date after the EPC Contract has been entered into, the
Administrative Agent shall have received the agreements and other documents as
contemplated in Section 5.27(f); provided however, if the EPC Contract is
entered into on a Disbursement Date, then the Administrative Agent shall have
received such agreements and documents on such Disbursement Date.

 

(o)           Other Documents.  The Administrative Agent shall have received
such other statements, certificates, documents, writings, approvals, consents,
legal opinions pertaining to events occurring or circumstances arising after the
Closing Date as the Administrative Agent may reasonably request.

 

Unless waived by the Administrative Agent in writing, the acceptance of the
proceeds of each Construction Loan shall constitute a certification by the
Borrower to the Lenders confirming the satisfaction of the conditions set forth
in clauses (a) through (o) of this Section 3.2 upon the making of such
Construction Loan.

 

3.3           The Conversion Date.  The occurrence of the Conversion Date shall
be subject to the conditions precedent that the Administrative Agent shall have
received, or the Administrative Agent shall have waived receipt of, the
following, each of which (unless otherwise specified below) shall be in form and
substance satisfactory to the Administrative

 

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Agent, and that the other conditions set forth below shall have been satisfied
or waived by the Administrative Agent in writing:

 

(a)           Term Notes.  Each Lender shall have received its original Term
Note in respect of the Term Loans made or maintained by it, duly completed,
executed and delivered by the Borrower and in accordance with Section 2.7.

 

(b)           Insurance.  The Administrative Agent shall have received a
certified copy of the insurance policies required by Section 5.9 hereof or
certificates of insurance with respect thereto, together with evidence of the
payment of all premiums due and payable therefor, and a certificate of the
Insurance Advisor, certifying that insurance complying with Section 5.9 hereof,
covering the risks referred to therein, has been obtained and is in full force
and effect.  The Borrower shall have delivered the final Title Insurance or
certificates of insurance with respect thereto, in favor of the Collateral
Agent, for the benefit of the Secured Parties set forth in Section 3.1(s)
together with evidence of the payment of all premiums due and payable therefor.

 

(c)           Necessary Approvals.

 

(1)         All Necessary Approvals shall have been duly obtained and shall be
final, non-appealable and in full force and effect and free from material
conditions or requirements at all relevant times; provided that, with respect to
such Necessary Approvals that cannot be obtained on or prior to the Conversion
Date in the exercise of reasonable diligence (but which are routinely
obtainable, can be obtained only after completion of certain operations testing
or can be obtained only after a period of operations), the Administrative Agent
shall have received assurances satisfactory to the Administrative Agent that
such Necessary Approvals will be obtained by the time when needed in connection
with the operation of the Project.

 

(2)         The Administrative Agent shall have received (A) originals (or
copies certified by an Authorized Officer of the Borrower to be true and
complete copies) of all of the Necessary Approvals received by the Borrower and
(B) if requested, copies (certified by an Authorized Officer of the Borrower to
be true and complete copies) of all applications made for any Necessary
Approvals and all material correspondence received or sent in respect of such
applications.

 

(d)           Completion Certificates.  The Administrative Agent shall have
received (i) an original executed counterpart of the Borrower Completion
Certificate and (ii) an original executed counterpart of the Independent
Engineer Completion Certificate, and, in each case, the statements contained
therein shall be true and correct in all material respects.

 

(e)           Officer’s Certificates.  The Administrative Agent shall have
received an original counterpart of an Officer’s Certificate, dated as of the
Conversion Date, to the effect that (i) the representations and warranties made
by the Borrower in ARTICLE 4 hereof and the representations and warranties made
by the Borrower in each of the other Financing Documents to which it is a party
are true and correct in all material respects on and as of the Conversion Date
with the same force and effect as if made on and as of such date (or, if stated
to have been made solely as of an earlier date, were true and correct in all
material respects as of such date);

 

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(ii) no Default or Event of Default has occurred and is continuing on the
Conversion Date; (iii) no Material Adverse Effect, and no event or condition
that could reasonably be expected to have a Material Adverse Effect, has
occurred and is continuing; and (iv) no default by the Borrower or, to the
knowledge of the Borrower, by any Project Participant (other than any Non Smith
LP and any Shipper) under any of the Transaction Documents (which default could
reasonably be expected to have a Material Adverse Effect) has occurred and is
continuing on the Conversion Date.

 

(f)            Opinions.  The Administrative Agent shall have received original
counterparts of such supplemental opinions of counsel to the Borrower as the
Administrative Agent may reasonably request.

 

(g)           Budget.  The Administrative Agent shall have received the
Borrower’s proposed Operating Budget for the first Operating Year.

 

(h)           Final Survey.  The Borrower shall have delivered to the
Administrative Agent a final “as-built” survey of the Land, certified to the
Collateral Agent, for the benefit of the Secured Parties, the Title Insurance
Company and the Borrower, updated to within 30 days before the Conversion Date,
showing the Project (completed as to Phase 1), which, in the case any Phase 2
Project has commenced or been completed on the Land, shall include such parts of
a Phase 2 Project(s) on the Land and indicated as part of a Phase 2 Project. 
Such survey shall be in a form satisfactory to the Administrative Agent and the
Title Insurance Company, and shall disclose no easements, rights-of-way,
encumbrances or other Liens on real property, other than Permitted Liens.  The
Borrower shall have prepared and caused to be executed and recorded such
amendments to the Deed of Trust or other confirmatory documents as may have been
reasonably requested by the Administrative Agent in order to protect or confirm
the lien of the Deed of Trust on the Mortgaged Property, as reflected in the
final survey delivered pursuant to this Section 3.3(h).

 

(i)            Lien Waivers.  Lien waivers shall have been delivered by
Construction Contractors in accordance with the Construction Contracts.

 

(j)            Project Documents.  Each Project Document shall be in full force
and effect unless (1) expired in accordance with its terms, (2) in the case of
any Non-COP TUA or Shared Facilities Agreement, if any, the failure thereof to
be in full force and effect could not reasonably be expected to have a Material
Adverse Effect or (3) otherwise consented to by the Administrative Agent.

 

(k)           Searches.  Administrative Agent shall have received satisfactory
reports of UCC Searches conducted by a search firm reasonably acceptable to
Administrative Agent with respect to the Collateral and each Borrower Entity in
Harris County, Brazoria County, the State of Texas, the state jurisdiction of
organization of such entity and any locations specified by the Administrative
Agent and copies of any financing statements or other publicly filed record
listed on such reports.

 

(l)            Other Documents.  The Administrative Agent shall have received
original counterparts of such other statements, certificates and documents
pertaining to events occurring

 

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or circumstances arising after the Closing Date as the Administrative Agent may
reasonably request.

 

3.4           No Failure to Satisfy Condition.  Notwithstanding anything in
Section 3.1, 3.2 or 3.3 to the contrary, the failure of any Borrower Entity in
performance or compliance with any term, covenant or provision under any
Financing Document shall not constitute the failure to satisfy a condition set
forth in Section 3.1, 3.2 or 3.3 if such failure of any Borrower Entity in
performance or compliance thereof is the reasonably foreseeable result of:

 

(a)           the COP Directors’ failure to approve or consent to any Board
Action where:

 

(1)         such failure to approve or consent to such Board Action could
reasonably be foreseen to result in a specific, identified risk of a failure to
satisfy a condition set forth in Section 3.1, 3.2 or 3.3 , and

 

(2)         such risk is expressly noted in the Board minutes (such minutes to
be provided to the Board and certified by the secretary of the General Partner
within 45 days of such meeting), with specific reference to the certain failure
to satisfy a condition set forth in Section 3.1, 3.2 or 3.3 and with a
description of the connection between the Board Action and the foreseen risk of
Default or Event of Default, and

 

(3)         the COP Directors have the right to vote on the matter under the
Stockholders Agreement, and

 

(4)         the MS Directors voted to approve or consent to the Board Action, or

 

(b)           any Board Action approved or consented to by a majority of the COP
Directors where:

 

(1)         the good faith implementation of such Board Action could reasonably
be foreseen to result in a specific, identified risk of a failure to satisfy a
condition set forth in Section 3.1, 3.2 or 3.3, and

 

(2)         such risk is expressly noted in the Board resolution with specific
reference to the certain failure to satisfy a condition set forth in
Section 3.1, 3.2 or 3.3, or

 

(c)           any action or inaction under the exclusive control of the COP
Directors under the Stockholders Agreement, but expressly excluding
ConocoPhillips’ rights under Section 3(d) of the Stockholders Agreement and
actions and inactions by any COP Designated Employees, or

 

(d)           any uncured and material breach by ConocoPhillips or its
Affiliates under a Project Document, where the Borrower Entities and their
Affiliates, agents and other representatives (other than ConocoPhillips and its
Affiliates and representatives) shall have performed all of their obligations to
date in respect of such Project Document; provided however that (i) any dispute
as to whether a “material breach” has occurred will be as finally determined
under the applicable Project Document dispute resolution provision and (ii) no
Secured Party

 

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shall be entitled to claim a condition set forth in Section 3.1, 3.2 or 3.3 is
not satisfied due to the circumstances set out in this Section 3.4(d) until such
time as a determination that no “material breach” has occurred has become final
and non-appealable.

 

3.5           Administrative Agent Rights.  Notwithstanding Sections 3.4, the
failure of any Borrower Entity in performance or compliance with any term,
covenant or provision under any Financing Document shall still constitute a
failure to satisfy a condition set forth in Section 3.1, 3.2 or 3.3 if the
Administrative Agent determines in its reasonable discretion that such failure
of any Borrower Entity in performance or compliance thereof could have a
material adverse effect on the validity of the Lien of the Security Documents or
the priority contemplated thereby.

 

3.6           Conditions to Initial Tranche B Construction Loan.  The obligation
of any Lender to make the initial Tranche B Construction Loan shall be subject
to the conditions precedent that, both immediately prior to the making of such
initial Tranche B Construction Loan and also after giving effect thereto on and
as of the Disbursement Date of such initial Tranche B Construction Loan and to
the application of proceeds therefrom, as though made on and as of such
Disbursement Date, unless such condition is waived by the Administrative Agent
in writing:

 

(a)           Transaction Documents.  (1) Each of the Transaction Documents to
which an Equity Pledgor is a party and which is to be in effect on the
Disbursement Date of such initial Tranche B Construction Loan shall have been
duly authorized, executed and delivered to the Administrative Agent by each
party thereto.  Each Lender shall have received an original of each such
Transaction Document to which it is a party executed by all parties thereto, its
Tranche B Construction Note, and a copy of all other Transaction Documents.

 

(2)         (A) No Equity Pledgor is in default in the performance, observance
or fulfillment of any of its obligations, covenants or conditions contained in
any of the Project Documents in full force and effect as of Disbursement Date of
the initial Tranche B Construction Loan.

 

(b)           Notes.  The Borrower shall have duly authorized and executed a
Tranche B Construction Note for the account of each Lender.  Each such Tranche B
Construction Note shall be appropriately completed with the name of the payee
and date thereof inserted therein.  Each Tranche B Construction Note shall be
delivered by the Borrower to the Administrative Agent.

 

(c)           Charter Documents.  The Administrative Agent shall have received
the following documents, each certified as indicated below:

 

(1)         (A) a certificate as to the good standing of each Equity Pledgor,
and its general partner (if applicable) from the Secretary of State of its
jurisdiction of organization, and (B) a certificate of authority for each such
entity to transact business in Texas from the Secretary of State of the State of
Texas to the extent such Equity Pledgor is required to be or registered to do
business in the State of Texas, in each case dated as of a date no earlier than
30 days prior to the Closing Date;

 

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(2)         a certificate of an Authorized Officer of each Equity Pledgor (if
applicable), dated the Disbursement Date of such initial Tranche B Construction
Loan, in the form attached hereto as Exhibit H-2, with appropriate insertions,
together with copies of such Person’s (and it’s manager or general partner, as
applicable) Charter Documents and the resolutions of such Person referred to in
such certificate.

 

(d)           Satisfaction of Section 3.2 Conditions for Disbursement Date of
Initial Tranche B Construction Loan.  For the Disbursement Date of the initial
Tranche B Construction Loan, the conditions set forth in Section 3.2 are
satisfied.

 

(e)           Filings, Registrations and Recordings.  Any document required to
be filed, registered, notarized or recorded in order to create and perfect the
Liens created under the Equity Pledges as first priority Liens (subject to the
Permitted Liens set forth in Section 5.12(d), (e) and (g)) shall have been
properly filed, registered, notarized or recorded in each office in each
jurisdiction in which such filings, registrations, notarizations and
recordations are required, and any other action required in the judgment of the
Administrative Agent to perfect such Liens as such first priority Liens (subject
to the Permitted Liens set forth in Section 5.12(d), (e) and (g)) shall have
been effected, any certificates evidencing the equity to be pledged under the
Equity Pledges, and any stock powers or other assignments relating to such
equity, and the Collateral Agent shall have received acknowledgment copies or
other evidence satisfactory to it that all necessary filing, registration,
notarization, recording and other fees and all taxes and expenses related to
such filings, registrations, notarizations and recordings have been paid in
full.

 

(f)            Security Documents.  The Collateral Agent shall have received
such documents as are necessary to perfect the Liens of the Secured Parties
created under the Equity Pledges covering a *** interest in the General Partner
and a *** interest in the limited partnership interest in the Borrower and the
General Partner’s general partnership interest in the Borrower with a first
priority contemplated thereby.

 

(g)           Searches.  On the Disbursement Date of the initial Tranche B
Construction Loan, the Administrative Agent shall have received satisfactory
reports of UCC Searches conducted by a search firm reasonably acceptable to the
Administrative Agent with respect to the Collateral which is the subject of the
Equity Pledges and each Equity Pledgor in the state jurisdiction of organization
of such entity and any locations specified by the Administrative Agent and
copies of any financing statements or other publicly filed record listed on such
reports.

 

(h)           Equity Pledgor’s Certificate.  (A) The representations and
warranties of each Equity Pledgor contained in the Financing Documents to which
such Equity Pledgor is a party are true and correct in all material respects on
and as of the Disbursement Date of the initial Tranche B Construction Loan (or,
if made solely as of an earlier date, were true and correct as of such earlier
date), (B) all Financing Documents to which each Equity Pledgor is a party are
in full force and effect under the terms and conditions set forth in such
Financing Documents, and (C) (A) - (B) being certified by an Authorized Officer
of each Equity Pledgor (as applicable to such Equity Pledgor) as set forth in a
certificate dated the Disbursement Date for the initial Tranche B Construction
Loan, in a form to be reasonably acceptable to the Administrative Agent

 

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and delivered to the Administrative Agent on the Distribution Date of the
initial Tranche B Construction Loan.

 

(i)            Process Agent.  The Administrative Agent shall have received a
copy of a letter from Corporation Service Company accepting its appointment as
process agent in New York for each Equity Pledgor in substantially the form of
Exhibit C hereto.

 

(j)            Legal Opinions.  On the Closing Date, the Administrative Agent
shall have received original counterparts of legal opinions dated the
Distribution Date of the initial Tranche B Construction Loan and addressed to
each Secured Party in form, scope and substance reasonably satisfactory to the
Administrative Agent of counsel to each Equity Pledgor that is satisfactory to
the Administrative Agent.

 

(k)           Investment Company; Public Utility.  No Borrower Entity or Equity
Pledgor shall be subject to regulation by reason of the transactions
contemplated by the Transaction Documents as:

 

(1)         an “investment company,” or company “controlled” by an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter”
for, an “investment company,” as such terms are defined in the Investment
Company Act of 1940, as amended; or

 

(2)         a “holding company,” or an “affiliate” of a “holding company,” or a
“subsidiary company” of a “holding company,” or a “public utility company” or an
“associate company” of any of the foregoing, within the meaning of the Public
Utility Holding Company Act of 1935, as amended; or

 

(3)         subject to regulation under any Applicable Law relating to public
utilities, gas utilities, public service corporations or similar entities.

 

(l)            Material Adverse Effect.  (i) No event shall have occurred and no
condition shall exist that has had or could reasonably be expected to have a
Material Adverse Effect and (ii) no material adverse change shall have occurred
in the business, operations or condition (financial or otherwise) of any
Borrower Entity or Equity Pledgor which could reasonably be expected to have a
Material Adverse Effect.

 

(m)          Initial Period.  The Initial Period shall have expired.

 

(n)           Tranche B Notice.  The Borrower shall have delivered to the
Administrative Agent a written notice of its intent to borrow under the Tranche
B Construction Loan Commitment at least 30 days before the initial Disbursement
Date of a Tranche B Construction Loan is reasonably expected to occur.

 

(o)           Additional Matters.  All corporate, limited liability company,
partnership and other proceedings, and all documents, instruments and other
legal matters in connection with the transactions contemplated by the Security
Documents relating to the Collateral which is the subject of the Equity Pledges
shall be satisfactory in form and substance to the Administrative Agent, and the
Administrative Agent shall have received such other documents, certificates, and

 

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instruments relating to the Security Documents relating to the Collateral which
is the subject of the Equity Pledges or the transactions contemplated hereby as
the Administrative Agent shall have reasonably requested, in each case in form
and substance satisfactory to the Administrative Agent.

 

Unless waived by the Administrative Agent in writing, the acceptance of the
proceeds of the initial Tranche B Construction Loan shall constitute a
certification by the Borrower to the Lenders confirming the satisfaction of the
conditions set forth in clauses (a) through (o) of this Section 3.6 upon the
making of such initial Tranche B Construction Loan.

 

ARTICLE 4.           REPRESENTATIONS, WARRANTIES AND AGREEMENTS

 

In order to induce each of the Lenders to enter into this Agreement and to make
the Loans, the Borrower (on its own behalf and on behalf of the General Partner
and their respective Subsidiaries) makes the following representations,
warranties and agreements, all of which are true as of the Closing Date, each
Disbursement Date and the Conversion Date (or, if made solely as of an earlier
date, were true and correct as of such earlier date) shall survive the execution
and delivery of this Agreement and the Notes and the making and continuance of
the Loans:

 

4.1           Organization.  The Borrower is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware.  Each Borrower Entity and Equity Pledgor (other than the Borrower and
the General Partner) is an entity duly organized, validly existing and in good
standing under the laws of its state of organization.  The General Partner is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.  Each Borrower Entity and Equity Pledgor: (i) is duly
authorized and qualified to do business and is in good standing in each
jurisdiction in which it owns or leases Property or in which the conduct of its
business requires it to so qualify, except where the failure to so qualify could
not reasonably be expected to have a Material Adverse Effect and (ii) has the
requisite power and authority to own or lease and operate its Property, to carry
on its business (including with respect to the Project), to borrow money, to
create and perfect the Liens in the Collateral as contemplated by the Security
Documents and to execute, deliver and perform each Transaction Document
(including the Notes) to which it is or will be a party.

 

4.2           Authority and Consents.

 

(a)           The execution, delivery and performance by each Borrower Entity
and Equity Pledgor of each Transaction Document to which it is or will be a
party, and the transactions contemplated by the Transaction Documents: (i) have
been duly authorized by all necessary partnership or corporate action; (ii) will
not breach, contravene, violate, conflict with or constitute a default under (A)
any of its Charter Documents or any of the other Transaction Documents or (B)
any Applicable Law or any contract, loan, agreement, indenture, mortgage, deed
of trust, lease, instrument or other writing to which it is a party or by which
it or any of its Property may be bound or affected, including all Governmental
Approvals, except, in the case of this clause (ii), for any such breach,
contravention, violation, conflict or default which could not reasonably be
expected to have a Material Adverse Effect; and (iii) except for the Liens
created by the Security Documents or any Permitted Lien, will not result in or
require the creation or

 

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imposition of any Lien upon or with respect to any of the Property of any
Borrower Entity or Equity Pledgor.

 

(b)           Each Transaction Document to which any Borrower Entity or Equity
Pledgor is a party (i) has been duly executed and delivered by such Borrower
Entity or Equity Pledgor a party thereto and (ii) when executed and delivered by
each of the other parties thereto will be the legal, valid and binding
obligation of the Borrower Entity or Equity Pledgor in each case if such
Borrower Entity or Equity Pledgor is a party thereto, enforceable against such
Person in accordance with its terms, except as the enforceability thereof may be
limited by (A) applicable bankruptcy, insolvency, moratorium or other similar
Applicable Laws affecting the enforcement of creditors’ rights generally and (B)
the application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity).

 

(c)           No authorization, consent or approval of, or notice to or filing
with, any Governmental Authority or any other Person has been, is required to be
obtained or made (i) for the due execution, delivery, recordation, filing or
performance by any Borrower Entity or Equity Pledgor of any of the Financing
Documents to which it is a party or any transaction contemplated by the
Financing Documents, (ii) for the grant by any Borrower Entity or Equity
Pledgor, or the perfection and maintenance, of the Liens contemplated by the
Security Documents (including the first priority nature thereof subject only to
Permitted Liens) or (iii) for the exercise by the Collateral Agent or any other
Secured Party of any of its rights under any Transaction Document or any
remedies in respect of the Collateral pursuant to the Security Documents, all of
which have been duly obtained, taken, given or made and are in full force and
effect, except for the authorizations, consents, approvals, notices and filings
listed on Schedule 4.2.

 

4.3           Capitalization; Debt; Investments.

 

(a)           FGP is the only General Partner.  No Change of Control has
occurred.  As of the Closing Date, CLNGI, Contango LP and FLNGI are the only
Limited Partners.  As of the Closing Date, Contango LP and CLNGI are the only
Non Smith LPs.  The Borrower has notified the Administrative Agent of each
Person previously considered to be a Non Smith LP that has ceased to be a Non
Smith LP.  Immediately prior to the closing of the Omnibus Agreement (as
contemplated in Article 5 thereof) and immediately prior to giving effect to the
Stock Purchase Agreement, Smith is the sole owner of the General Partner.  As of
the Closing Date, (1) there is no Lien on the Partnership Interest of the
General Partner or FLNGI and (2) no Borrower Entity has been notified of the
assignment of all or any part of the Partnership Interests in the Borrower.

 

(b)           As of the Closing Date, (i) no Borrower Entity has Debt of any
nature, whether due or to become due, absolute, contingent or otherwise, except
for (A) trade payables and (B) that certain account payable of the Borrower to
Technip for services provided to the Borrower prior to the date of execution of
this agreement estimated to be no greater than ***, which is not due by Borrower
until *** and (ii) no Borrower Entity holds any Investments other than
Investments permitted by Section 5.15

 

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4.4           Financial Condition.

 

(a)           The Borrower has delivered to the Administrative Agent the
following financial statements (certified as set forth in the next sentence):
the unaudited and, if available, audited financial statements (together with the
auditor’s unqualified opinion meeting the requirements set forth in
Section 5.1(b)), of the Borrower prepared in accordance with GAAP (i) as of and
for the fiscal year ended on December 31, 2003 and (ii) as of and for the most
recent period ended (on a month end) and after, and cumulative from,
December 31, 2003.  An Authorized Officer of the Borrower shall have certified
as of a recent date that the foregoing financial statements present fairly in
all material respects the financial condition of the Borrower as of the date of
such financial statements and the results of its operations for the period then
ended on such date in accordance with GAAP; provided however that such
certification is subject, in the case of interim statements, to normal year-end
audit adjustments and the absence of footnotes.

 

(b)           No Borrower Entity has any outstanding Debt, obligations or
liabilities, fixed or contingent, except as permitted under this Agreement. 
Since (1) the date of the financial statements described in Section 4.4(a) above
or, (2) if more recent financial statements have been delivered pursuant to
Section 5.1(a) and Section 5.1(b), then in such financial statements delivered
pursuant thereto, no event, condition or circumstance has occurred and is
continuing which has resulted in or could reasonably be expected to result in a
material adverse change in the financial condition, operations, business,
profits or prospects of the Borrower from that set forth in such financial
statements, and no event or condition has occurred which could reasonably be
expected to have a Material Adverse Effect.

 

4.5           Legal Matters; Labor Disputes.  There is no Legal Matter nor any
Governmental Approval pending or to Borrower’s knowledge threatened,
(a)(1) against or affecting any Borrower Entity, any of such entity’s Property
or rights, or the Project, or (2) that otherwise relates to the Project, any of
the Transaction Documents or any of the transactions contemplated thereby and
(b) that could reasonably be expected to have, a Material Adverse Effect.  There
are no ongoing, or, to the knowledge of the Borrower, currently threatened,
strikes, labor disputes, slowdowns or work stoppages by the employees of, or
independent contractors or subcontractors used by or on behalf of, any Borrower
Entity, the EPC Contractor, any party to a Construction Contract or
EPC Guarantor that could materially and adversely affect the Project.

 

4.6           Necessary Approvals.

 

(a)           All Necessary Approvals have been duly obtained or made, were
validly issued or executed and delivered, are in full force and effect, are
final and not subject to modification, or pending or threatened dispute or
appeal, and are held in the name of the Borrower (unless otherwise disclosed by
the Borrower to the Administrative Agent in a writing referencing this
Section 4.6(a)) except those Necessary Approvals that have not been obtained but
will be obtained by the time such approvals are required for the performance by
any Project Participant of any of its obligations respecting the Project and for
which none of the Borrower or the General Partner has any reason to believe that
any Necessary Approvals will not be obtained in due course prior to the time
required;

 

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(b)           All Necessary Approvals obtained or to be obtained in
Section 4.6(a), are (or in the case of those not obtained as set forth therein
will be) free from conditions or requirements at all relevant times, the
non-compliance with which could reasonably be expected to have a material
adverse effect on the Construction Budget, each Phase 1 Addition Budget for
construction (to the extent not in conflict with the Construction Budget), the
Project Schedule, operation, maintenance or ownership of the Project or which
any of the Borrower or the General Partner does not reasonably expect to be able
to satisfy;

 

(c)           No event has occurred to the knowledge of the Borrower that could
reasonably be expected to result in the revocation, termination or adverse
modification of any such Necessary Approval or have a Material Adverse Effect or
a material adverse effect on any other Project Participant (other than any
Non-COP Shipper and any Non Smith LP) under any Necessary Approval.

 

(d)           The information set forth in each application submitted by or on
behalf of any Borrower Entity in connection with each Necessary Approval and in
all correspondence sent by or on behalf of any Borrower Entity in respect of
each such application is, to the knowledge of the Borrower, true and correct in
all material respects and such applications and correspondence do not contain
any material misstatement of fact or omit to state a material fact or any fact
necessary to make the statements contained herein or therein not materially
misleading.

 

(e)           The Facility, if imported, installed, constructed, owned,
maintained and operated in accordance with the Plans and Specifications and the
Transaction Documents, will conform to and comply in all material respects with
all covenants, conditions, restrictions and requirements in all Necessary
Approvals, in the Transaction Documents applicable thereto and under all zoning,
environmental, land use and other Applicable Laws.

 

(f)            It is expressly agreed that for Sections 4.6(a), 4.6(b), 4.6(c),
4.6(d) and 4.6(e) on the Closing Date and during the Initial Period,
(1) Necessary Approvals shall be construed to mean the FERC Approval,
(2) notwithstanding Section 4.6(a) the FERC Approval may be subject to appeal
under applicable U.S. federal law, (3) the Borrower and General Partner
represent and warrant on the Closing Date and each Disbursement Date during the
Initial Period that the exception in Section 4.6(a) does not apply to the FERC
Approval.  Section 4.6(b) does not apply on the Closing Date and during the
Initial Period.

 

4.7           Use of Proceeds; Margin Stock.

 

(a)           Unless used for repayment or prepayment of the Loans and other
Obligations as permitted hereunder, the proceeds of the Loans have been used
only to pay for Project Costs for Phase 1 or for reimbursement thereof as
contemplated in the Construction Budget and substantially in accordance with the
Drawdown Schedule (which amounts shall be deposited into the Construction
Account), which Project Costs shall include the certain development and
construction costs incurred by or on behalf of the Borrower and its Affiliates
mutually agreed upon and listed on Schedule 5.20 on the Closing Date.

 

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(b)           For the avoidance of doubt and without limiting the generality of
Section 5.20(a), the proceeds of the Tranche A Loans have not been used to pay,
reimburse or finance (including by providing support for a financing of) (1)
more than 50% of the Supplemental Cost in accordance with this Agreement, (2)
any Phase 2 Expenditure, (3) Phase 2 Project, (4) any TUA Insurance and (5) any
costs or expenses for any Phase 1 Addition.  For the avoidance of doubt and
without limiting the generality of Section 5.20(a), the proceeds of the Tranche
B Loans have not been used to pay, reimburse or finance (including by providing
support for a financing of) (1) more than *** of the Supplemental Cost in
accordance with this Agreement (as such amount is reduced by such Supplemental
Costs paid other than by the proceeds of Tranche A Loans), (2) any Phase 2
Expenditure, (3) Phase 2 Project, (4) any TUA Insurance and (5) any costs or
expenses for any Phase 1 Addition.

 

(c)           No Borrower Entity is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying Margin Stock
and no part of the proceeds of any Loan will be used to purchase or carry any
Margin Stock.

 

(d)           Neither the making of any Loan nor the use of the proceeds thereof
will violate or be inconsistent with the provisions of Regulation T, Regulation
U or Regulation X.

 

4.8           ERISA.  Except as permitted under Section 5.28, no Borrower Entity
has any Plan, Pension Plan, Multiemployer Plan, collective bargaining agreement
or ERISA Affiliate, and no Borrower Entity or the Project or any part thereof is
subject to regulation under ERISA.

 

4.9           Taxes; Tax Status.

 

(a)           Each Borrower Entity and Equity Pledgor has filed all Federal,
state, local and foreign income tax returns, and all other Tax and informational
returns that are required to be filed by it, if any, and has paid all Taxes due
and payable, except such Taxes, if any, as are being contested in good faith and
by proper proceedings and as to which adequate reserves are established in
accordance with GAAP.  No claim for assessment or collection of Taxes has been
asserted or threatened against the Borrower, its Affiliates or the Borrower’s
Property or the Project by any Governmental Authority, unless contested as
aforesaid.  The Base Case Projections accurately reflect in all material
respects all Taxes that, under present Applicable Law, will be due and payable
by the Borrower assuming that the Borrower has the income and other expenses
reflected in the Base Case Projections.

 

(b)           Except as set forth on Schedule 4.9 hereto, no liability for any
Tax will be incurred by any Borrower Entity or Equity Pledgor as a result of the
execution, delivery or performance of this Agreement or any other Financing
Document or the consummation of the transactions contemplated hereby or thereby
and, based on present Applicable Laws, no deduction or withholding in respect of
Taxes imposed by or for the account of any Governmental Authority is required to
be made from any payment (or other performance) by any Borrower Entity under
this Agreement or any other Financing Document.

 

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(c)           For United States federal income tax purposes, the Borrower shall
be treated as a partnership.

 

4.10         Investment Company Act.  No Borrower Entity or Equity Pledgor is,
or is subject to regulation as, an “investment company,” or company “controlled”
by an “investment company” or an “affiliated person” of, or “promoter” or
“principal underwriter” for, an “investment company,” as such terms are defined
in the Investment Company Act of 1940, as amended.  Neither the making or
receipt of any Disbursement, nor the application of the proceeds or repayment
thereof by the Borrower, nor the consummation of the other transactions
contemplated by the Financing Documents will violate any provisions of such Act
or any Applicable Law thereunder.

 

4.11         Regulation.  No Borrower Entity or Equity Pledgor is (a) a “holding
company,” or an “affiliate” of a “holding company,” or a “subsidiary company” of
a “holding company,” or a “public utility company” or an “associate company” of
any of the foregoing, within the meaning of the Public Utility Holding Company
Act of 1935, as amended or (b) subject to regulation under any Applicable Law
relating to public utilities, gas utilities, public service corporations or
similar entities.

 

4.12         Title; Security Documents.

 

(a)           The Borrower Entities (1) will, upon payment of the amounts
payable by it under the EPC Contract prior to or on the Conversion Date, own and
have good, marketable and indefeasible title to the Facility and (2) own and
have a good, marketable and valid leasehold interest in the Land (subject only
to Brazos River Authority obtaining title to the Outstanding Parcels as
contemplated in, and to the extent provided in, Section 5.3(b)), and good,
marketable and valid rights of easement in, to, over and under the lands covered
by the Easements, all pursuant to provisions of the Site Leases and Easements,
and good and marketable fee title to real estate, if any, it purports to own in
fee simple, in each case free and clear of all Liens other than Permitted Liens
and, in the case of Section 4.12(a)(2), by lease, in fee simple, condemnation or
otherwise.

 

(b)           Each Borrower Entity has good, marketable and indefeasible title
to all of the Property (except, to the extent permitted under Section 5.3(b),
the Outstanding Parcels) purported to be owned by it, free and clear of all
Liens, other than Permitted Liens, and holds such title and all of such Property
in its own name and not in the name of any nominee or other Person.  No Borrower
Entity has created or is contractually bound to create any Lien on or with
respect to any of its Property, including any of its assets and rights, or
revenues, except for Permitted Liens, and, except as set forth in the Financing
Documents in respect of the Secured Parties, no Borrower Entity is restricted by
contract, law or otherwise from creating Liens on any of its Property.

 

(c)           The provisions of the Account Agreement, the Deed of Trust, the
Security Agreement, and, upon the execution and delivery by the parties thereto,
each Equity Pledge, are effective to create, in favor of the Collateral Agent,
for the benefit of the Secured Parties, legal, valid and enforceable Liens on or
in all of the Collateral intended to be covered thereby, and all necessary
recordings and filings have been made in all necessary public offices and all
other

 

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necessary and appropriate action has been taken so that the Liens created by
each such Security Document constitute perfected Liens on or in the Collateral
intended to be covered thereby, prior and superior to all other Liens (other
than Permitted Liens) for the full intended duration of such Liens created by
the Security Documents to the extent permitted by Applicable Law, and all
necessary consents to such creation, effectiveness, priority and perfection of
each such Lien have been obtained.  There is no Lien or leasehold interest, and
no effective recording or filing, including any mortgage, deed of trust or
financing statement, covering all or any part of the Collateral, except in each
such case as may be in favor of the Secured Parties or in respect of Permitted
Liens.

 

(d)           No condemnation proceeding has commenced against all or any
portion of the Project or Outstanding Parcels and no Governmental Authority has
delivered written notice threatening condemnation against all or any portion of
the Project or Outstanding Parcels except (1) as conducted by Brazos River
Authority in order to acquire title to the Outstanding Parcels for inclusion in
the Land and the Borrower Entities’ leasehold interests pursuant to the Site
Leases or (2) as may be conducted by a Governmental Authority to acquire
easement rights in the land necessary for the pipeline to the pipeline
interconnection at Stratton Ridge, Texas in connection with Phase 1.

 

4.13         Environmental Matters.  Except as expressly set forth in the Pre
Closing COP Site Report received by the Borrower, to the knowledge of the
Borrower:

 

(a)           each Borrower Entity has complied and is now complying in all
material respects with (i) all applicable Environmental Laws and (ii) the
requirements of any Governmental Approvals relating to such Environmental Laws.

 

(b)           as of the Closing Date, there are no facts, circumstances,
conditions or events relating to the Project that (i) could reasonably be
anticipated to form the basis of an Environmental Claim against all or any part
of the Project or land in proximity to the Land, any Borrower Entity, any
Project Participant, the EPC Contractor, or the Operator or any other Person
occupying, conducting operations on or about, or otherwise using the Land or
land in proximity to the Land that if adversely determined could reasonably be
expected to have a Material Adverse Effect, (ii) could reasonably be anticipated
to cause the Land to be subject to any restrictions on its ownership, occupancy,
use, marketability or transferability under any Environmental Law, or (iii)
could be reasonably anticipated to require the filing or recording of any
notice, registration, permit or disclosure document under any Environmental Law
(other than Necessary Approvals).

 

(c)           as of the Closing Date, there are no past, pending, or threatened
Environmental Claims against (i) any Borrower Entity or all or any part of the
Project, or (ii) the EPC Contractor, the Operator or any other Person occupying,
using, or conducting operations on or about the Land or land in proximity to the
Land, which, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.

 

(d)           as of the Closing Date, no Hazardous Materials have at any time
been generated, used, treated, recycled, stored on, or transported to or from,
or Released, deposited or disposed of on all or any portion of the Land, or land
in proximity to the Land, other than in

 

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compliance at all times with all applicable Environmental Laws, unless any such
noncompliance could not reasonably be expected to have a Material Adverse
Effect.

 

(e)           as of the Closing Date, there are not now and never have been any
underground storage tanks located on the Land, there is no asbestos contained
in, forming part of, or contaminating any part of the Project, and no
polychlorinated biphenyls (PCBs) are used, stored, located at or contaminate any
part of the Project.

 

(f)            as of the Closing Date, there is no evidence of groundwater
contamination on the Land.

 

(g)           copies of all environmental studies regarding the Project,
including the Land, held by any Borrower Entity have been delivered to the
Administrative Agent.

 

4.14         Subsidiaries; Capital Stock Ownership.  Except for any wholly-owned
Subsidiary permitted hereunder, neither the Borrower or the General Partner has
any Subsidiaries and does not own, beneficially or of record, any Capital Stock
of any other Person.

 

4.15         Intellectual Property.  The Borrower Entities own or have the right
to use all intellectual property, including all patents, trademarks, permits,
service marks, domain names, trade names, copyrights, franchises, formulas,
licenses and other rights with respect thereto, and have obtained assignment of
all licenses and other rights of whatsoever nature, necessary for the Project
and the operation of its business as and for the duration currently contemplated
by the Transaction Documents without any conflict or other infringement with the
rights of others.  No product, process, method, substance, part or other
material sold or employed or presently contemplated to be sold by or employed by
any Borrower Entity in connection with its business infringes or will infringe
any intellectual property, including any patent, trademark, permit, service
mark, domain name, trade name, copyright, franchise, formula, license and other
rights with respect thereto.

 

4.16         Project Documents.

 

(a)           To the knowledge of the Borrower, except for services and Property
that can reasonably be expected to be available on commercially reasonable terms
at the time required in the ordinary course of business, the Project Documents
provide the Borrower with all services and Property, including rights
(contractual and otherwise), title, materials, Necessary Approvals, easements
and licenses, that are necessary for the design, construction, completion, start
- up, operation and maintenance of the Project, including each Borrower Entity’s
full and prompt performance of its obligations, and full and timely satisfaction
of all conditions precedent to the performance by the other parties thereto of
their obligations, under the Project Documents.  Each Project Document to which
any Borrower Entity is a party has been duly authorized, executed and delivered
by such Borrower Entity, is in full force and effect and is binding upon and
enforceable against such Borrower Entity in accordance with its terms.  Each
Borrower Entity, and to the Borrower’s knowledge, each Project Participant, is
in compliance in all material respects with the terms and conditions of the
Project Documents to which it is a party, and no event has occurred that could
reasonably be expected to (1) result in an event of default under, or a material
breach of, any Project Document (except any event of default or material

 

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breach by a Non Smith LP, Shipper or (solely as a party to the Shared Facilities
Agreement, if any) Expansion unless such event of default or material breach
could reasonably be expected to have a Material Adverse Effect), (2) result in
the revocation, termination or adverse modification of any Project Document
(other than a Non-COP TUA or Shared Facilities Agreement, if any, unless such
revocation, termination or adverse modification could reasonably be expected to
have a Material Adverse Effect), or (3) adversely affect the rights of any
Borrower Entity under any Project Document (other than a Non-COP TUA or Shared
Facilities Agreement, if any, unless such adverse affect could reasonably be
expected to have a Material Adverse Effect).

 

(b)           All representations and warranties of any Borrower Entity and, to
the Borrower’s knowledge, the other parties thereto, contained in the Project
Documents (other than a Non-COP TUA) are true and correct in all material
respects (except to the extent that any such representation or warranty is
expressed to be made only as of an earlier date, in which case such
representation or warranty was true and correct in all material respects on and
as of such earlier date).

 

(c)           All conditions precedent to the obligations of the respective
parties under the Project Documents (other than a Non-COP TUA) have been
satisfied in all material respects, except for such conditions precedent which
by their terms cannot be (and are not required to be) met until a later stage in
the construction or operation of the Project, and the Borrower has no reason to
believe that any such conditions precedent cannot be satisfied in all material
respects prior to the time when such conditions are required to be met pursuant
to the applicable Project Documents (other than a Non-COP TUA).

 

(d)           As of the Closing Date, each of the Project Documents consists
only of the original document (including exhibits, schedules and other
attachments) and the amendments thereto expressly described in the relevant
definitions appearing in Appendix A hereto, and there are no other amendments,
modifications, waivers or supplements, written or oral, with respect thereto. 
The Administrative Agent has received a true and complete copy of each material
Project Document, including all exhibits, schedules, attachments and disclosure
letters referred to therein or delivered pursuant thereto, if any.  Since the
Closing Date, none of the Project Documents has been amended, modified, waived
or supplemented except as permitted under this Agreement.

 

4.17         No Default; Force Majeure.  No Default or Event of Default has
occurred and is continuing.  No force majeure under any Transaction Document
(other than the Non-COP TUAs or Shared Facilities Agreement, if any) has
occurred and is continuing that could reasonably be expected to have a Material
Adverse Effect.

 

4.18         Compliance with Applicable Laws and Necessary Approvals.  No
Borrower Entity or Equity Pledgor, or any Property of any Borrower Entity or
Equity Pledgor or any Site Lease or Easement, is in violation of any Applicable
Law, Governmental Approval, Necessary Approval, or Charter Document (and no
Borrower Entity or Equity Pledgor has received any written notification
thereof), except for any violation of any Applicable Law, Governmental Approval
or Necessary Approval that could not reasonably be expected to have a Material
Adverse Effect.

 

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4.19         Disclosure.

 

(a)           All factual information (other than Projections) relating to the
Borrower, its Affiliates, Expansion and its Affiliates, the Equity Pledgors, the
MS Directors, the Project, any actual or proposed Phase 2 Project or any other
transaction contemplated by the Transaction Documents or the Omnibus Agreement
that has been furnished to any Agent, any Lender, the Insurance Advisor or the
Independent Engineer by or on behalf of the Borrower, any of its Affiliates,
Expansion, any of its Affiliates, the Equity Pledgors, or Smith (including (1)
any application to any Lender for the extensions of credit provided for in the
Financing Documents, (2) the Financing Documents, including the exhibits and
schedules attached thereto, (3) all such information disclosed by the Borrower
to any Agent or any Lender and (4) all such information disclosed by any
Affiliates of the Borrower or any MS Director) taken as a whole with all of such
information (other than Projections) furnished to such recipient, are true and
correct in all material respects and do not contain any material misstatement of
fact or omit to state a material fact or any fact necessary to make the
statements contained herein or therein not materially misleading.

 

(b)           There is no fact, event or circumstance known to the MS Directors
or any officer (designated as an officer pursuant to the Stockholders Agreement)
of the Borrower or General Partner (after due inquiry) that has not been
disclosed to the Agents and Lenders in writing, the existence of which could
reasonably be expected to have a Material Adverse Effect.

 

(c)           All Projections by or on behalf of the Borrower, its Affiliates,
Expansion and its Affiliates, the Equity Pledgors and the MS Directors have been
developed and made in good faith and with due care based upon reasonable
assumptions by such Persons and do not require updating in any material respect
in order to not be materially misleading.

 

(d)           Without limiting the generality of Section 4.19(c), (1) after the
Initial Period, the Construction Budget will accurately specify in all material
respects all costs and expenses incurred and the Borrower’s best estimate of all
costs and expenses anticipated by the Borrower to be incurred prior to the Date
Certain in order to construct and finance the construction of Phase 1, to
implement Phase 1 of the Project in the manner contemplated by the Transaction
Documents and to cause the Project Completion Date to occur on or prior to the
Date Certain and (2) the Base Case Projections and, after the Initial Period,
the Construction Budget (A) are based on reasonable assumptions as to all legal
and factual matters, (B) are consistent with the provisions of the Transaction
Documents in all material respects, (C) have been prepared in good faith and
with due care and (D) fairly represent the Borrower’s reasonable expectations as
to the matters covered thereby.

 

4.20         Utilities, etc.  To the knowledge of the Borrower, all utility
services, infrastructure, means of transportation, facilities and other
materials necessary for the construction, and operation of the Facility
(including gas, potable and raw water supply, storm, electric, radio, cellular,
telephone and sewage services and facilities) are or will be available to the
Project (in the case of utility services, at the boundaries of the Land) when
necessary for construction, operations, testing and start-up of the Facility
and, to the extent necessary, arrangements have been made in the ordinary course
of business on commercially reasonable

 

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terms for such services and other materials, in each case on terms consistent
with those reflected in the Construction Budget.

 

4.21         Transactions with Affiliates

 

(a)           Except for the Partnership Agreement, the Management Fee
Agreement, and the Omnibus Agreement, no Borrower Entity has engaged or agreed
to engage in any transactions (including any transactions relating to the buying
or selling of any Property or any products of the Project or involving the
receipt of money as payment for goods or services) with any Affiliate of the
Borrower except (i) transactions with Affiliates of the Borrower conducted on an
“arms-length” basis in which such Borrower Entity receives value at least equal
to what would be obtained from an unrelated third party or (ii) otherwise in
accordance with Section 5.19.

 

(b)           No Borrower Entity has entered into any transaction or series of
related transactions, whether or not in the ordinary course of business, with or
for the benefit of Expansion or any Affiliate of Expansion which has not been
previously approved by the board of directors of General Partner in a vote where
a majority of the COP Directors voted in favor of such transaction or series of
related transactions.

 

4.22         Single-Purpose Entity; Phase 1 Additions; Location of Business.  No
Borrower Entity has engaged in any activities, business or otherwise, except as
contemplated in Section 5.15.  Each Borrower Entity has established offices in
Houston, Texas and does not have a place of business at any other location
except the Facility site.

 

ARTICLE 5.           COVENANTS.

 

The Borrower (on its own behalf and on behalf of the General Partner and their
respective Subsidiaries) covenants and agrees with each of the Lenders that, so
long as any Commitment or any Loan or any other Obligation is outstanding and
until payment in full of all amounts payable by the Borrower under the Financing
Documents:

 

5.1           Financial Statements and Other Information.  The Borrower shall
deliver or cause to be delivered to the Administrative Agent, and in the case of
clauses (a) and (b), any Lender; provided, however, that in the case of clauses
(e) and (f) of this Section 5.1 the Administrative Agent shall have made a prior
specific written request of the Borrower for such materials set forth therein:

 

(a)           Quarterly Financial Statements.  As soon as available and in any
event within 45 days after the end of each quarterly fiscal period of the
Borrower, a copy of the complete unaudited financial statements as of and for
such period (such financial statements being consolidated statements of income,
retained earnings and cash flow of the Borrower for such period, and the related
consolidated balance sheet of the Borrower as of the end of such period),
setting forth in each case in comparative form the corresponding figures for the
corresponding cumulative and quarterly period in the preceding fiscal year, if
any, and accompanied by a certificate of an Authorized Officer of the Borrower
substantially in the form of Exhibit I-1, which certificate shall state as of a
recent date that the foregoing financial statements present fairly in all
material respects the financial condition of the Borrower as of the

 

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date of such financial statements and the results of its operations for the
period then ended on such date in accordance with GAAP; provided however that
such certification is subject to normal year-end audit adjustments and the
absence of footnotes.

 

(b)           Annual Financial Statements.  As soon as available and in any
event within 90 days after the end of each fiscal year of the Borrower, a copy
of the complete audited financial statements as of and for such period (such
financial statements being consolidated statements of income, retained earnings
and cash flow of the Borrower for such period, and the related consolidated
balance sheet of the Borrower as of the end of such period) and any related
audit letters, setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year and accompanied by (1) a certificate of an
Authorized Officer of the Borrower substantially in the form of Exhibit I-2 and
(2) an unqualified opinion thereon of the Independent Accountants which opinion
(i) shall state in effect that such financial statements present fairly in all
material respects the financial condition of the Borrower as of the date of such
financial statements and the results of its operations for the period then ended
on such date in accordance with GAAP and (ii) shall not contain any
qualification or exception, including any “going concern” or like qualification
or exception and any qualification or exception as to the scope of such audit;

 

(c)           Officer’s Certificate.  At the time it furnishes each set of
financial statements pursuant to Section 5.1(a) or (b) above, an Officer’s
Certificate certifying that no Default or Event of Default has occurred and is
continuing (or, if any Default or Event of Default has occurred and is
continuing, describing the same in reasonable detail and describing what action
any Borrower Entity or Equity Pledgor has taken and proposes to take with
respect thereto);

 

(d)           Defaults; Events of Default.  Promptly, and in any event within
two Business Days after the Borrower obtains actual knowledge thereof, a written
notice that (i) a Default or (ii) an Event of Default has occurred and is
continuing, describing the same in detail satisfactory to the Administrative
Agent and, together with such notice, a statement that such notice is provided
under this section, a description of what action the Borrower or such Project
Participant has taken and proposes to take with respect thereto, and that such
notice is in accordance with Section 8.5;

 

(e)           Progress Reports.  Promptly upon receipt thereof, each progress
report, and each other material report received by any Borrower Entity from a
Construction Contractor.

 

(f)            Reports from Independent Engineer and Contractors; Operating
Reports.

 

(1)         Reports from Independent Engineer and Contractors:

 

(A)          until Completion, on a quarterly basis, copies of all construction
schedules, including the Project Schedule, construction budgets and monthly
reports issued by the Independent Engineer prior to the Completion of the
Project;

 

(B)           until Completion, on a quarterly basis, copies of all change
orders under any Construction Contract and any document or written notice from
an EPC Contractor (or other contractor) requesting or recommending the
initiation of a

 

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change orders under any Construction Contract and any other document or written
notice, including notices with respect to the occurrence of force majeure (as
defined in any Project Document) or event of a similar effect that may result in
a material increase in Project Costs within a reasonable period of time after
receipt thereof; and

 

(C)           until Completion and if no certificate under Section 3.2(l) has
been delivered to the Administrative Agent from the Independent Engineer within
the last 30 days, the Borrower shall cause the Independent Engineer to deliver
to the Administrative Agent and the Borrower at least every 90 days (or earlier
if material updating is required) a notice of (1) the Independent Engineer’s
determination of the date when the Project Completion Date is reasonably
expected to occur and (2) whether Supplemental Costs are expected to be incurred
within the next 12 months of the date of such notice.

 

(2)         Operating Reports for Operating Years. As soon as available and in
any event within 60 days after the end of each calendar quarter following the
Project Completion Date, an operating report with respect to the Project for
such quarter and for the portion of the Operating Year then ended, which report
shall (i) correspond to the items and classifications and periods set forth in
the applicable Operating Budget (and any Phase 1 Addition Budget or budget for
Phase 1 Addition (Stratton Ridge)) and shall show all Project Revenues, all
expenditures for Operating and Maintenance Costs and Phase 1 Additions, and a
reasonably detailed accounting of the use of any amounts transferred to the
Payment Account from the O&M Account and Major Maintenance Reserve Account for
application by Borrower, segregated at least by Phase 1 and the Phase 1
Additions, and (ii) be certified as complete and correct in a certificate of an
Authorized Officer of the Borrower substantially in the form of Exhibit I-3,
which certificate shall also state that the Operating and Maintenance Costs
reflected therein complied with the Operating Budget under Section 5.23, or, if
any such certifications cannot be given, shall state in detail any necessary
qualifications to such certifications; provided that if a Default or Event of
Default shall have occurred and so long as such Default or Event of Default
shall be continuing, operating reports shall be delivered under this
Section 5.1(f)(2) within 30 days after the end of each month covering such month
and the portion of the Operating Year then ended;

 

(g)           Notices.  Promptly after delivery or receipt thereof by any
Borrower Entity but in any event within 10 days thereafter, a copy of each
material notice, demand or other communication given or received by such
Borrower Entity (1) pursuant or relating to any of the Project Documents
(including all requests for amendments or waivers), (2) relating to the Project
whether from a Governmental Authority or otherwise, or (3) pursuant or relating
to any Necessary Approval;

 

(h)           Environmental Reports.  Within a reasonable period of time after
receipt thereof, any report related to material environmental matters,
including: (1) the environmental performance of the Facility, (2) the results of
any environmental monitoring or sampling activity relating to the Project, (3)
any accidents relating to the Project having an impact on the environment or
resulting in the loss of human life, (4) any environmental deficiencies relating
to

 

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the Project identified by any Governmental Authority, (5) any material
non-compliance with the Environmental Laws, and (6) any remedial actions taken
with regard to any material environmental matters relating to the Project;

 

(i)            Approvals.  Promptly upon receipt or delivery thereof by any
Borrower Entity, as the case may be, originals (or copies certified by an
Authorized Officer of the Borrower to be true and complete copies) of all of the
Necessary Approvals received by any Borrower Entity and if requested, copies
(certified by an Authorized Officer of the Borrower to be true and complete
copies) of all applications made for any Governmental Approvals for or on behalf
of any Borrower Entity and all material correspondence received or sent in
respect of such applications;

 

(j)            Acquisition of Outstanding Parcels.  At least five Business Days
prior written notice of the acquisition of title by Brazos River Authority to an
Outstanding Parcel.

 

(k)           Notice of Refinancing and Material Amendments to Certain Debt.  At
least 30 days prior written notice of any renewals, extensions, replacements or
refinancings of (or material amendment, modification or supplement to the
financing documents for) any TPS Obligations or Expansion Obligations; and

 

(l)            Other Information.  From time to time such other information
regarding the financial condition, operations, business or prospects of any
Borrower Entity or the Project or, to the extent obtainable by the Borrower upon
the exercise of its reasonable best efforts, any Project Participant, as may be
reasonably requested by the Administrative Agent.

 

5.2           Other Notices.  The Borrower shall promptly, but in any event no
later than five Business Days after an Authorized Officer of the Borrower
obtains actual knowledge thereof, give to the Administrative Agent notice of:

 

(a)           Any pending or threatened application or Legal Matter by or before
any Governmental Authority for the purpose of revoking, terminating,
withdrawing, suspending, modifying or withholding any Necessary Approval that
could reasonably be expected to have a Material Adverse Effect;

 

(b)           Any Legal Matters, pending or threatened against or affecting
(1)(A) the Borrower or its Property or rights or the Project or (B) to the
knowledge of the Borrower, against any Affiliate of the Borrower or any of such
Person’s Property or, in the case of any Project Participant, in connection with
the Project, which, in each case if adversely determined, could reasonably be
expected to have a Material Adverse Effect, or (2) affecting any Borrower Entity
or Equity Pledgor or the Project (A) in which the amount involved is $1,000,000
or more (when aggregated with all similar Legal Matters against the other
Borrower Entities and Equity Pledgors) or (B) in which injunctive, declaratory
or similar relief is involved;

 

(c)           The discovery of any Hazardous Material on the Land or any other
condition that could give rise to a material violation of or liability under any
Environmental Law or of any Environmental Claim against or affecting any
Borrower Entity or the Project, which, in each case, could reasonably be
expected to have a Material Adverse Effect, including any such Environmental
Claim against or affecting any Project Participant in connection with the
Project;

 

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(d)           Any request by a Project Participant (other than ConocoPhillips)
for an alternative dispute resolution proceeding under any Project Document;

 

(e)           Any default (or an event or condition that, with the giving of
notice, the passage of time or both, would become a default) by any Project
Participant under any Transaction Document has occurred that could reasonably be
expected to have a Material Adverse Effect;

 

(f)            Any Expropriation Event, or other casualty, damage or loss to any
Property of the Borrower Entities, taken as a whole, whether or not insured,
through fire, theft, flood, hazard or other force majeure (as defined in any
Transaction Document) or casualty, in excess of (when aggregated with all
similar casualty, damage or loss of all Borrower Entities) $1,000,000 for any
one casualty, damage or loss or $1,000,000 in the aggregate in any calendar
year;

 

(g)           Any delay (other than weather-related delays that are not
anticipated to have any effect on the Project Completion Date) for any reason in
the critical path activities for the design or construction of Phase 1 of the
Project and any unscheduled shutdown or reduction in operation of the Facility,
in each case for a period in excess of 48 hours, or any substantial labor
dispute which could lead to such a shutdown or reduction;

 

(h)           Any actual or proposed cessation, suspension or material slowdown
for a period in excess of five days of the Work by a Construction Contractor for
any reason;

 

(i)            Any event, circumstance, development or condition which could
reasonably be expected to have a Material Adverse Effect; and

 

(j)            Any act, event, or circumstance constituting force majeure (as
defined in any Project Document) or any claim, pending or threatened, by any
Project Participant (other than ConocoPhillips) alleging that a force majeure
act, event, or circumstance thereunder has occurred.

 

Each notice pursuant to this Section 5.2 shall be in writing and accompanied by
a statement signed by an Authorized Officer of the Borrower setting forth a
description in reasonable detail of the occurrence referred to therein and
stating that such notice is provided under this Section and what action the
Borrower has taken and proposes to take with respect thereto.

 

5.3           Conduct of Business; Title to Assets

 

(a)           Each Borrower Entity shall:

 

(1)         preserve and maintain its qualification to do business in each other
jurisdiction in which the character of properties owned or leased by it or in
which the transaction of its business as conducted or proposed to be conducted
makes such qualification necessary except where such failure to be so qualified
could not reasonably be expected to have a Material Adverse Effect,

 

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(2)         maintain and renew all of the powers, licenses, rights, privileges
and franchises necessary for the transaction of its business as conducted or
proposed to be conducted, except where such failure to do so could not
reasonably be expected to have a Material Adverse Effect, and

 

(3)         preserve and maintain good, marketable and valid title, leasehold
rights and easement rights to its Property, including the Land (including, upon
their acquisition by the Brazos River Authority, the Outstanding Parcels) and
other assets (subject to no Liens other than Permitted Liens) and defend such
title and rights to the Collateral against the claims (except for claims solely
relating to Permitted Liens) of all Persons.

 

(b)           Outstanding Parcels

 

(1)         All Outstanding Parcels are set forth on Schedule 5.3(b).

 

(2)         Borrower shall cause Brazos River Authority to obtain fee title to
the Outstanding Parcels subject only to Permitted Liens as soon as practicable
and shall cause the Title Insurance Company to issue to the Administrative Agent
new mortgagee policies of title insurance for such Outstanding Parcels within 30
days after their acquisition.  Each such additional policy shall be written in
an amount equal to the acquisition price for such Outstanding Parcel and shall
conform to the requirements for the Title Insurance set forth in Section 3.1(s).

 

(3)         Once the Brazos River Authority obtains any right, title or interest
in or to an Outstanding Parcel, the Borrower Entity’s leasehold interest in such
Outstanding Parcel pursuant to the applicable Site Lease shall be deemed part of
the Project, and such Outstanding Parcel shall be deemed part of the Land.  The
Borrower Entity’s leasehold interests in such Outstanding Parcel shall be
subject to the Lien created by the Security Documents.  Each Borrower Entity
shall satisfy its obligations under Section 5.30 with respect to such
Outstanding Parcel.

 

5.4           Compliance with Applicable Laws; Legal Matters

 

(a)           Each Borrower Entity shall conduct its business in compliance with
all Applicable Laws, including all relevant Governmental Approvals and
Environmental Laws and Applicable Laws that relate to the issuance of the Loans
by the Lenders and performance by such Borrower Entity of its obligations under
the Financing Documents.

 

(b)           Notwithstanding Section 5.4(a), any Borrower Entity may, at its
expense, by appropriate proceedings conducted in good faith both contest the
validity or application of any requirement of Applicable Law and engage in any
Legal Matter, so long as:

 

(1)         none of the Administrative Agent, the Borrower, any Affiliate of the
foregoing or any director, manager, officer, employee or agent of the foregoing
could be subject to any criminal liability in connection with the failure of or
delay in compliance with such Applicable Law or Legal Matter,

 

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(2)         all proceedings to enforce such requirement of Applicable Law or
Legal Matter against the Administrative Agent, the Borrower, any Affiliate of
the foregoing or any director, manager, officer, employee or agent of the
foregoing, or the Project or any part of the Project shall have been duly
stayed,

 

(3)         the Administrative Agent determines in good faith that such contest
or engagement is not otherwise materially adverse to its interests, and

 

(4)         such contest or engagement does not involve any risk of the sale,
forfeiture or loss of any of the Collateral.

 

(c)           Notwithstanding Section 5.4(b), if any judgment or order shall be
rendered against a Borrower Entity that has had or could reasonably be expected
to have a Material Adverse Effect, a stay of execution, modification (to the
extent that such judgment or order could not thereupon reasonably be expected to
have a Material Adverse Effect) or rescission shall be obtained by or on behalf
of such entity within 30 days from the date of entry thereof.

 

5.5           Payment of Taxes, Tax Status etc.

 

(a)           Each Borrower Entity shall, prior to the time the same becomes
overdue, pay and discharge or cause to be paid or discharged all Taxes,
including any assessments and governmental charges or levies, imposed upon it,
its Property, its income or profits, or the Project, except where such Taxes are
being diligently contested in good faith by appropriate proceedings and adequate
reserves are established in accordance with GAAP.

 

(b)           The Borrower shall not elect to be treated as an association
taxable as a corporation for federal income tax purposes.

 

(c)           The Borrower shall not take any action or fail to take any action
that would result in a change in the Federal income tax classification of the
Borrower as described in Section 4.9(c) hereof. No Borrower Entity (other than
the General Partner) shall take any action or fail to take any action that would
cause (i) the representations and warranties set forth in Section 4.9(b) to be
untrue at any time or (ii) a Borrower Entity (other than the General Partner) to
be subject to any obligations under any agreements or arrangements with respect
to Taxes.

 

5.6           Books and Records; Financial Management; Auditors.

 

(a)           Each Borrower Entity shall at all times (1) maintain adequate
management information, including financial and accounting information and cost
and internal control systems and (2) in order to permit the preparation of
financial reports in accordance with GAAP, proper books and records of all of
its business and financial affairs and (3) promptly deliver to the
Administrative Agent a copy of any “management letter”, recommendations, reports
or other similar communication received by it from its accountants relating to
its management information, including financial and accounting information, cost
and internal control systems and other systems.

 

(b)           The Borrower shall retain the Independent Accountants and
authorize such firm to communicate directly with the Agents, Lenders, or any
duly authorized agent or

 

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representative of the foregoing and the Independent Engineer, if any, including
as provided in Section 5.7.

 

5.7           Inspection.

 

(a)           Each Borrower Entity shall permit each of the Agents or any duly
authorized agent or representative of the foregoing and the Independent
Engineer, from time to time (except while no Default or Event of Default has
occurred and is continuing, then at all reasonable times and upon reasonable
prior notice) to conduct reasonable inspections and examinations of the books
and records and Property of any Borrower Entity and the Project, Collateral, and
in connection therewith (i) make copies of the books and records as reasonably
necessary and (ii) have communication regarding the affairs, finances and
accounts of each Borrower Entity with, and be advised as to the same by, its
officers, representatives, agents (including any advisors), auditors, the EPC
Contractor, any other contractor in respect of the Project and any
subcontractors in respect of the Project; provided that a representative of the
Borrower shall at all times have the opportunity to be present (including being
copied on any written communications under Section 5.7(a)(ii).

 

(b)           Without limiting the generality of Section 5.7(a), each Borrower
Entity shall permit the Agents, Lenders, or any duly authorized agent or
representative of the foregoing and the Independent Engineer, to review (1) all
Plans and Specifications, (2) any quality control data and performance test
data, and (3) any other data available and in existence relating to the Project
or to the progress of construction of the Project as may be reasonably
requested.  Further, each Borrower Entity shall permit the Administrative Agent,
the Independent Engineer and any other consultant engaged by the Administrative
Agent to monitor, witness and review the Work.

 

(c)           Without limiting the generality of Section 5.7(a), the Borrower
shall give timely notice to the Agents of, and each Borrower Entity shall permit
the Agents, Lenders, and any duly authorized agent or representative of the
foregoing and the Independent Engineer, to attend, (1) all Phase 1 construction
progress review meetings involving any Borrower Entity or its representatives or
agents and (2) any and all acceptance tests or other performance tests of the
Facility conducted prior to the Conversion Date.

 

(d)           Notwithstanding anything to the contrary in Section 5.7, no act or
omission of Agents or any duly authorized agent or representative of the
foregoing, including the Independent Engineer, shall in any way (1) affect the
obligations of any Borrower Entity, the EPC Contractor or any other Person under
any Transaction Document or any other contract relating to the Construction
Contracts, (2) be deemed to be the acceptance of any defective work performed by
the EPC Contractor or any other Person under any Construction Contract or
otherwise, or (3) be deemed to be a waiver of any rights against the EPC
Contractor or any other Person under the EPC Contract or other Construction
Contracts or otherwise.

 

5.8           Governmental Approvals; Maintenance of Certain Rights.  Each
Borrower Entity shall obtain in a timely manner and maintain in full force and
effect (or where appropriate, renew) and comply with all Governmental Approvals,
and all other powers, licenses, rights, privileges and franchises necessary (i)
for the transaction of its business as conducted or

 

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proposed to be conducted and (ii) to execute and deliver the Financing Documents
to which it is party and to perform its obligations thereunder.

 

5.9           Insurance.

 

(a)           Insurance Requirements.  The Borrower shall maintain or cause to
be maintained in full force and effect at all times on and after the Closing
Date (unless otherwise specified in Appendix C) and continuing throughout the
term of this Agreement (unless otherwise specified in Appendix C) insurance
coverages for the Project meeting the requirements set forth in Appendix C with
responsible insurance companies authorized to do business in Texas with (1) a
Best Insurance Reports rating of “A-” or better and a financial size category of
“VIII” or higher or a S&P financial strength rating of “BBB+” or higher, or (2)
other companies acceptable to the Collateral Agent (acting on the instruction of
the Required Lenders), with limits and coverage provisions sufficient to satisfy
the requirements set forth in each of the Project Documents, but in no event
less than the limits and coverage provisions set forth in Appendix C; provided
however, on the Closing Date and during the Initial Period the Borrower shall be
obligated to maintain or cause to be maintained in full force and effect such
insurance coverages only to the extent reasonably required by the Administrative
Agent.

 

(b)           Endorsements.  All policies of liability insurance required to be
maintained shall be endorsed as follows:

 

(1)         Other than for workers compensation insurance, to name the Borrower
and its officers and employees as named insureds, and to name the Secured
Parties, their Affiliates and their respective officers and employees as
additional insureds;

 

(2)         To provide a severability of interests and cross liability clause;
and

 

(3)         To provide that the insurance shall be primary and not excess to or
contributing with any insurance or self-insurance maintained by the Secured
Parties.

 

(c)           Waiver of Subrogation.  The Borrower hereby waives any and every
claim for recovery from the Secured Parties for any and all loss or damage
covered by any of the insurance policies to be maintained under this Agreement
until such time as the Secured Parties shall have recovered the Obligations in
full or until such Insurance Proceeds have been expended to restore the
Facilities pursuant to an Approved Restoration Project.  Inasmuch as the
foregoing waiver will preclude the assignment of any such claim to the extent of
such recovery, by subrogation (or otherwise), to an insurance company (or other
Person), the Borrower shall give written notice of the terms of such waiver to
each insurance company that has issued, or that may issue in the future, any
such policy of insurance (if such notice is required by the insurance policy)
and shall cause each such insurance policy to be properly endorsed by the issuer
thereof to, or to otherwise contain one or more provisions that, prevent the
invalidation of the insurance coverage provided thereby by reason of such
waiver.

 

(d)           Amendment of Requirements.

 

(1)         Amendment by the Collateral Agent:  The Collateral Agent (acting on
the advice of the Insurance Advisor) may at any time amend the requirements
(including the

 

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amount and scope of insurance coverage) and approved insurance companies
described in this Section 5.9 due to (i) material new information not known on
the Closing Date or (ii) changed circumstances after the Closing Date which in
the reasonable judgment of the Collateral Agent (acting on the instruction of
the Required Lenders) either render such coverage materially inadequate or
materially reduce the financial ability of the approved insurance companies to
pay claims.

 

(2)         Amendment Due To Commercial Unfeasibility:  In the event any
insurance (including the limits or deductibles thereof) hereby required to be
maintained shall not be reasonably available and commercially feasible in the
commercial insurance market, the Required Lenders shall not unreasonably
withhold their agreement to waive such requirement to the extent the maintenance
thereof is not so available; provided, however, that (A) the Borrower shall
first request any such waiver in writing, which request shall be accompanied by
written reports prepared by the Insurance Advisor certifying that such insurance
is “not reasonably available and commercially feasible” (and, in any case where
the required amount is not so available, certifying as to the maximum amount
which is so available) and explaining in detail the basis for such conclusions;
(B) at any time after the granting of any such waiver, but not more often than
once a year, the Collateral Agent (acting on the instruction of the Required
Lenders) may request, and the Borrower shall furnish to the Collateral Agent
within fifteen (15) days after such request, supplemental reports reasonably
acceptable to the Collateral Agent from the Insurance Advisor updating its prior
reports and reaffirming such conclusion; and (C) any such waiver shall be
effective only so long as such insurance shall not be reasonably available and
commercially feasible in the commercial insurance market, it being understood
that the failure of the Borrower to timely furnish any such supplemental report
shall be conclusive evidence that such waiver is no longer effective because
such condition no longer exists, but that such failure is not the sole means to
establish such non-existence.  The failure at any time to satisfy the condition
to any waiver of an insurance requirement set forth in the proviso to the
preceding sentence shall not impair or be construed as a relinquishment of the
Borrower’s ability to obtain a waiver of an insurance requirement pursuant to
the preceding sentence at any other time upon satisfaction of such conditions. 
For the purposes of this Section 5.9(d) insurance will be considered “not
reasonably available and commercially feasible” if it is obtainable only at
excessive costs that are not justified in terms of the risk to be insured and is
generally not being carried by or applicable to projects or operations similar
to the Project because of such excessive costs.

 

(e)           Additional Provisions.

 

(1)         Loss Notification:  The Borrower shall promptly notify the
Collateral Agent of any Event of Loss likely to give rise to a claim under the
all-risk property (including physical damage and business interruption),
machinery, delay-in-startup, marine cargo, marine delay-in-startup (advanced
loss of profits) insurance policies.

 

(2)         Payment of Loss Proceeds:  The Collateral Agent, on behalf of the
holders of the Loans, shall be named as the sole loss payee in insurance
policies in respect of property loss, casualty and condemnation of the Project
(pursuant to a standard lender’s

 

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loss payable endorsement equivalent to a CP 1218, in favour of the Collateral
Agent and shall name the Collateral Agent as first loss payee) and as additional
insured in respect of all other insurance policies in respect of all other
Transaction Documents.

 

(3)         Loss Adjustment and Settlement:  A loss under the construction “all
risks,” boiler and machinery, delay-in-startup, marine cargo, marine
delay-in-startup (advanced loss of profits) property and business interruption
insurance policies shall be adjusted with the insurance companies, including the
filing in a timely manner of appropriate proceedings, by the Borrower, subject
to the approval of the Collateral Agent (acting on the instructions of the
Required Lenders) if such loss is in excess of $5,000,000.  In addition, the
Borrower may in its reasonable judgment consent to the settlement of any loss,
provided that in the event that the amount of the loss exceeds $5,000,000, the
terms of such settlement are approved by the Collateral Agent (acting on the
instructions of the Required Lenders).

 

(4)         Policy Cancellation and Change:  All policies of insurance except
for the construction “all risks” required to be maintained pursuant to this
Section 5.9 shall be endorsed so that if at any time they should be cancelled,
or coverage be reduced or materially changed in any manner, such cancellation,
reduction or material change shall not be effective as to the Secured Parties
(A) in the case of non-payment of premium (or as otherwise specified in Appendix
C), for ten days after receipt by the Collateral Agent of written notice from
such insurer of such cancellation or reduction and (B) in all other cases, for
60 days after receipt of such notice.

 

(5)         Miscellaneous Policy Provisions: The construction “all risks,”
boiler and machinery, delay-in-startup, marine cargo, marine delay-in-startup
(advanced loss of profits) property and business interruption insurance policies
shall (A) not include any annual or term aggregate limits of liability or clause
requiring the payment of an additional premium to reinstate the limits after
loss except as regards the insurance applicable to the perils of flood,
pollution and earth movement, (B) include the Secured Parties as additional
named insureds as their interest may appear, and (C) include a clause requiring
the insurer to make final payment on any claim within 30 days after the
submission of proof of loss and its acceptance by the insurer.

 

(6)         Separation of Interests:  All policies covering the Borrower’s
assets and revenues shall insure the interests of the Secured Parties regardless
of any breach or violation by the Borrower or any other Person of warranties,
declarations or conditions contained in such policies, or any action or inaction
of the Borrower or others.  This provision may be satisfied through the use of
an acceptable multi-insured endorsement.

 

(7)         Acceptable Policy Terms and Conditions:  Except as otherwise agreed
by the Collateral Agent, all policies of insurance required to be maintained
pursuant to this Section 5.9 shall be the same in all material respects as the
policies furnished to the Insurance Advisor (A) prior to the Closing Date or,
(B) if not required to be maintained on the Closing Date pursuant to the proviso
in Section 5.9(a), then prior to when such policies of insurance are required to
be maintained pursuant to Section 5.9(a).

 

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(8)         Waiver of Subrogation:  All policies of insurance to be maintained
by the provisions of this Section 5.9 shall (A) provide for waivers by the
insurers of subrogation in favour of the Secured Parties and their respective
officers and employees and (B) provide that there shall be no recourse against
any Secured Party for payment of premiums or other amounts with respect thereto.

 

(f)            Evidence of Insurance.

 

(1)         On the Closing Date and on an annual basis on or before the
insurance renewal dates, the Borrower shall provide the Collateral Agent with an
Officer’s Certificate certifying that the insurance then carried or to be
renewed is in accordance with the terms of this Section 5.9.

 

(2)         Concurrently with the furnishing of the Officer’s Certificate in
Section 5.9(f)(1), the Borrower shall provide the Collateral Agent with (x) a
certification that all required insurance is marked “premium paid” or is
accompanied by other evidence of payment reasonably satisfactory to the
Administrative Agent and (y) a schedule of the insurance policies held by or for
the benefit of the Borrower and required to be in force by the provisions of
this Section 5.9.

 

(A)          The certification required by this Section 5.9(f)(2) shall be
executed by each insurer or by an authorized representative of each insurer
where it is not practical for such insurer to execute the certificate itself. 
Such certification shall identify underwriters, the type of insurance, the
insurance limits and the policy term and shall specifically list the special
provisions enumerated for such insurance required by this Section 5.9.

 

(B)           The schedule of insurance shall include the name of the insurance
company, policy number, type of insurance, major limits of liability and
expiration date of the insurance policies.

 

(3)         Upon request, the Borrower will promptly furnish the Administrative
Agent with satisfactory evidence of such insurance relating to the insurance
required to be maintained hereunder.

 

(g)           Reports.  Concurrently with the furnishing of the Officer’s
Certificate in Section 5.9(f)(1), the Borrower shall furnish the Collateral
Agent with a report of an independent insurance broker, signed by an officer of
the broker, stating that in the opinion of such broker, the insurance then
carried or to be renewed is in accordance with the terms of this Section 5.9.

 

(h)           Failure to Maintain Insurance.  In the event the Borrower fails,
or fails to cause any Construction Contractor or the Operator, to obtain or
maintain the full insurance coverage required by this Section 5.9, the
Collateral Agent (acting on the instruction of the Required Lenders), upon 30
days’ prior written notice (unless the aforementioned insurance would lapse
within such period, in which event notice should be given as soon as reasonably
possible) to the Borrower of any such failure, may (but shall not be obligated
to) obtain the required policies of insurance and pay the premiums on the same. 
All amounts so advanced therefor by the Collateral Agent shall become an
additional Obligation of the Borrower, and the

 

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Borrower shall forthwith pay such amounts to the Collateral Agent, together with
interest thereon at the Default Rate from the date so advanced until fully paid.

 

(i)            No Duty of Collateral Agent to Verify or Review.  No provision of
this Section 5.9 or any provision of any other Transaction Document shall impose
on any Secured Party any duty or obligation to verify the existence or adequacy
of the insurance coverage maintained pursuant to this Section 5.9, nor shall any
Secured Party be responsible for any representations or warranties made by or on
behalf of the Borrower to any insurance company or underwriter.  Any failure on
the part of any Secured Party to pursue or obtain the evidence of insurance
required by this Agreement and/or failure of any Secured Party to point out any
non - compliance of such evidence of insurance shall not constitute a waiver of
any of the insurance requirements in this Agreement.

 

(j)            Assigned Insurance Policies.  Promptly following receipt of an
Assigned Insurance Policy or any amendment, modification and supplement thereto,
the Borrower shall deliver to the Administrative Agent a true and complete copy
(as certified by an Authorized Officer of the Borrower) thereof.

 

5.10         Events of Loss; Project Document Claims and Performance Liquidated
Damages.

 

(a)           If an Event of Loss shall occur, or a Project Document Claim shall
arise or other right to Performance Liquidated Damages shall arise, the Borrower
promptly notify the Administrative Agent thereof and shall (i), subject to
Section 5.10(b), diligently pursue all its rights to compensation against any
Person with respect thereto, and (ii) cause all Loss Proceeds, amounts received
by or on behalf of a Borrower Entity as a result of any Project Document Claim
and Performance Liquidated Damages to be deposited in the applicable Account
pursuant to the Account Agreement.  To the extent that any such amounts are paid
to any Borrower Entity, such amounts shall be held in trust for the Collateral
Agent for the benefit of the Secured Parties segregated from other funds of the
Borrower, and the Borrower shall cause such amounts to be deposited in the
applicable Account as contemplated in this Section 5.10(a) as promptly as
practicable.

 

(b)           The Borrower and Administrative Agent shall jointly (and the
Borrower hereby consents to such participation by the Administrative Agent to
the extent permitted by Applicable Law) compromise, adjust or settle any claim
described in Section 5.10(a) in excess of $5,000,000 unless an Event of Default
has occurred and is continuing, then all right of the Borrower to compromise,
adjust or settle any amounts or rights respecting such claim (or any smaller
claim) shall terminate and become vested in the Administrative Agent.  The
Borrower shall from time to time deliver to the Administrative Agent all
documents and information and take all other actions requested by the
Administrative Agent in connection with its rights under this Section 5.10(b).

 

5.11         Application of Loss Proceeds; Expropriation Event.

 

(a)           Prepayment of Loans.  If an Event of Loss shall occur with respect
to the Collateral or any Borrower Entity shall have a Project Document Claim or
other matured right to Performance Liquidated Damages, the Borrower shall, if
any Secured Party requests in its sole

 

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discretion, cause the Net Available Amount net of such amounts applied or to be
applied to approved expenditures paid in an Approved Restoration Plan in
accordance with Section 5.11(c) to be applied to the prepayment of the Loans
held by such requesting Secured Party on the next Principal Payment Date (or if
on or prior to the Conversion Date, the last Business Day of the month) after
the earlier of (i) the completion of the related Restoration, and (ii) the
applicable Restoration Date Certain pursuant to Section 6.3.

 

(b)           Restoration of Project.  The Borrower shall apply the Net
Available Amount to Restore the Project subject to and in accordance with the
following conditions precedent and continuing covenants:

 

(1)         Promptly following any Event of Loss, the occurrence of any Project
Document Claim or the maturity of any other right to Performance Liquidated
Damages, the Borrower shall give written notice of same to the Administrative
Agent.  Following such notice, the Borrower and the Administrative Agent shall
consult with the Independent Engineer to develop an Approved Restoration Plan
regarding such Event of Loss, Project Document Claim or Performance Liquidated
Damages.  Upon approval of the Independent Engineer of the Approved Restoration
Plan and the delivery of the certificates provided for in the definition of such
term, any related Net Available Amount deposited pursuant to the Account
Agreement shall be, subject to the terms of the Account Agreement and this
Section 5.11, used for the applicable Restoration through the Restoration Date
Certain.  The Borrower shall cause the Restoration to be completed by the
applicable Restoration Date Certain.

 

(2)         An Approved Restoration Plan shall be effective prior to
commencement of the Restoration of the Project (other than temporary Restoration
Work to protect Property of the Borrower or people or to prevent interference
with the Borrower’s business) and shall be diligently complied with at all times
during the Restoration Period;

 

(3)         The Restoration Work shall be supervised by the Independent Engineer
and shall have commenced within the time period established by the Independent
Engineer in the Approved Restoration Plan;

 

(4)         No Default or Event of Default shall have occurred and be continuing
prior to or at any time during the Restoration Period; and

 

(5)         The Property of the Borrower constituting the Restoration Work shall
be part of the Collateral (whether by amendment of the Security Documents or by
entering into new Security Documents or otherwise).

 

(c)           Disbursements of Net Available Amount.  The Net Available Amount
shall be disbursed in accordance with the applicable Approved Restoration Plan,
this Section 5.11 and the Account Agreement.

 

(d)           Expropriation Event.  Anything to the contrary in the foregoing
provisions of this Section 5.11 notwithstanding, if an Expropriation Event shall
occur with respect to any Collateral, the Borrower shall:

 

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(1)         promptly upon discovery or receipt of notice of any occurrence
thereof provide written notice to the Administrative Agent,

 

(2)         not, without the written consent of the Administrative Agent,
compromise or settle any claim with respect to such Expropriation Event, and

 

(3)         with respect to any Affected Property,

 

(A)          if the Independent Engineer determines within 60 days after the
Expropriation Event that such Affected Property can reasonably be expected to be
Restored pursuant to Section 5.11(b), then Section 5.11(b) shall apply;

 

(B)           otherwise deposit all Net Available Amount received in respect of
such Expropriation Event in the Accounts pursuant to the Account Agreement and,
subject to any sharing of Net Available Amount with the TPS Lenders set forth in
an intercreditor arrangement between the Secured Parties and the TPS Secured
Parties, apply such Net Available Amount to the prepayment of the Loans on the
Principal Payment Date (or if on or prior to Conversion Date, the last Business
Day of the month) next following the receipt of such proceeds in accordance with
Section 6.3.

 

Nothing in this Section 5.11 shall be deemed to impair any rights any Secured
Party may have with respect to any such Expropriation Event.

 

5.12         Limitation on Liens.  No Borrower Entity may create, incur, assume
or suffer to exist any Lien upon any of its Property, whether now owned or
hereafter acquired, except for the following Liens upon such Property of any
Borrower Entity (each such Lien, a “Permitted Lien”):

 

(a)           Liens that do not secure Debt or other payment obligations
specifically and that are permitted, required, or created by any Transaction
Document listed on Schedule 5.12;

 

(b)           Liens on Property of the Borrower specified in Section 2.15 to
secure Permitted Debt under Section 5.13(b) as limited in this Agreement;
provided that the Secured Parties and the TPS Secured Parties, as applicable,
shall have agreed to the intercreditor arrangements acceptable to the Secured
Parties contemplated by Section 2.15;

 

(c)           Liens on Property of the Borrower specified in Section 2.16(a) to
secure the Expansion Obligations under Section 2.16(a) as limited in this
Agreement; provided that the Secured Parties and the Expansion Secured Parties
shall have agreed to intercreditor arrangements acceptable to the Secured
Parties contemplated by Section 2.16;

 

(d)           Liens created by the Security Documents in favor of any of the
Secured Parties;

 

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(e)           Liens for Taxes, including any assessments or governmental
charges, (i) which are not yet due or (ii) otherwise to the extent Taxes are not
required to be paid under Section 5.5;

 

(f)            mechanic’s or materialmen’s Liens secured by bonds for which no
Borrower Entity is liable;

 

(g)           Liens arising by operation of law in the ordinary course of
business;

 

(h)           deposits or pledges to secure statutory obligations, appeals,
releases, attachments, stay of execution, stay of injunction, or for purposes of
like general nature in the ordinary course of business of such entity;

 

(i)            Permitted Title Defects and Liens expressly created by
Section 25.21 of each of the Site Leases

 

(j)            defects, imperfections, easements, rights of way, restriction,
irregularities, encumbrances and clouds on title and statutory Liens which, in
the aggregate with the other Liens under this clause (j), do not materially
impair or restrict the use of the Property affected and that do not materially
impair the value of the Liens granted under the Security Documents;

 

(k)           pledges or deposits under worker’s compensation, unemployment
insurance or other social security or pension obligations (other than ERISA);

 

(l)            legal or equitable encumbrances deemed to exist because of the
existence of any litigation or other proceeding if brought in good faith
provided that such encumbrances shall be cancelled by bonds, for which no
Borrower Entity is liable, or other like means within 5 Business Days after
their creation;

 

(m)          Liens that (i) are not Permitted Liens under any of clauses (a) -
(l), (ii) are incidental to the conduct of such Borrower Entity’s business,
(iii) were not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than vendor’s Liens for accounts payable
in the ordinary course of business), and (iv) do not, in the aggregate with the
other Liens under this clause (m), materially impair the use of any Borrower
Entity’s Property in the operation of such Borrower Entity’s business;

 

(n)           the COP Royalty Lien; and

 

(o)           the Shared Facilities Agreement, if any.

 

5.13         Guarantees; Debt.  No Borrower Entity shall contingently or
otherwise be or become liable, directly or indirectly, in connection with any
Guarantee or Debt except for the following Debt only (such Debt, the “Permitted
Debt”):

 

(a)           Debt incurred in respect of the Loans, or any other Financing
Document;

 

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(b)           Debt incurred in respect of the TPS Loans as limited by this
Agreement and the other Financing Documents; provided no Default or Event of
Default has occurred and is continuing at the time of incurrence thereof;

 

(c)           after the Project Completion Date, Debt incurred by the Borrower
to finance the reasonable cost of the construction, installation or acquisition
of equipment or facilities required by Applicable Law for the continued
operation of the Project in accordance with Applicable Laws provided that and
only to the extent that the Projected Debt Service Coverage Ratio for the
current and each subsequent fiscal year through the Term Loan Maturity Date will
not be less than ***; and

 

(d)           after the Project Completion Date, Debt incurred by the Borrower
under an unsecured revolving working capital credit facility issued by any
lender in an aggregate principal amount not to exceed *** outstanding at any
time.

 

5.14         Leases.  No Borrower Entity shall enter into any agreement, or be
or become liable as lessee or lessor under any agreement, for the lease, hire or
use of any real or personal Property, except for (i) the Site Leases and the
arrangement contemplated by the Site Availability Letter, (ii) operating leases
of personal Property (which do not constitute Capital Lease Liabilities)
provided for in the prevailing Operating Budget, and (iii) leases that
constitute Capital Lease Liabilities of the Borrower and that are permitted
pursuant to Section 5.13 hereof; provided that (a) such items of personal
Property are not affixed to, accession of or commingled with the Facility, do
not constitute “fixtures” under Applicable Law, and are standard, non-customized
items; and (b) the aggregate payment obligations of the Borrower Entities under
all leases (except for the Site Leases) shall not exceed $500,000 in any
calendar year.

 

5.15         Single Purpose Entity of the Borrower and General Partner;
Subsidiaries and Investments; Phase 1 Additions.

 

(a)           Neither the Borrower, any of its Subsidiaries or any Subsidiaries
of the General Partner shall engage in any activities, business or otherwise,
other than the design, development, construction, testing, start-up, ownership,
operation, maintenance, repair, improvement, equipping, preservation, insurance,
financing, use (as intended by the Transaction Documents) and management of the
Project, the transactions contemplated by the Transaction Documents and any
activities related to any of the foregoing.  The General Partner shall not
engage in any activities, business or otherwise other than those set forth in
Section 2 of the Stockholders Agreement, the transactions contemplated by the
Transaction Documents and any activities related to any of the foregoing.  No
Borrower Entity shall engage in any activities, business or otherwise, in
respect of a Phase 2 Project except pursuant to the Shared Facilities Agreement.

 

(b)           Without limiting the generality of Section 5.15(a), neither the
Borrower or any of its Subsidiaries may (i) form or permit to exist any
Subsidiaries of it and (ii) make any Investments, including (A) making any loans
or advances to any Person and (B) acquiring or owning (beneficially or
otherwise) the Capital Stock, Debt or other obligations of any Person; provided
however that Borrower may (x) form the Site Lessee as a wholly owned Subsidiary
and, with 15 day prior written notice to, and the written consent (such consent
to not be

 

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unreasonably withheld) of, the Administrative Agent, any other wholly owned
Subsidiary necessary to the ordinary course of business of the Borrower and
(y) make any Permitted Investments, in each case in accordance with this
Agreement and the Account Agreement.  Without limiting the generality of
Section 5.15(a), except as contemplated by the immediately preceding sentence
regarding the Borrower and its Subsidiaries, neither the General Partner nor any
of its Subsidiaries may form or permit to exist any Subsidiaries of it; provided
however that the General Partner may form the Borrower and the Site Lessee as
wholly owned Subsidiaries and, with 15 day prior written notice to, and the
written consent (such consent to not be unreasonably withheld) of, the
Administrative Agent, any other wholly owned Subsidiary necessary to the
ordinary course of business of the Borrower.  It is expressly understood that
the Administrative Agent may withhold its consent under this Section 5.15(b) if
(1) the formation, existence, intended purpose or future use of the Borrower
Entity could have an adverse effect on either (A) the ability of a Borrower
Entity to perform its obligations under any of the Transaction Documents or (B)
the validity of the Lien of the Security Documents or the priority contemplated
thereby or the material rights and remedies of the Secured Parties under any
Financing Document or (2) the formation or intended purpose of the Borrower
Entity was not previously approved by the board of directors of General Partner
in a vote where a majority of the COP Directors voted in favor of the formation
and intended purpose of such Borrower Entity.  Each Borrower Entity shall
satisfy its obligations under Sections 5.30 and 9.18(b) with respect to such
Subsidiary in connection with the formation thereof.

 

(c)           The duties, obligations, liabilities, covenants of the Borrower
under the Financing Documents (and the provisions of the Financing Documents
applicable to the Borrower) shall apply to the fullest extent permitted by
Applicable Law to the Subsidiaries of the Borrower, and the duties, obligations,
liabilities, covenants of the General Partner under the Financing Documents (and
the provisions of the Financing Documents applicable to the Borrower) shall
apply to the fullest extent permitted by Applicable Law to the Subsidiaries of
the General Partner.  Without limiting the generality of the immediately
preceding sentence, if either the Borrower is prohibited from performing an act
or deed then the Subsidiaries of the Borrower are also prohibited from
performing such act or deed.  Any duties, obligations or covenants of any
Subsidiary of the Borrower or any Subsidiary of the General Partner (other than
the Borrower) under any Financing Document to which such Subsidiary is not a
party shall be construed to include a duty, obligation or covenant of the
Borrower or the General Partner (as applicable) if the Borrower or the General
Partner, as applicable, is a party to such Financing Document, to cause such
Subsidiary to perform or comply with such duties, obligations and covenants.

 

(d)           Phase 1 Additions

 

(1)         No Borrower Entity may engage in any activity in connection with or
relating to any Phase 1 Addition, including entering into any oral or written
agreements, unless such Phase 1 Addition and such activities shall have been
previously approved by the board of directors of General Partner in a vote where
a majority of the COP Directors voted in favor thereof.

 

(2)         As a condition to the beginning of each Phase 1 Addition and as a
continuing obligation of each Borrower Entity,

 

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(A)          No activity in respect of a Phase 1 Addition could reasonably be
expected to have a material adverse effect on (1) the Services Quantity (as
defined in the COP TUA) committed to be provided pursuant to the COP TUA or the
amount or timing of the Fee or (2) the validity of the Lien of the Security
Documents or the priority contemplated thereby or the material rights and
remedies of the Secured Parties under any Financing Document;

 

(B)           As a condition to the beginning of each Phase 1 Addition and as a
continuing obligation of each Borrower Entity, the risks associated with
completion of any Phase 1 Addition shall be mitigated through engineering,
procurement and construction arrangements that (A) utilize one or more
internationally reputable construction contractors having significant experience
in the type of work contemplated, who will serve as the primary contractors
responsible for all of the work, (B) are contracted for on terms and conditions
that are substantially similar to those governing the engineering, procurement
and construction of Phase 1 of the Project, including substantially similar
rights and remedies in respect of liabilities and damages for performance
failures and third-party losses and injuries, and appropriate security for any
non-performance damages to be provided by a Person or Persons (1) having a long
term unsecured debt rating of at least “BBB–” by S&P and “Baa3” by Moody’s and
(2) who shall not hold or be the beneficiary of any Liens on any or all of the
Project, any Phase 1 Addition or Property of any Borrower Entity, Expansion or
any of Expansion’s Subsidiaries, (C) require such contractors to provide and
maintain construction–related insurances of substantially similar types,
coverages, amounts and provisions as required in connection with the Project as
set out in Section 5.9 and Appendix C, and (D) are designed so that there could
not reasonably be expected to occur a material adverse interference to the
Project’s design, construction, installation, operation, maintenance in
conformity with the Construction Contracts, Good LNG Practices, Necessary
Approvals and Applicable Law or the continuing availability of the Services
Quantity (as used in each of the TUAs (or similar term if such term is not used
therein)) as contemplated by the Financing Documents and the TUAs.

 

5.16         Restricted Payments.  Except as permitted by Section 5.16(a) and
5.16(b), no Borrower Entity shall make any Restricted Payments to any Partner or
other Person.

 

(a)           Amounts on deposit in the Distribution Account may be transferred
to the Payment Account and therefrom remitted to the Borrower on any Quarterly
Distribution Date for the purpose of making Restricted Payments or any other
lawful purpose, if each of the following conditions precedent (the “Distribution
Conditions”) are satisfied:

 

(1)         The Conversion Date has occurred,

 

(2)         No Default or Event of Default shall have occurred and be continuing
or could result from the making of such Distribution.

 

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(3)         For any Quarterly Distribution Date, the Projected Debt Service
Coverage Ratio for the 12 month period succeeding such Quarterly Distribution
Date (ending on the date immediately preceding the first anniversary of such
Quarterly Distribution Date) shall be greater than or equal to ***, and the
calculation thereof shall have been certified by the Borrower in the applicable
Transfer Date Certificate and verified by the Independent Engineer to the
Administrative Agent regarding the rates and assumptions used by the Borrower;

 

(4)         No transfers are required to be made from the Distribution Suspense
Account pursuant to Section 4.12 of the Account Agreement (other than
Section 4.12(b)(ii) thereof), and no transfers would be required to be made
therefrom pursuant to Section 4.12 of the Account Agreement (other than
Section 4.12(b)(ii) thereof) if funds were available to make such transfers; and

 

(5)         The Borrower certifies the foregoing conditions have been satisfied
in the applicable Transfer Date Certificate.

 

(b)           After making the transfers specified in clauses (a), (b), (c) and
(d) of Section 4.3 of the Account Agreement, from the monies remaining in the
Revenue Account the amount set forth in the Transfer Date Certificate and
certified therein to be the amount equal to the Partner Tax Distribution Amount
may be transferred to the Partner Tax Distribution Account, if each of the
following conditions precedent (the “Partner Tax Distribution Conditions”) are
satisfied:

 

(1)         The Conversion Date has occurred;

 

(2)         No Default or Event of Default shall have occurred and be continuing
or could result from the making of such distribution of the Partner Tax
Distribution Amount or from any Distribution under Section 5.16(a) on such
Monthly Transfer Date, if any;

 

(3)         Assuming no transfers were made pursuant to Section 4.3(e) of the
Account Agreement, no transfers are required to be made from the Distribution
Suspense Account pursuant to Section 4.12 of the Account Agreement (other than
Sections 4.12(b)(i)(B), 4.12(b)(i)(C) and 4.12(b)(ii) thereof), and no transfers
would be required to be made therefrom pursuant to Section 4.12 of the Account
Agreement (other than Section 4.12(b)(ii) thereof) if funds were available to
make such transfers;

 

(4)         Such amount to be distributed on such Monthly Transfer Date is equal
to 1/12th of the good faith estimate by the Borrower of the distributions in
regard to Taxes to be made to the Partners in accordance with Section 5.2 of the
Partnership Agreement, where such estimate has been confirmed to the
Administrative Agent in writing as a fair and reasonable estimate by a firm of
independent certified public accountants of national standing mutually
acceptable to the Administrative Agent and the Borrower, which firm may be the
Independent Accountant (“Partner Tax Distribution Amount”); and

 

(5)         The Borrower certifies the foregoing conditions have been satisfied
in the applicable Transfer Date Certificate.

 

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5.17         Hedging Agreements.  No Borrower Entity may enter into Hedging
Agreements except that the Borrower may enter into any Hedging Agreement in the
ordinary course of business in connection with the ownership, operation and
maintenance of the Project and that is not for a speculative purpose.

 

5.18         Certain Security Interest Matters.  Each Borrower Entity shall:

 

(a)           maintain its chief executive office, principal office, and
principal place of business at Two Allen Center, 1200 Smith Street, Suite 600
Houston, TX  77002, and maintain the office where it keeps its books and records
concerning the Transaction Documents and Collateral at such address,

 

(b)           not keep any place or business or Property outside of the State of
Texas,

 

(c)           not change its jurisdiction of organization,

 

(d)           not change its name or organizational identification number,

 

(e)           except for any inventory (as defined in the UCC) and equipment (as
defined in the UCC) in transit, keep any inventory (as defined in the UCC) or
any equipment (as defined in the UCC) that is part of the Security Agreement
Collateral at any location other than Two Allen Center, 1200 Smith Street, Suite
600 Houston, TX  77002 or on the Land (as set forth in the most recent survey
delivered to the Administrative Agent), and

 

(f)            not do business under any other name or have an assumed name,
unless, in each such case, the Borrower shall have given the Administrative
Agent at least 45 days’ prior written notice, and the requirements, if any, of
Section 5.30 and the Security Documents are satisfied.  The originals of all
documents evidencing the Collateral, including originals of all Assigned
Agreements and Assigned Insurance Policies, and the only original books of
account and records of each Pledgor relating thereto are, and will continue to
be, kept at its chief executive office.

 

5.19         Transactions with Affiliates; Expansion

 

(a)           No Borrower Entity may enter into any transaction or series of
related transactions, whether or not in the ordinary course of business, with or
for the benefit of any Affiliate of the Borrower which is not on terms and
conditions at least as favorable as would be obtained in a comparable
arm’s-length transaction with a Person other than an Affiliate of the Borrower,
except (i) that any Borrower Entity may perform its obligations under the
Transaction Documents listed on Schedule 5.19 as in effect on the Closing Date
and delivered to the Administrative Agent under Section 3.1 (and any amendments,
modifications and supplements to those Transaction Documents entered into and
delivered to the Administrative Agent in accordance with this Agreement),
(ii) for Restricted Payments permitted as set forth in Section 5.16 or (iii) as
previously approved by the board of directors of General Partner in a vote where
a majority of the COP Directors voted in favor of such transaction or series of
related transactions.

 

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(b)           No Borrower Entity shall enter into any transaction or series of
related transactions, whether or not in the ordinary course of business, with or
for the benefit of Expansion or any Affiliate of Expansion which has not been
previously approved by the board of directors of General Partner in a vote where
a majority of the COP Directors voted in favor of such transaction or series of
related transactions.

 

(c)           Each Borrower Entity shall (and shall cause Expansion to) maintain
or cause to be maintained (and shall use its reasonable best efforts to cause
other Persons (that are not its Subsidiaries) to maintain or cause to be
maintained) in full force and effect (1) the intercreditor agreements entered
into in connection with the intercreditor arrangements contemplated by
Section 2.16(b)(1) and (2) non-disturbance and recognition agreement(s) entered
into by the Expansion Secured Parties with the COP Shipper as to the COP TUA
contemplated by Section 2.16(b)(2).

 

(d)           Each Borrower Entity shall ensure the provisions of
Section 2.16(c) are satisfied.

 

(e)           In the event the Administrative Agent advised the Borrower in
writing of an identified activity within the reasonable control of Expansion or
its Subsidiaries in respect of a Phase 2 Project which could reasonably be
expected to have a material adverse effect on (1) the Services Quantity
committed to be provided pursuant to the COP TUA or (2) the validity of the Lien
of the Security Documents or the priority contemplated thereby or the material
right and remedies of the Secured Parties under the Security Documents, the
Borrower shall promptly, and in any event within five Business Days, cause
Expansion or such Subsidiary to desist from such identified activity or cure any
aspect of such activity which could result in such expected material adverse
effect.

 

5.20         Use of Proceeds; Accounts; Construction Budget.

 

(a)           Unless used for repayment or prepayment of the Loans and other
Obligations as permitted hereunder, the proceeds of the Loans shall be used only
to pay for Project Costs for Phase 1 or for reimbursement thereof as
contemplated in the Construction Budget and substantially in accordance with the
Drawdown Schedule (which amounts shall be deposited into the Construction
Account), which Project Costs shall include the certain development and
construction costs incurred by or on behalf of the Borrower and its Affiliates
mutually agreed upon and listed on Schedule 5.20 on the Closing Date.  The
proceeds of the Loans will be used only in accordance with this Agreement and
the other Financing Documents.

 

(b)           For the avoidance of doubt and without limiting the generality of
Section 5.20(a), the proceeds of the Tranche A Loans will not be used to pay,
reimburse or finance (including by providing support for a financing of) (1)
more than *** of the Supplemental Cost in accordance with this Agreement, (2)
any Phase 2 Expenditure, (3) Phase 2 Project, (4) any TUA Insurance and (5) any
costs or expenses for any Phase 1 Addition.  For the avoidance of doubt and
without limiting the generality of Section 5.20(a), the proceeds of the Tranche
B Loans will not be used to pay, reimburse or finance (including by providing
support for a financing of) (1) more than *** of the Supplemental Cost in
accordance with this Agreement (as such amount is reduced by such Supplemental
Costs paid other than by the

 

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proceeds of Tranche A Loans), (2) any Phase 2 Expenditure, (3) Phase 2 Project,
(4) any TUA Insurance and (5) any costs or expenses for any Phase 1 Addition.

 

(c)           The Borrower shall cause all Project Revenues and all payments
from each Construction Contractor (including payments from its guarantors and
sureties) to be deposited in, and disbursed from, the Accounts in accordance
with the Account Agreement.

 

(d)           During the Initial Period, except as set forth in the immediately
following sentence the board of directors of the General Partner shall approve
the Construction Budget and the Drawdown Schedule and any amendments,
supplements, and modifications to either of the foregoing, in each case in a
vote where a majority of the COP Directors voted in favor thereof.  For purposes
of the Closing Date and the Initial Disbursement Date (if such date is also the
Closing Date), the Construction Budget and the Drawdown Schedule and any
amendments, supplements, and modifications to either of the foregoing need to be
approved only by the advisory board of the General Partner.

 

(e)           After the Initial Period, neither the Borrower nor the General
Partner shall, without the prior written consent of the Independent Engineer (or
if no Independent Engineer exists at such time, the Administrative Agent),

 

(1)         amend, supplement, or modify the Construction Budget, including to
change the number or type of Construction Budget categories or amounts contained
in any category or

 

(2)         request any Borrowing for the purpose of funding any Project Costs
in excess of the amount contained in the Construction Budget for such category
of Project Costs.

 

Notwithstanding the foregoing provisions of this Section 5.20(e), the Borrower
may, without the consent of the Administrative Agent, (i) transfer unutilized
amounts from a Construction Budget category to Contingency upon completion of
the Work contemplated by such Construction Budget category, and (ii) request
Loans in respect of the Contingency for the purpose of change orders under any
Construction Contract permitted to be entered into pursuant to Section 5.25.

 

(f)            After the Initial Period, the Borrower shall not, without the
prior written consent of the Independent Engineer (or Administrative Agent, as
applicable), amend, supplement, or modify the Drawdown Schedule, except in
connection with, but only to the extent necessary to reflect, changes to the
Construction Budget and any other actions permitted by Section 5.20(e).

 

(g)           Each Borrower Entity shall use at least commercially reasonable
efforts to cause initial satisfaction of all conditions set forth in Section 3.2
to occur as soon as possible after the Closing Date.

 

5.21         Project Construction; Maintenance.

 

(a)           Each Borrower Entity shall (i) cause construction of Project to be
carried out with diligence and continuity in accordance with the Necessary
Approvals, Good LNG

 

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Practices, the Construction Budget, each Phase 1 Addition Budget for
construction (to the extent not in conflict with the Construction Budget), the
Project Schedule, and the Construction Contracts, (ii) cause the Project
Completion Date to occur on or before the Date Certain, and (iii) not enter into
any change orders under any Construction Contract except as permitted by
Section 5.25.

 

(b)           Each Borrower Entity shall maintain and operate, or cause to be
maintained and operated, the Project in good working order and condition in
accordance with the Project Documents and Good LNG Practices, including:

 

(1)         maintaining and preserving its Property, including as set forth in
Section 4.16 hereof, necessary or useful in the proper conduct of its business
in good working order and in such condition that the Facility will have the
capacity and functional ability to perform, on a continuing basis (ordinary wear
and tear excepted), in normal commercial operation, the functions for which it
was specifically designed in accordance with the Construction Contracts at
substantially the levels contemplated thereby and Good LNG Practices;

 

(2)         operating, servicing, maintaining and repairing the Project so that
the condition and operating efficiency thereof will be maintained and preserved
(ordinary wear and tear excepted) in all material respects in accordance and
compliance with (A) Good LNG Practices, (B) such operating standards as shall be
required to enforce any material warranty claims against dealers, manufacturers,
vendors, contractors, and sub - contractors, (C) the terms and conditions of all
insurance policies maintained with respect to the Project at any time, (D) all
requirements of Applicable Law and all Necessary Approvals and (E) the terms of
the Project Documents; and

 

(c)           The Borrower and the General Partner shall not, directly or
indirectly, make or commit to make any expenditure in respect of the purchase or
other acquisition of fixed or capital assets, other than (i) expenditures
contemplated by the Construction Budget or the prevailing Operating Budget, as
appropriate, (ii) expenditures permitted to be made pursuant to Section 5.11,
(iii) Major Maintenance Expenses contemplated by Section 4.9 of the Account
Agreement and (iv) any Phase 1 Additions permitted under Section 5.15(d).

 

(d)           Subject only to Borrower’s rights under Section 8.2(b) of the COP
TUA with respect to the berthing and unloading dock, the Borrower shall not,
directly or indirectly, alter, remodel, add to, reconstruct, improve or demolish
any part of the Project or any other Collateral, except as contemplated by or in
accordance with the Plans and Specifications or as provided in Section 5.21(a)
or 5.21(c); provided however, that after the Conversion Date prior to beginning
any such alterations, remodeling, additions, reconstructions, improvements or
demolition, the Borrower shall provide written notice to the Administrative
Agent of such actions to be taken.

 

(e)           The Borrower shall cause the Conversion Date to occur within 60
days after Conversion.

 

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5.22         Performance of Project Documents

 

(a)           Each Borrower Entity (1) shall perform and observe all of its
covenants, obligations and agreements under any and all of the Transaction
Documents, (2) shall take all necessary actions to prevent the termination or
cancellation of any Transaction Document and (3) shall take any and all action
as may be reasonably necessary promptly to enforce its rights and to collect any
and all sums due to it under the Project Documents; provided, however, that
clause (2) of this Section 5.22(a) shall not apply in the case of any Project
Document for which such Borrower Entity has entered into an Material Additional
Project Document and obtained any necessary Consent Agreement related thereto.

 

(b)           Each Borrower Entity shall instruct all Project Participants to
make all payments payable to it, to the Depositary Agent for deposit in the
appropriate Account in accordance with the Account Agreement.

 

(c)           No Borrower Entity will transport natural gas, or cause natural
gas to be transported, by a pipeline to or near the limits of a municipality in
which such gas is received and distributed or sold to the public by a gas
utility or by the municipality in a situation where same is the only or
practically the only supply of natural gas to such gas utility or municipality
so as to subject Borrower to the provisions of V.T.C.A., Utilities Code
§ 121.001(a)(3) and § 121.051.

 

5.23         Operating Budget; Account Agreement; Phase 1 Addition Expenses.

 

(a)           Preparation of Operating Budget

 

(1)         Prior to a given Operating Year, the Borrower shall cause the
Operator to prepare the Operating Budget for such year.  The Borrower shall
permit the Operator to prepare an amended Operating Budget for the remainder of
any then current Operating Year.

 

(2)         The Borrower will consult with, advise and provide information and
access requested by the Operator and the Independent Engineer, if any, in
connection with the preparation of such budget, including amended budgets, in
clause (1).

 

(3)         The Borrower shall cause each Operating Budget (A) to be prepared on
a cash basis, (B) to specify, for each month during the Operating Year (i) the
Project Revenues anticipated to be received, (ii) the Operating and Maintenance
Costs (by category), together with a comparative presentation of Operating and
Maintenance Costs to the prior Operating Year, and (iii) if applicable, the COP
O&M Percentage and the TPS O&M Percentage and (C) to describe in reasonable
detail (x) the maintenance and overhaul schedule (including any major
maintenance or overhauls that are projected for the next succeeding Operating
Year), capital expenditures for Phase 1, anticipated staffing plans,
mobilization schedules, equipment acquisitions and spare parts and consumable
inventories (including a breakdown of capital items and expense items), and
administrative activities and (y) any other material underlying assumptions in
connection with the proposed Operating Budget.

 

(b)           Delivery of Operating Budget.  The Borrower shall deliver or cause
to be delivered to the Administrative Agent:

 

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(1)         at least 30 days before the beginning of each Operating Year and
prior to adoption thereof, the Operating Budget for such year and

 

(2)         at least 10 days prior to adoption thereof, any amended Operating
Budget.

 

(c)           Approval and Adoption of Operating Budget.

 

(1)         The Borrower shall approve and adopt an Operating Budget for each
Operating Year reasonably prior to the beginning of such year.

 

(2)         Prior to adoption of any such budget, including any amended budget,
by the Borrower,

 

(A)          the Independent Engineer, if any, shall approve such Operating
Budget and deliver such approval thereof to the Administrative Agent, and

 

(B)           the Borrower shall deliver a certificate from the controller or
chief accounting officer of the Borrower to the Administrative Agent certifying
that the proposed Operating Budget and the preparation thereof complies with
this Section 5.23.

 

(d)           Account Agreement.

 

(1)         Operating and Maintenance Costs.  The Borrower shall ensure that the
aggregate Operating and Maintenance Costs reflected in each Transfer Date
Certificate delivered by the Borrower under the Account Agreement shall comply
with the requirements set forth in Section 5.23(a) above.

 

(2)         Major Maintenance Reserve Requirement and Account.

 

(A)          The Borrower shall permit the Independent Engineer, if any, to
review the amounts projected by the Borrower for the Major Maintenance Reserve
Requirement and, if necessary, provide the Borrower with its recommendations for
adjustments to such amounts.

 

(B)           If, at any time, the Independent Engineer determines that a Major
Maintenance Reserve Account is necessary to maintain and operate the Project in
accordance with Section 5.21(b), then such Account shall be opened under the
Account Agreement pursuant to a written instruction from the Collateral Agent to
the Depositary Agent (with a copy to the Borrower) to open such Account.  Such
Account shall remain open unless the Independent Engineer determines that such
Account is not necessary to maintain and operate the Project in accordance with
Section 5.21(b), and thereupon such Account shall be closed pursuant to a
written instruction from the Collateral Agent to the Depositary Agent (with a
copy to the Borrower) to close such Account.  Such Account may be reopened and
reclosed in accordance with the preceding provisions of this
Section 5.23(d)(2)(B).  The Borrower hereby acknowledges the transfers
contemplated in the Account

 

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Agreement with respect to allocating funds for the Major Maintenance Reserve
Requirement.

 

(e)           Phase 1 Addition Expenses.  Any payment for, or incurrence of, any
expenses and costs by a Borrower Entity for any Phase 1 Addition (except for the
Phase 1 Addition (Stratton Ridge)) shall be in compliance with and pursuant to
applicable Phase 1 Addition Budget, in each case such budget shall have been
previously approved by the board of directors of General Partner in a vote where
a majority of the COP Directors voted in favor thereof.  Any payment for, or
incurrence of, any expenses and costs by a Borrower Entity for the Phase 1
Addition (Stratton Ridge)) shall be in compliance with and pursuant to a budget
for such Phase 1 Addition previously approved by the board of directors of
General Partner in a vote where a majority of the MS Directors voted in favor
thereof.  No costs or expenses for any Phase 1 Addition shall be included in the
Construction Budget or Operating Budget.

 

5.24         Fundamental Changes.

 

(a)           Except as permitted in Section 5.24(b) or (c), each Borrower
Entity shall preserve and maintain its current legal existence, and all of its
respective material powers, licenses, rights, privileges and franchises
necessary for the maintenance of its current organizational existence, and
comply, in all material respects, with its Charter Documents;

 

(b)           No Borrower Entity shall enter into (or otherwise be a party to)
any transaction of merger or consolidation, conversion or otherwise change its
legal form including transferring to another jurisdiction of organization
(except as permitted under Sections 5.24(b) or (c)), restructure or reclassify
Capital Stock of a Borrower Entity, liquidate, wind-up or dissolve a Borrower
Entity (or suffer any liquidation or dissolution), abandon or discontinue its
business or purchase or acquire (in one transaction or in a series of related
transactions) all or substantially all of the assets of any Person or Affiliates
of any Person.  Notwithstanding anything else in any Financing Document to the
contrary, subject to satisfaction of the conditions precedent set forth in the
immediately following sentence, the Site Lessee may merge into the Borrower with
the Borrower being the surviving entity of such merger and, to the extent
permitted by Applicable Law, the certificate of formation and partnership
agreement of Borrower immediately prior to the merger shall be the certificate
of formation and partnership agreement of the surviving entity.  Any such merger
set forth in the immediately preceding sentence is subject to the following
conditions:

 

(1)         the Administrative Agent shall have received as of the date of such
merger an Officer’s Certificate certifying that:

 

(A)          (1) all the representations and warranties of the Borrower and Site
Lessee in the Financing Documents are true and correct in all material respects
and (2) all the representations and warranties of the Borrower in the Financing
Documents shall be true and correct in all material respects on the date of such
merger immediately after giving effect to such merger;

 

(B)           such merger has received all necessary corporate and partnership
approvals and consents from Governmental Authorities and third parties; and

 

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(C)           the other requirements set forth in this Section 5.24(b) have been
satisfied;

 

(2)         the Administrative Agent shall have received prior to the date of
such merger, a copy of the certificate of merger and the agreement of merger, in
each case substantially in the form and substance to be executed and delivered
and, if applicable, filed.

 

(3)         In such merger, (A) the Capital Stock of the Subsidiary shall be
cancelled, retired and otherwise cease to exist and (B) the Partners of the
Borrower immediately prior to such merger shall be the only Partners of the
Borrower immediately after such merger.

 

(4)         When such merger shall have become effective, all of the rights,
privileges and powers of the Site Lessee and the Borrower and all Property
belonging to such Persons shall be vested in the Borrower and shall thereafter
be the property of the Borrower as they were of each of the Site Lessee and the
Borrower, and the title to any real property vested by deed or otherwise in
either the Site Lessee or the Borrower shall not revert or be in anyway impaired
by reason of such merger.

 

(5)         All Necessary Approvals and other Governmental Approvals in the name
of the Site Lessee shall have been transferred to and in the name of the
Borrower promptly after such merger with substantially similar rights, title and
interests as immediately prior to such merger;

 

(6)         Such merger is permitted under all other Debt of the Borrower
Entities;

 

(7)         No Default or Event of Default shall have occurred and be continuing
prior to such merger or shall have occurred after giving effect to such merger;

 

(8)         The Brazos River Authority and any Project Participants from which
any Consents have been obtained in respect of agreements with the Site Lessee
(A) shall have acknowledged to the Collateral Agent, in form and substance
reasonably satisfactory to the Collateral Agent, its understanding that such
merger will occur as disclosed to the Collateral Agent and (B) shall have agreed
to, ratified and confirmed its obligations under its Consent (or, in the case of
the Brazos River Authority, the Brazos Consent) for the benefit of the Secured
Parties notwithstanding such merger; and

 

(9)         The validity and priority of the Liens on the Collateral and the
material rights and remedies of the Secured Parties under any Financing Document
shall not be adversely affected, and the Borrower shall provide an endorsement
to any title policy covering the Property of the Site Lessee immediately prior
to the merger confirming that the validity and priority of the Liens on the
Collateral constituting real property shall not be adversely affected.

 

Promptly after such merger, the Borrower shall deliver evidence of such merger
to the Administrative Agent.  Upon the satisfaction of the conditions set forth
in this Section 5.24(b), such merger shall be permitted under the Financing
Documents.

 

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(c)           Except as permitted in Section 5.24(b), no Borrower Entity shall
cancel, terminate, permit the cancellation or termination of, amend, modify,
supplement or grant any material consent, waiver or approval under, or take or
fail to take any other action that would impair the value of the interest or
impair its rights under, any of its Charter Documents.  Notwithstanding the
foregoing, subject to Section 5.18 and 5.30, the Borrower may become a limited
liability limited partnership upon the prior written notice and consent of the
Administrative Agent, such consent not to be unreasonably withheld.

 

(d)           No Borrower Entity shall transfer (including directly or
indirectly by sale, assignment, disposal or exchange), lease, or sublease (in
one transaction or in a series of related transactions) any of its Property
(including Property of any of its Subsidiaries), except (1) Property sold,
leased or subleased in the ordinary course of business, (2) Property that is
obsolete and not integral to the business of any Borrower Entity, and
(3) pursuant to Sections 5.12, 5.14, 5.24(b) and 5.25(a)(2) and the terms of the
Shared Facilities Agreement, if any.

 

(e)           No Borrower Entity shall purchase or acquire any assets other than
the purchase or acquisition of (1) assets reasonably required for the completion
of Phase 1 of the Project in accordance with the Construction Budget, (2) assets
in the ordinary course of business reasonably required in connection with the
operation of the Project and (A) in accordance with the Operating Budget or
(B) if permitted under Section 5.15(d) in accordance with any Phase 1 Addition
Budget for operation or operating budget for Phase 1 Addition (Stratton Ridge),
(3) Permitted Investments, (4) fixed or capital assets permitted to be purchased
or acquired as described in Section 5.21 or (5) permitted to be purchased or
acquired by Section 5.24(b).

 

5.25         Amendment of Transaction Documents; Material Additional Project
Documents; Change Orders; etc.

 

(a)           No Borrower Entity may:

 

(1)         consent to, enter into or grant any amendment, waiver, forgiveness,
release, consent, suspension, cancellation, termination, change or modification
to:

 

(A)          any Project Document, including any Material Additional Project
Document but excluding any Non-COP TUA, that (i) adversely affects the ability
of any Borrower Entity or any guarantor of the obligations of any Borrower
Entity under the Financing Documents to perform its obligations under any of the
Financing Documents or the validity or priority of the Liens on the Collateral
or the material rights and remedies of the Secured Parties under any Financing
Document without the consent of the Administrative Agent or (ii) causes or
results in a Default or an Event of Default; and

 

(B)           except in accordance with this Agreement, any Financing Document
without the consent of the Administrative Agent.

 

For the avoidance of doubt, each Borrower Entity shall also satisfy the
requirements of Section 5.30 to the extent applicable to this Section 5.25(a);
or

 

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(2)         sell, assign or otherwise dispose of (by operation of law or
otherwise) any part of its rights or interest in any Transaction Document or
delegate any of its duties or obligations under any Transaction Document except
(1) pursuant to the Security Documents, (2) the COP Royalty Lien, and TPS
Collateral to the TPS Secured Parties to secure the obligations of any Borrower
Entity to such TPS Secured Parties in respect of the Project and (3) as
permitted by Section 2.16(a) and, if permitted under Section 5.19, any
assignment of real property rights, title and interest to Expansion or any of
its Subsidiaries (for any Phase 2 Project to the extent necessary for the
operation and conduct of business of such Phase 2 Project) and assumption by
such entity of any related liabilities, duties and obligations.

 

(b)           The Borrower shall provide the Administrative Agent with true and
complete copies of each executed and delivered Project Document, including any
amendments, waivers, modifications, supplements and replacements thereof
promptly after execution and delivery thereof, provided however that in the case
of a Non-COP TUA, the Administrative Agent shall have executed and delivered to
Borrower and the Shipper under the relevant Non-COP TUA, if required by such
Shipper, a confidentiality agreement between such Shipper and the Administrative
Agent that is satisfactory to the Administrative Agent and such Shipper.

 

(c)           In the event that any Project Document (other than Non-COP TUAs)
is terminated or cancelled prior to its expressed expiration date, each Borrower
Entity party thereto shall use reasonable best efforts to enter into within 60
days after such termination or cancellation (subject to the consent of the
Administrative Agent), a replacement agreement with a Replacement Project
Participant constituting a replacement of the Project Document so terminated or
cancelled. The obligations of the Borrower Entities under this Section 5.25(c)
shall not be in derogation or limitation of the obligations of any Borrower
Entity under Section 5.25(a) or in any way limit or impair the rights or
remedies of the Secured Parties hereunder or under any other Financing Document
directly or indirectly arising out of the termination or cancellation of any
Project Document.

 

(d)           Notwithstanding the provisions of Section 5.25(a), after the
Initial Period the Borrower may initiate or approve:

 

(1)         any change orders under any Construction Contract included in the
Budgeted Construction Costs, and

 

(2)         upon five Business Days’ prior notice to the Independent Engineer,
any change orders under any Construction Contract provided the Borrower
certifies that such change order (i) is in accordance with Good LNG Practices,
(ii) is not reasonably expected to materially and adversely affect the operation
or reliability of Phase 1 of the Project, and (iii) if implemented, is not
reasonably expected to materially delay the Project Completion Date.

 

(e)           No Borrower Entity shall enter into any capacity rights agreement,
terminal use agreement, lease or other agreement and no agreement shall be
binding on the Property of the Borrower with respect to which any projected
payments receivable by a Borrower Entity in any 12 month period is in excess of
*** of the Future Average Annual

 

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Payments.  For any given 12 month period, “Future Average Annual Payments” is
equal to: (a – b) / c;

 

where:

 

“a” is the total projected payments receivable under the agreement

“b” is the total payments under the agreement received prior to such 12 month
period

“c” is the remaining life of the agreement in years or part of years

 

To the degree payments under the contract are indexed, e.g., linked to a gas
price index, payments and distributions referred to above shall be calculated
using the same assumptions.

 

5.26         Environmental Compliance.  Each Borrower Entity shall:

 

(a)           comply in all material respects and cause all other Persons
constructing, occupying, using, maintaining or conducting operations at the
Project to comply in all material respects with all Environmental Laws now or
hereafter applicable to the Project;

 

(b)           obtain or cause to be obtained, at or prior to the time required
by applicable Environmental Laws, all Governmental Approvals, including any
emissions credit or allowances, required pursuant to applicable Environmental
Law for the design, construction, completion, start-up, operation and
maintenance of the Project, and maintain or cause to be obtained such
Governmental Approvals in full force and effect;

 

(c)           other than in compliance in all material respects with all
applicable Environmental Laws, not generate, use, treat, recycle, store, Release
or dispose of, or permit the generation, use, treatment, recycling, storage,
Release or disposal of Hazardous Materials on the Land, or transport or permit
the transportation of Hazardous Materials to or from the Project;

 

(d)           conduct and complete any investigation, study, sampling and
testing and undertake any cleanup, removal, remediation or other action
necessary or advisable to remove and clean up all Hazardous Materials generated,
used, treated, recycled, stored, Released or disposed at, on, in, under or from
the Project, in accordance with all applicable Environmental Laws and promptly
notify the Administrative Agent of any such material action;

 

(e)           provide the Administrative Agent with written notice of (i) any
fact, circumstance, condition, occurrence or Release at, on, under or from the
Project that results in material noncompliance with any Environmental Law
applicable to the Project or that has resulted or may result in personal injury
or material Property damage or an Environmental Claim or otherwise that could
reasonably be expected to have a Material Adverse Effect, such notice to be
given promptly after the fact, circumstance, condition, occurrence or Release is
discovered or such Release or occurrence takes place and (ii) any pending or
threatened Environmental Claim against any Borrower Entity or any other Persons
constructing, occupying, using, maintaining or conducting operations at the
Project that, if adversely determined, could reasonably be expected to have a
Material Adverse Effect, such notice to be given promptly after such
Environmental Claim is commenced or threatened; all such notices shall describe
in reasonable detail the nature of the claim, investigation, condition,
incident, or occurrence and what action has been taken and any proposed action
or response to be taken with respect thereto;

 

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(f)            provide the Administrative Agent with copies of all material
communications with any Governmental Authority relating to any Environmental Law
or any Environmental Claim promptly after the giving or receiving of any such
communications; and

 

(g)           provide such information concerning any Environmental Claim or
Governmental Approval required pursuant to applicable Environmental Law relating
to the Project as may be reasonably requested by the Administrative Agent.

 

5.27         Completion; Construction Contracts; Performance Tests.

 

(a)           No Borrower Entity may without the prior approval of the
Administrative Agent (after consultation with the Independent Engineer), unless
in each case approved by the board of directors of General Partner in a vote
where a majority of the COP Directors voted in favor thereof:

 

(1)         enter into any Construction Contract or any material amendment,
modification or supplement thereof without the consent of the Administrative
Agent (such consent to not be unreasonably withheld);

 

(2)         approve the addition, deletion or substitution of any material
subcontractor from the subcontractors listed in or attached to a Construction
Contract or enter into, or intend to enter into, any material subcontract with
any subcontractor not listed in or attached to such Construction Contract;

 

(3)         approve the addition, deletion or substitution of any material
sub-subcontractor from the list of sub-subcontractors listed in or attached to a
Construction Contract;

 

(4)         make an election under any Construction Contract with respect to
Performance Liquidated Damages;

 

(5)         take any action or fail to take any action which could cause an
extension of any guaranteed completion or acceptance date under the Construction
Contract or amend, modify, supplement or waive any provision of the Project
Schedule relating to the Construction Contract;

 

(6)         accept or confirm that the Project has achieved Substantial
Completion or Final Completion in respect of the EPC Contract, or fail to advise
any contractor of any defects, deficiencies or discrepancies of which a Borrower
Entity has knowledge and which such contractor is required to remedy pursuant to
such Construction Contract;

 

(7)         notify the contractor that it accepts a “punchlist” under a
Construction Contract, including the Punchlist, for the construction of any part
of the Facility;

 

(8)         prior to the Conversion Date, issue, approve or execute any
acceptance or completion certificate or otherwise confirm acceptance or
completion of the Project or any portion or phase thereof;

 

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(9)         accept or confirm that the Facility or any part thereof has
satisfied any of the performance tests set forth in any Construction Contract or
met any of the performance guarantees set forth in any Construction Contract; or

 

(10)       reject the Facility or any material portion thereof.

 

Notwithstanding the foregoing, no Borrower Entity may without the prior approval
of the Administrative Agent (after consultation with the Independent Engineer),
waive, defer or reduce any of the requirements of any acceptance tests or
performance guarantees set forth in any Construction Contract.

 

(b)           The Borrower shall provide at least five Business Days’ prior
written notice to the Independent Engineer of the scheduled date for the
commencement of the acceptance tests pursuant to each Construction Contract.

 

(c)           The Borrower shall provide the Independent Engineer with a copy of
the recommended spare parts list provided by any contractor pursuant to any
Construction Contract.  The Independent Engineer shall be allowed to review and
comment on the list of spare parts that any Borrower Entity intends to purchase
pursuant to any Construction Contract.

 

(d)           When available, the Borrower shall provide the Independent
Engineer with a copy of each start-up manual or user manual that is part of the
specifications of the Facility or portion thereof that is the subject of a
Construction Contract.

 

(e)           The Borrower shall not accept Completion of the Project until an
Authorized Officer of the Independent Engineer shall have delivered to the
Administrative Agent a certificate confirming that Completion has occurred.

 

(f)            EPC Contract Closing  In connection with the entering into of the
EPC Contract and the EPC Guaranty, the Borrower shall deliver or cause to be
delivered to the Administrative Agent the following documents:

 

(1)         A true and complete copy of the EPC Contract and the EPC Guaranty;

 

(2)         Original counterparts of an opinion of counsel to each of the EPC
Contractor and the EPC Guarantor addressed to each Secured Party, each of which
opinions shall be in form, scope and substance and given by counsel satisfactory
to the Administrative Agent, which legal opinions shall be dated the date of the
EPC Contract; and

 

(3)         A certificate of an Authorized Officer of the EPC Contractor and the
EPC Guarantor in the form attached hereto as Exhibit H-2, with appropriate
insertions, certifying (i) that attached thereto is a true and complete copy of
the Charter Documents of such Person, as in effect at all times from the date on
which the resolutions referred to in clause (ii) below were adopted to and
including the date of such certificate, (ii) that attached thereto is a true and
complete copy of resolutions duly adopted by the board of directors (or other
equivalent body) or evidence of all partnership or limited liability company
action, as the case may be, of such Person, authorizing the execution, delivery

 

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and performance of the Transaction Documents to which such Person is or is
intended to be a party, and that such resolutions have not been modified,
rescinded or amended and are in full force and effect, and (iii) as to the name,
incumbency and specimen signature of each officer of such Person executing the
Transaction Documents to which such Person is intended to be a party.

 

5.28         ERISA.  Unless previously approved by the board of directors of
General Partner in a vote where a majority of the COP Directors voted in favor
thereof, no Borrower Entity shall have any Plan, Pension Plan, Multiemployer
Plan, collective bargaining agreement or ERISA Affiliate. No Borrower Entity or
the Project or any part thereof shall be subject to regulation under ERISA
except in connection with ERISA matters permitted under the immediately
preceding sentence.

 

5.29         Certain Restrictive Agreements.  No Borrower Entity may enter into
or suffer to exist or become effective any restriction or encumbrance of any
kind (except for (i) the Financing Documents, (ii) any restriction or
encumbrance approved by the Administrative Agent for the refinancing of any of
the Loans, and (iii) any restriction or encumbrance in connection with Debt with
respect to TPS Loans but solely as provided in by an intercreditor arrangement
with the Secured Parties and in accordance with this Agreement) on the ability
of a Borrower Entity to (a) amend this Agreement or any other Financing
Document, (b) sell any of its Property, (c) create or permit to exist Liens on
any property, now or hereafter existing, (d) create, incur, permit to exist any
Debt or to pay any Debt owed to any other Borrower Entity, (e) make any
Distribution, or (f) make loans, advances or Investments or transfer funds or
assets to any other Borrower Entity.

 

5.30         Security Documents.

 

(a)           Each Borrower Entity shall take all actions necessary or requested
by the Administrative Agent to maintain each Security Document in full force and
effect and enforceable in accordance with its terms and to maintain and preserve
the Liens created by the Security Documents and the priority contemplated
thereby, including:

 

(1)         making filings and recordations,

 

(2)         executing and delivering additional Security Documents or amending,
modifying or supplementing existing Security Documents,

 

(3)         actions necessary or requested to ensure that all the rights, title
and interests and other Property of any Subsidiary of the Borrower or any
Subsidiary of the General Partner and/or any Phase 1 Addition (other than the
Phase 1 Addition (Stratton Ridge)) are included in the Collateral and that the
Lien thereon pursuant to the Security Documents has the priority intended by the
Security Documents and that each such Subsidiary guarantees the Obligations of
the Borrower pursuant to documentation satisfactory to the Administrative Agent,
including legal opinions;

 

(4)         making payments of fees and other charges,

 

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(5)         issuing and, if necessary, filing or recording supplemental
documentation, including continuation statements,

 

(6)         discharging all claims or other Liens adversely affecting the rights
of any Secured Party in any Collateral,

 

(7)         publishing or otherwise delivering notice to third parties,

 

(8)         executing, delivering and recording title documents and

 

(9)         taking all other actions either necessary or otherwise requested by
the Administrative Agent to ensure that all Collateral (including any
after-acquired Property of any Borrower Entity intended to be covered by any
Security Document) is subject to a valid and enforceable first-priority Lien
(subject to Permitted Liens) in favor of the Collateral Agent for the benefit of
the Secured Parties.

 

In furtherance of the foregoing, (A) each Borrower Entity shall ensure that all
Property acquired or otherwise obtained by it intended by the Security Documents
to be included in the Collateral shall be Collateral and shall have the priority
contemplated by the Security Documents promptly upon the acquisition thereof and
(B) except as set forth in the immediately following sentence, no Borrower
Entity may open or maintain any bank account, deposit account, or securities
account without first taking all such actions as may be necessary or otherwise
requested by the Administrative Agent to ensure that such account is subject to
a valid and enforceable first priority Lien (subject to Permitted Liens) in
favor of the Collateral Agent for the benefit of the Secured Parties.  Without
taking such action, a Borrower Entity may, upon prior written notice to the
Administrative Agent, open and maintain bank accounts, deposit accounts, or
securities accounts solely for: (1) TPS Accounts opened and maintained in
accordance with Section 2.15 for the financing with the TPS Secured Parties,
(2) capacity reservation fees, (3) proceeds of capital calls solely for any
Phase 1 Addition, (4) withdrawals, transfers and/or remittances of payments from
the Payment Account in accordance with the Account Agreement to be applied in
accordance with the related transfers into the Payment Account pursuant to the
Account Agreement and (5) the proceeds of the foregoing set forth in clauses
(1)-(4) of this sentence.

 

(b)           Each Borrower Entity shall take all action necessary to cause each
Material Additional Project Document intended to be included in the Collateral
to be Collateral (whether by amendment to any Security Document, execution of a
new Security Document or otherwise) in favor of the Collateral Agent, and shall
deliver or cause to be delivered to the Administrative Agent such legal
opinions, certificates or other documents with respect to each Material
Additional Project Document as the Administrative Agent may reasonably request. 
Each Borrower Entity shall cause each party to a Material Additional Project
Document (other than the Borrower Entities and ConocoPhillips and its
Affiliates) to execute and deliver a Consent Agreement with respect to each
Material Additional Project Document and such legal opinions relating to such
Material Additional Project Document as the Administrative Agent may reasonably
request.

 

(c)           At such time as the Administrative Agent may reasonably request in
writing, the Borrower shall furnish, or cause to be furnished, to the Collateral
Agent and the

 

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Administrative Agent, an opinion or opinions of duly qualified legal counsel
(which opinions may be of in-house counsel) either stating that, in the opinion
of such counsel, as of the date of such opinion(s):

 

(1)         (A) such actions have been taken that are necessary to maintain each
Security Document in full force and effect and enforceable in accordance with
its terms and to maintain and preserve the Liens created by the Security
Documents and the priority thereof, including any after-acquired Property
intended to be covered by any Security Document, and the priority thereof and
(B) a description of such actions or

 

(2)         no action is necessary to maintain each Security Document in full
force and effect and enforceable in accordance with its terms and to maintain
and preserve the Liens created by the Security Documents and the priority
thereof, including any after-acquired Property intended to be covered by any
Security Document, and the priority thereof.

 

Such opinion(s) shall also describe the taking of any other action that will, in
the opinion of such counsel, be necessary to maintain each Security Document in
full force and effect and enforceable in accordance with its terms and to
maintain and preserve the Liens created by the Security Documents and the
priority thereof, including any after-acquired Property intended to be covered
by any Security Document, and the priority thereof after the date of such
opinion.

 

5.31         Prepayment of Debt.  Except for prepayments required or permitted
to be made pursuant to ARTICLE 6, the Borrower shall not make, or permit to be
made on its behalf, any prepayment of any of the Loans.  The Borrower shall not
reduce all or any portion of the Commitment of any Lender prior to the
Conversion Date.

 

5.32         Transfers of Capital Stock in the Borrower and its Subsidiaries.
 No Borrower Entity may transfer (including directly or indirectly by sale,
assignment, gift, pledge, hypothecation, mortgage, deed of trust, disposal, or
exchange), authorize or issue any Capital Stock of the Borrower (or any
Subsidiary thereof or Subsidiary of the General Partner) or consent or permit
any of the foregoing except (a) in the case of the Capital Stock of the Borrower
in accordance with the Stockholders Agreement and the Partnership Agreement and
(b) in the case of any other Capital Stock in accordance with the Financing
Documents, but (c) in no case in violation of Applicable Laws, including if
applicable the Securities Act and the Exchange Act.

 

5.33         Payment of Project Costs with Project Revenues.  Except as
otherwise specified in the Account Agreement or this Agreement, any Project
Revenues received on or prior to the Project Completion Date shall be deposited
into the Accounts and applied, in accordance with the Account Agreement, to the
payment of Project Costs, subject to the conditions precedent set forth in
either Section 3.1 or 3.2, as applicable, which shall be satisfied both
immediately prior to the application of such Project Revenues and also after
giving effect thereto on and as of such Disbursement Date, as though made on and
as of such disbursement date, unless such conditions are waived by the
Administrative Agent.

 

5.34         Investment Company Act; PUHCA.  No Borrower Entity may take or
permit to be taken any action that will cause any of them to be, or be subject
to regulation as:

 

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(a)           an “investment company,” or company “controlled” by an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter”
for, an “investment company,” as such terms are defined in the Investment
Company Act of 1940, as amended, or

 

(b)           a “holding company,” or an “affiliate” of a “holding company,” or
a “subsidiary company” of a “holding company,” or a “public utility company” or
an “associate company” of any of the foregoing, within the meaning of the Public
Utility Holding Company Act of 1935, as amended or

 

(c)           subject to regulation under any Applicable Law relating to public
utilities, gas utilities, public service corporations or similar entities.

 

5.35         Further Assurances.  Each Borrower Entity shall promptly and duly
execute and deliver to the Administrative Agent such documents and assurances
and take any further action as the Administrative Agent may from time to time
reasonably request in order to carry out the intents and purposes of the
Financing Documents and to establish, preserve, maintain, and perfect the rights
and remedies (as well as the priority thereof) created or intended to be created
in favor of the Secured Parties pursuant to the Security Documents.

 

ARTICLE 6.           PAYMENT PROVISIONS; FEES.

 

6.1           Repayment of Principal; Interest; Reduction of Commitment.

 

(a)           The Borrower shall repay the aggregate principal amount of the
Tranche A Construction Loans outstanding, and such Tranche A Construction Loans
shall mature on, the Tranche A Construction Loan Maturity Date (except to the
extent that such Construction Loans are converted into Tranche A Term Loans in
accordance with Section 2.2 hereof).  The Borrower shall repay the aggregate
principal amount of the Tranche B Construction Loans outstanding, and such
Tranche B Construction Loans shall mature on, the Tranche B Construction Loan
Maturity Date (except to the extent that such Construction Loans are converted
into Tranche B Term Loans in accordance with Section 2.2 hereof).  The
Construction Loan Commitments shall automatically be reduced to zero at the
close of business on the Term Date.

 

(b)           The Borrower agrees to pay interest in respect of the Tranche A
Term Loans in arrears on the Principal Payment Dates at a rate per annum which
is equal to the Tranche A Rate in accordance with 6.1(c).

 

(c)           The Borrower shall repay the aggregate principal amount of the
Tranche A Term Loans outstanding on the Conversion Date (the “Principal Sum”)
and interest thereon on the Payment Dates (each such date, a “Principal Payment
Date”) commencing with the first such date occurring after the Conversion Date
and continuing to and including the Tranche A Term Loan Maturity Date in the
applicable amounts set forth in the notice delivered to the Borrower by the
Administrative Agent on the Conversion Date.  Such amounts shall be in equal
monthly installments of principal and interest and shall fully amortize the
Principal Sum over the period set forth in the immediately preceding sentence
while paying all outstanding accrued interest on a monthly basis in arrears as
calculated by the Administrative Agent as of the Conversion Date, which
calculations and resulting amounts set forth in the notice shall be conclusive
absent

 

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manifest error.  All amounts paid by the Borrower pursuant to Section 6.3(c) in
respect of Tranche A Loans shall be applied to reduce the accrued interest on
the principal amount prepaid, and then to reduce the Principal Sum under this
Section 6.1(c), and, upon such reduction of the Principal Sum, the monthly
instalments referred to in the immediately preceding sentence shall be
recalculated prior to, and such recalculated amount shall be in effect as of,
the next Principal Payment Date.

 

(d)           The Borrower agrees to pay interest in respect of the Tranche B
Term Loans in arrears on the amount unpaid and owed Tranche B Obligations at a
rate per annum which is equal to the Tranche B Rate. The Borrower shall pay the
Lenders and other Persons to whom Tranche B Obligations are unpaid and owed the
entire amount in the COP Supplemental Debt Payment Account (ratably if
sufficient funds are not available in such Account) on each Monthly Transfer
Date in accordance with the Account Agreement until no Tranche B Obligations
remain unpaid and owed.

 

6.2           Voluntary Prepayments

 

(a)           The Borrower may not voluntarily prepay any Loans except in
accordance with this section.

 

(b)           The Borrower may prepay the Tranche A Loans, in whole or in part
at any time and from time to time after the initial Disbursement Date on the
following terms and conditions: (i) each of the Lenders consent to such
prepayment, which consent may be given or withheld in each Lenders’ sole
discretion, (ii) the Borrower shall give the Administrative Agent at the Notice
Office at least five Business Days’ prior written notice of its intent to prepay
the Tranche A Loans and the aggregate principal amount of the prepayment;
(iii) such prepayment shall be (A) in an aggregate principal amount of the
lesser of $1,000,000 and the aggregate outstanding amount of the Loans and
(B) if more than $1,000,000, in integral multiples of $1,000,000 in excess
thereof.  The amount paid by the Borrower pursuant to this Section 6.2(b) shall
be applied to reduce the accrued interest on the principal amount prepaid, and
then to the remaining Scheduled Principal Payments in inverse chronological
order of their due dates.

 

(c)           The Borrower may prepay the Tranche B Loans, in whole or in part
at any time and from time to time after the initial Disbursement Date of the
Tranche B Loans on the following terms and conditions: (i) the Borrower shall
give the Administrative Agent at the Notice Office at least five Business Days’
prior written notice of its intent to prepay the Tranche B Loans and the
aggregate principal amount of the prepayment; (ii) such prepayment shall be
(A) in an aggregate principal amount of the lesser of $1,000,000 and the
aggregate outstanding amount of the Loans and (B) if more than $1,000,000, in
integral multiples of $1,000,000 in excess thereof.  The amount paid by the
Borrower pursuant to this Section 6.2(c) shall be applied to reduce the accrued
interest on the principal amount prepaid, and then to the other unpaid and owed
Tranche B Obligations.

 

6.3           Mandatory Prepayments. The Borrower shall make mandatory
prepayments of the Loans as follows:

 

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(a)           Loss Proceeds, Project Document Claims and Performance Liquidated
Damages.  The Borrower shall prepay the outstanding Loans to the extent required
pursuant to Section 5.11.

 

(b)           Change of Control.  Upon the occurrence of a Change of Control,
each Lender shall immediately have the option of having its Loans prepaid, in
all or in part, by delivering a notice of such prepayment to the Borrower within
30 days after delivery of the notice pursuant to Section 5.1(d)(ii) to the
Administrative Agent. If a Lender so elects, the Borrower shall immediately
prepay the outstanding amount of such Loans held by such Lender and set forth in
such notice at such time at a price equal to *** of the outstanding principal
amount of such Lender’s Loans, plus accrued interest thereon and shall pay any
other Obligations due and payable in respect of such Loans.

 

(c)           Excess Construction Loan.  The Borrower shall prepay the
outstanding Tranche A Loans and Tranche B Loans to the extent of the transfers
to the COP Redemption Account from the Construction Account for such purpose
made pursuant to Section 4.1(e) of the Account Agreement.

 

(d)           Application.  All amounts paid by the Borrower pursuant to this
Section 6.3 (except for Section 6.3(c) in respect of Tranche A Loans) shall be
applied to reduce the accrued interest on the principal amount prepaid, and then
to the remaining Scheduled Principal Payments in inverse chronological order of
their due dates.  All amounts paid by the Borrower pursuant to Section 6.3(c) in
respect of Tranche A Loans shall be applied pursuant to the last sentence of
Section 6.1(c).

 

6.4           Term Loan Maturity Date.  The outstanding principal amount of any
Tranche A Term Loans shall be repaid in full on the Tranche A Term Loan Maturity
Date.  The unpaid and owed amount of any Tranche B Term Loans shall be repaid in
full on the Tranche B Term Loan Maturity Date.

 

6.5           Method and Place of Payment.

 

(a)           Except as set forth in the following sentence or as otherwise
specifically provided herein, all payments under this Agreement or any Note
shall be made to the Administrative Agent for the account of the Lender or
Lenders entitled thereto not later than 10:00 a.m. (New York City time) on the
date when due and shall be made in Dollars in immediately available funds at the
Payment Office pursuant to the instructions as the Administrative Agent shall
designate to the Borrower in writing.  Whenever any payment to be made hereunder
or under any Note shall be stated to be due on a day which is not a Business
Day, the due date thereof shall be extended to the next succeeding Business Day
and, with respect to payments of principal, interest shall be payable at the
applicable rate during such extension.

 

(b)           All computations of interest hereunder shall be made on the basis
of a 360-day year and the actual number of days elapsed.

 

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6.6           Application of Payments; Sharing.

 

(a)           Subject to the provisions of this Section 6.6, the Administrative
Agent agrees that promptly after its receipt of each payment from or on behalf
of the Borrower in respect of any Obligations of the Borrower hereunder, it
shall promptly distribute such payment to the Lenders pro rata based upon their
respective shares, if any, of such Obligations.

 

(b)           Each of the Lenders agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker’s lien, by counterclaim or cross
action, by the enforcement of any right under the Transaction Documents, or
otherwise), which, in any such case, is in excess of its ratable share of
payments on account of the Obligations obtained by all Lenders, then such Lender
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Lenders an interest in the Obligations of the Borrower
to such Lenders in such amount as shall result in a proportional participation
by all the Lenders in such amount; provided, however, that if all or any portion
of such excess amount is thereafter recovered from such Lender, such purchase
shall be rescinded and the purchase price restored to the extent of such
recovery, but without interest.

 

ARTICLE 7.           EVENTS OF DEFAULT AND REMEDIES.

 

7.1           Events of Default.  The occurrence of any of the following events
or circumstances shall constitute an “Event of Default” hereunder:

 

(a)           The Borrower shall fail to pay any principal of or interest on any
Loan when the same becomes due and payable, whether by scheduled maturity,
required prepayment, redemption, acceleration or otherwise, within two Business
Days after the date such payment is due;

 

(b)           With respect to the TPS Loans or other Debt of a Borrower Entity
outstanding in excess of $*** (other than Debt incurred pursuant to the Credit
Agreement) when aggregated with all Debt under the same facility of the other
Borrower Entities.

 

(1)         a default in the payment obligations thereunder occurs after
satisfaction of any applicable notice requirements and expiration of any
applicable cure periods for such default in the financing documents for such
Debt;

 

(2)         such Debt shall be required to be prepaid, redeemed or repurchased
prior to its stated maturity after satisfaction of any applicable notice
requirements and expiration of any applicable cure periods for such requirement
to prepay, redeem or repurchase in the financing documents for such Debt;

 

(3)         such Debt shall be automatically due and payable prior to its stated
maturity or be declared to be due and payable, or, in the case of any Hedging
Agreement, the payments thereunder are or are permitted to be liquidated, other
than by regularly scheduled required repayment, prior to the stated maturity
thereof or

 

(4)         (A) any event occurs that permits the holders (or their
representatives) of such Debt to cause such Debt to be prepaid, redeemed or
repurchased or to be declared due and payable or, in the case of any Hedging
Agreement, permits the payments

 

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thereunder to be liquidated other than by regularly scheduled required repayment
and (B) all notice requirements shall have been satisfied, and all cure periods
shall have expired, applicable to the right of such holders (or their
representatives) to cause such prepayment, redemption or repurchase or
obligation to pay to occur or applicable to the liquidation of payments to
occur;

 

(c)           The Borrower shall fail to pay any unscheduled cost, charge or
other amount due, which it is not disputing in good faith, under any of the
Financing Documents within 10 days after the date the Borrower receives notice
that such payment is due;

 

(d)           Any representation or warranty or certification made (or deemed
made) by or on behalf of the Borrower, any of its Affiliates or any Equity
Pledgor or any MS Director in the Credit Agreement or in any other Financing
Document to which it is a party, or any representation, warranty or statement in
any certificate, notice, financial statement or other document furnished is
false or misleading in any material respect when made or deemed made, the effect
of which could reasonably be expected to have a Material Adverse Effect;

 

(e)           Any Borrower Entity or any Equity Pledgor breaches any of its
representations, warranties or fails to perform or comply with any of its
covenants or other obligations under the COP TUA, the Omnibus Agreement, the
Stock Purchase Agreement, the Stockholders Agreement, or any Project Document
(other than a Non-COP TUA) and such breach or failure could reasonably to be
expected to have a Material Adverse Effect;

 

(f)            The Borrower, the General Partner or any Equity Pledgor shall
fail to perform or comply with any term, covenant or provision under
Section 5.4(c), 5.5(b), 5.12, 5.13, 5.14, 5.15, 5.16, 5.19(c), 5.19(e), 5.20(a),
5.20(b), 5.21(e), 5.23(e), 5.28, 5.29 or 5.32;

 

(g)           Except as expressly set forth in Section 7.1(h), the Borrower or
any of its Affiliates or any Equity Pledgor shall fail to perform or comply with
any term, covenant or provision under the Credit Agreement (other than those
referred to in clause (f)) or any other Financing Document and such failure
shall continue uncured for 30 or more days from the date such Person obtains
actual knowledge of such failure;

 

(h)           During the continuation of a MS Directors Cure Period, the failure
of the Borrower or any of its Affiliates to perform or comply with any term,
covenant or provision under Section 5.1(h), 5.2(c), 5.2(g), 5.4(a), 5.4(b), 5.6
or 5.21(b) shall not constitute an Event of Default unless such failure shall
continue uncured for 30 or more days from the date the General Partner receives
written notice of such failure from the Administrative Agent; provided that the
Administrative Agent may not give such notice until 30 days after delivering a
previous notice to the Borrower and the General Partner of the failure to
perform or comply;

 

(i)            Any Borrower Entity, or any Affiliate thereof, or FLNGI or any
Equity Pledgor (other than a Non-Smith Equity Pledgor unless the Administrative
Agent determines in its reasonable discretion that such failure could have a
material adverse effect on the validity or enforceability of the Security
Documents or the priority contemplated thereby) shall (i) apply for or consent
to the appointment of, or the taking of possession by, a trustee, receiver,
custodian, liquidator or the like of itself or all or a substantial part of its
Property, (ii) admit in writing its

 

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inability or be generally unable to pay its debts as such debts become due,
(iii) make a general assignment for the benefit of its creditors, (iv) commence
a voluntary case under the Federal Bankruptcy Code or any other Debtor Relief
Law, (v) file a petition seeking to take advantage of any other Debtor Relief
Law, (vi) fail to controvert in a timely and appropriate manner, acquiesce in
writing to, or file an answer admitting the material allegations of any petition
filed against it in an involuntary case under the Federal Bankruptcy Code or any
other Debtor Relief Law or (vii) take any action for the purpose of effecting
any of the foregoing;

 

(j)            A proceeding or case shall be commenced without the application
or consent of any Borrower Entity, Equity Pledgor (other than a Non-Smith Equity
Pledgor unless the Administrative Agent determines in its reasonable discretion
that such failure could have a material adverse effect on the validity or
enforceability of the Security Documents or the priority contemplated thereby)
or any of their Affiliates, or FLNGI or any Equity Pledgor (other than a
Non-Smith Equity Pledgor unless the Administrative Agent determines in its
reasonable discretion that such failure could have a material adverse effect on
the validity or enforceability of the Security Documents or the priority
contemplated thereby) in any court of competent jurisdiction, seeking with
respect to such Person (i) its liquidation, reorganization, dissolution or
winding-up or the composition or readjustment of its debts or similar action or
(ii) the appointment of a trustee, receiver, custodian, liquidator or the like
of such Person or all or a substantial part of its Property under any Debtor
Relief Law and such proceeding or case shall continue undismissed, or any order,
judgment or decree approving any of the foregoing shall be entered and continue
unstayed and in effect for a period of 60 or more consecutive days from and
including the date of commencement of such proceeding or case, or any order for
relief against such Person shall be entered in any involuntary case under the
Federal Bankruptcy Code or any other Debtor Relief Law;

 

(k)           Any Project Participant (other than any Borrower Entity, any
Affiliate of any Borrower Entity, FLNGI, a Non-COP Shipper, EPC Contractor, EPC
Guarantor, and while such entity has no liabilities, duties or obligations under
any Transaction Documents, for the Project (or its financing) or any Phase 1
Addition (or financing therefor), any Non Smith LP and Expansion) shall (i)
apply for or consent to the appointment of, or the taking of possession by, a
trustee, receiver, custodian, liquidator or the like of itself or all or a
substantial part of its Property, (ii) admit in writing its inability or be
generally unable to pay its debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary case
under the Federal Bankruptcy Code or any other Debtor Relief Law, (v) file a
petition seeking to take advantage of any other Debtor Relief Law, (vi) fail to
controvert in a timely and appropriate manner, acquiesce in writing to, or file
an answer admitting the material allegations of any petition filed against it in
an involuntary case under the Federal Bankruptcy Code or any other Debtor Relief
Law or (vii) take any action for the purpose of effecting any of the foregoing,
and the effect of any or all of the foregoing (i) – (vii) could reasonably be
expected to have a Material Adverse Effect;

 

(l)            A proceeding or case shall be commenced without the application
or consent of any Project Participant (other than any Borrower Entity, any
Affiliate of any Borrower Entity, FLNGI, any Equity Pledgor, a Non-COP Shipper,
EPC Contractor, EPC Guarantor, and while such entity has no liabilities, duties
or obligations under any Transaction Documents, for the Project (or its
financing) or any Phase 1 Addition (or financing therefor), any

 

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Non Smith LP and Expansion) in any court of competent jurisdiction, seeking with
respect to such Person (i) its liquidation, reorganization, dissolution or
winding-up or the composition or readjustment of its debts or similar action or
(ii) the appointment of a trustee, receiver, custodian, liquidator or the like
of such Person or all or a substantial part of its Property under any Debtor
Relief Law and such proceeding or case shall continue undismissed, or any order,
judgment or decree approving any of the foregoing shall be entered and continue
unstayed and in effect for a period of 60 or more consecutive days from and
including the date of commencement of such proceeding or case, or any order for
relief against such Person shall be entered in any involuntary case under the
Federal Bankruptcy Code or any other Debtor Relief Law, and the effect of any or
all of the foregoing (i) – (ii) could reasonably be expected to have a Material
Adverse Effect;

 

(m)          Any Security Document shall cease to be in full force and effect in
any material respect (other than by virtue of the scheduled expiration in the
ordinary course of such Security Document in accordance with its terms) or any
Lien purported to be granted thereby shall cease to be a valid and perfected
Lien over the Collateral purported to be covered thereby in favor of the
Collateral Agent for the benefit of the Secured Parties on the Collateral
described therein with the priority purported to be created thereby and, in the
case of any such cessation caused by the action or inaction of the Borrower,
such cessation shall continue for a period of at least 10 days;

 

(n)           One or more final and non-appealable judgments or awards by a
Governmental Authority or alternative dispute resolution authority for the
payment of money in excess of $***, which excess is not fully covered by
insurance, shall be entered against any Borrower Entity or Equity Pledgor (if,
with respect to any Equity Pledgor, the Administrative Agent determines in its
reasonable discretion that such judgment or award could have a material adverse
effect on the validity or enforceability of the Security Documents or the
priority contemplated thereby) (when aggregated with all similar judgments and
awards against other Borrower Entities and Equity Pledgors (if, with respect to
any Equity Pledgor, the Administrative Agent determines in its reasonable
discretion that such judgment or award could have a material adverse effect on
the validity or enforceability of the Security Documents or the priority
contemplated thereby)) and shall remain undischarged (or provision satisfactory
to the Administrative Agent shall not be made for such discharge) or unstayed
for a period of 30 or more consecutive days from the date of entry thereof;

 

(o)           Any Borrower Entity or Equity Pledgor (other than a Non-Smith
Equity Pledgor unless the Administrative Agent determines in its reasonable
discretion that such failure could have a material adverse effect on the
validity or enforceability of the Security Documents or the priority
contemplated thereby) shall be terminated, dissolved or liquidated (as a matter
of law or otherwise), or a proceeding shall be commenced by any Person seeking
the termination, dissolution or liquidation of a Borrower Entity or an Equity
Pledgor (other than a Non-Smith Equity Pledgor unless the Administrative Agent
determines in its reasonable discretion that such failure could have a material
adverse effect on the validity or enforceability of the Security Documents or
the priority contemplated thereby) and, if such proceedings were commenced by
any Person other than the Person for whom termination, dissolution or
liquidation is sought either (i) such proceedings shall not be dismissed without
any such termination, dissolution, liquidation or other Material Adverse Effect
within 30 days from the date of commencement

 

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thereof or (ii) the Administrative Agent shall reasonably determine that such
proceedings and the effect thereof could reasonably be expected to have a
Material Adverse Effect;

 

(p)           (i) Any Acceptable Credit Support or Reserve Account Support
Instrument ceases to be valid and binding and in full force and effect, (ii) any
party to any Acceptable Credit Support or Reserve Account Support Instrument
fails to make any required payments thereunder within three Business Days of the
date when due or (iii) any other guarantor under any Project Document fails to
make any required payments pursuant thereto within three Business Days of the
date when due;

 

(q)           Sufficient funds from financing under Sections 2.15(a)(1),
2.15(a)(2) and/or 2.15(a)(3) shall not be available to pay or reimburse
Supplemental Costs when such Supplemental Costs are required to be paid or
reimbursed;

 

(r)            The requirements of Section 2.15(d), Section 2.16(b) or
Section 2.16(c) are not satisfied; provided however, in the case of
Section 2.16(b), such failure shall not be an Event of Default unless it is the
result of the acts or omissions of a Borrower Entity;

 

(s)           The EPC Contractor fails to perform or comply with its obligations
pursuant to the EPC Contract and such failure is not cured within *** days and
could reasonably be expected to have a Material Adverse Effect; provided
however, if an EPC Contractor Event occurs then the Board and the Administrative
Agent will work together to mutually select a new EPC Contractor; and if a new
EPC Contractor is not mutually selected by the Board and the Administrative
Agent within *** days from the occurrence of an EPC Contractor Event, then the
Administrative Agent will have the unilateral right to select the EPC Contractor
(and the Borrower will not be in default under this Section 7.1(s)).

 

(t)            (i) Any Necessary Approval shall fail to be obtained, renewed,
maintained or complied with, (ii) any Necessary Approval is revoked, terminated,
suspended, withdrawn, withheld or ceases to be in full force and effect, or
(iii) any proceeding, case or alternative dispute resolution with respect to any
action relating to a Necessary Approval set forth in the immediately preceding
clause (ii) is commenced, is not terminated within 30 days of such commencement;
provided, however, that no such action shall be a Event of Default if the
Borrower diligently pursues in good faith and in all material respects (x)
obtains an additional Necessary Approval in substitution therefor or replacement
thereof or (y) causes such Necessary Approval to be reissued, reinstated or
otherwise to become in full force and effect; provided further, however, that
the cure period pursuant to the immediately preceding proviso shall cease when
the Administrative Agent determines (after consultation with the Borrower) that
a cure pursuant thereto cannot reasonably be achieved;

 

(u)           Any Borrower Entity, or any Affiliate thereof, FLNGI, any Equity
Pledgor or any other Project Participant (other than a Non-COP Shipper, EPC
Contractor, EPC Guarantor, ConocoPhillips and any Non Smith LP) fails to perform
or comply with any term, covenant or provision forth in under the Project
Documents to which it is a party after any applicable cure periods contained
therein that in the judgment of the Administrative Agent could reasonably be
expected to have a Material Adverse Effect; provided that the Borrower may cure
such Event of Default by causing a replacement agreement to be entered into in
accordance with

 

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this Agreement and the necessary Consent Agreement, if any, related thereto
promptly after such determination but no later than 30 days after such
determination;

 

(v)           All or a material part of the Project is destroyed or suffers a
material actual loss or material damage and an Approved Restoration Plan does
not exist in respect thereof when required in accordance with Section 5.11;

 

(w)          (i) Any material Project Document (other than any Non-COP TUA and
the EPC Contract), or any material provision of any such Project Document,
ceases to be valid and binding and in full force and effect in any material
respect (other than by virtue of the scheduled expiration in the ordinary course
of such Project Document in accordance with its terms), (ii) any party thereto
(not a party hereto) denies that it has any liability or obligation under any
material Project Document (other than any Non-COP TUA and the EPC Contract) and
such party ceases performance thereunder, (iii) any party to a material Project
Document (other than the Borrower, the General Partner, Non-COP Shipper, EPC
Contractor, EPC Guarantor, and ConocoPhillips) is in default under any material
Project Document (other than any Non-COP TUA and the EPC Contract) (subject to
satisfaction of any applicable notice and cure periods), or (iv) any material
Project Document (other than any Non-COP TUA and the EPC Contract), or any
material provision of any such Project Document, shall be declared to be null
and void, or the validity or enforceability thereof shall be contested by any
party thereto (not a party hereto), third party or any Governmental Authority;
and in each case of clauses (i) - (iv) such cessation, default, declaration or
contest has resulted or could reasonably be expected to result in a Material
Adverse Effect and such circumstance remains uncured for a period of at least 30
days; it being understood that the Borrower may cure such circumstance by
causing a replacement agreement to be entered into in accordance with this
Agreement and any necessary Consent Agreement related thereto prior to the
expiration of such 30 day period;

 

(x)            Completion shall not have occurred by the Date Certain; provided
however, the Date Certain shall be extended up to *** if the Borrower Entities
and the Construction Contractors on Phase 1 are working in good faith to achieve
Completion;

 

(y)           A Change of Control shall have occurred; and

 

(z)            An Expropriation Event of all or a material part of the
Collateral shall have occurred unless, with respect to the Affected Property,
the Independent Engineer determines pursuant to Section 5.11(d)(3) within 60
days after the Expropriation Event that such Affected Property can reasonably be
expected to be Restored pursuant to Section 5.11(a).

 

7.2           Acceleration.

 

(a)           If an Event of Default specified in clause (i) or (j) of
Section 7.1 shall occur with respect to the Borrower, all Commitments shall
automatically and immediately terminate and all Loans (with accrued interest
thereon) and all other amounts owing under the Financing Documents shall
immediately become due and payable.

 

(b)           If any Event of Default (other than an Event of Default referred
to in Section 7.2(a)) shall occur, then the Administrative Agent (acting at the
direction of the Required Lenders) may by notice to the Borrower either (1)
declare the Commitments to be terminated,

 

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whereupon all Commitments shall immediately terminate and/or (2) declare the
Loans, all accrued and unpaid interest thereon and all other amounts owing under
the Financing Documents to be due and payable, whereupon the same shall become
immediately due and payable.

 

(c)           Except for the notice delivered to the Borrower pursuant to
Section 7.2(b) by the Administrative Agent, presentment, demand, protest and all
other notices and other similar formalities are hereby expressly waived by each
Borrower Entity.

 

7.3           Other Remedies.  Upon the occurrence and during the continuation
of an Event of Default:

 

(a)           The Agents and Lenders may exercise any or all rights and remedies
at law and in equity (in any combination or order that any of the foregoing may
elect), including any and all rights and remedies available under any of the
Financing Documents.

 

(b)           With the prior written consent of the Required Lenders, which
consent may be given or withheld in the Required Lenders’ sole discretion, the
EPC Contractor, any subcontractor or any other Person may submit an invoice for
amounts owed thereto in connection with the Project or the transactions
contemplated by the Transaction Documents to the Administrative Agent, and the
Lenders may, in their sole discretion, make payments directly to the EPC
Contractor, any subcontractor or any other Person.  The Administrative Agent
shall give the Borrower prior written notice of payments to be made by the
Lenders pursuant to this clause (b).  All sums advanced and disbursed pursuant
to this clause shall be deemed to be Loans disbursed to the Borrower pursuant to
the Financing Documents.

 

(c)           The Borrower hereby irrevocably appoints the Collateral Agent
(acting on the instruction of the Required Lenders) as the agent and
attorney-in-fact of the Borrower, with full power of substitution, and in the
name, place and stead of the Borrower, pursuant to which the Collateral Agent
may, if it so elects, at any time after the Loans have been declared immediately
due and payable pursuant to this ARTICLE 7: (1) make such changes in the Plans
and Specifications, employ such engineers and contractors as may be required,
and advance and incur such expenses and obligations as the Required Lenders deem
necessary, including any proceeds of the Loans, for the design, construction,
timely and proper completion, start - up, operation, maintenance and
preservation of the Project, and/or performance and compliance with any of a
Borrower Entity’s covenants hereunder or under any other Transaction Document,
(2) disburse and directly apply the proceeds of any Loan to the satisfaction of
any of a Borrower Entity’s Debts and other obligations hereunder or under any
other Financing Document, (3) hold, use, disburse and apply the Loans for
payment of any Project Costs, and/or the payment or performance of any Debt or
obligation of a Borrower Entity under any Project Document, (4) disburse any
portion of any Loan, from time to time, to Persons other than the Borrower for
the purposes specified herein or in any other Transaction Document, (5) advance
and incur such expenses as the Required Lenders deem reasonably necessary for
the completion of construction of the Facility and the preservation of the
Project, (6) design, construct, complete, start-up, operate, maintain and
preserve the Project and/or perform and comply with any of a Borrower Entity’s
covenants hereunder or under any other Transaction Document, including
(A) obtaining or renewing any Necessary Approvals in the name of a Borrower
Entity and (B) executing all applications and certificates in the name of a
Borrower Entity relating to the foregoing provisions

 

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of this clause (6), (7) endorse the name of a Borrower Entity on any checks,
drafts or instruments representing proceeds of any insurance policies or hedging
agreements, or other checks, drafts or instruments payable to a Borrower Entity
with respect to the Project or any Transaction Document, (8) do every act or
omit to do any act with respect to the Transaction Documents and the design,
construction, timely and proper completion, start-up, operation, maintenance,
and preservation of the Project that any Borrower Entity may or is required to
do or omit doing, and (9) prosecute or defend any action, claim or proceedings,
including any before a Governmental Authority or an alternative dispute
resolution authority, relating or incident to the Project or any Transaction
Document, and each Borrower Entity hereby subrogates any and all of its rights
relating to such actions, claims and proceedings to the Collateral Agent
effective immediately after the Loans have been declared immediately due and
payable pursuant to this ARTICLE 7.  The appointments as agent and
attorney-in-fact granted hereby each are coupled with an interest and are
irrevocable.  The Collateral Agent shall have no obligation to undertake any of
the foregoing actions, and, if it takes any such action, it shall have no
liability to any Borrower Entity to continue the same, for the sufficiency or
adequacy thereof, or for the results thereof.  At the request of the Collateral
Agent, any Borrower Entity shall ratify all actions taken by the Collateral
Agent hereunder.

 

(d)           Any funds of any Lender or the Agents (including the proceeds of
any Loans) used for any purpose referred to in this Section 7.3, whether or not
in excess (without obligating any Lender to fund any Loans in excess of its
Construction Loan Commitment) of the relevant Commitments shall (i) be governed
hereby, (ii) constitute a part of the Obligations of the Borrower secured by the
Security Documents, (iii) bear interest at the Default Rate, and (iv) be payable
upon demand by such Lender or the Agent, as applicable.

 

7.4           No Default or Event of Default.  Notwithstanding anything in
Section 7.1 to the contrary, the failure of any Borrower Entity in performance
or compliance with any term, covenant or provision under any Financing Document
shall not constitute a Default or an Event of Default if such failure is the
reasonably foreseeable result of:

 

(a)           the COP Directors’ failure to approve or consent to any Board
Action where:

 

(1)         such failure to approve or consent to such Board Action could
reasonably be foreseen to result in a specific, identified risk of Default or
Event of Default under any Financing Document, and

 

(2)         such risk is expressly noted in the Board minutes (such minutes to
be provided to the Board and certified by the secretary of the General Partner
within 45 days of such meeting), with specific reference to the certain Default
or Event of Default and with a description of the connection between the Board
Action and the foreseen risk of Default or Event of Default , and

 

(3)         the COP Directors have the right to vote on the matter under the
Stockholders Agreement, and

 

(4)         the MS Directors voted to approve or consent to the Board Action, or

 

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(b)           any Board Action approved or consented to by a majority of the COP
Directors where:

 

(1)         the good faith implementation of such Board Action could reasonably
be foreseen to result in a specific, identified risk of Default or Event of
Default under any Financing Document, and

 

(2)         such risk is expressly noted in the Board resolution with specific
reference to the certain Default or Event of Default, or

 

(c)           any action or inaction under the exclusive control of the COP
Directors under the Stockholders Agreement, but expressly excluding
ConocoPhillips’ rights under Section 3(d) of the Stockholders Agreement and
actions and inactions by any COP Designated Employees, or

 

(d)           any uncured and material breach by ConocoPhillips or its
Affiliates under a Project Document, where the Borrower Entities and their
Affiliates agents and other representatives (other than ConocoPhillips and its
Affiliates and representatives) shall have performed all of their obligations to
date in respect of such Project Document; provided however that (i) any dispute
as to whether a “material breach” has occurred will be as finally determined
under the applicable Project Document dispute resolution provision and (ii) no
Secured Party shall be entitled to declare a Default or Event of Default due to
the circumstances set out in this Section 7.4(d) until such time as a
determination that no “material breach” has occurred has become final and
non-appealable.

 

7.5           Administrative Agent Rights.  Notwithstanding Section 7.4, the
failure of any Borrower Entity in performance or compliance with any term,
covenant or provision under any Financing Document shall still constitute a
Default or an Event of Default if the Administrative Agent determines in its
reasonable discretion that such failure could have a material adverse effect on
the validity of the Lien of the Security Documents or the priority contemplated
thereby.

 

ARTICLE 8.           THE AGENTS.

 

8.1           Appointment and Authorization.

 

(a)           Each Lender hereby irrevocably (subject to Section 8.9) appoints,
designates and authorizes the Administrative Agent to take such action on its
behalf under the provisions of this Agreement and each other Financing Document
to which it is a party and to exercise such powers and perform such duties as
are expressly delegated to it by the terms of this Agreement or any such other
Financing Document, together with such powers as are reasonably incidental
thereto.

 

(b)           Each Lender hereby irrevocably (subject to Section 8.9) appoints,
designates and authorizes the Collateral Agent to take such action on its behalf
under the provisions of this Agreement and each other Financing Document to
which it is a party and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this

 

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Agreement or any such other Financing Document, together with such powers as are
reasonably incidental thereto.

 

(c)           Each Lender hereby irrevocably (subject to Section 8.4 of the
Account Agreement and Section 8.9 hereof) consents to the appointment by the
Collateral Agent of The Bank of New York Trust Company, N.A., as the Depositary
Agent under the Account Agreement, and hereby authorizes such Agent to take such
action on its behalf under the provisions of the Account Agreement and each
other Financing Document to which it is a party and to exercise such powers and
perform such duties as are expressly delegated to it by the terms thereof,
together with such powers as are reasonably incidental thereto.

 

(d)           Each of the Lenders authorizes, respectively, each Agent to
execute, deliver and perform each of the Financing Documents to which such Agent
is or is intended to be a party and each Lender agrees to be bound by all of the
agreements of such Agent contained in the Financing Documents.

 

(e)           Notwithstanding any provision to the contrary contained elsewhere
in this Agreement or in any other Financing Document, none of the Agents shall
have any duties or responsibilities except those expressly set forth herein and
in the other Financing Documents, nor shall any of the Agents have or be deemed
to have any fiduciary relationship with (or any fiduciary duties to) any Lender,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Financing Document or
otherwise exist against any of the Agents.  Without limiting the generality of
the foregoing sentence, the use of the terms “Administrative Agent,” “Collateral
Agent,” and “Depositary Agent” in this Agreement with reference to the
Administrative Agent, the Collateral Agent or Depositary Agent is not intended
to connote any fiduciary or other implied (or express) duties or obligations
arising under agency doctrine of any Applicable Law.  Instead, such terms are
used merely as a matter of market custom, and are intended to create or reflect
only an arm’s-length relationship between independent contracting parties.

 

8.2           Delegation of Duties.  Any of the Agents may execute any of its
duties under this Agreement or any other Financing Document by or through
agents, officers, managers, members, partners, employees or attorneys-in-fact
and shall be entitled to advice of counsel concerning all matters pertaining to
such duties.  None of the Agents shall be responsible for the negligence or
misconduct of any agent or attorney-in-fact that it selects with reasonable
care.

 

8.3           Liability of the Agents.  NONE OF THE AGENTS OR ANY AGENT-RELATED
PERSONS SHALL (A) BE LIABLE FOR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY ANY
OF THEM UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (EXCEPT FOR ITS OWN
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), OR (B) BE RESPONSIBLE IN ANY MANNER TO
ANY OF THE SECURED PARTIES OR ANY OTHER PERSON FOR ANY RECITAL, STATEMENT,
REPRESENTATION OR WARRANTY MADE BY THE BORROWER OR ANY AFFILIATE OF THE
BORROWER, OR ANY OFFICER, DIRECTOR, MANAGER, OWNER AND/OR HOLDER OF CAPITAL
STOCK, TRUSTEE,

 

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BENEFICIARY, EMPLOYEE, COUNSEL, AGENT, OR ATTORNEY-IN-FACT THEREOF, CONTAINED IN
THIS AGREEMENT OR IN ANY OTHER TRANSACTION DOCUMENT, OR IN ANY CERTIFICATE,
REPORT, STATEMENT OR OTHER DOCUMENT REFERRED TO OR PROVIDED FOR IN, OR RECEIVED
BY ANY AGENT OR AGENT-RELATED PERSON UNDER OR IN CONNECTION WITH, THIS AGREEMENT
OR ANY OTHER TRANSACTION DOCUMENT, OR FOR THE VALUE OF OR TITLE TO ANY
COLLATERAL, OR THE VALIDITY, EFFECTIVENESS, GENUINENESS, ENFORCEABILITY OR
SUFFICIENCY OF THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, OR FOR ANY
FAILURE OF THE BORROWER OR ANY OTHER PARTY TO ANY TRANSACTION DOCUMENT TO
PERFORM ITS OBLIGATIONS HEREUNDER OR THEREUNDER OR FOR ANY OTHER INDEMNIFIED
LIABILITY.  NONE OF THE AGENTS OR ANY AGENT-RELATED PERSON SHALL BE UNDER ANY
OBLIGATION TO ANY SECURED PARTY TO ASCERTAIN OR TO INQUIRE AS TO THE OBSERVANCE
OR PERFORMANCE OF ANY OF THE AGREEMENTS CONTAINED IN, OR CONDITIONS OF, THIS
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, OR TO INSPECT THE PROPERTY, BOOKS
OR RECORDS OF THE BORROWER OR ANY AFFILIATE OF THE BORROWER.  IT IS EXPRESSLY
UNDERSTOOD AND AGREED THAT EACH AGENT SHALL NOT BE LIABLE FOR THE NEGLIGENCE OF
ITSELF AND OTHERS.

 

8.4           Reliance by the Agents.  Each of the Agents (and each
Agent-Related Person) shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent, certificate, affidavit,
letter, telegram, facsimile, telex or telephone message, statement, webpage,
email or other document, conversation or communication believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and, if such Agent so determines in its sole discretion, upon advice
and statements of legal counsel (including counsel to the Borrower), independent
accountants and other experts selected by any such Agent.  Each of the Agents
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Transaction Document (a) if such action would, in the
opinion of such Agent (after consultation with counsel), be contrary to
Applicable Law or the terms of any Financing Document, (b) if such action is not
specifically provided for in the Financing Documents to which such Agent is a
party, and it shall not have received such advice or concurrence of the Required
Lenders as it deems appropriate, (c) if in connection with the taking of any
such action that would constitute the making of a payment due under any Project
Document pursuant to the terms of any Consent Agreement, it shall not first have
received from any or all of the other Secured Parties funds equal to the amount
of such payment, or (d) unless, if it so requests, such Agent shall first be
indemnified to its satisfaction by the Lenders against any and all Losses which
may be incurred by it by reason of taking or continuing to take any such
action.  Each of the Agents shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement or any other Transaction
Document in accordance with a request or consent of the Required Lenders and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Secured Parties.

 

8.5           Notice of Default.

 

(a)           The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default, except with respect
to defaults in the

 

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payment of principal, interest and fees required to be paid to the
Administrative Agent for the account of the Lenders, unless the Administrative
Agent shall have received written notice from a Lender or the Borrower referring
to this Agreement, describing such Default or Event of Default and stating that
such notice is a “Notice of Default.”  If the Administrative Agent receives any
such notice of the occurrence of a Default or an Event of Default, it shall give
notice thereof to the Lenders.  The Administrative Agent shall take such action
with respect to such Default or Event of Default as may be requested by the
Required Lenders in accordance with this ARTICLE 8; provided, however, that
unless and until the Administrative Agent has received any such request, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the Lenders.

 

(b)           The Collateral Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default unless the
Collateral Agent shall have received written notice from the Administrative
Agent, a Lender or the Borrower referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a “Notice of
Default”.  If the Collateral Agent receives any such notice of the occurrence of
a Default or an Event of Default, it shall give notice thereof to the
Administrative Agent and the Lenders.  The Collateral Agent shall take such
action with respect to such Default or Event of Default, and such action on
behalf of the Secured Parties under any other Financing Document as may be
requested by the Required Lenders; provided, however, that unless and until the
Collateral Agent has received any such request, the Collateral Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable or
in the best interest of the Lenders.

 

8.6           Credit Decision.  Each Lender acknowledges that none of the Agents
or the Agent-Related Persons has made any representation or warranty to it, and
that no act by or on behalf of any of the Agents hereafter taken, including any
review of the Project or of the affairs of any Borrower Entity, shall be deemed
to constitute any representation or warranty by any Agent or Agent-Related
Person to any Lender.  Each Lender represents to the Agents that it has,
independently and without reliance upon any Agent or Agent-Related Person and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, prospects, operations,
Property, financial and other condition and creditworthiness of the Borrower,
the Project, the value of and title to any Collateral, and all applicable bank
regulatory Applicable Laws relating to the transactions contemplated hereby or
by any Transaction Document, and made its own decision to enter into this
Agreement and to extend credit to the Borrower hereunder.  Each Lender also
represents that it will, independently and without reliance upon any Agent or
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Transaction Documents, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, Property,
financial and other condition and creditworthiness of the Borrower and the
Project.  Except for notices, reports and other documents expressly required
pursuant to any Financing Document to be furnished to the Lenders by the Agents,
the Agents shall not have any duty or responsibility to provide any Lender with
any credit or other information concerning the business, prospects, operations,

 

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Property, financial and other condition or creditworthiness of the Project or of
the Borrower which may come into the possession of any Agent or any of the
Agent-Related Persons.

 

8.7           Indemnification of Agents.

 

(a)           WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY ARE
CONSUMMATED, THE LENDERS SHALL INDEMNIFY UPON DEMAND EACH AGENT AND THE
AGENT-RELATED PERSONS (TO THE EXTENT NOT REIMBURSED BY OR ON BEHALF OF THE
BORROWER AND WITHOUT LIMITING THE OBLIGATION OF THE BORROWER TO DO SO), PRO RATA
IN ACCORDANCE WITH THE SUM OF THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF THE
LOANS AND UNUTILIZED COMMITMENTS OF SUCH LENDER, FROM AND AGAINST ANY AND ALL
INDEMNIFIED LIABILITIES; PROVIDED, HOWEVER, THAT NO LENDER SHALL BE LIABLE FOR
THE PAYMENT TO ANY AGENT OR THE AGENT-RELATED PERSONS OF ANY PORTION OF SUCH
INDEMNIFIED LIABILITIES RESULTING SOLELY FROM SUCH PERSON’S GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT.  IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT EACH AGENT SHALL
NOT BE LIABLE FOR THE NEGLIGENCE OF ITSELF AND OTHERS.

 

(b)           WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH LENDER
SHALL REIMBURSE EACH AGENT UPON DEMAND FOR ITS RATABLE SHARE AS PROVIDED ABOVE
OF ANY COSTS OR OUT-OF-POCKET EXPENSES (INCLUDING ATTORNEY COSTS) INCURRED BY
SUCH AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY,
ADMINISTRATION, MODIFICATION, AMENDMENT OR ENFORCEMENT (WHETHER THROUGH
NEGOTIATIONS, LEGAL MATTERS OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF
RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT
OR ANY DOCUMENT CONTEMPLATED BY OR REFERRED TO HEREIN, TO THE EXTENT THAT SUCH
AGENT IS NOT REIMBURSED FOR SUCH EXPENSES BY OR ON BEHALF OF THE BORROWER.

 

(c)           THE UNDERTAKINGS OF THE LENDERS IN THIS ARTICLE SHALL SURVIVE THE
TERMINATION OF THE COMMITMENTS, THE PAYMENT OF ALL OBLIGATIONS HEREUNDER, THE
LOAN TERMINATION DATE AND THE RESIGNATION OR REPLACEMENT OF ANY AGENT.

 

8.8           Agents in Individual Capacities; Other Business with the Borrower.
 Each of the Agents and their respective Affiliates may make loans to, issue
letters of credit for the account of, accept deposits from, acquire Capital
Stock in and generally engage in any kind of banking, trust, financial advisory,
underwriting or other business with any Borrower Entity or any of its Affiliates
or Expansion or any of its Affiliates, including any business related to or in
connection with LNG and any activities relating thereto or related to, in
connection with or contemplated by the Omnibus Agreement, the COP TUA or any of
the other Transaction Documents, as though such Agent were not an Agent
hereunder or under any other Transaction Document and without notice or any
other formality to or consent of the Lenders.  The Lenders hereby acknowledge
that, pursuant to such activities, an Agent or its Affiliates may receive
information regarding the Borrower Entity or any of its Affiliates or Expansion
or any of its

 

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Affiliates (including information that may be subject to confidentiality
obligations in favor of the Borrower or such Affiliates) and acknowledge that
the Agents shall be under no obligation to provide such information to any of
the Lenders.  Any Agent which is also a Lender hereunder shall have the same
rights and powers under this Agreement and the other Transaction Documents as
any other Lender and may exercise the same as though it were not an Agent, and
the terms “Lender” and “Lenders” shall include such Agent in its individual
capacity.

 

8.9           Successor Agents.

 

(a)           The Collateral Agent may, on the instructions of the Required
Lenders, remove and replace the Depositary Agent pursuant to the terms and
conditions of the Account Agreement and may, on the instructions of the Required
Lenders, direct the Depositary Agent according to the terms of this Agreement
and the relevant Financing Documents.

 

(b)           Subject to the appointment and acceptance of a successor as
provided below, each of the Administrative Agent and the Collateral Agent may
resign at any time by giving notice thereof to the other Agents, the Lenders and
the Borrower, and each such Agent may be removed at any time with or without
cause by the Required Lenders.  Upon any such resignation or removal, the
Required Lenders shall have the right to appoint a successor to the applicable
Agent.  If no successor Agent shall have been appointed by the Required Lenders,
and shall have accepted such appointment within 30 days after the resigning
Agent’s giving of notice of resignation or the giving of any notice of removal
of any such Agent, then the resigning Agent or Agent being removed, as the case
may be, may appoint a successor to such Agent.  If the Collateral Agent shall
resign or be removed pursuant to the foregoing provisions, upon the acceptance
of appointment by a successor Collateral Agent hereunder, the former Collateral
Agent shall deliver all Collateral then in its possession to the successor
Collateral Agent.  Upon the acceptance of its appointment as a successor Agent
hereunder, such successor Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of such resigning or removed
Agent, and such resigning Agent or removed Agent shall be discharged from its
duties and obligations hereunder.

 

(c)           After any Agent’s resignation or removal, the provisions of this
ARTICLE 8 and of Sections 9.1 and 9.2 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was an Agent.

 

8.10         Withholding Tax.

 

(a)           If any Lender is a “United States Person”, as such term is defined
in Code Section 7701(a)(30), such Lender agrees with and in favor of the
Administrative Agent to deliver to the Administrative Agent a properly completed
and executed Form W-9, or successor form thereto (i) before the first payment of
any interest to such Lender under this Agreement and (ii) at such other times as
shall be necessary to establish such Lender’s exemption from U.S. backup
withholding Taxes during any period in which interest may be paid under this
Agreement.  If any Lender is a “foreign corporation, partnership or trust”
within the meaning of the Code and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441, 1442 or 6049 of the
Code, such Lender agrees with and in favor of the Administrative Agent to
deliver to the Administrative Agent:

 

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(1)         if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty or pursuant to the portfolio
interest exemption, a properly completed and executed IRS Form W-8BEN or
successor form thereto (i) before the first payment of any interest to such
Lender under this Agreement, and (ii) at such other times as shall be necessary
to establish such Lender’s exemption from or reduction in the rate of U.S.
withholding tax during any period in which interest may be paid under this
Agreement;

 

(2)         if such Lender claims that interest paid under this Agreement is
exempt from U.S. withholding tax because it is effectively connected with a
United States trade or business of such Lender, a properly completed and
executed IRS Form W-8ECI or successor form thereto (i) before the first payment
of any interest to such Lender under this Agreement, and (ii) at such other
times as shall be necessary to establish such Lender’s exemption from U.S.
withholding tax during any period in which interest may be paid under this
Agreement, and IRS Form W-9 or successor form thereto; or

 

(3)         such other form or forms at such times in each case as may be
required under the Code or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.

 

Such Lender agrees to promptly notify the Administrative Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction and to file a new Form W-9, W-8BEN or W8ECI or successor form thereto,
as the case may be.

 

(b)           If any Lender claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form W-8BEN or successor
form thereto and such Lender sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations to another Person, such
Lender agrees to notify the Administrative Agent of the percentage amount in
which it is no longer the beneficial owner of Obligations to such Lender.  To
the extent of such percentage amount, the Administrative Agent will treat such
Lender’s IRS Form W-8BEN or successor form thereto as no longer valid.

 

(c)           If any Lender claiming exemption from U.S. withholding tax by
filing IRS Form W-8ECI or Form W-9 or successor form thereto with the
Administrative Agent sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations to another Person, such Lender agrees
to undertake sole responsibility for complying with the withholding tax
requirements imposed by Sections 1441, 1442 or 6049 of the Code.

 

(d)           If any Lender is entitled to a reduction in the applicable
withholding tax, the Administrative Agent may withhold from any interest payment
to such Lender an amount equivalent to the applicable withholding tax after
taking into account such reduction.  If the forms or other documentation
required by Section 8.10(a) are not delivered to the Administrative Agent in a
timely manner, then the Administrative Agent may withhold from any interest
payment to such Lender not providing such forms or other documentation an amount
equivalent to the applicable withholding tax.

 

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(e)           If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Administrative Agent did
not properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered in a timely manner, was not
properly executed, or because such Lender failed to notify the Administrative
Agent of a change in circumstances which rendered the exemption from, or
reduction of, withholding tax ineffective, or for any other reason) such Lender
shall indemnify the Administrative Agent fully for all amounts paid, directly or
indirectly, by the Administrative Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Administrative Agent under this Section, together with all costs
and expenses (including Attorney Costs).  The obligation of the Lenders under
this Section shall survive the payment of all Obligations and the resignation or
replacement of the Administrative Agent.

 

ARTICLE 9.           MISCELLANEOUS.

 

9.1           COSTS AND EXPENSES.  FOR THE AVOIDANCE OF DOUBT AND WITHOUT IN ANY
WAY LIMITING THE GENERALITY OF SECTION 9.2, THE BORROWER SHALL, WHETHER OR NOT
THE TRANSACTIONS CONTEMPLATED HEREBY ARE CONSUMMATED AND WHETHER OR NOT ANY OF
THE FOLLOWING ARE INCURRED BEFORE OR AFTER THE CLOSING DATE, PAY, WITHIN 30 DAYS
AFTER INITIAL DEMAND: (A) ALL COSTS AND EXPENSES OF THE AGENTS RELATING TO OR IN
CONNECTION WITH THE ENFORCEMENT OF AND SIMILAR ACTIONS RELATING TO THIS
AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, AND ANY OTHER DOCUMENTS RELATING
THERETO OR WHICH MAY BE DELIVERED IN CONNECTION THEREWITH, INCLUDING ALL
REASONABLE ATTORNEY COSTS, AND (B) ALL COSTS AND EXPENSES OF ANY SECURED PARTY
(INCLUDING ATTORNEY COSTS) RELATING TO OR IN CONNECTION WITH: (I) ANY AND ALL
AMOUNTS WHICH ANY SECURED PARTY HAS PAID RELATING TO OR IN CONNECTION WITH ANY
EVENT OF DEFAULT OR ACTUAL OR ATTEMPTED CURE THEREOF OR (II) THE ENFORCEMENT OR
ATTEMPTED ENFORCEMENT OF, OR THE INVESTIGATION OR PRESERVATION OF ANY RIGHTS OR
REMEDIES UNDER, THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR ANY OTHER
DOCUMENTS RELATING THERETO OR WHICH MAY BE DELIVERED IN CONNECTION THEREWITH.

 

9.2           INDEMNITY.  WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY
ARE CONSUMMATED AND WHETHER OR NOT ANY OF THE FOLLOWING ARE INCURRED BEFORE OR
AFTER THE CLOSING DATE:

 

(a)           THE BORROWER SHALL PAY, INDEMNIFY, AND HOLD (1) EACH SECURED
PARTY, (2) EACH OF THEIR AFFILIATES AND (3) EACH OF THE OFFICERS, DIRECTORS,
MEMBERS, MANAGERS, PARTNERS, OWNERS AND/OR HOLDERS OF CAPITAL STOCK, CONTROLLING
PERSONS, TRUSTEES, BENEFICIARIES, EMPLOYEES, COUNSEL, CONSULTANTS, AGENTS,
SERVANTS, CONTRACTORS, ATTORNEYS-IN-FACT AND OTHER REPRESENTATIVES OF THE
FOREGOING (EACH, AN “INDEMNIFIED PERSON”) HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES (INCLUDING AT LAW OR BY OPERATION THEREOF, IN

 

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EQUITY, CONTRACT, TORT (INCLUDING SUCH LIABILITY THAT IS SOLE, JOINT, SEVERAL,
ALTERNATIVE, CONCURRENT, ACTIVE OR PASSIVE) AND STRICT LIABILITY), OBLIGATIONS,
LOSSES, CLAIMS AND DAMAGES (INCLUDING FORESEEABLE AND UNFORESEEABLE
CONSEQUENTIAL, SPECIAL, DIRECT, INDIRECT AND PUNITIVE), PENALTIES, FINES, FEES,
ACTIONS, JUDGMENTS, AWARDS, SUITS, COSTS, CHARGES, DISBURSEMENTS, AND EXPENSES
AND SIMILAR MATTERS (INCLUDING ANY ATTORNEY COSTS AND FEES, DISBURSEMENTS AND
OTHER CHARGES OF ANY CONSULTANT) OF ANY KIND OR NATURE WHATSOEVER (COLLECTIVELY,
“LOSSES”) THAT MAY AT ANY TIME (INCLUDING AT ANY TIME FOLLOWING REPAYMENT OF THE
LOANS, TERMINATION OF THE COMMITMENTS OR THE TERMINATION, RESIGNATION OR
REPLACEMENT OF ANY AGENT OR ANY LENDER) BE IMPOSED ON, PAID OR INCURRED BY OR
ASSERTED OR AWARDED AGAINST ANY SUCH PERSON DIRECTLY OR INDIRECTLY BASED ON,
RESULTING FROM, OR IN ANY WAY RELATING TO, IN CONNECTION WITH OR ARISING OUT OF
(I) THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, INCLUDING THE SECURITY
DOCUMENTS, AND ANY OTHER DOCUMENT OR INSTRUMENT RELATING THERETO, IN CONNECTION
THEREWITH, CONTEMPLATED THEREIN, AND THE TRANSACTIONS CONTEMPLATED THEREBY,
(II) THE LOANS AND THE USE AND ANY INTENDED USE OF THE PROCEEDS THEREOF,
(III) ANY OR ALL OF THE PROJECT, (IV) ANY ACTION TAKEN OR OMITTED BY ANY
INDEMNIFIED PERSON RELATING TO, IN CONNECTION WITH OR CONTEMPLATED BY ANY
INDEMNIFIED LIABILITIES, INCLUDING ANY SUCH ACTION WITH RESPECT TO THE EXERCISE
BY ANY SECURED PARTY OF ANY OF ITS RESPECTIVE RIGHTS OR REMEDIES UNDER ANY OF
THE FINANCING DOCUMENTS, (V) ANY GOVERNMENTAL APPROVAL, NECESSARY APPROVAL OR
LEGAL MATTER (INCLUDING ANY LEGAL MATTER RELATING TO ANY DEBTOR RELIEF LAW)
RELATING TO, IN CONNECTION WITH OR CONTEMPLATED BY ANY OF THE FOREGOING WHETHER
OR NOT ANY INDEMNIFIED PERSON IS A PARTY THERETO; EXCEPT IN CONNECTION WITH THE
CLOSING DATE CLAUSES (I)-(V) SHALL NOT INCLUDE ANY LOSSES FOR THE PREPARATION,
EXECUTION, DELIVERY, FILING, OR RECORDING OF THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT, INCLUDING THE SECURITY DOCUMENTS, AND ANY OTHER DOCUMENT
OR INSTRUMENT RELATING THERETO, IN CONNECTION THEREWITH OR CONTEMPLATED THEREIN
(ALL THE FOREGOING, COLLECTIVELY, THE “INDEMNIFIED LIABILITIES”); PROVIDED,
HOWEVER, THAT THE BORROWER SHALL HAVE NO OBLIGATION HEREUNDER TO AN INDEMNIFIED
PERSON FOR INDEMNIFIED LIABILITIES TO THE EXTENT SUCH INDEMNIFIED LIABILITIES
ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PERSON
(AS DETERMINED BY A COURT OF COMPETENT JURISDICTION IN A FINAL NON-APPEALABLE
DECISION).  IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT (I) EACH INDEMNIFIED
PERSON SHALL BE PAID, INDEMNIFIED AND HELD HARMLESS FOR THE NEGLIGENCE OF ITSELF
AND OTHERS AND (II) NEGLIGENCE IS INCLUDED IN THE TERM “INDEMNIFIED
LIABILITIES”.

 

(b)           SURVIVAL; DEFENSE.  THE OBLIGATIONS IN THIS SECTION 9.2 AND IN
SECTION 9.1 SHALL SURVIVE TERMINATION OF THE COMMITMENTS AND

 

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PAYMENT OF THE LOANS AND ALL OTHER OBLIGATIONS.  AT THE ELECTION OF ANY
INDEMNIFIED PERSON, THE BORROWER’S INDEMNIFICATION OBLIGATIONS UNDER SUCH
SECTIONS SHALL INCLUDE THE OBLIGATION TO DEFEND SUCH INDEMNIFIED PERSON IN
CONNECTION WITH OR RELATING TO ANY INDEMNIFIED LIABILITY TO SUCH INDEMNIFIED
PERSON’S SATISFACTION, INCLUDING USING LEGAL COUNSEL SATISFACTORY TO AND
CONSULTING WITH SUCH INDEMNIFIED PERSON, AT THE SOLE COST AND EXPENSE OF THE
BORROWER.  ALL AMOUNTS OWING UNDER THIS SECTION 9.2 SHALL BE PAID WITHIN 30 DAYS
AFTER INITIAL DEMAND.  IN CONNECTION WITH ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION COVERED BY SECTION 9.1 OR SECTION 9.2 AGAINST MORE THAN ONE INDEMNIFIED
PERSON, ALL SUCH INDEMNIFIED PERSONS SHALL BE REPRESENTED BY THE SAME LEGAL
COUNSEL SELECTED BY THE INDEMNIFIED PERSONS; PROVIDED, HOWEVER, THAT IF SUCH
LEGAL COUNSEL DETERMINES IN GOOD FAITH AND NOTIFIES THE BORROWER IN WRITING
(1) THAT REPRESENTING ALL SUCH INDEMNIFIED PERSONS COULD BE CONTRARY TO
APPLICABLE LAWS OR APPLICABLE STANDARDS OF CONDUCT OR ETHICAL PRINCIPLES, COULD
RESULT IN A CONFLICT OF INTEREST OR (2) THAT A DEFENSE, COUNTERCLAIM OR THIRD
PARTY CLAIM APPLICABLE THERETO IS AVAILABLE TO AN INDEMNIFIED PERSON THAT IS NOT
AVAILABLE TO ALL SUCH INDEMNIFIED PERSONS, THEN EACH INDEMNIFIED PERSON SHALL BE
ENTITLED TO SEPARATE REPRESENTATION BY LEGAL COUNSEL SELECTED BY THAT
INDEMNIFIED PERSON.

 

(c)           CONTRIBUTION.  TO THE EXTENT THAT ANY UNDERTAKING IN SECTION 9.1
OR THE PRECEDING CLAUSES OF THIS SECTION 9.2 MAY BE UNENFORCEABLE BECAUSE IT IS
VIOLATIVE OF ANY LAW OR PUBLIC POLICY, THE BORROWER WILL CONTRIBUTE THE MAXIMUM
PORTION THAT IT IS PERMITTED TO PAY AND SATISFY UNDER APPLICABLE LAW TO THE
PAYMENT AND SATISFACTION OF SUCH UNDERTAKING.

 

(d)           SETTLEMENT.  SO LONG AS THE BORROWER IS IN COMPLIANCE WITH ITS
OBLIGATIONS UNDER SECTIONS 9.1 AND 9.2, THE BORROWER SHALL NOT BE LIABLE TO ANY
INDEMNIFIED PERSON UNDER SUCH SECTIONS FOR ANY SETTLEMENT MADE BY SUCH
INDEMNIFIED PERSON WITHOUT THE BORROWER’S CONSENT (SUCH CONSENT TO NOT BE
UNREASONABLY WITHHELD).

 

(e)           WAIVER OF CONSEQUENTIAL DAMAGES, ETC.  TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EXCEPT AS SET FORTH IN SECTION 9.1 OR THE PRECEDING CLAUSES OF
THIS SECTION 9.2 EACH PARTY HERETO (FOR ITSELF AND ALL WHO MAY CLAIM THROUGH OR
UNDER IT, INCLUDING ANY SECURED PARTIES OR LENDERS SUBORDINATE TO THE SECURED
PARTIES, INSOFAR AS IT OR THEY NOW OR HEREAFTER LAWFULLY MAY) HEREBY AGREES IT
SHALL NOT ASSERT IN ANY LEGAL MATTER, AND HEREBY WAIVES AND RELEASES THE OTHER
PARTIES HERETO AND THE INDEMNIFIED PERSONS FROM, ANY CLAIM AGAINST ANY OTHER
PARTY HERETO AND/OR ANY INDEMNIFIED PERSON, ON ANY THEORY OF LIABILITY (WHETHER
IN CONTRACT, TORT,

 

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INCLUDING THE SOLE, ALTERNATE OR CONTRIBUTORY NEGLIGENCE OF ANY PARTY OR ANY
INDEMNIFIED PERSON, WARRANTY, STRICT LIABILITY, OR STATUTE, UNDER ANY INDEMNITY
PROVISION, OR OTHERWISE), FOR SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR
EXEMPLARY DAMAGES (INCLUDING DAMAGES ASSOCIATED WITH LOST PROFITS, BUSINESS
INTERRUPTION AND LOSS OF GOODWILL) DIRECTLY OR INDIRECTLY BASED ON, RESULTING
FROM, OR IN ANY WAY RELATING TO, IN CONNECTION WITH OR ARISING OUT OF AT ANY
TIME ANY INDEMNIFIED LIABILITIES.

 

9.3           Notices.

 

(a)           All notices, requests and other communications provided for
hereunder shall be in writing (including by facsimile, unless the context
expressly otherwise provides, provided that any writing transmitted by a
Borrower Entity by facsimile (a) shall be immediately confirmed by a telephone
call to the recipient at the number specified on the applicable signature page
hereof or (or at such other number as shall be designated by such party in a
written notice to the other parties hereto), and (b) shall be followed promptly
by a hard copy original thereof by express courier) and delivered, to the
address or facsimile number specified for notices on the applicable signature
page hereof or to such other address or facsimile number as shall be designated
by such party in a written notice to the other parties hereto.

 

(b)           All such notices, requests and other communications (i) sent by
express courier will be effective upon delivery to or refusal to accept delivery
by the addressee, and (ii) transmitted by facsimile will be effective when
facsimile confirmation received; except that all notices, requests and other
communications to any Agent set forth in ARTICLE 2 shall not be effective until
actually received.

 

(c)           Each Borrower Entity hereby acknowledges and agrees that any
agreement of the Secured Parties to receive certain notices, requests and other
communications by telephone and facsimile is solely for the convenience and at
the request of the Borrower Entities.  The Secured Parties shall be entitled to
rely on the authority of any Person purporting to be a Person authorized by a
Borrower Entity to give such notice, request or other communication, and the
Secured Parties shall not have any liability to any Borrower Entity or other
Person on account of any action taken or not taken by any of the Secured Parties
in reliance upon such telephonic or facsimile notice, request or communication.

 

(d)           All notices, requests and other communications hereunder and under
the other Financing Documents shall be in the English language.

 

9.4           Benefit of Agreement; Assignment by Borrower.  This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and permitted assigns of the parties hereto.  No Borrower
Entity may assign or otherwise transfer any of its rights under this Agreement
or any of the other Financing Documents.

 

9.5           No Waiver; Remedies Cumulative.  No failure or delay on the part
of any of the Secured Parties or the holder of any Note in exercising any right,
power or privilege hereunder or under any other Financing Document and no course
of dealing between the

 

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Borrower and any Secured Party or the holder of any Note shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Financing Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder.  No notice to or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances or constitute a waiver of the rights of any Secured Party
or the holder of any Note to take any other or further action in any
circumstances without notice or demand.  All remedies, either under this
Agreement or any other Financing Document or pursuant to any Applicable Law or
otherwise afforded to any Secured Party and to the holder of any Note shall be
cumulative and not alternative.

 

9.6           No Third Party Beneficiaries.  The agreements of the parties
hereto set forth in the Financing Documents are solely for the benefit of the
Borrower and the Secured Parties and their respective successors and permitted
assigns, and no other Person (a) shall have any rights, powers remedies or
claims hereunder or thereunder and/or (b) shall be entitled to rely on any of
the representations, warranties, covenants, obligations, duties, liabilities or
provisions or matters set forth herein or therein.

 

9.7           Confidentiality.  Each Lender agrees to hold any information
designated as “confidential” that it receives from the Borrower pursuant to this
Agreement in confidence, except for disclosure: (a) to its Affiliates, (b) its
and its Affiliates’ officers, directors, members, managers, partners, trustees,
beneficiaries, employees, counsel, consultants, agents, contractors, and
attorneys in fact, (c) to another party to a Financing Document, (d) as required
by any court of law or any law, rule, or regulation, or as requested by a
Governmental Authority having or asserting jurisdiction over a Lender and having
or asserting authority to require such disclosure in accordance with that
authority, or pursuant to the rules of any recognized stock exchange or agency
established in connection therewith (e) with the consent of the Borrower, (f)
pursuant to Applicable Law or any Legal Matter, (g) to another financial
institution in connection with a participation or assignment as contemplated by
Section 9.11 hereof or a proposed participation or assignment as contemplated by
Section 9.11 hereof, provided that the recipient agrees to keep such information
confidential subject to the exceptions set forth herein (and further provided
that such exceptions shall be construed as if such recipient were a Lender) and
(h) in connection with the exercise of the rights and remedies of such Lender as
a Secured Party.  The confidentiality obligations set forth above shall not,
however, apply to any information (i) that is not treated by the Borrower in a
manner designed to maintain the confidentiality thereof, (ii) filed with any
Governmental Authority and obtainable by the public, (iii) that is published in
any public medium or otherwise becomes publicly available in either case other
than as a result of a breach of this Section 9.7 and (iv) disclosed by or on
behalf of the Borrower (or an Affiliate thereof) to any Person not associated
with the Borrower without first obtaining a confidentiality agreement
substantially similar to this Section 9.7.  Any Person required to hold any
information designated as “confidential” in confidence shall be deemed to have
complied with such requirement if such Person has exercised the same degree of
care to maintain the confidentiality of such information as such Person would
accord to its own confidential information.  For the avoidance of doubt, nothing
in this Section 9.7 shall be construed to create or give rise to any fiduciary
duty on the part of any Lender to the Borrower.

 

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9.8           No Immunity.  To the extent that the Borrower, the General Partner
or any of their Subsidiaries may be entitled, in any jurisdiction in which any
Legal Matter may at any time be commenced with respect to this Agreement or any
other Financing Document, to claim for itself or its revenues, assets or
Property any immunity from suit, the jurisdiction of any court, attachment prior
to judgment, attachment in aid of execution of judgment, set-off, execution of a
judgment or any other legal process, and to the extent that in any such
jurisdiction there may be attributed to such Person such an immunity (whether or
not claimed), each such Person (for itself and all who may claim through or
under it, insofar as it or they now or hereafter lawfully may, including any
secured parties or lenders subordinate to the Secured Parties) hereby
irrevocably agrees not to claim and hereby irrevocably waives such immunity to
the fullest extent permitted by Applicable Law.

 

9.9           Counterparts.  This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.

 

9.10         Amendment or Waiver.

 

(a)           No provision of this Agreement or any other Financing Document may
be amended, supplemented, modified or waived, without the express written
consent of the Required Lenders and, if the Borrower is a party thereto, the
Borrower, and, to the extent that its rights or obligations may be affected
thereby, the Agent or Agents party thereto.  Notwithstanding the immediately
preceding sentence, no such waiver and no such amendment, supplement or
modification shall (i) increase or extend the Commitment of any Lender (it being
understood that waivers, amendments, supplements and modifications of conditions
precedent, covenants, Defaults or Events of Default or of a mandatory reduction
in the Total Commitment (with corresponding reductions in the Commitments of the
Lenders), shall not constitute a change in the terms of any Commitment of any
Lender including any increase or extension thereof), without the prior written
consent of such Lender, (ii) postpone or delay any date fixed by this Agreement
or any other Financing Document for any payment of principal, interest, fees or
other amounts due to any Lender hereunder or under any other Financing Document,
without the prior written consent of such Lender, (iii) reduce the principal of,
or the rate of interest, premium or penalty specified in any Financing Document
on, any Loan of any Lender, without the prior written consent of such Lender,
(iv) release all or substantially all of the Collateral except as provided in
any Security Document or other Financing Document or consent to the assignment
or transfer by the Borrower of any of its respective obligations under this
Agreement or any other Financing Document, without the prior written consent of
each Lender, (v) amend, supplement, modify or waive the EPC Guarantee or any
other Guarantee, (vi) amend, supplement, modify or waive any provision of this
Section 9.10 or Section 9.1 or 9.2 without the prior written consent of each
Lender or (vii) reduce the percentage specified in or otherwise amend,
supplement, modify or waive the definition of Required Lenders or any provision
in any Financing Document providing for the consent or other action by all of
the Lenders, without the prior written consent of each Lender.

 

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(b)           Any waiver and any amendment, supplement or modification made or
entered into in accordance with Section 9.10(a) shall be binding upon the
Borrower, the Agents and the Lenders.

 

(c)           The Borrower will not directly or indirectly pay or cause to be
paid any remuneration in any manner whatsoever to any Secured Party as
consideration for or as an inducement to the entering into by such Secured Party
of any waiver or amendment of any of the terms or provisions of any of the
Transaction Documents unless such remuneration is concurrently paid ratably to
each Secured Party even if any such Secured Party is not required to, objects or
did not consent to such waiver or amendment.

 

9.11         Assignments by Lenders, Participations, etc.

 

(a)           Subject to the conditions set forth in Section 9.11(b) below, any
Lender may assign to one or more assignees that is an Eligible Institution
(each, an “Assignee”) all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitments and Loans at the time
owing to it) with the prior written consent of the Administrative Agent (such
consent to not be unreasonably withheld); provided, however, that no consent of
the Administrative Agent shall be required for an assignment to (i) another
Lender or (ii) an Eligible Affiliate of any Lender.

 

(b)           Each assignment shall be subject to the following additional
conditions precedent:

 

(1)         except in the case of an assignment to a Lender, an Affiliate of a
Lender or an Approved Fund or an assignment of the entire remaining amount of
the assigning Lender’s Commitments or Loans, the amount, if any, of the
Commitments and the amount, if any, of the Loans to be assigned shall in each
case not be less than $5,000,000 (and if more than $5,000,000 is to be assigned,
in each case integral multiples of $1,000,000 in excess thereof) unless the
Administrative Agent otherwise consents;

 

(2)         each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations
(including its Commitments, if any) under the Financing Documents;

 

(3)         the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Acceptance, together with a total
processing and recordation fee of $3,500 payable to the Administrative Agent for
its own account;

 

(4)         the Assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire; and

 

(5)         the Assignee may not be a LNG Supply Project until after Completion
unless the Initial Lender would constitute the Required Lenders immediately
after giving effect to such assignment.

 

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(c)           Subject to the condition precedent of the acceptance and recording
thereof pursuant to Section 9.11(e), from and after the effective date specified
in the relevant Assignment and Assumption:

 

(1)         the Assignee thereunder shall be a party hereto and, to the extent
of the interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement; and

 

(2)         except for the funding obligation of the Initial Lender set forth in
Section 2.6 that the Initial Lender shall retain until the expiration of the
Construction Loan Availability Period regardless of any assignment or transfer,
the assigning Lender thereunder shall, to the extent of the rights and
obligations assigned by such Assignment and Acceptance, be released and
discharged from its obligations under the Financing Documents and its rights
thereunder shall be similarly reduced (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender’s rights and obligations under
the Financing Documents, such Lender shall cease to be a party hereto and
thereto, and its obligations shall be released and discharged, but shall
continue to be entitled to the benefits of Sections 2.10, 2.11, 2.12, 2.13,
2.14, 9.1, 9.2, 9.12, 9.13 and 9.18).

 

Any assignment or transfer by a Lender of rights or obligations under the
Financing Documents that does not comply with this Section 9.11 shall be treated
for all purposes of the Financing Documents as a sale by such Lender of a
participation in such rights and obligations subject to Section 9.11(g).

 

(d)           The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and principal amount of the
Loans owing to, each Lender pursuant to the terms hereof from time to time (the
“Register”); provided, however, that each Lender shall duly inform the
Administrative Agent in writing of any changes to such information relating to
it prior to the Administrative Agent being required to update such information
contained in the Register.  The entries in the Register shall be conclusive, and
the Borrower, the Agents and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary.  The
Register shall be available for inspection by the Borrower, the Agents and any
Lender, at any reasonable time during normal business hours upon reasonable
prior notice.

 

(e)           Upon its receipt of a completed Assignment and Acceptance executed
by an assigning Lender and an Assignee, the Assignee’s completed Administrative
Questionnaire (unless the Assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in this Section and any written
consent to such assignment required by this section, the Administrative Agent
shall accept such Assignment and Acceptance and record the relevant information
contained therein in the Register.  No assignment shall be effective for
purposes of the Financing Documents unless it has been recorded in the Register
as provided in this Section 9.11(e).

 

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(f)            Within five Business Days after its receipt of notice, if any,
from the Administrative Agent that it has recorded the relevant information in
the Register required by Section 9.11(d) and referred in Section 9.11(e), the
Borrower shall execute and deliver to the Administrative Agent new Notes
evidencing the Assignee’s assigned Commitments and Loans and, if the assigning
Lender has retained a portion of its Loans, replacement Notes reflecting the
Commitment and the principal amount of the Loans retained by the assigning
Lender (such Notes to be in exchange for, but not in payment of, the Notes held
by such Lender).

 

(g)           Participations.  Any Lender (the “Originating Lender”) may,
without any consent being required, sell participations to one or more
commercial banks or other Persons in either case that is not an Affiliate of the
Borrower (a “Participant”) in all or a portion of such Lender’s rights and
obligations under this Agreement and the other Financing Documents (including
all or a portion of its Commitments and the Loans owing to it); provided that

 

(1)         such Lender’s obligations under this Agreement and the other
Financing Documents shall remain unchanged,

 

(2)         such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, and

 

(3)         the Borrower, the Agents, and the other Lenders and the Affiliates
of each of the foregoing shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement and the other Financing Documents.

 

Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and the other Financing Documents and to approve any
amendment, supplement, modification or waiver of any provision of this Agreement
or any other Financing Document; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, supplement, modification or waiver described in the second
sentence of Section 9.10(a) that would require the consent of the originating
for such amendment, supplement, modification or waiver to be effective against
such Originating Lender.  In the case of any participation, the Participant
shall not have any rights under this Agreement or any of the other Financing
Documents (the participant’s rights against the Originating Lender in respect of
such Participation to be those set forth in the agreement executed by the
Originating Lender in favor of the Participant relating thereto) and all amounts
payable by the Borrower hereunder shall be determined as if such Lender had not
sold such participation..

 

(h)           Certain Pledges.  Any Lender may at any time pledge or assign a
Lien in all or any portion of its rights under this Agreement or the other
Financing Documents to secure obligations of such Lender or its Affiliates,
including any such pledge or assignment to secure obligations to a Federal
Reserve Bank, and the provisions of this Section other than this clause shall
not apply to any such pledge or assignment of a Lien; provided, however, that no
such pledge or assignment of a Lien shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

 

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(i)            No Assignments to the Borrowers or Affiliates.  Notwithstanding
anything to the contrary in this section, no Lender may assign or participate
any of its rights and obligations under any Financing Document, including any
part of any Loan owed to it or its Commitments, to the Borrower or any of its
Affiliates without the prior written consent of each Lender and any such
assignment or participation in violation of this Section shall be void from the
beginning.

 

9.12         Survival.  All indemnities set forth herein, including Sections 9.1
and 9.2, shall survive the execution and delivery of this Agreement and the
Notes, the making and repayment of the Loans, the termination of the Commitments
and the Loan Termination Date.  In addition, each representation and warranty
made or deemed to be made pursuant hereto shall survive the making or deemed
making of such representation or warranty, and no Lender shall be deemed to have
waived, by reason of making any extension of credit, any Default or Event of
Default that may arise by reason of such representation or warranty to have been
false or misleading when made or deemed made, notwithstanding that such Lender
may have had notice or knowledge or reason to believe that such representation
or warranty was false or misleading at the time such extension of credit was
made.

 

9.13         WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES THE RIGHTS ANY OF THEM MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL MATTER BASED ON, OR ARISING OUT
OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT, THE NOTES, OR ANY OTHER
FINANCING DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN), OR ACTIONS OF ANY PARTY RELATING HERETO OR THERETO
AND, FOR THE AVOIDANCE OF DOUBT, ANY INDEMNIFIED LIABILITIES.  THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE SECURED PARTIES TO ENTER INTO THIS AGREEMENT AND
THE OTHER FINANCING DOCUMENTS.

 

9.14         Right of Set-off.  In addition to any rights now or hereafter
granted under Applicable Law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and continuance of an Event of Default whether
or not any Loans are accelerated pursuant to Section 7.2, each Lender is hereby
authorized at any time or from time to time, without presentment, demand,
protest or any other notice or similar formality to any Borrower Entity or to
any other Person, any such notice or formality being hereby expressly waived, to
set off and to appropriate and apply any and all deposits (general or special)
and any other Debt and other obligations at any time held or owing by such
Lender (including by branches, offices and agencies of any Lender wherever
located), to or for the credit or the account of the Borrower against and on
account of the Obligations, Debt and other obligations of the Borrower to such
Lender under this Agreement and any of the other Financing Documents, including
all Legal Matters of any nature or description arising out of or connected with
this Agreement or any other Financing Document, irrespective of whether such
Lender shall have made any demand or other formality hereunder or thereunder and
although said Obligations, Debt, other obligations and Legal Matters, or any of
them, shall be contingent or unmatured.

 

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9.15         Severability.  Any provision hereof which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and without affecting the validity or enforceability
of any provision in any other jurisdiction.

 

9.16         Domicile of Loans.  Each Lender may transfer and carry its Loans
at, to or for itself or any of its Affiliates or any branch, office, agency of
the foregoing.

 

9.17         Limitation of Recourse.

 

The Obligations and the other obligations of the Borrower, its Subsidiaries and
the Subsidiaries of the General Partner under the Financing Documents (a) will
be obligations of the Borrower, its Subsidiaries and the Subsidiaries of the
General Partner, (b) will be with full recourse to the Borrower, its
Subsidiaries and the Subsidiaries of the General Partner and to all of their
Property and (c) will be secured by the Collateral.  None of the Partners,
Smith, Cheniere Energy, Contango, or any other Affiliate thereof (other than the
Borrower, its Subsidiaries and the Subsidiaries of the General Partner) or the
owners and/or holders of Capital Stock (including any partners and members),
officers, directors and employees thereof shall be personally liable or
obligated for such obligations of the Borrower, its Subsidiaries and the
Subsidiaries of the General Partner, except as may be specifically provided in
any Transaction Document to which such Person is a party.  Nothing contained
herein shall (x) limit or be construed to limit the obligations and liabilities
of any such Person in any Transaction Document creating such liabilities and
obligations to which such Person is a party or (y) affect or diminish any rights
of any Person against any other Person as a result of such other Person’s fraud,
violation of law, willful misrepresentation, gross negligence or willful
misconduct.

 

9.18         Governing Law; Submission to Jurisdiction.

 

(a)           THIS AGREEMENT AND EACH OF THE OTHER FINANCING DOCUMENTS (UNLESS
SUCH DOCUMENT EXPRESSLY STATES OTHERWISE THEREIN) SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK BUT EXCLUDING ANY
CONFLICT OF LAW RULES AND PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW) THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF A
DIFFERENT JURISDICTION.

 

(b)           Each Borrower Entity (in the case the Borrower and the General
Partner, each, on its own behalf and on behalf of its respective Subsidiaries)
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New York State court
sitting in New York City for the purposes of all legal proceedings, including
any suits or actions, arising out of or relating to this Agreement, any other
Financing Document or the transactions contemplated hereby or thereby.  Each
Borrower Entity (in the case the Borrower and the General Partner, each, on its
own behalf and on behalf of its respective Subsidiaries) hereby irrevocably
waives, to the fullest extent permitted by Applicable Law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.  Each Borrower Entity (in the
case the Borrower and the General Partner, each, on its own behalf and on behalf
of its respective

 

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Subsidiaries) hereby irrevocably appoints Corporation Service Company (the
“Process Agent”), with an office on the date hereof at 80 State Street, Albany,
New York 12207, as its agent to receive on its behalf and on behalf of its
Property, service of copies of the summons and complaint and any other process
that may be served in any such proceeding.  Service upon the Process Agent shall
be deemed to be personal service on the Borrower Entity and shall be legal and
binding upon the entity deemed served for all purposes notwithstanding any
failure to mail copies of such legal process to such entity, or any failure on
the part of such entity to receive the same.  Nothing herein shall affect the
right to serve process in any other manner permitted by Applicable Law or any
right to bring legal proceedings, including any suits or actions, in any other
competent jurisdiction, including judicial or non-judicial foreclosure of real
property interests which are part of the Collateral.  Each Borrower Entity (in
the case the Borrower and the General Partner, each, on its own behalf and on
behalf of its respective Subsidiaries) further agrees that the aforesaid courts
of the State of New York and of the United States of America for the Southern
District of New York shall have exclusive jurisdiction with respect to any claim
or counterclaim it has based upon the assertion that the rate of interest
charged by or under this Agreement or under the other Financing Documents is
usurious.  To the extent permitted by Applicable Law, each Borrower Entity (in
the case the Borrower and the General Partner, each, on its own behalf and on
behalf of its respective Subsidiaries) further irrevocably agrees to the service
of process of any of the aforementioned courts in any proceeding, including any
suit or action, by the mailing of copies thereof by certified mail, postage
prepaid, return receipt requested, to it at the address referenced in
Section 9.3, such service to be effective upon the date indicated on the postal
receipt returned from it.

 

(c)           Each Borrower Entity agrees that it will at all times continuously
maintain an agent to receive service of process in the State of New York on
behalf of itself and its Property, and, in the event that for any reason the
agent mentioned above shall not serve as agent for a Borrower Entity to receive
service of process in the State of New York on its behalf, such Borrower Entity
shall promptly appoint a successor satisfactory to the Administrative Agent to
so serve, advise the Administrative Agent thereof, and deliver to the
Administrative Agent evidence in writing of the successor agent’s acceptance of
such appointment.

 

(d)           To the extent any Borrower Entity may, in any action or proceeding
arising out of or relating to any of the Financing Documents, be entitled under
any Applicable Law to require or claim that any Secured Party post security for
costs or other amounts or take similar action, such Borrower Entity hereby
irrevocably waives and agrees not to claim the benefit of such entitlement.

 

9.19         Reinstatement.  To the extent that any Secured Party receives any
payment by or on behalf of any Borrower Entity, which payment or any part
thereof is subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to the Borrower or to its estate, trustee,
receiver, custodian, liquidator or any other party under any Debtor Relief Law
or otherwise, then to the extent of the amount so required to be repaid, the
obligation or part thereof which has been paid, reduced or satisfied by the
amount so repaid (and the Financing Documents) shall be reinstated by the amount
so repaid and shall be included within the Obligations as of the date such
initial payment, reduction or satisfaction occurred.

 

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9.20         Complete Agreement.  THIS AGREEMENT AND THE OTHER FINANCING
DOCUMENTS REPRESENT THE FINAL AND COMPLETE EXPRESSION OF AGREEMENT ON THE
MATTERS ADDRESSED THEREIN, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR OR
CONTEMPORANEOUS ORAL AGREEMENTS OF THE PARTIES. ALL PRIOR NEGOTIATIONS,
REPRESENTATIONS, UNDERSTANDINGS, WRITINGS AND STATEMENTS OF ANY NATURE RELATING
TO SUCH MATTERS ARE HEREBY SUPERSEDED IN THEIR ENTIRETY BY THE TERMS OF THIS
AGREEMENT AND THE OTHER FINANCING DOCUMENTS.  THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.

 

9.21         Maximum Interest Rate.  Notwithstanding any provision contained in
this Agreement or any other Financing Document, no Lender shall ever be entitled
to receive, collect, take, reserve, charge or apply as interest (whether termed
interest herein or deemed to be interest by operation of law or judicial
determination) on any Loan any amount in excess of interest calculated at the
Maximum Rate, and, in the event that any Lender ever receives, collects, or
applies as interest any such excess, then the amount that would be excessive
interest shall be deemed to be a partial prepayment of principal and treated
hereunder as such; and, if the principal amount of the applicable Loans are paid
in full, then any remaining excess shall forthwith be paid to the Borrower.  In
determining whether or not the interest paid or payable under any specific
contingency exceeds interest calculated at the Maximum Rate, the Borrower and
the Lenders shall, to the maximum extent permitted under applicable law: (a)
characterize any non-principal payment as an expense, fee, or premium rather
than as interest; (b) exclude voluntary prepayments and the effects thereof; and
(c) amortize, prorate, allocate and spread, in equal parts, the total amount of
interest throughout the entire contemplated term of the Loans, including any
conversion from Construction Loans to Term Loans; provided, however, that, if
Loans are paid and performed in full prior to the end of the full contemplated
term thereof, and if the interest received for the actual period of existence
thereof exceeds interest calculated at the Maximum Rate, then the applicable
Lender shall refund to the Borrower the amount of such excess or credit the
amount of such excess against the principal amount of the applicable Loans and,
in such event, no Lender shall be subject to any penalties provided by any
Applicable Laws for contracting for receiving, collecting, taking, reserving,
charging or applying interest in excess of interest calculated at the Maximum
Rate.  “Maximum Rate” means the highest nonusurious rate of interest (if any)
permitted from day to day by Applicable Law.  To the extent Texas law is
applicable, each Lender hereby notifies and discloses to the Borrower that, for
purposes of Texas Finance Code § 303.001, as it may from time to time be
amended, the “applicable ceiling” shall be the “weekly ceiling” from time to
time in effect as limited by Texas Finance Code § 303.009; provided, however,
that each Lender reserves the right to change the “applicable ceiling” from time
to time by further notice and disclosure to the Borrower.  The parties agree
that Chapter 346 of the Texas Finance Code, which regulates certain revolving
loan accounts and revolving tri-party accounts, shall not be applicable to this
Agreement, any other Financing Document or any Loan.

 

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.  NEXT PAGE IS A
SIGNATURE PAGE.]

 

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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of the date first above
written.

 

 

 

FREEPORT LNG DEVELOPMENT, L.P.

Notice Address:

 

 

 

 

By: FREEPORT LNG-GP, INC., its general partner

Freeport LNG Development, L.P.

 

 

1200 Smith Street, Suite 600

 

 

Houston, TX  77002

 

 

By:

 /s/ Michael S. Smith

 

Attn: Michael S. Smith

 

 

Name:

Michael S. Smith

Telephone No.: 713.980.2888

 

 

Title:

Chief Executive Officer

Telecopier No.: 713.982.2903

 

 

 

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

 

 

 

FREEPORT LNG-GP, INC.

Notice Address:

 

 

 

 

 

Freeport LNG-GP, Inc.

 

By:

 /s/ Michael S. Smith

 

1200 Smith Street, Suite 600

 

Name:

Michael S. Smith

Houston, TX  77002

 

Title:

Chief Executive Officer

Attn: Michael S. Smith

 

 

Telephone No.: 713.980.2888

 

 

Telecopier No.: 713.982.2903

 

 

 

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

 

 

CONOCOPHILLIPS COMPANY, as Lender and

Notice Address:

Administrative Agent

 

 

ConocoPhillips Company

 

600 North Dairy Ashford

By:

 /s/ J.W. Sheets

 

Room ML-3092

Name: J.W. Sheets

Houston, TX 77079-1175

Title: V.P. and Treasurer

Attn: Vice President and Treasurer

 

Telephone No.: 281.293.2797

 

Telecopier No.: 281.293.6067

 

 

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

 

 

CONOCOPHILLIPS COMPANY, as Collateral Agent

Notice Address:

 

 

 

ConocoPhillips Company

By:

 /s/ J.W. Sheets

 

600 North Dairy Ashford

Name: J.W. Sheets

Room ML-3092

Title: V.P. and Treasurer

Houston, TX 77079-1175

 

Attn: Vice President and Treasurer

 

Telephone No.: 281.293.2797

 

Telecopier No.: 281.293.6067

 

 

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APPENDIX A

to

Credit Agreement

 

DEFINED TERMS AND RULES OF INTERPRETATION

 

1.             Defined Terms.

 

“Acceptable Credit Support” means (1) immediately available Dollars pledged,
including being funded into the Supplemental Reserve Account, (2) any
irrevocable standby letter of credit issued by an Acceptable Credit Support
Issuer for which no Borrower Entity is an account party, or (3) any
unconditional guarantee issued by an Acceptable Credit Support Issuer in respect
of which no Borrower Entity is an obligor or otherwise liable.

 

“Acceptable Credit Support Issuer” means an Eligible Institution issuing or
primarily obligated on any Acceptable Credit Support.

 

“Acceptable Use Agreement” means a use agreement in respect of which or that (a)
the counterparty of which or the credit support provider for such counterparty
(including any parent of such counterparty which guarantees such counterparty’s
obligations) is rated at least “BBB–” by S&P and “Baa3” by Moody’s, (b) has a
minimum term remaining at the time of determination of at least two years and
(c) the pricing and commercial terms  that are fair and reasonable and of the
kind which would be entered into by a prudent Person in the position of the
Borrower.

 

“Account Agreement” means the Collateral Account Agreement, dated as of the date
of the Credit Agreement, among the Borrower, the Collateral Agent and the
Depositary Agent.

 

“Accounts” has the meaning provided in the Account Agreement and shall include
any other accounts or sub-accounts established pursuant to the Account
Agreement.

 

“Administrative Agent” means ConocoPhillips, acting in its capacity as agent for
the Lenders pursuant to the Credit Agreement.

 

“Administrative Questionnaire” means an administrative questionnaire in a form
supplied by the Administrative Agent.

 

“Affected Property” means: (1) with respect to any Event of Loss, the Property
lost, destroyed, damaged, condemned (including through an Expropriation Event)
or otherwise taken as a result of such Event of Loss and (2) with respect to any
Project Document Claim or Performance Liquidated Damages, the Property,
including any part of the Project, failing to meet the performance standards set
forth in any Construction Contract.

 

“Affiliate” means, (i) as to any Person, any Subsidiary of such Person and any
other Person which, directly or indirectly, controls or is controlled by or
under direct or indirect common control with such specified Person and (ii) as
to any Borrower Entity, any Person included in clause (i) and, whether or not
included therein, the Equity Pledgors.  For the purposes of this definition,
“control,” when used with respect to any Person, means the possession of the

 

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power to direct or cause the direction of management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.  Notwithstanding the
foregoing, (1) no individual shall be an Affiliate of any Person solely by
reason of his or her being a director, manager, officer or employee of such
Person, (2) none of ConocoPhillips and its Subsidiaries shall be deemed to be
Affiliates of the Borrower or any of the Borrower’s Affiliates and (3) none of
Expansion and its Subsidiaries shall be deemed to be Affiliates of the Borrower
or ConocoPhillips or any of their respective Affiliates.  As of the Closing
Date, CLNGI and Contango LP are not Affiliates of the Borrower.

 

“Affiliate Payment” means any payments made or amounts distributed by or on
behalf of a Borrower Entity or Equity Pledgor to or for the benefit of an
Affiliate of any Person at any time a Partner in connection with the Project
pursuant to a written agreement that are not reimbursements of reasonable
expenses incurred on behalf of the Borrower or reasonable consideration for
services rendered to the Borrower.

 

“Agent-Related Persons” means each Agent, and any successor Agent appointed
pursuant to Section 8.9 of the Credit Agreement or Section 8.4 of the Account
Agreement, together with their respective Affiliates, officers, directors,
managers, owners and/or holders of Capital Stock, trustees, beneficiaries,
employees, counsel, agents, and attorneys-in-fact.

 

“Agents” means, collectively, the Administrative Agent, the Collateral Agent and
the Depositary Agent.

 

“Applicable Law” means, with respect to any Person, property or matter, any of
the following applicable thereto: any statute, law, regulation, ordinance, rule,
judgment, rule of common law, order, decree, Governmental Approval, approval,
concession, grant, franchise, license, agreement, directive, ruling, guideline,
policy, requirement or other governmental restriction or any similar form of
decision of, or determination by, or any interpretation, construction or
administration of any of the foregoing by, any Governmental Authority, in each
case as amended.

 

“Applicable Lending Office” means, for each Lender, the “Lending Office” of such
Lender (or of an affiliate thereof ) designated in its Administrative
Questionnaire or such other office of such Lender (or an affiliate thereof) as
such Lender may from time to time specify to the Administrative Agent by written
notice in accordance with the terms hereof as the office by which its Loans are
to be made and maintained.

 

“Approved Fund” means any Person (other than a natural person) that is engaged
in making, purchasing, holding or investing in bank loans and similar extensions
of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
Affiliate of an entity that administers or manages a Lender.

 

“Approved Restoration Plan” means a plan for Restoration Work that is submitted
to and approved by the Independent Engineer, if any, no more than three months
after the related Event of Loss or event giving rise to Performance Liquidated
Damages and that provides for the

 

2

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Restoration of the Affected Property and includes a scope of the Restoration
Work, conditions for the disbursement of any Net Available Amounts and other
amounts to be expended in such Approved Restoration Plan, a completion test for
such Approved Restoration Plan to be administered by the Independent Engineer
and, a date specified (the “Restoration Date Certain”), which date may be
extended by the Independent Engineer if such Independent Engineer determines
that the delay in completion is due to force majeure and that the material terms
(other than projected completion date) of such Approved Restoration Plan shall
continue to be satisfied during such extension of the Restoration Date Certain,
by which the Independent Engineer shall certify successful completion of such
completion test and that is accompanied by a certificate of (A) the Independent
Engineer, if any, certifying that in its professional judgment (i) such plan is
reasonable and technically feasible and economically viable and is reasonably
expected to Restore the Project to at least as good condition or state of repair
as it was in (1) prior to such Event of Loss, (2) if such failure in meeting
performance standards that gave rise to the Project Document Claim or
Performance Liquidated Damages did not occur and the performance standards under
such Construction Contract were fully met or (3) its original specifications,
(ii) after taking into consideration the Net Available Amount (together with all
other proceeds reasonably expected to be available for the Restoration of the
Affected Property that are secured obligations of an Acceptable Credit Support
Issuer or otherwise secured by Acceptable Credit Support) there will be adequate
cash flow during the Restoration Period to Restore the Project and to pay all
ongoing obligations as they become due, including Debt Service, all Operating
and Maintenance Costs, Taxes (not included in Operating and Maintenance Costs),
and reserves, and the Borrower’s ability to pay such obligations will not be
materially adversely affected following such Restoration and (iii) if the
Project has not yet reached Completion, the Restoration in accordance with the
plan will not materially adversely affect the Construction Budget, Phase 1
Addition Budget (to the extent not in conflict with the Construction Budget),
any construction schedule, including the Project Schedule, and otherwise, any
budget for such Approved Restoration Plan, and (B) the Borrower certifying that
the Restoration of the Project in accordance with the plan or the operation of
the Project following such Restoration will not violate in any material respect
(x) the terms of any Transaction Document, (y) Applicable Law or (z) any
Necessary Approval.

 

“Assignee” has the meaning provided in Section 9.11 of the Credit Agreement.

 

“Assignment and Acceptance” means an assignment and acceptance agreement,
substantially in the form of Exhibit G to the Credit Agreement, duly completed
and signed by the assigning Lender and the applicable Assignee.

 

“Attorney Costs” means all fees, disbursements and charges of any law firm or
other external counsel.

 

“Authorized Officer” means, with respect to any Person, the chief executive
officer, president, chief financial officer, general counsel, principal
accounting officer or any vice president of such Person or such Person’s general
partner or managing member.

 

“Base Case Projections” means the financial statement projections of the
Borrower as of the Closing Date over a period ending no sooner than 20 years
beyond the Closing Date, showing the Borrower’s reasonable good faith estimates
for the Project, as of the

 

3

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Closing Date, of revenue, expenses, Debt Service Coverage Ratios and sources and
uses of revenues over the forecast period as confirmed by, and set forth in the
report of, the Independent Engineer, if any.

 

“Board” has the meaning provided in the Stockholders Agreement.

 

“Board Action” means any written action or resolution presented to the Board in
accordance with the General Partner’s written bylaws, the terms of the
Stockholders Agreement and Applicable Law.

 

“Borrower” means Freeport LNG Development, L.P., a limited partnership organized
and existing under the laws of the State of Delaware.

 

“Borrower Completion Certificate” means a certificate, substantially in the form
of Exhibit E-1 to the Credit Agreement, duly completed and signed by an
Authorized Officer of the Borrower.

 

“Borrower Entities” means the Borrower, the General Partner, each Subsidiary of
the Borrower and each Subsidiary of the General Partner.

 

“Borrowing” means the borrowing of Loans from the Lenders on a given date

 

“Brazos Consent” means the consent and agreement between the Brazos River
Authority, the Borrower, the Site Lessee and the Collateral Agent entered into
in connection with the Credit Agreement that incorporates provisions of Exhibit
G to certain of the Site Leases.

 

“Brazos River Authority” means the Brazos River Harbor Navigation District of
Brazoria County, Texas.

 

“Budgeted Construction Costs” means the anticipated Project Costs of Phase 1 of
the Project.  During the Initial Period, such Project Costs of Phase 1 of the
Project shall be as set forth in the Construction Budget established, modified,
amended and supplemented in accordance with Section 5.20 of the Credit
Agreement, which Project Costs shall include some level of initial working
capital as agreed between the Administrative Agent and the Borrower but shall
exclude the initial funding of the O&M Account, the O&M Reserve Account, Major
Maintenance Reserve Account, the other Reserve Accounts, COP Supplemental Debt
Payment Account, COP Debt Payment Account, and the TPS Accounts.  After the
Initial Period, such Project Costs of Phase 1 of the Project shall be as
confirmed by the Independent Engineer and set forth in the Construction Budget
as of the first day after the Initial Period and shall include the Budgeted
Construction Costs during the Initial Period, all as confirmed by the
Independent Engineer (after consultation with the Administrative Agent).

 

“Business Day” means any day that is not a Saturday, Sunday or legal holiday in
the State of Texas or the State of New York, or a day on which banking
institutions chartered by the State of Texas, the State of New York or the
United States, are legally required or authorized to close.

 

4

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“Capital Adequacy Regulation” means any guideline, request or directive of any
central bank or other Governmental Authority, or any other Applicable Law,
whether or not having the force of law, in each case, regarding capital adequacy
of any bank or of any corporation controlling a bank.

 

“Capital Stock” means, with respect to any Person, any and all shares,
interests, participations and/or rights in or other equivalents (however
designated, whether voting or nonvoting, ordinary or preferred), including any
partnership interest or membership interest, in the equity, capital or ownership
of such Person, now or hereafter outstanding and any and all rights, warrants or
options exchangeable for or convertible into any thereof.

 

“Capitalized Lease Liabilities” of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.

 

“Change of Control” means any breach of Section 7 of the Stockholders Agreement
other than by ConocoPhillips or a Subsidiary (other than, if applicable, the
General Partner) of ConocoPhillips.

 

“Channel Widening Costs” means the actual costs incurred by or on behalf of the
Borrower in connection with the widening of the Channel (as defined in the
Omnibus Agreement) contemplated by the Omnibus Agreement up to a maximum of
$***.

 

“Charter Documents” means, with respect to any Person, (i) the articles of
incorporation, certificate of limited partnership, certificate of formation,
statement of qualification, limited partnership agreement, partnership
agreement, operating agreement or other similar organizational document of such
Person, (ii) the by-laws or other similar document of such Person, (iii) any
certificate of designation or other filed instrument relating to the rights of
preferred shareholders or other holders of Capital Stock of such Person and
(iv) any shareholder rights agreement or other similar agreement.

 

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

 

“CLNGI” means Cheniere LNG, Inc. a Delaware corporation and wholly owned
Subsidiary of Cheniere Energy.

 

“Class”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or, if applicable, the Loans comprising such Borrowing, are Tranche A
Loans or Tranche B Loans and, when used in reference to any Commitment, refers
to whether such Commitment is a Tranche A Commitment or Tranche B Commitment.

 

“Closing Date” means the date upon which the conditions precedent set forth in
Section 3.1 of the Credit Agreement have been initially satisfied (or waived by
the Administrative Agent).

 

5

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“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and the regulations promulgated and rulings issued thereunder. 
Section references to the Code are to the Code as in effect at the date of the
Credit Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.

 

“Collateral” means all Property that, in accordance with the terms of the
Security Documents, is or is intended to be subject to any Lien in favor of any
or all of the Secured Parties as security for the Obligations.

 

“Collateral Agent” means ConocoPhillips, acting in its capacity as Collateral
Agent for the Secured Parties, and shall include any successor Collateral Agent
appointed pursuant to Section 8.9 of the Credit Agreement.

 

“Commitments” means the Construction Loan Commitments and the Term Loan
Commitments.

 

“Completion” means the satisfaction of all the items set forth in the
Independent Engineer Completion Certificate as certified by the Independent
Engineer to the Administrative Agent.

 

“ConocoPhillips” means ConocoPhillips Company, a corporation organized and
existing under the laws of the State of Delaware.

 

“Consent Agreement” means an Acknowledgment and Consent Agreement between a
Project Participant and the Collateral Agent and acknowledged by the Borrower,
substantially in the form of Exhibit F to the Credit Agreement or such other
form of acknowledgment and consent agreement consented to by the Administrative
Agent; such consent to not be unreasonably withheld; provided however, the
Administrative Agent may withhold its consent in its sole discretion in order to
protect the validity of the Lien of the Security Documents or the priority
contemplated thereby or the material rights and remedies of the Secured Parties
under any Financing Document from being impaired.

 

“Construction Account” has the meaning provided in the Account Agreement.

 

“Construction Advisory Services Agreement” means the construction advisory
services agreement dated as of July 2, 2004 between ConocoPhillips and the
Borrower.

 

“Construction Budget” means the budget dated the Closing Date for Phase 1,
prepared and certified as such by an Authorized Officer of the Borrower of all
Project Costs theretofore incurred and thereafter expected to be incurred by the
Borrower Entities on or prior to the final completion of the Construction
Contracts including the Final Completion of the EPC Contract, as the same may be
amended from time to time in accordance with Section 5.20 of the Credit
Agreement.

 

“Construction Contractor” means any contractor pursuant to a Construction
Contract, including the EPC Contractor.

 

6

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“Construction Contracts” means the EPC Contract and all other material contracts
or agreements for the engineering, procurement, construction, design,
installation, completion, and startup of the Project, including the construction
of the pipeline to the pipeline interconnection at Stratton Ridge, Texas, but
excluding the Construction Advisory Services Agreement and any subcontract under
the EPC Contract.

 

“Construction Loan Availability Period” means the period commencing on the
Closing Date, and ending on the earlier to occur of (i) the full utilization of
the Construction Loan Commitments of the Lenders, (ii) the Term Date, (iii) the
Project Completion Date, and (iv) the termination of the Total Commitment
pursuant to the provisions of the Credit Agreement; provided, however, the
Tranche B Commitments shall terminate if financing is utilized under a TPS Loan
facility.

 

“Construction Loan Commitment” means, as to any Lender, the aggregate of such
Lender’s Tranche A Construction Loan Commitment and Tranche B Construction Loan
Commitment.

 

“Construction Loans” means the Tranche A Construction Loans and the Tranche B
Construction Loans.

 

“Construction Notes” means the Tranche A Construction Notes and the Tranche B
Construction Notes.

 

“Construction Requisition” means a certificate, substantially in the form of
Exhibit D-1 to the Credit Agreement, executed and delivered by an Authorized
Officer of the Borrower to the Administrative Agent and the Depositary Agent,
including all attachments referred to therein (a) pursuant to Section 3.1(e) or
3.2(a) of the Credit Agreement in connection with each Disbursement of
Construction Loans and (b) pursuant to Section 5.33 of the Credit Agreement in
connection with the application of Project Revenues contemplated thereby.

 

“Contango” means Contango Oil & Gas Company, a Delaware corporation.

 

“Contango LP” means Contango Sundance, Inc., a Delaware corporation and wholly
owned Subsidiary of Contango.

 

“Contingency” means the aggregate amount specified in the “Contingency” line
item in the Construction Budget.

 

“Conversion” means the actions to be taken on the Conversion Date pursuant to
Section 2.2(a) of the Credit Agreement.

 

“Conversion Date” means the date on which the conditions precedent set forth in
Section 3.3 of the Credit Agreement are satisfied or waived and Conversion
occurs.

 

“COP Debt Payment Account” has the meaning provided in the Account Agreement.

 

7

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“COP Designated Employees” means the Designated Employees that may be
terminated, removed or replaced solely by the COP Directors under the
Stockholders Agreement.

 

“COP Directors” has the meaning provided in the Stockholders Agreement.

 

“COP O&M Percentage” has the meaning provided in the Account Agreement.

 

“COP Redemption Account” has the meaning provided in the Account Agreement.

 

“COP Revenue Account” has the meaning provided in the Account Agreement.

 

“COP Royalty” means the “FLNG Component” as that term is defined in the COP TUA.

 

“COP Royalty Lien” means the Liens, if any, upon COP Royalty granted by the
Borrower in favor of either (1) any or all TPS Secured Parties to secure the TPS
Obligations or (2) any or all Expansion Secured Parties to secure the Expansion
Obligations.

 

“COP Shipper” means “Customer” (as that term is defined in the COP TUA) and
“Temporary Customer” (as that term is defined in the COP TUA) and their
respective successors and assigns in whole or in part.

 

“COP Supplemental Debt Payment Account” has the meaning provided in the Account
Agreement.

 

“COP TUA” means the TUA between COP Shipper and the Borrower together with the
Services Quantity Increase Agreement, and any partial or full replacement of
either of the foregoing, including any Parallel TUA (as defined in the TUA
between COP Shipper and the Borrower).

 

“Credit Agreement” means the Credit Agreement, dated as of July 2, 2004, among
the Borrower, the General Partner, the Administrative Agent, the Lenders, and
the Collateral Agent.

 

“Crest” means Crest Investment Company.

 

“Crest Agreement” means the Settlement and Purchase Agreement dated as of
June 14, 2001, among Crest, Cheniere Energy and the other parties thereto, which
for purposes of the transfers in to the Crest Reserve Account under Section 4.3
of the Account Agreement will be as in effect on the Closing Date.

 

“Crest Reserve Account” has the meaning provided in the Account Agreement.

 

“Date Certain” means ***.

 

“Debt” of any Person means, without duplication, (i) all obligations of such
Person for borrowed money; (ii) all obligations issued, undertaken or assumed as
the deferred

 

8

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purchase price of property or services which purchase price is due more than six
months from the date of incurrence of the obligation in respect thereof or is
evidenced by a note or other instrument, except trade accounts arising in the
ordinary course of business; (iii) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced incurred
in connection with the acquisition of property, assets or businesses; (iv) all
obligations of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by the Person;
(v) (A) all Capitalized Lease Liabilities and (B) Operating Lease Liabilities
that are entered into in the ordinary course of business in an aggregate amount
in excess of $*** in rental payments annually; (vi) all net payment obligations
with respect to interest rate cap agreements, interest rate swap agreements,
sales of foreign exchange options and other hedging agreements or arrangements;
(vii) all payment obligations, contingent or otherwise, of such Person as an
account party in respect of letters of credit and letters of guarantee; (viii)
all Debt referred to in clauses (i) through (vii) above secured by (or for which
the holder of such Debt has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including accounts and contracts
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Debt; and (ix) all Guarantees by such Person of
the Debt of others.  The Debt of any Person shall include the Debt of any other
entity (including any partnership in which such Person is a general partner) to
the extent such Person is liable therefor as a result of such Person’s ownership
interest in or other relationship with such entity, except to the extent the
terms of such Debt provide that such Person is not liable therefor.

 

“Debt Service” means, for any period, the sum of (i) all amounts payable by the
Borrower during such period pursuant to the terms and conditions of the
Financing Documents (including all amounts that are required to be prepaid and
all amounts overdue from any prior period) in respect of principal of the Loans
during such period plus (ii) all amounts payable in respect of Interest Expense
for such period.

 

“Debt Service Coverage Ratio” means for any period, without duplication, the
ratio of (a) the sum of all Project Revenues of the Borrower during such period
less the aggregate amount of the Operating and Maintenance Costs (including
amounts to be deposited in the Major Maintenance Reserve Account during such
period) for such period to (b) the sum of all principal, premium (if any) and
interest due and payable with respect to the Loans and other Permitted Debt
outstanding.

 

“Debt Service B.I./Delay Insurance” has the meaning provided in the Account
Agreement.

 

“Debt Service Installment” has the meaning provided in the COP TUA.

 

“Debtor Relief Law” means any applicable liquidation, dissolution,
conservatorship, bankruptcy, moratorium, rearrangement, insolvency,
reorganization, readjustment of debt or similar law affecting the rights or
remedies of creditors generally, as in effect from time to time, including the
Federal Bankruptcy Code.

 

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“Deed of Trust” means the Leasehold Deed of Trust, Security Agreement,
Assignment of Rents and Financing Statement, dated as of July 2, 2004, by the
Site Lessee to Robert W. Mahood as trustee for the benefit of the Collateral
Agent for the Secured Parties.

 

“Default” means any event or condition that, with the giving of notice, the
passage of time or both, would become an Event of Default.

 

“Default Notice Date” has the meaning provided in the Account Agreement.

 

“Default Rate” has the meaning provided in Section 2.8(b) of the Credit
Agreement.

 

“Defaulting Lender” means any Lender that does not make available to the
Administrative Agent its pro rata portion of the aggregate amount of the Loans
requested to be made on the date specified in the applicable Notice of Borrowing
pursuant to Section 2.6 of the Credit Agreement.

 

“Delay Liquidated Damages” means all liquidated damages payable under the EPC
Contract or other Construction Contract in respect of delays by or on behalf of
the contractor or delays in meeting standards, criteria or deadlines. 
Notwithstanding the immediately preceding sentence, Delay Liquidated Damages
shall not include Performance Liquidated Damages.

 

“Depositary Agent” has the meaning provided in the Account Agreement.

 

“Designated Employees” has the meaning provided in the Stockholders Agreement.

 

“Disbursement” means any disbursement of a Loan pursuant to the Credit
Agreement.

 

“Disbursement Date” means the date specified in a Construction Requisition as
the date on which Disbursements of Construction Loans are requested by the
Borrower.

 

“Disposition” means any sale, transfer, assignment, lease, conveyance or other
disposition by the Borrower to any Person of any Property.

 

“Distribution Account” has the meaning provided in the Account Agreement.

 

“Distribution Conditions” has the meaning provided in Section 5.16 of the Credit
Agreement.

 

“Distribution Suspense Account” has the meaning provided in the Account
Agreement.

 

“Dollars” and the sign “$” shall each mean freely transferable, lawful money of
the United States.

 

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“Drawdown Schedule” means the schedule of Disbursements of the Construction
Loans to be made during each month prior to the Conversion Date, prepared by the
Borrower and delivered to the Administrative Agent pursuant to Section 3.1 or
3.2 of the Credit Agreement, as the same may be amended from time to time in
accordance with the Credit Agreement.

 

“Easements” means the easements described in the Site Leases and any other
easements which are appurtenant to the Land.

 

“Eligible Affiliate” means, with respect to a Lender, an Affiliate of such
Lender (1) that is a commercial bank or other financial institution having a
combined capital and surplus of at least $50,000,000 or (2) whose obligations
under the Credit Agreement are guaranteed by an Eligible Institution.

 

“Eligible Institution” means (1) a commercial bank or other financial
institution rated at least “A–” by S&P and “A3” by Moody’s, or (2)(A) in the
case of the Lenders, also a LNG Supply Project and (B) in the case of either the
TPS Secured Parties or Expansion Secured Parties, also a Person acceptable in
writing to the Administrative Agent (such acceptance not to be unreasonably
withheld).

 

“Enforcement Action” means any action or proceeding against any Borrower Entity,
any Equity Pledgor, the Project or all or any part of the Collateral taken for
the purpose of (i) enforcing the rights of any Secured Party under or in respect
of the Collateral or the Security Documents, including the initiation of action
in any court or before any Governmental Authority to enforce such rights, and
any action to exercise any rights provided in Sections 7.2, 7.3 or 7.5 of the
Credit Agreement, and (ii) adjudicating or seeking a judgment on a claim.

 

“Environmental Claim” means, with respect to any Person, (i) any notice, claim,
administrative, regulatory or judicial or equitable action, suit, Lien,
judgment, demand by any other Person or other Legal Matter and (ii) any other
written communication by any Governmental Authority, in either case alleging or
asserting such Person’s liability for investigatory costs, cleanup costs,
consultants’ fees, governmental response costs, damages to natural resources
(including wetlands, wildlife, aquatic and terrestrial species and vegetation)
or other Property, property damages, personal injuries, fines or penalties
arising out of, based on or resulting from (x) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person or (y) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law or Governmental Approval issued under any
Environmental Law.

 

“Environmental Laws” means any and all Applicable Laws, now or hereafter in
effect, and any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, human health or safety, or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, condensate, chemicals,
Hazardous Material, or toxic or hazardous substances or wastes into the
environment including ambient air, surface water, groundwater, or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants,
chemicals, or toxic or hazardous substances or wastes.

 

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“EPC Contract” means an engineering, procurement, and construction contract
between Borrower and the EPC Contractor for the construction of certain work on
Phase 1, including, berthing facilities, unloading facilities, a vapor return
line system, LNG storage facilities, and LNG regasification facilities, but
excluding (i) a pipeline to the pipeline interconnection at Stratton Ridge,
Texas (ii) any improvements included in a Phase 2 Project and (iii) Phase 1
Addition (Stratton Ridge).

 

“EPC Contractor” means a joint venture or partnership between Technip and Zachry
Construction Corporation, or another Person or Persons acceptable to the
Administrative Agent and the Borrower.

 

“EPC Contractor Event” means any of the following:

 

(a)                                  the EPC Contractor shall (i) apply for or
consent to the appointment of, or the taking of possession by, a trustee,
receiver, custodian, liquidator or the like of itself or all or a substantial
part of its Property, (ii) admit in writing its inability or be generally unable
to pay its debts as such debts become due, (iii) make a general assignment for
the benefit of its creditors, (iv) commence a voluntary case under the Federal
Bankruptcy Code or any other Debtor Relief Law, (v) file a petition seeking to
take advantage of any other Debtor Relief Law, (vi) fail to controvert in a
timely and appropriate manner, acquiesce in writing to, or file an answer
admitting the material allegations of any petition filed against it in an
involuntary case under the Federal Bankruptcy Code or any other Debtor Relief
Law or (vii) take any action for the purpose of effecting any of the foregoing;

 

(b)                                 A proceeding or case shall be commenced
without the application or consent of the EPC Contractor in any court of
competent jurisdiction, seeking with respect to such Person (i) its liquidation,
reorganization, dissolution or winding-up or the composition or readjustment of
its debts or similar action or (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of such Person or all or a substantial part of
its Property under any Debtor Relief Law and such proceeding or case shall
continue undismissed, or any order, judgment or decree approving any of the
foregoing shall be entered and continue unstayed and in effect for a period of
60 or more consecutive days from and including the date of commencement of such
proceeding or case, or any order for relief against such Person shall be entered
in any involuntary case under the Federal Bankruptcy Code or any other Debtor
Relief Law; and

 

(c)                                  the EPC Contractor is terminated.

 

“EPC Guarantor” means Technip, S.A., société anonyme organized under the laws of
France.

 

“EPC Guaranty” means the Guaranty entered into in connection with the EPC
Contract made by the EPC Guarantor in favor of the Borrower.

 

“Equity Pledge” means, collectively, the Equity Pledge (Smith), the Equity
Pledge (FGP), Equity Pledge (FLNGI) and any other Equity Pledge delivered
pursuant to Section 3.6(f) or the applicable Equity Pledge.

 

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“Equity Pledge (FGP)” means the Pledge Agreement to be delivered by FGP in favor
of the Collateral Agent pursuant to Section 3.6(f).

 

“Equity Pledge (FLNGI)” means the Pledge Agreement to be delivered by FLNGI in
favor of the Collateral Agent pursuant to Section 3.6(f).

 

“Equity Pledge (Smith)” means the Pledge Agreement to be delivered by Smith in
favor of the Collateral Agent pursuant to Section 3.6(f).

 

“Equity Pledgors” means for any determination of whether the conditions of
Sections 3.2, 3.3 and 3.6 to making or converting any Tranche B Loan have been
satisfied and at any time any Tranche B Loan is outstanding, FLNGI and its
permitted successors and assigns, Smith, FGP and any Non-Smith Equity Pledgor.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder.

 

“ERISA Affiliate” shall mean, with respect to any Person, (a) a corporation
which is a member of a controlled group of corporations with such Person within
the meaning of Section 414(b) of the Code, (b) a trade or business (including a
sole proprietorship, partnership, trust, estate or corporation) which is under
common control with such Person within the meaning of Section 414(c) of the Code
or Section 4001(b)(1) of ERISA, (c) a member of an affiliated service group with
such Person within the meaning of Section 414(m) of the Code or (d) an entity
described in Section 414(o) of the Code.

 

“Event of Default” has the meaning provided in Section 7.1 of the Credit
Agreement.

 

“Event of Loss” means an event that causes all or a material part of the Project
to be damaged, destroyed or rendered unfit for normal use for any reason
whatsoever, or any Expropriation Event, or transfer under threat of an
Expropriation Event, of any material part of the Project by any Governmental
Authority.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Expansion” means a Person (other than an individual) (1) that as of the Closing
Date the parties to the Credit Agreement anticipate may be formed for the
purpose of undertaking the development, construction and ownership of LNG
facilities on or near Quintana Island, Texas and/or underground storage capacity
at or near Stratton Ridge, Texas and any other facilities and activities related
to or in connection therewith, (2) that is not the Borrower or the General
Partner and (3) of which neither the Borrower nor General Partner owns directly
or indirectly any Capital Stock.

 

“Expansion Agents” means, collectively, the administrative agent, the collateral
agent and the depositary agent, if any, or other similar agent for and on behalf
of the Expansion Lenders appointed in or pursuant to the Expansion Financing
Documents.

 

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“Expansion Financing Documents” means, collectively, the notes, the credit
agreement, the security documents and any other similar or related documents
executed in connection with the making of the Expansion Loans other than
opinions and certificates.

 

“Expansion Lenders” means the lenders of the Expansion Loans.  No such lender
may be an Affiliate of the Borrower or Expansion.

 

“Expansion Loans” means loans to Expansion, its general partner or any their
Subsidiaries made by the lenders financing (i) the development and construction
of a Phase 2 Project and (ii) interest on such loans during the development and
construction of the Phase 2 Project for which such loans were made.

 

“Expansion Obligations” means, collectively, all loans, advances, Debts, debts,
liabilities, and obligations, howsoever arising or owed by any and all of
Expansion and its Subsidiaries under any or all Expansion Financing Documents or
otherwise to any Expansion Secured Party of every kind and description (whether
or not evidenced by any note or instrument and whether or not for the payment of
money), direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, including all interest, fees, charges, expenses,
attorneys’ fees and consultants’ fees chargeable to the Expansion; and which,
for the avoidance of doubt, includes (a) any and all amounts advanced by any
Expansion Secured Party in order to preserve the Expansion Collateral or to
preserve the related Liens; (b) in the event of any enforcement action, the
expenses of retaking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Expansion Collateral, or of any exercise by any
Secured Party of its rights under the Expansion Financing Documents, together
with attorneys’ fees and court costs and (c) performance of its obligations
under the documents executed in connection therewith.

 

“Expansion Secured Parties” means, collectively, the Expansion Agents and the
Expansion Lenders.

 

“Expropriation Event” means (a) any condemnation, nationalization, seizure,
compulsory transfer or expropriation by a Governmental Authority of all or any
portion of the Project or the Property or the assets of any Borrower Entity or
of its Capital Stock, (b) any assumption by a Governmental Authority of control
or ownership of the Property, assets or business operations of any Borrower
Entity or of its Capital Stock, (c) any taking of any action by a Governmental
Authority for the dissolution or disestablishment of any Borrower Entity,
(d) any taking of any action by a Governmental Authority that would prevent any
Borrower Entity from carrying on its business or operations or a substantial
part thereof or (e) any circumstance or event, or series of circumstances or
events in consequence of which any of the foregoing occurs.

 

“Facility” means the “Freeport Facility” (as that term is defined in the COP
TUA) on the Closing Date and any alterations, remodeling, additions,
reconstructions, improvements or demolitions in compliance with Section 5.21(d)
of the Credit Agreement together with any and all Phase 1 Additions (other than
the Phase 1 Addition (Stratton Ridge)), but excluding the foregoing from the
definition of “Facility” solely to the extent the foregoing includes any Phase 2
Project.

 

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“Federal Bankruptcy Code” means Title 11, Section 101 et seq. of the United
States Code titled “Bankruptcy,” as amended from time to time, and any successor
statute thereto.

 

“Federal Funds Rate” means, for any day, the rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) equal to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding such day;
provided, that (i) if the day for which such rate is to be determined is not a
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day and (ii) if such rate is not so published for such day
pursuant to clause (i), the Federal Funds Rate for such day shall be the average
rate quoted to the Administrative Agent (in its individual capacity) on such day
on such transactions as determined by the Administrative Agent.

 

“Fee” has the meaning provided in the COP TUA.

 

“FERC” means the Federal Energy Regulatory Commission of the United States or
any successor agency thereto.

 

“FERC Approval” means the FERC order issued June 18, 2004 (Docket No.
CP03-75-000) granting authorization under Section 3(a) of the Natural Gas Act
(available at 15 U.S.C. §717(c)) for the Project, pursuant to the application
filed by the Borrower with the Federal Energy Regulatory Commission on March 28,
2003 and that meets the requirements of Sections 7.1(b)(iii) and 7.1(c)(ii) of
the Omnibus Agreement.

 

“FGP” means Freeport LNG-GP, Inc., a Delaware corporation.

 

“Final Completion” shall have the meaning provided in the EPC Contract.

 

“Final Maturity Year” means, as of any date of determination, the year in which
the latest stated maturity of any Debt then outstanding shall occur.

 

“Financing Documents” means:

 

1.               the Credit Agreement,

2.               the Equity Pledges,

3.               the Notes,

4.               the Security Documents,

5.               the Reserve Account Support Instruments,

6.               the Acceptable Credit Support,

7.               any intercreditor agreement between any Secured Party and
another creditor of the Borrower and/or a creditor of Expansion relating to,
among other things, the Project and/or any Phase 2 Project and

8.               any other similar or related documents executed in connection
with the making of the Loans other than opinions and certificates.

 

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“FLNGI” means Freeport LNG Investments LLLP, a Delaware limited liability
limited partnership.

 

“Foreign Lender” means any Lender that is not a United States person as defined
in Code Section 7701(a)(30).

 

“GAAP” means the generally accepted accounting principles in effect from time to
time in the U.S.

 

“General B.I./Delay Insurance” has the meaning provided in the Account
Agreement.

 

“General Partner” means any Person that becomes and is a general partner of the
Borrower in accordance with the Partnership Agreement.

 

“Good LNG Practices” means (1)(A) International LNG Terminal Standards (as
defined in the COP TUA); and (B) to the extent not inconsistent with
International LNG Terminal Standards, such good and prudent practices as are
generally followed in the LNG industry by Reasonable and Prudent Operators (as
defined in the COP TUA) of LNG receiving and regasification terminals and (2)(A)
Pipeline Standards (as defined in the COP TUA); and (B) to the extent not
inconsistent with Pipeline Standards, such good and prudent practices as are
generally followed by Reasonable and Prudent Operators of U.S. Gas (as defined
in the COP TUA) pipelines; provided however, it is expressly understood that the
foregoing standards and practices shall apply to (and the defined terms
referenced in the definition of “Good LNG Practices” shall be construed to) the
engineering, procurement, design, construction, installation, testing,
completion, startup, use, equipping, operation, maintenance, repair,
improvement, management and/or conduct of the Project or Collateral or any part
of either of the foregoing and all activities incidental or related to or in
connection with any of the foregoing and not just the operation and maintenance
of the Facility, except to the extent such standards and practices are
inconsistent with the standards and practices in the Construction Contracts, in
which case such applicable standards and practices set forth in the Construction
Contracts shall apply to such Construction Contractors.

 

“Governmental Approval” means any authorization, consent, approval, license,
action, lease, ruling, permit, tariff, rate, credit, directive, certification,
exemption, filing, variance, claim, order, judgment, decree, publication, notice
by, of or with, declaration of or with, or registration by or with, any
Governmental Authority.

 

“Governmental Authority” means the government of any federal, state, local,
municipal, or other political subdivision in which the Project or any part
thereof is at any time located, within or without the United States, and any
other government or political subdivision thereof exercising jurisdiction over
the Project or any party to any of the Project Documents, including any
governmental department, commission, board, bureau, agency, regulatory
authority, instrumentality of such governments and political subdivisions.

 

“Guarantee” of or by any Person means any obligation, contingent or otherwise,
of such Person guaranteeing or having the economic effect of guaranteeing any
Debt or other obligation (the “primary obligation”) of any other Person (the
“primary obligor”) in any manner,

 

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whether directly or indirectly, and including any obligation of such
guaranteeing Person, direct or indirect contingent or otherwise, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such Debt or
other obligation or to purchase (or to advance or supply funds for the purchase
of) any security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such Debt or
other obligation of the payment thereof, (c) to maintain working capital, equity
capital, net worth or any other financial statement condition or liquidity of
the primary obligor so as to enable the primary obligor to pay such Debt or
other obligation or (d) as an account party in respect of any letter of credit
or letter of guarantee issued to support such Debt or obligation; provided,
however, that the term Guarantee shall not include endorsements for collection
or deposit in the ordinary course of business.  The amount of any Guarantee
shall be deemed to be an amount equal to the stated or determinable amount of
the primary obligation in respect of which such Guarantee is made or, if not
stated or determinable, the maximum possible liability of such Person as
determined by such Person in good faith.

 

“Hazardous Material” means any substance that is regulated or could lead to
liability under any Environmental Law, including any petroleum or petroleum
product, hydrocarbons, natural gas in any form, asbestos in any form that is or
could become friable, transformers or other equipment that contain dielectric
fluid containing levels of polychlorinated biphenyls (PCBs), hazardous waste,
hazardous material, hazardous substance, toxic substance, contaminant or
pollutant, as defined or regulated as such under any applicable Environmental
Law.

 

“Hedging Agreement” means any agreement in respect of any capacity sales, fuel
supply, interest rate swap transaction, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap, equity or equity
index option, bond option, interest rate option, foreign exchange transaction,
cap transaction, floor transaction, collar transaction, currency swap
transaction, cross-currency rate swap transaction, currency option, any other
interest rate, commodity or currency contract or any other similar transaction 
or agreement (including any option with respect to any of the foregoing
transactions) or any combination of the foregoing transactions.  For the
avoidance of doubt, the term “Hedging Agreement” does not include an Acceptable
Use Agreement.

 

“Indemnified Liabilities” has the meaning provided in Section 9.2(a) of the
Credit Agreement.

 

“Indemnified Person” has the meaning provided in Section 9.2(a) of the Credit
Agreement.

 

“Independent Accountants” means, at any time, a firm of independent certified
public accountants of national standing appointed by agreement of the Board of
Directors of the General Partner.

 

“Independent Engineer” means the Person appointed after consultation with the
Borrower by the Administrative Agent as independent engineer or successor
appointed by the Administrative Agent or pursuant to an intercreditor
arrangement between the Secured Parties and the TPS Secured Parties.  The
Administrative Agent shall endeavour to require in its contract

 

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with the Independent Engineer that the Independent Engineer will deliver the
Independent Engineer Completion Certificate within 30 days of the satisfactory
completion of the performance tests achieving minimum acceptance criteria.

 

“Independent Engineer Completion Certificate” means a certificate, substantially
in the form of Exhibit E-2 to the Credit Agreement, duly completed and signed by
an Authorized Officer of the Independent Engineer that (1) provides that Phase 1
of the Project has achieved Completion and (2) sets forth the specific date that
is the Project Completion Date.

 

“Initial Lender” means ConocoPhillips, not in its individual capacity except as
expressly provided in the Transaction Documents, but solely as Lender.

 

“Initial Period” has the meaning provided in Section 3.1 of the Credit
Agreement.

 

“Insurance Advisor” means the Person appointed after consultation with the
Borrower by the Administrative Agent as insurance advisor or successor appointed
by the Administrative Agent or pursuant to an intercreditor arrangement between
the Secured Parties and the TPS Secured Parties.

 

“Insurance Proceeds” means all amounts payable to any Borrower Entity or the
Collateral Agent in respect of any insurance required to be maintained (or
caused to be maintained) by any Borrower Entity pursuant to Section 5.9 of the
Credit Agreement (other than general liability insurance, delayed completion
insurance and business interruption insurance), regardless of whether such
payments are received from any insurer or from a Construction Contractor
pursuant to a Construction Contract or otherwise.

 

“Interest Expense” means, for any period, all interest on the Loans accrued or
capitalized during such period (whether or not actually paid during such period)
pursuant to the Financing Documents.

 

“Investment” in any Person means, without duplication: (a) the acquisition
(whether for cash, securities, other Property, services or otherwise) or holding
of Capital Stock, bonds, notes, debentures, or other securities of such Person,
or any agreement to make any such acquisition or to make any capital
contribution to such Person; or (b) the making of any deposit with, or advance,
loan or other extension of credit to, such Person.

 

“Land” means the site upon which the Facility will be installed and all real
property rights, title and interests of any or all Borrower Entities, together
with any fixtures, crops, timber, aerial rights, subsurface rights, and civil
works constructed thereon and any other easements, licenses and other real
property rights, title and interests whether now owned or hereafter acquired by
or on behalf of any Borrower Entity, including the land referred to in the Site
Leases and the Easements but excluding the foregoing from the definition of
“Land” solely to the extent (1) sublet, sold or otherwise assigned in fee or
leasehold to Expansion or an Affiliate of Expansion in accordance with
Section 2.16 of the Credit Agreement or (2) such foregoing includes the site
solely for the Phase 1 Addition (Stratton Ridge) and is not otherwise part of
the site for Phase 1 or another Phase 1 Addition.

 

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“Legal Matter” means any action, suit, litigation other legal proceeding,
alternative dispute resolution proceeding, inquiry, investigation or other
proceeding by or before any Governmental Authority or any arbitral or other
forum, including any of the foregoing in which injunctive, declaratory or
similar relief is involved and any condemnation proceedings.

 

“Lender” means each Lender referenced on Annex I to the Credit Agreement and any
Assignee thereof pursuant to Section 9.11 of the Credit Agreement.

 

“Lien” means, with respect to any Property of any Person, any mortgage, pledge,
hypothecation, assignment, mandatory deposit arrangement with any other Person
owning Debt of such Person, encumbrance, lien (statutory or other), deed of
trust, fiduciary transfer of title, charge, lease, sale and lease-back
arrangement, easement, servitude, trust arrangement, security interest,
preference, priority or other security agreement of any kind or nature
whatsoever that has the substantial effect of constituting a security interest,
including any conditional sale or other title retention agreement, any financing
lease having substantially the same effect as any of the foregoing and the
filing of any financing statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction, domestic or foreign.

 

“Limited Partner” means any Person that becomes and is a limited partner of the
Borrower in accordance with the Partnership Agreement.

 

“LNG” means liquefied natural gas.

 

“LNG Supply Project” has the meaning provided in the COP TUA.

 

“Loan Termination Date” means the date on which all Obligations, other than
contingent liabilities and obligations which are unasserted at such date, have
been paid and satisfied in full and all Commitments have been terminated.

 

“Loans” means the Construction Loans and the Term Loans.

 

“Losses” has the meaning provided in Section 9.2(a) of the Credit Agreement.

 

“Loss Proceeds” means all proceeds from an Event of Loss, including insurance
proceeds, condemnation awards or other compensation, awards, damages and other
payments or relief (including any compensation payable in connection with a
Expropriation Event) or other amounts actually received on account of an Event
of Loss, but excluding Delay Liquidated Damages and proceeds of General
B.I./Delay Insurance, Debt Service B.I./Delay Insurance and TUA Insurance.

 

“Loss Proceeds Account” has the meaning provided in the Account Agreement.

 

“Maintenance Requisition” has the meaning provided in the Account Agreement.

 

“Major Maintenance Expenses” means all expenditures by the Borrower on regularly
scheduled (or reasonably anticipated) maintenance of the Project in accordance
with Good LNG Practices and vendor and supplier requirements constituting major
maintenance

 

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(including teardowns, turnarounds, overhauls, capital improvements, replacements
and/or refurbishments of major components of the Project).

 

“Major Maintenance Reserve Account” has the meaning provided in the Account
Agreement.

 

“Major Maintenance Reserve Requirement” means that portion of the Operating and
Maintenance Costs for Phase 1 of the Project on and after the Conversion Date
equal to the amount the Independent Engineer projects is needed for Major
Maintenance Expenses, as such amount may be adjusted from time to time based
upon actual operating results and the recommendations of the Independent
Engineer, if any.

 

“Management Fee Agreement” means the agreement between the Borrower and the
General Partner contemplated by Section 4(i) of the Stockholders Agreement
relating to the management fee arrangement between the Borrower and the General
Partner.

 

“Margin Stock” means margin stock within the meaning of Regulation T, Regulation
 U, and Regulation X.

 

“Master Services Agreement” means the Master Services Agreement made on July 2,
2004, by and between ConocoPhillips and the Borrower.

 

“Material Additional Project Document” means any transportation agreement,
interconnection agreement or other contract or agreement relating to or in
connection with the acquisition, ownership, engineering, procurement, design,
development, construction, installation, testing, completion, financing,
insurance, permitting, licensing, taxing (including tax abatement), startup,
equipping, leasing, operation, maintenance, repair, improvement, management
and/or conduct of the Project or Collateral or any part of either of the
foregoing and all activities incidental or related to any of the foregoing
entered into by a Borrower Entity with any Person or binding on the Property of
any Borrower Entity if such contract or agreement is material to (i) the
condition (financial or otherwise), results of operation or business of any
Borrower Entity, (ii) the ability of a Borrower Entity to perform its
obligations under any of the Transaction Documents or (iii) the validity of the
Lien of the Security Documents or the priority contemplated thereby or the
material rights and remedies of the Secured Parties under any Financing
Document.  Notwithstanding the foregoing, “Material Additional Project Document”
shall not include (i) contracts or agreements customarily entered into in
connection with the acquisition of Permitted Investments, (ii) any Hedging
Agreement, (iii) any Financing Document, (iv) the TPS Financing Documents or (v)
the Construction Advisory Services Agreement.

 

“Material Adverse Effect” means a material adverse effect on (i) the condition
(financial or otherwise), results of operation or business of any Borrower
Entity, or any guarantor of the obligations of a Borrower Entity, (ii) the
ability of a Borrower Entity, or any guarantor of the obligations of a Borrower
Entity, an Equity Pledgor or any guarantor of the obligations of an Equity
Pledgor under the Transaction Documents, to perform its obligations or enforce
its rights under any of the Transaction Documents, (iii) the validity of the
Lien of the Security Documents or the priority contemplated thereby or the
material rights and remedies of the Secured Parties

 

20

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under any Financing Document or (iv) the Services Quantity (as defined in the
COP TUA) committed to be provided pursuant to the COP TUA.

 

“Memoranda of Site Lease” means (i) Memorandum of Lease, dated June 24, 2004, by
and between Site Lessee and Brazos River Authority, recorded under Clerk’s File
No. 2004038631 of the Official Records maintained in the office of the County
Clerk of Brazoria County, Texas, (ii) Memorandum of Lease, dated June 24, 2004,
by and between Site Lessee and Brazos River Authority, recorded under Clerk’s
File No. 2004038630 of the Official Records maintained in the office of the
County Clerk of Brazoria County, Texas, and (iii) Memorandum of Lease, dated
June 24, 2004, by and between Site Lessee and Brazos River Authority, recorded
under Clerk’s File No. 200438632 of the Official Records maintained in the
office of the County Clerk of Brazoria County, Texas.

 

“Monthly Period” shall mean a period commencing on the day succeeding a Monthly
Transfer Date and ending on the next succeeding Monthly Transfer Date.

 

“Monthly Transfer Date” means the last Business Day of each month commencing on
the first such day occurring on or after the Conversion Date.

 

“Moody’s” means Moody’s Investors Services, Inc.

 

“Mortgaged Property” means the Mortgaged Property as such term is defined in the
Deed of Trust.

 

“MS Directors” has the meaning provided in Stockholders Agreement.

 

“MS Directors Cure Period” means any period when each of clause (a), (b) and (c)
are true:

 

(a)                                  (1) the General Partner is the sole general
partner of the Borrower, (2) subject to the approval rights described in the
Partnership Agreement, the business and affairs of the Borrower are managed
exclusively by or under the direction of the General Partner, and (3) if the MS
Director Cure Period relates to an Event of Default of a Borrower Entity other
than the Borrower or the General Partner, the business and affairs of such
Borrower Entity are managed exclusively by or under the direction of the General
Partner;

 

(b)                                 Smith (1) owns Shares (as defined in the
Stockholders Agreement) of the General Partner and (2) has (or the other
shareholders have agreed in writing that Smith shall have) designated director
representation on the board of directors of the General Partner with the ability
to terminate, remove or replace employees of the General Partner and the
Borrower that, taken as a group, have responsibilities over the Borrower and the
Project substantially similar to the Designated Employees, taken as a group,
which may be terminated, removed or replaced solely by the MS Directors as set
forth in Section 3(c)(i) of the Stockholders Agreement as such agreement is in
effect on the Closing Date; and

 

(c)                                  either of the following is true:

 

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(1)                            ConocoPhillips or a Subsidiary of ConocoPhillips
(A) owns Shares (as defined in the Stockholders Agreement) of the General
Partner and (B) has (or the other shareholders have agreed in writing that
ConocoPhillips or a Subsidiary of ConocoPhillips shall have) designated director
representation on the board of directors of the General Partner with the ability
to terminate, remove or replace employees of the General Partner and the
Borrower that, taken as a group, have responsibilities over the Borrower and the
Project substantially similar to the Designated Employees, taken as a group,
which may be terminated, removed or replaced solely by the COP Directors as set
forth in Section 3(d) of the Stockholders Agreement as such agreement is in
effect on the Closing Date; and

 

(2)                            ConocoPhillips is the construction advisor of the
Project pursuant to the Construction Advisory Services Agreement.

 

“Multiemployer Plan” shall mean, with respect to any Person, a plan that is a
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA to which
such Person or any ERISA Affiliate of such Person is making, or has an
obligation to make, contributions or had made, or has been obligated to make,
contributions since the Closing Date.

 

“Necessary Approvals” means all Governmental Approvals and third party consents
and waivers that (a) the failure to obtain or maintain such Governmental
Approval or third party consent or waiver could reasonably be expected to have a
material adverse effect on the Construction Budget, Phase 1 Addition Budget for
construction (to the extent not in conflict with the Construction Budget), any
construction schedule, including the Project Schedule, or acquisition,
importation, ownership, management, financing, commencement, leasing, design,
construction, installation, operation, maintenance and repair of all or any part
of the Project as contemplated by the Financing Documents and the TUAs and (b)
are necessary to: (i) the due execution and delivery of, and performance by each
Borrower Entity or Equity Pledgor of their respective obligations and the
exercise of their respective rights under the Transaction Documents to which
they are party, (ii) the legality, validity and binding effect or enforceability
of the Transaction Documents, (iii) the Loans, or (iv) the acquisition,
importation, ownership, management, financing, commencement, leasing, design,
construction, installation, operation, maintenance and repair of all or any part
of the Project as contemplated by the Financing Documents and the TUAs.

 

“Net Available Amount” means, with respect to any Event of Loss, any Project
Document Claim or Performance Liquidated Damages, the aggregate amount of Loss
Proceeds (in the case of an Event of Loss), amounts received as a result of any
Project Document Claim or Performance Liquidated Damages received by a Borrower
Entity or the Collateral Agent in respect of such Event of Loss, Project
Document Claim or Performance Liquidated Damages, as the case may be, net of
reasonable expenses incurred in connection with the collection thereof.

 

“Non-COP Shipper” means any Shipper to a TUA other than the COP Shipper.

 

“Non-COP TUA” means a TUA other than the COP TUA.

 

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“Non Smith Equity Pledgor” means any Person (other than an individual) (1) of
which neither Smith nor any of Smith’s Affiliates owns or controls any Capital
Stock at any time, (2) that is a successor in interest of FLNGI as to any
interest as a Limited Partner and was admitted in the Borrower without violation
or breach of or default under the Financing Documents, (3) in respect of which,
prior to becoming a Non Smith Equity Pledgor, the Borrower has certified to the
Administrative Agent in an Officers Certificate that the foregoing requirements
of becoming a Non Smith Equity Pledgor have been satisfied and that the Borrower
desires such Person to be considered a Non Smith Equity Pledgor and (4) the
Administrative Agent is reasonably satisfied that such requirements have been
satisfied.

 

“Non Smith LP” means any Person (other than an individual) (1) of which neither
Smith nor any of Smith’s Affiliates owns or controls any Capital Stock at any
time, (2) that is Limited Partner and was admitted in the Borrower without
violation or breach of or default under the Financing Documents, (3) that is not
otherwise a Project Participant and (4) in respect of which, prior to becoming a
Non Smith LP, the Borrower has certified to the Administrative Agent in an
Officers Certificate that the foregoing requirements of becoming a Non Smith LP
have been satisfied and that the Borrower desires such Person to be considered a
Non Smith LP.

 

“Notes” means the Construction Notes and the Term Notes.

 

“Notice of Borrowing” has the meaning provided in Section 2.3 of the Credit
Agreement.

 

“Notice Office” means the office of the Administrative Agent located at:

 

ConocoPhillips Company

600 North Dairy Ashford

Room ML-3092

Houston, TX 77079-1175

Attn: Vice President and Treasurer

Telephone No.: 281.293.2797

Telecopier No.: 281.293.6067

 

or such other office, telephone or facsimile number as the Administrative Agent
may hereafter designate in writing as such to each of the other parties to the
Credit Agreement.

 

“Notice to Proceed” shall have the meaning provided in the EPC Contract.

 

“O&M Account” has the meaning provided in the Account Agreement.

 

“O&M Reserve Account” has the meaning provided in the Account Agreement.

 

“Objection” has the meaning provided in the Account Agreement.

 

“Obligations” means, collectively, all loans, advances, Debts, debts,
liabilities, and obligations, howsoever arising or owed by any or all Borrower
Entities or any or all Equity Pledgors under any or all Financing Documents to
any Secured Party of every kind and description (whether or not evidenced by any
note or instrument and whether or not for the

 

23

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payment of money), direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, including all interest, fees, charges,
expenses, attorneys’ fees and consultants’ fees chargeable to the Borrower; and
which, for the avoidance of doubt, includes (a) any and all amounts advanced by
any Secured Party in order to preserve the Collateral or to preserve the related
Liens; (b) in the event of any Enforcement Action, the expenses of retaking,
holding, preparing for sale or lease, selling or otherwise disposing of or
realizing on the Collateral, or of any exercise by any Secured Party of its
rights under the Financing Documents, together with attorneys’ fees and court
costs, (c) performance of its obligations under the documents executed in
connection therewith and (d) all Tranche B Obligations.

 

“Officer’s Certificate” means a certificate signed by an Authorized Officer of
the Borrower.

 

“Omnibus Agreement” means the Omnibus Agreement dated as of December 20, 2003 by
and among the Borrower, FGP, and ConocoPhillips, as amended by the First
Amendment to Omnibus Agreement dated as of July 2, 2004 between Borrower, FGP,
and ConocoPhillips.

 

“Operating and Maintenance Costs” means (a) all amounts disbursed by or on
behalf of the Borrower Entities for operation, maintenance (including Major
Maintenance Expenses), repair or improvement of Phase 1 of the Project,
including insurance expense, property and other Taxes, and payments under the
relevant operating and maintenance agreements, leases, royalty and other land
agreements, and any other payments required under the applicable Project
Documents, including the approved salaries and expenses of the Borrower’s
employees, or for the administration or performance of the Transaction
Documents, and (b) all fees and other amounts due and owing to the Collateral
Agent and Depositary Bank relating to the Project and the Financing Documents,
provided however, that this term shall not include (1) any Affiliate Payment,
(2) other Restricted Payment (3) amounts payable under the Crest Agreement,
(4) any Phase 2 Expenditures, (5) any costs or expenses for TUA Insurance or (6)
any costs or expenses for any Phase 1 Addition.

 

“Operating Budget” means, with respect to an Operating Year, the operating plan
and budget of Operation and Maintenance Costs for such year in accordance with
Section 5.23 of the Credit Agreement.

 

“Operating Lease Liability” of any Person means all monetary obligations of such
Person other than Capitalized Lease Liabilities under any lease of (or other
arrangement conveying the right to use) real or personal property of such
Person, or a combination thereof, and, for purposes of each Financing Document,
the amount of such obligations shall be the termination value of such lease.

 

“Operating Year” means a calendar year beginning with the year in which the
Project Completion Date occurs; provided however that the first such year shall
begin on and include the Project Completion Date.

 

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“Operator” means the entity that has accepted the appointment by General Partner
to operate the Project that has not been removed, withdrawn or terminated;
provided however, if at any time there is no such entity, the Borrower shall be
deemed the “Operator” for such time.

 

“Originating Lender” has the meaning provided in Section 9.11 of the Credit
Agreement.

 

“Outstanding Parcels” means those parcels of land which are within the
boundaries of the Land covered by the Site Leases but which have not, as of the
Closing Date, been acquired by the Brazos River Authority.

 

“Participant” has the meaning provided in Section 9.11.

 

“Partner” means each General Partner and each Limited Partner of the Borrower
from time to time.

 

“Partner Tax Distribution Account” has the meaning provided in the Account
Agreement.

 

“Partnership Agreement” means the Amended and Restated Agreement of Freeport LNG
Development, L.P. dated as of February 27, 2003, as amended by the First
Amendment, dated as of December 20, 2003.

 

“Partnership Interest” means Interest as defined in the Partnership Agreement.

 

“Partner Tax Distribution Amount” has the meaning provided in Section 5.16 of
the Credit Agreement.

 

“Partner Tax Distribution Conditions” has the meaning provided in Section 5.16
of the Credit Agreement.

 

“Payment Account” has the meaning provided in the Account Agreement.

 

“Payment Date” means the last Business Day of each month commencing on the first
such day occurring after the Conversion Date.

 

“Payment Office” means the office of the Administrative Agent located at:

 

ConocoPhillips Company

c/o The Bank of New York Trust Company, N.A.

101 Barclay Street

New York, NY 10286

Attn: Corporate Trust

Telephone No.: 214.880.8238

Telecopier No.: 214.880.8253

 

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with a copy to:

 

ConocoPhillips Company

600 North Dairy Ashford

Room ML-3092

Houston, TX 77079-1175

Attn: Vice President and Treasurer

Telephone No.: 281.293.2797

Telecopier No.: 281.293.6067

 

or such other office, telephone or facsimile number as the Administrative Agent
may hereafter designate in writing as such to each of the other parties to the
Credit Agreement.

 

“Pension Plan” shall mean, with respect to any Person, any pension plan within
the meaning of Section 3(2) of ERISA, including any multiemployer pension plan
which is subject to the provisions of Title I and IV of ERISA or Section 412 of
the Code and which (a) is established, sponsored, maintained or administered by
such Person or any ERISA Affiliate of such Person or for which such Person or
any ERISA Affiliate of such Person has an obligation to contribute or any
liability or in which such Person or any ERISA Affiliate of such Person
participates, or (b) has at any time since the Closing Date been established,
sponsored, maintained, or administered on behalf of employees of such Person or
any of its current or former ERISA Affiliates or for which such Person or any of
its current or former ERISA Affiliates had an obligation to contribute or any
liability or in which such Person or any of its current or former ERISA
Affiliates participated.

 

“Performance Liquidated Damages” means any sums received by or on behalf of any
Borrower Entity under any Construction Contract with respect to an agreement to
meet the performance standards set forth in such Construction Contract. 
Notwithstanding the immediately preceding sentence, Performance Liquidated
Damages shall not include Delay Liquidated Damages.

 

“Permitted Debt” has the meaning provided in Section 5.13 of the Credit
Agreement.

 

“Permitted Investments” mean, as to any Person:  (i) securities issued or
directly and fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than one
year from the date of acquisition by such Person; (ii) time deposits and
certificates of deposit, with maturities of not more than one year from the date
of acquisition by such Person of any commercial bank of recognized standing
having combined capital and surplus in excess of $500,000,000 and having a
rating on its commercial paper of at least A-1 or the equivalent thereof by S&P
or at least P-1 or the equivalent thereof by Moody’s; (iii) commercial paper
issued by any Person, which commercial paper is rated at least A-1 or the
equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody’s
and matures not more than one year after the date of acquisition by such Person;
(iv) investments in money market funds substantially all the assets of which are
comprised of securities of the types described in clauses (i) and (ii) above
(including those managed by Affiliate of the Depositary Agent), (v) United
States Securities and Exchange Commission registered money market mutual funds
conforming to Rule 2a-7 of the Investment Company Act of 1940 if in effect in
the United

 

26

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States, that invest primarily in direct obligations issued by the United States
Treasury and repurchase obligations backed by those obligations, and rated in
one of the two highest categories by S&P and Moody’s, (vi) investments in
repurchase agreements having a term not more than seven days for underlying
securities of the types described in clauses (i) and (ii) above, and (vii) tax
exempt securities rated at least A, MIG 1 or VMIG 1 by Moody’s and A or SP-1 by
S&P.

 

“Permitted Liens” has the meaning provided in Section 5.12 of the Credit
Agreement.

 

“Permitted Title Defects” means the exceptions to title of the Land accepted by
ConocoPhillips pursuant to Section 7.1(e) of the Omnibus Agreement.

 

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

 

“Phase 1” means the acquisition, engineering, procurement, design, development,
construction, installation, testing, completion and start-up of the Facility and
leasing of the Land, as authorized in the FERC Approval and any subsequent
amendments or supplements thereto, so that upon completion thereof the Project
has the ability to unload, store and revaporize LNG and redeliver regasified LNG
at a maximum gas redelivery rate of approximately 1.75 bcf/day, including
Peaking Gas (as defined in the COP TUA) and includes a pipeline to the pipeline
interconnection at Stratton Ridge, Texas but excludes any Phase 1 Addition.

 

“Phase 1 Addition” means a project, including any repair or improvement project,
(1) that is not part of Phase 1 and (2) for which costs and expenses are or will
be made or incurred by any Borrower Entity.

 

“Phase 1 Addition Budget” means, for a Phase 1 Addition (other than Phase 1
Addition (Stratton Ridge)), the plan and budget for such Phase 1 Addition
approved by the board of directors of General Partner in a vote where a majority
of the COP Directors voted in favor thereof.

 

“Phase 1 Addition (Stratton Ridge)” means the Phase 1 Addition solely for
underground storage capacity at or near Stratton Ridge, Texas.

 

“Phase 2 Expenditures” means any and all costs, expenses and expenditures made
or incurred or by or on behalf of Expansion or any of its Affiliates or their
secured lenders (or reimbursement thereto) relating to the acquisition,
engineering, procurement, design, development, construction, installation,
testing, completion, financing, insurance, startup, ownership, use, obtaining
title, equipping, possession, preservation, leasing, sub-leasing, operation,
maintenance, repair, improvement, management and/or conduct of any assets,
operation or business and all activities incidental or related to or in
connection with any of the foregoing.

 

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“Phase 2 Project” means a project, including any repair or improvement project,
for which Phase 2 Expenditures are or will be made or incurred which includes
any, all or none of the following: (a) a LNG storage tank of double containment
design, (b) a piled dock and unloading facilities, (c) vaporization capacity and
(d) at Borrower’s option and in lieu of the Phase 1 Addition (Stratton Ridge),
underground storage capacity at or near Stratton Ridge, Texas.

 

“Plan” shall mean, with respect to any Person, any employee benefit plan within
the meaning of Section 3(3) of ERISA, subject to Title I of ERISA, which (a) is
established, sponsored, maintained or administered by such Person or any ERISA
Affiliate of such Person, or for which such Person or any ERISA Affiliate of
such Person has an obligation to contribute or any liability or in which such
Person or any ERISA Affiliate of such Person participates, or (b) has since the
Closing Date been established, sponsored, maintained or administered for
employees of such Person or any of its current or former ERISA Affiliates or for
which such Person or any of its current or former ERISA Affiliates had an
obligation to contribute or any liability or in which such Person or any of its
current or former ERISA Affiliates participated.

 

“Plans and Specifications” means the plans and specifications relating to the
Project as set forth in or contemplated by any Construction Contract.

 

“Pre Closing COP Site Report” means the Environmental Due Diligence Study
Report, dated May 28, 2004, associated with the environmental assessment
performed on the Freeport LNG Property located on Quintana Island, Brazoria
County, Texas prepared for ConocoPhillips by Entrix, Inc. in connection with the
Review (as defined in the Exhibit G to the Omnibus Agreement) under
Section 7.1(d) of the Omnibus Agreement delivered to the Borrower on or prior to
Closing Date.

 

“Prime Rate” means the per annum rate of interest denominated as “Prime Rate” as
reported in the “Money Rates” Section of the Wall Street Journal.

 

“Principal Payment Date” has the meaning provided in Section 6.1(c)) of the
Credit Agreement.

 

“Principal Sum” has the meaning provided in Section 6.1(c) of the Credit
Agreement.

 

“Process Agent” has the meaning provided in Section 9.18(b) of the Credit
Agreement.

 

“Project” means, collectively, the Facility, the Land, the leasehold interests
pursuant to the Site Leases, the Easements and all other easements, leasehold
interests, licenses, permits, contract rights and other real and personal
property interests and title now owned or hereafter acquired by any Borrower
Entity or in which any Borrower Entity has any rights, including rights, title
and interest related to any Phase 2 Project acquired or obtained in connection
with the Shared Facilities Agreement, if any, but excluding any Phase 1 Addition
(Stratton Ridge) and any Phase 2 Project.

 

“Project Activity” has the meaning provided in the Security Agreement.

 

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“Project Completion Date” means the date set forth in the Independent Engineer
Completion Certificate.

 

“Project Costs” means (i) all costs and expenses reasonably and necessarily
incurred or to be incurred by the Borrower Entities to finance and complete
Phase 1 of the Project and achieve the Project Completion Date (including the
costs incurred to achieve final completion of the Construction Contracts,
including the Final Completion of the EPC Contract) in the manner contemplated
by the Transaction Documents, including the certain development and construction
costs incurred by or on behalf of the Borrower and its Affiliates mutually
agreed upon and listed on Schedule 5.20 to the Credit Agreement on the Closing
Date, all reasonable and necessary costs and expenses incurred in connection
with the negotiation and preparation of the Transaction Documents, all fees
payable in respect of the Construction Loans, and all other reasonable and
necessary expenses required for the financing, development, design,
construction, equipment procurement, installation, start-up and initial
operation of the Phase 1 of the Project, (ii) all Interest Expense and Operating
and Maintenance Costs incurred during the construction, installation and
start-up of Phase 1 of the Project, (iii) the cost and expenses of the Title
Insurance and any surveys under Sections 3.1(s), 3.1(t), 3.2(i) and 3.3(h) and
(iv) Channel Widening Costs.  “Project Costs” may include the reimbursement of
the Borrower or the Partners and their Affiliates for Budgeted Construction
Costs incurred and paid by or on behalf of the Borrower or its Affiliates in
respect of the Project prior to the Project Completion Date as certified by the
Independent Engineer.  “Project Costs” shall not include (a) payments of
principal of any Debt, (b) any payments of any kind to the Borrower, Expansion
or any of their respective Affiliates other than, in the case of this clause
(b), payments in respect of the reimbursement of Project Costs expressly
permitted above, (c) Phase 2 Expenditures, (d) any costs or expenses for TUA
Insurance or (e) any costs and expenses of any Phase 1 Addition.

 

“Project Document Claim” means any claim in respect of Performance Liquidated
Damages.

 

“Project Documents” means:

 

1.               the Non COP TUAs,

2.               the COP TUA,

3.               the Partnership Agreement and other material Charter Documents
of each Borrower Entity (other than the General Partner),

4.               the Stockholders Agreement,

5.               the Construction Advisory Services Agreement,

6.               the Construction Contracts,

7.               the EPC Guarantee, if any,

8.               the Management Fee Agreement,

9.               any Hedging Agreement,

10.         the Site Leases,

11.         the Memoranda of Site Lease,

12.         the Site Availability Letter,

13.         the Brazos Consent,

14.         the Consent Agreements,

15.         the Shared Facilities Agreement, if any,

 

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16.         the Secondment Agreement

17.         the Master Services Agreement,

18.         the Quintana Industrial District Contract,

19.         the Material Additional Project Documents, if any, and

20.         any replacement agreements of any of the foregoing.

 

“Project Manager” is an employee of ConocoPhillips and is the Project Manager
under the Construction Advisory Services Agreement.

 

“Project Participants” means each Limited Partner, each Borrower Entity, the EPC
Contractor, the EPC Guarantor, each party (other than the Borrower) to a Project
Document, each Shipper, and each Replacement Project Participant.

 

“Project Revenues” means, for any period, without duplication, the aggregate of
all revenues received by the Borrower Entities during such period from (i)
payments made to any Borrower Entity pursuant to any TUA, (ii) interest accrued
on, and other income derived from, the balance outstanding during such period in
the Accounts (including from Permitted Investments), (iii) the proceeds of any
General B.I./Delay Insurance, Debt Service B.I./Delay Insurance and TUA
Insurance, and (iv) the proceeds of any Delay Liquidated Damages; provided that
Project Revenues shall exclude, to the extent included, (1) net amounts
receivable under any Hedging Agreements, (2) proceeds payable in respect of any
insurance (other than any General B.I./Delay Insurance, Debt Service B.I./Delay
Insurance and TUA Insurance), (3) the proceeds of any Performance Liquidated
Damages and any liquidated damages payable to any Borrower Entity under
operation and maintenance agreement, if any, entered into between the Operator
and the Borrower for the Project in respect of performance deficiencies, and
(4) warranty or indemnity payments or damages payable to any Borrower Entity
under any Project Document.

 

“Project Schedule” shall mean the project schedule (or similar schedule of
required schedule milestone dates) under the EPC Contract.

 

“Projected Debt Service Coverage Ratio” means, for any period and on any date of
determination, a projection of the Debt Service Coverage Ratio for such period
using only the Project Revenue from Acceptable Use Agreements with a term of at
least two years remaining after the date of determination in the projection of
Project Revenue.

 

“Projections” means projections, expressions of view as to future circumstances
and other forward-looking statements.

 

“Property” means any property of any kind whatsoever, whether real, personal or
mixed and whether tangible or intangible, and any right or interest therein.

 

“Punchlist” shall have the meaning provided in the EPC Contract.

 

“Quarterly Distribution Date” means each Monthly Transfer Date occurring in the
months of January, April, July and October, commencing with the first such date
to occur at least six months after the Conversion Date.

 

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“Quintana Industrial District Contract” means the agreement dated May 5, 2004
between the Town of Quintana, Texas and the Site Lessee.

 

“Regulation T” means Regulation T of the Board of Governors of the Federal
Reserve system (or any successor).

 

“Regulation U” means Regulation U of the Board of Governors of the Federal
Reserve system (or any successor).

 

“Regulation X” means Regulation X of the Board of Governors of the Federal
Reserve system (or any successor).

 

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing into the
environment (including the abandonment or discarding of barrels, containers, and
other closed receptacles containing any Hazardous Material, but excluding
emissions from the engine exhaust of a properly maintained motor vehicle.

 

“Replacement Project Participant” means, with respect to any Project
Participant, any Person satisfactory to the Administrative Agent and having
credit, or acceptable credit support, equal to at least the lesser of (i) that
of the replaced Project Participant on the date that the applicable Project
Document was entered into, or (ii) “BBB–” by S&P and “Baa3” by Moody’s, that
pursuant to a definitive agreement reasonably satisfactory to the Administrative
Agent, assumes the obligations of the replaced Project Participant on terms and
conditions no less favorable to the Borrower Entity than those applicable to the
replaced Project Participant pursuant to the applicable Project Document.

 

“Required Lenders” means the Lenders holding more than *** of the sum of the
aggregate outstanding principal amount of the Loans but excluding the aggregate
outstanding principal amount of the Loans of any Defaulting Lenders.

 

“Requisition” means a Construction Requisition, a Restoration Requisition or a
Maintenance Requisition.

 

“Requisition Date” means each date specified in a Requisition as a date on which
moneys are requested by the Borrower to be withdrawn and transferred from the
Account to which such Requisition relates for the purpose set forth in such
Requisition.

 

“Reserve Account” means any of the following:

 

1.                                       Crest Reserve Account,

2.                                       Major Maintenance Reserve Account (if
required in accordance with Section 5.23 of the Credit Agreement),

3.                                       O&M Reserve Account, and

4.                                       Supplemental Reserve Account

5.                                       Working Capital Facility Reserve
Account.

 

“Reserve Account Guarantee” means any of the following:

 

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1.                                       Reserve Account Guarantee (CRA), which
means an unconditional guarantee agreement executed and delivered by an Eligible
Institution in favor of the Collateral Agent in respect of the Crest Reserve
Account satisfying the applicable criteria specified in Section 5.1(b) of the
Account Agreement;

 

2.                                       Reserve Account Guarantee (MMRA), which
means an unconditional guarantee agreement executed and delivered by an Eligible
Institution in favor of the Collateral Agent in respect of the Major Maintenance
Reserve Account satisfying the applicable criteria specified in Section 5.1(b)
of the Account Agreement;

 

3.                                       Reserve Account Guarantee (OMRA), which
means an unconditional guarantee agreement executed and delivered by an Eligible
Institution in favor of the Collateral Agent in respect of the O&M Reserve
Account satisfying the applicable criteria specified in Section 5.1(b) of the
Account Agreement;

 

4.                                       Reserve Account Guarantee (SRA), which
means an unconditional guarantee agreement executed and delivered by an Eligible
Institution in favor of the Collateral Agent in respect of the Supplemental
Reserve Account satisfying the applicable criteria specified in Section 5.1(b)
of the Account Agreement; and

 

5.                                       Reserve Account Guarantee (WCFRA),
which means an unconditional guarantee agreement executed and delivered by an
Eligible Institution in favor of the Collateral Agent in respect of the Working
Capital Facility Reserve Account satisfying the applicable criteria specified in
Section 5.1(b) of the Account Agreement.

 

“Reserve Account Letter of Credit” means any of the following:

 

1.                                       Reserve Account Letter of Credit (CRA),
which means an irrevocable standby letter of credit in respect of the Crest
Reserve Account satisfying the applicable criteria set forth in Section 5.1(b)
of the Account Agreement;

 

2.                                       Reserve Account Letter of Credit
(MMRA), which means an irrevocable standby letter of credit in respect of the
Major Maintenance Reserve Account satisfying the applicable criteria set forth
in Section 5.1(b) of the Account Agreement;

 

3.                                       Reserve Account Letter of Credit
(OMRA), which means an irrevocable standby letter of credit in respect of the
O&M Reserve Account satisfying the applicable criteria set forth in
Section 5.1(b) of the Account Agreement;

 

4.                                       Reserve Account Letter of Credit (SRA),
which means an irrevocable standby letter of credit in respect of the
Supplemental Reserve Account

 

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satisfying the applicable criteria set forth in Section 5.1(b) of the Account
Agreement; and

 

5.                                       Reserve Account Letter of Credit
(WCFRA), which means an irrevocable standby letter of credit in respect of the
Working Capital Facility Reserve Account satisfying the applicable criteria set
forth in Section 5.1(b) of the Account Agreement.

 

“Reserve Account Support Instrument” means, for a given Reserve Account, an
applicable Reserve Account Guarantee or an applicable Reserve Account Letter of
Credit, as indicated pursuant to Section 5.1(c) of the Account Agreement.

 

“Restoration Date Certain” has the meaning provided in the definition of
Approved Restoration Plan set forth in Appendix A to the Credit Agreement.

 

“Restoration Period” means, with respect to any Restoration, the period of time
required to Restore the Project ending on the earlier of (a) the complete
Restoration of the applicable Affected Property and (b) the applicable
Restoration Date Certain as it may be extended in accordance with the definition
of Approved Restoration Plan.

 

“Restoration Requisition” has the meaning provided in the Account Agreement.

 

“Restoration Work” means the design, engineering, construction, testing and
other work and any contracts and other arrangements for the performance thereof
with respect to the Restoration of Affected Property.

 

“Restore” means, with respect to any Affected Property, to rebuild, repair,
restore or replace such Affected Property in accordance with an approved
Restoration Plan.  The term “Restoration” has a correlative meaning.

 

“Restricted Payment” means, with respect to any Person, (i) the declaration and
payment of distributions, dividends or any other similar payment made to any
direct or indirect owner of the Capital Stock of such Person in cash, Property,
obligations or other securities, (ii) the withdrawal by a direct owner of the
Capital Stock of such Person, or the retirement, redemption, reacquisition or
exercise of appraisal rights with respect to, the Capital Stock of such Person,
or similar actions (iii) any payment of the principal of or interest or other
amounts owing on any Subordinated Debt, (iv) other than the Loans, the making of
any loan, advances or other credit extension to or for the benefit of any
Affiliate or (v) any Affiliate Payment.

 

“Revenue Account” has the meaning provided in the Account Agreement.

 

“S&P” means Standard & Poor’s Rating Group.

 

“Scheduled Principal Payments” means the scheduled amounts payable in respect of
the principal of the Loans pursuant to Section 6.1(c) of the Credit Agreement.

 

“Secondment Amendment” means the secondment agreement dated July 2, 2004, by and
between ConocoPhillips and the Borrower.

 

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“Secured Parties” means, collectively, the Agents and the Lenders.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Security Agreement” means the pledge and security agreement between the
Borrower, the Collateral Agent, the Subsidiaries of the Borrower from time to
time parties thereto and the Subsidiaries of the General Partner from time to
time parties thereto dated as of the Closing Date.

 

“Security Documents” means each of the Account Agreement, the Deed of Trust, the
Security Agreement, the Brazos Consent, each Consent Agreement, the Subsidiary
Guaranty, the Equity Pledges and any other documents necessary to create,
perfect, provide priority of or continue a Lien on any of the Collateral,
including documents executed, delivered and/or filed under Section 5.30 of the
Credit Agreement, and all Uniform Commercial Code financing statements and other
filings, recordings or registrations required by the Credit Agreement or
Applicable Law to be filed or made in respect of any such Security Document.

 

“Senior Debt Account” has the meaning provided in the Account Agreement.

 

“Services Quantity Increase Agreement” means the Services Quantity Increase
Agreement dated as of July 2, 2004 between ConocoPhillips and the Borrower.

 

“Shared Accounts” has the meaning provided in the Account Agreement.

 

“Shared Facilities Agreement” means the agreement, if any, described in
Section 2.16 of the Credit Agreement hereof and relating to, among other things,
the Project and the current and future Phase 2 Projects.

 

“Shipper” means a shipper counterparty to a TUA with rights to terminal services
from the Project.

 

“Site Availability Letter” means the letter dated April 6, 2004 from the Site
Lessee to ConocoPhillips regarding the availability of land to build a terminal
facility on Quintana Island, Texas and to transport natural gas to Stratton
Ridge, Texas.

 

“Site Leases” means, collectively, (i) that certain Ground Lease and Development
Agreement between Brazos River Authority and Borrower dated December 12, 2002;
(ii) the Assignment, Consent and Amendment dated as of January 28, 2004, by and
among Brazos River Authority, the Borrower and the Site Lessee; (iii) that
certain Ground Lease and Slip Development Agreement between Brazos River
Authority and the Site Lessee dated January 19, 2004; and (iv) that certain
Ground Lease and Dock Development Agreement between Brazos River Authority and
the Site Lessee dated January 28, 2004.

 

“Site Lessee” means FLNG Land, Inc., a Delaware corporation and wholly-owned
direct Subsidiary of the Borrower.

 

“Smith” means Michael S. Smith, a resident of Texas with a principal office
located at 1200 Smith Street, Suite 600 Houston, TX  77002 on the Closing Date.

 

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“Stock Collateral” has the meaning provided in the Pledge Agreement.

 

“Stock Purchase Agreement” means the Stock Purchase Agreement dated as of
July 2, 2004 by and between Smith and ConocoPhillips.

 

“Stockholders Agreement” means the Stockholders Agreement dated as of July 2,
2004 among FGP, Smith and ConocoPhillips.

 

“Subsidiary” means, for any Person, any other Person (other than an individual)
of which at least a majority of the Voting Stock of such first Person is at the
time directly or indirectly owned or controlled by such second Person or one or
more Subsidiaries of such second Person or by such second Person and one or more
Subsidiaries of such second Person.  Notwithstanding the foregoing, (1) none of
the Borrower, the General Partner and their Subsidiaries shall be deemed to be a
Subsidiary of ConocoPhillips or any of its Subsidiaries and (2) none of
Expansion and its Subsidiaries shall be deemed to be Subsidiaries of the
Borrower, the General Partner, ConocoPhillips or any of their respective
Subsidiaries.

 

“Subsidiary Guaranty” means the guaranty dated as of the Closing Date made by
the Site Lessee and the other Subsidiaries of Borrower and/or General Partner
thereafter party thereto in favor of the Collateral Agent guaranteeing the
Obligations.

 

“Substantial Completion” shall have the meaning provided in the EPC Contract.

 

“Supplemental Costs” means the cumulative Project Costs (but solely those
Project Costs actually incurred) which exceed the aggregate undiscounted amount
equal to (1) $*** of the Project Costs (excluding the Channel Widening Costs)
and (2) Channel Widening Costs, but excluding any Interest Expense on such
amounts in clauses (1) and (2).

 

“Tax” means any tax, assessment, levy, impost, duty, deduction, fee, payment,
withholding or other charge of whatever nature, and any interest and penalties
thereon, required or imposed by any Applicable Law, including any by rule,
regulation, order, interpretation, ruling or official directive of any
Governmental Authority, but excluding, in the case of any Lender, (a) such taxes
(including income taxes or franchise taxes) as are imposed on or measured by the
net income of such Lender by the United States or by the jurisdiction (or any
political subdivision thereof) under the Applicable Laws of which such Lender is
organized or maintains its Applicable Lending Office, other than any such taxes
imposed on amounts payable under Section 2.10(c)(1) or (4) of the Credit
Agreement, and (b) in the case of any Foreign Lender, any withholding tax that
is imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party to this Agreement (or designates a new Applicable Lending
Office) or is attributable to such Foreign Lender’s failure to comply with
Section 2.10(f) of the Credit Agreement, except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new Applicable Lending Office (or assignment), to receive additional amounts
from the Borrower with respect to such withholding tax pursuant to Section 2.10.

 

“Technip” means Technip USA Corporation, a corporation organized and existing
under the laws of the State of Delaware.

 

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“Term Date” means the earlier to occur of (i) the Conversion Date and (ii) the
Date Certain; provided, that, if such day is not a Business Day, the Term Date
shall be the next succeeding Business Day.

 

“Term Loan Commitment” means, for each Lender, the aggregate amount of such
Lender’s Tranche A Term Loan Commitment and Tranche B Term Loan Commitment.

 

“Term Loans” means the Tranche A Term Loans and the Tranche B Term Loans.

 

“Term Notes” means the Tranche A Term Notes and the Tranche B Term Notes.

 

“Title Insurance” has the meaning provided in Section 3.1(s) of the Credit
Agreement.

 

“Title Insurance Company” means Stewart Title Guaranty Company.

 

“Total Commitment” means, at any time, the Construction Loan Commitments of the
Lenders and the Term Loan Commitments of the Lenders.

 

“TPS” means Third Party Supplemental.

 

“TPS Accounts” has the meaning provided in the Account Agreement.

 

“TPS Agents” means, collectively, the administrative agent, the collateral agent
and the depositary agent, if any, or other similar agent for and on behalf the
TPS Lenders appointed in or pursuant to the TPS Financing Documents.

 

“TPS Collateral” means all Property that, in accordance with the terms of the
security documents entered into in connection with the TPS Loans, is intended to
be subject to any Lien in favor of any or all of the TPS Secured Parties as
security for the TPS Obligations.

 

“TPS Financing Documents” means, collectively, the notes, the credit agreement,
the security documents and any other similar or related documents executed in
connection with the making of the TPS Loans other than opinions and
certificates.

 

“TPS Lender” means the lenders of the TPS Loans.  No such lender may be an
Affiliate of the Borrower or Expansion.

 

“TPS Loans” means the loans made to finance *** of the Supplemental Costs
contemplated by Section 2.15(a)(2) and shall not mean the Tranche B Loans.

 

“TPS O&M Percentage” means, for a given period, the percentage of the Operating
and Maintenance Costs relating to the Non-COP TUAs for such period, as
established from time to time in the Operating Budget.

 

“TPS Obligations” means, collectively, all loans, advances, Debts, debts,
liabilities, and obligations, howsoever arising or owed by any and all Borrower
Entities under any or all TPS Financing Documents or otherwise to any TPS
Secured Party of every kind and

 

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description (whether or not evidenced by any note or instrument and whether or
not for the payment of money), direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter arising, including all interest,
fees, charges, expenses, attorneys’ fees and consultants’ fees chargeable to the
Borrower; and which, for the avoidance of doubt, includes (a) any and all
amounts advanced by any TPS Secured Party in order to preserve the TPS
Collateral or to preserve the related Liens; (b) in the event of any enforcement
action, the expenses of retaking, holding, preparing for sale or lease, selling
or otherwise disposing of or realizing on the TPS Collateral, or of any exercise
by any Secured Party of its rights under the TPS Financing Documents, together
with attorneys’ fees and court costs and (c) performance of its obligations
under the documents executed in connection therewith.

 

“TPS Secured Parties” means, collectively, the TPS Agents and the TPS Lenders.

 

“Tranche A Commitment” means the Tranche A Construction Loan Commitment and
Tranche A Term Loan Commitment

 

“Tranche A Construction Loan Commitment” means, as to any Lender, the applicable
amount set forth opposite such Lender’s name in the column “Tranche A” in Annex
I to the Credit Agreement.

 

“Tranche A Construction Loan Maturity Date” means the Date Certain.

 

“Tranche A Construction Loans” has the meaning provided in Section 2.1 of the
Credit Agreement

 

“Tranche A Construction Note” has the meaning provided in Section 2.7 of the
Credit Agreement.

 

“Tranche A Loans” means Tranche A Term Loans and Tranche A Construction Loans.

 

“Tranche A Rate”, for any day, means *** per annum.

 

“Tranche A Term Loan” has the meaning provided in Section 2.2 of the Credit
Agreement.

 

“Tranche A Term Loan Commitment” means, for each Lender, the aggregate amount of
Tranche A Construction Loans of such Lender as of the Conversion Date (after
giving effect to any Borrowing of Tranche A Construction Loans on such date in
accordance with Section 2.2 of the Credit Agreement and any prepayment of
Tranche A Construction Loans on such date in accordance with ARTICLE 6 of the
Credit Agreement).

 

“Tranche A Term Loan Maturity Date” means the date which is the twelfth
anniversary of the earlier to occur of (a) the first Payment Date occurring
after the Conversion Date and (b) ***.

 

“Tranche A Term Note” has the meaning provided in Section 2.7 of the Credit
Agreement.

 

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“Tranche B Commitment” means the Tranche B Construction Loan Commitment and the
Tranche B Term Loan Commitment

 

“Tranche B Construction Loan Commitment” means, as to any Lender, the applicable
amount set forth opposite such Lender’s name in the column “Tranche B” in Annex
I to the Credit Agreement.

 

“Tranche B Construction Loan Maturity Date” means the Date Certain.

 

“Tranche B Construction Loans” has the meaning provided in Section 2.1 of the
Credit Agreement

 

“Tranche B Construction Note” has the meaning provided in Section 2.7 of the
Credit Agreement.

 

“Tranche B Loans” the Tranche B Term Loan and Tranche B Construction Loans

 

“Tranche B Obligations” means, collectively, all loans, advances, Debts, debts,
liabilities, and obligations, howsoever arising or owed by any and all Borrower
Entities with respect to the Tranche B Loans, including all interest, fees,
charges, expenses, attorneys’ fees and consultants’ fees chargeable to the
Borrower.

 

“Tranche B Rate”, for any day, means Prime Rate plus *** per annum.

 

“Tranche B Term Loan” has the meaning provided in Section 2.2 of the Credit
Agreement.

 

“Tranche B Term Loan Commitment” means, for each Lender, the aggregate amount of
Tranche B Construction Loans of such Lender as of the Conversion Date (after
giving effect to any Borrowing of Tranche B Construction Loans on such date in
accordance with Section 2.1 of the Credit Agreement and any prepayment of
Tranche B Construction Loans on such date in accordance with ARTICLE 6 of the
Credit Agreement).

 

“Tranche B Term Loan Maturity Date” means the date which is the *** anniversary
of the date on which the Construction Loan Availability Period ended.

 

“Tranche B Term Note” has the meaning provided in Section 2.7 of the Credit
Agreement.

 

“Transaction Documents” means the Financing Documents and the Project Documents.

 

“Transfer Date Certificate” means, in respect of a Monthly Transfer Date, an
Officer’s Certificate substantially in the form of Exhibit D to the Account
Agreement (or another Officer’s Certificate in the form consented to by the
Administrative Agent) and appropriately completed setting forth (i) the amounts
to be withdrawn, transferred or segregated pursuant to Article 4 of the Account
Agreement for such Monthly Transfer Date, (ii) the Persons to whom and the dates
on which such amounts withdrawn are to be paid, (iii) the address or wire
transfer

 

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instructions required for such payments and the priority of such payments, all
as in accordance with Article 4 of the Account Agreement.

 

“TUA” means a terminal use agreement entered into in connection with the Project
relating to rights to terminal services from the Project, as amended, modified
and supplemented.

 

“TUA B.I. Insurance” has the meaning provided in the Account Agreement.

 

“TUA Claims Account” has the meaning provided in the Account Agreement.

 

“TUA Delay Insurance” has the meaning provided in the Account Agreement.

 

“TUA Insurance” means TUA Delay Insurance and TUA B.I. Insurance.

 

“Type”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or, if applicable, the Loans comprising such Borrowing, are Construction
Loans or Term Loans.

 

“UCC” and “Uniform Commercial Code”, each, means the Uniform Commercial Code as
from time to time in effect in the State of New York; provided, however, that,
in the event that, by reason of mandatory provisions of law, any of the
attachment, perfection or priority of the Secured Parties’ Lien on any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, each of the terms “UCC” and
“Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions related to
such provisions.

 

“UCC Searches” has the meaning provided in Section 3.1(k) of the Credit
Agreement.

 

“United States” and “U.S.” shall each mean the United States of America.

 

“Voting Stock,” with respect to any Person, means the Capital Stock having by
the terms thereof ordinary voting power to elect a majority of the board of
directors or other Persons performing similar functions for such Person (whether
or not at the time Capital Stock of any other class or classes of such Person
shall have or might have voting power by reason of the happening of any
contingency), even if the right to vote has been suspended by the happening of a
contingency.

 

“Work” means the obligations, duties, standards, practices, responsibilities and
similar “work” of a contractor that is the subject matter of a Construction
Contract, including any work product, and the matters relating thereto.

 

“Working Capital Facility” means the working capital facility pursuant to which
Debt permitted by Section 5.13(d) of the Credit Agreement may be outstanding.

 

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“Working Capital Facility Reserve Account” has the meaning provided in the
Account Agreement.

 

2.                                       Rules of Interpretation.  In each
Financing Document, unless otherwise indicated:

 

(a)                                  each reference to, and the definition of,
any document (including any Transaction Document) shall be deemed to refer to
such document as it may be amended, supplemented, revised or modified from time
to time in accordance with its terms and, to the extent applicable, the terms of
the Credit Agreement;

 

(b)                                 each reference to a Applicable Law or
Governmental Approval, or section, chapter or other subdivision thereof, shall
be deemed to refer to such Applicable Law or Governmental Approval as the same
may be amended, supplemented or otherwise modified or substituted from time to
time;

 

(c)                                  any reference to a Person in any capacity
includes a reference to its permitted successors and assigns in such capacity
and, in the case of any Governmental Authority, any Person succeeding to any of
its functions and capacities;

 

(d)                                 references to days shall refer to calendar
days unless Business Days are specified; references to weeks, months or years
shall be to calendar weeks, months or years, respectively;

 

(e)                                  all references to an “Article,” “Section,”
“Appendix,” “Annex,” “Schedule” or “Exhibit” are to an Article or Section of
such Financing Document or to an Appendix, Annex, Schedule or Exhibit attached
thereto;

 

(f)                                    any table of contents, Article headings,
Section headings and other captions in a Financing Document are for the purpose
of reference only and do not affect the interpretation and construction of any
Financing Document;

 

(g)                                 defined terms in the singular shall include
the plural and vice versa, and the masculine, feminine or neuter gender shall
include all genders;

 

(h)                                 the words “hereof,” “herein” and
“hereunder,” and words of similar import, when used in any Financing Document,
shall refer to such Financing Document as a whole and not to any particular
provision of such Financing Document;

 

(i)                                     the words “include,” “includes” and
“including” are deemed to be followed by the phrase “without limitation”; and

 

(j)                                     where the terms of any Financing
Document require that the approval, opinion, consent or other input of any
Secured Party be obtained, such requirement shall be deemed satisfied only where
the requisite approval, opinion, consent or other input is given by or on behalf
of the relevant party in writing.

 

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APPENDIX B

to

Credit Agreement

 

Intercreditor Arrangement Between Secured Parties and TPS Secured Parties

 

Summary of Terms and Conditions

 

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

 

INTERCREDITOR AND SUBORDINATION AGREEMENT

 

TERM SHEET

 

Parties

CONOCOPHILLIPS COMPANY, as Lender (“COP Lender”) under the Credit Agreement
dated as of July 2, 2004 (the “COP Credit Agreement”), by and among Freeport LNG
Development, L.P., as Borrower, Freeport LNG-GP, Inc., as General Partner, COP
Lender, various financial institutions from time to time parties thereunder, as
Lenders, ConocoPhillips Company, as Administrative Agent, ConocoPhillips
Company, as Collateral Agent, and The Bank of New York, as Depositary Agent;

 

 

CONOCOPHILLIPS COMPANY, as Administrative Agent (“COP Agent”) under the COP
Credit Agreement;

 

 

THE ROYAL BANK OF SCOTLAND PLC, as Lender (“TPS Lender”) under the Credit
Agreement dated as of [                    ] (the “TPS Credit Agreement”), by
and among Freeport LNG Development, L.P., as Borrower, Freeport LNG-GP, Inc., as
General Partner, TPS Lender, as Sole Lead Arranger and Lender, various financial
institutions from time to time parties thereunder, as Lenders, The Royal Bank of
Scotland plc, as Administrative Agent, and The Bank of New York, as Collateral
Agent;

 

 

THE ROYAL BANK OF SCOTLAND PLC, as Administrative Agent (“TPS Agent”) under the
TPS Credit Agreement;

 

 

THE BANK OF NEW YORK, as Collateral Agent (“Collateral Agent”); and

 

 

FREEPORT LNG DEVELOPMENT, L.P., as Borrower under each of the COP Credit
Agreement and the TPS Credit Agreement (“Borrower”).

 

Defined Terms

Capitalized terms that are used but not in this Term Sheet shall have the
meanings given to such terms in the COP Credit Agreement and Collateral Account
Agreement, as applicable.  The following terms shall have the meanings set forth
below:

 

 

[NOTE: Allocation of the various Accounts and related security into COP
Collateral, TPS Collateral and Shared Collateral subject to final resolution of
Collateral Account Agreement]

 

 

“COP Collateral” means the following collateral granted to the Collateral Agent
for the benefit of the COP Secured Parties: the COP TUA and any related service
quantity increase agreement (but excluding the COP Royalty), the Construction
Account, the COP Debt Payment Account, the

 

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COP Redemption Account, the COP Revenue Account, the COP Supplemental Debt
Payment Account, the Crest Reserve Account, the Distribution Account, the
Distribution Suspense Account, the Working Capital Facility Reserve Account,
[the Reserve Account Guarantee (SRA), the Reserve Account Letter of Credit
(SRA], the Reserve Account Guarantee (WCFRA), the Reserve Account Letter of
Credit (WCFRA)], and all intangibles and fixed assets of the Borrower that are
not otherwise expressly defined below as either Shared Collateral or TPS
Collateral.

 

 

“Shared Collateral” means the following collateral granted to the Collateral
Agent for the benefit of the COP Secured Parties and the TPS Secured Parties as
provided below: all Delay Liquidated Damages, all Loss Proceeds [NOTE: this
includes proceeds received in respect of an Expropriation Event, but excludes
business interruption insurance proceeds], all Insurance Proceeds [NOTE: this
excludes proceeds from general liability, delayed completion insurance and
business interruption insurance], all Performance Liquidated Damages, all
Project Document Claims, all liquidated damages payable under any operation and
maintenance agreement, all [Debt Service B.I./Delay Insurance], all FOC
Insurance, any other insurance proceeds, all warranty or indemnity payments or
damages payable to the Borrower under any Project Document (but excluding any
warranty or indemnity payments or damages payable to the Borrower under any TUA,
which are to be paid into the appropriate TUA Revenue Account), the Loss
Proceeds Account, the Redemption Account, the O&M Account, the O&M Reserve
Account, the Reserve Account Guarantee (OMRA), the Reserve Account Letter of
Credit (OMRA), the Major Maintenance Reserve Account, the Reserve Account
Guarantee (MMRA), the Reserve Account Letter of Credit (MMRA), and all interest
accrued on and other income derived from the balance outstanding during the
applicable period in the aforementioned Accounts and related security (including
from Permitted Investments).

 

 

[NOTE:  Shared Collateral to be revisited in connection with finalizing TPS
Credit Agreement and Amended and Restated Collateral Account Agreement]

 

 

“TPS Collateral” means the following collateral granted to the Collateral Agent
for the benefit of the TPS Secured Parties: (a) a first priority Lien on the COP
Royalty, all or any portion of the Non-COP TUAs, including amounts payable (and
other obligations performable) by each of the Non-COP Shippers thereunder, the
TPS Reserve Account, the TPS Revenue Account, the TPS TUA Revenue Account, the
TPS Debt Reserve Account, the TPS Debt Payment Account, the TPS TUA Debt Payment
Account, the TPS Construction Account, the Reserve Account Guarantee (TPSDRA),
the Reserve Account Letter of Credit (TPSDRA), the COP Royalty Payment Account
(subject to potential disgorgement and

 

2

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repayment to COP Shipper to the extent that any credit becomes due to COP
Shipper resulting from any Annual Shortfall Reconciliation made under
Section 4.6 of the COP TUA) [NOTE: consider whether the COP Royalty should
simply be paid into the TPS Revenue Account, subject to the same disgorgement
treatment], all [TUA B.I. Insurance, all TUA Delay Insurance], and (b) a second
priority Lien on the Borrower’s interest in the Accounts and related security
other than the accounts and related security referenced in sub-clause (a) above.

 

Appointment of
Collateral and

 

Depositary Agent

The Bank of New York shall serve as Collateral and Depositary Agent as follows:
(a) the COP Agent and the TPS Agent shall appoint The Bank of New York to serve
as Collateral and Depositary Agent for the joint benefit of the COP Secured
Parties and the TPS Secured Parties with respect to the Shared Collateral, (b)
the Bank of New York shall continue to serve as the Depositary Agent for the
benefit of the COP Secured Parties with respect to the COP Collateral, and shall
be appointed to serve as Collateral Agent for the benefit of the COP Secured
Parties with respect to the COP Collateral, and (c) the TPS Agent shall appoint
the Bank of New York to serve as Collateral  and Depositary Agent for the
benefit of the TPS Secured Parties with respect to the TPS Collateral, all
subject to the terms and conditions to be set out in the necessary amendment to
and restatement of the Collateral Account Agreement.

 

Priority of

 

Security Interests

COP Collateral.  The Collateral Agent shall have and maintain a first priority
senior secured Lien on and against the COP Collateral for the benefit of the COP
Secured Parties.

 

 

The Collateral Agent shall have and maintain a second priority senior secured
Lien for the benefit of the TPS Secured Parties on and against that portion of
the COP Collateral constituting all Accounts and related security other than the
Accounts and related security in which the TPS Secured Parties enjoy the benefit
of a first priority senior secured Lien.

 

 

Shared Collateral.  The Collateral Agent shall maintain a first priority senior
secured Lien on and against the Shared Collateral in favor of both the COP
Secured Parties and the TPS Secured Parties.  The exercise of the party’s
respective rights in, and the application of proceeds in respect of, the Shared
Collateral shall be as set out in the section below entitled “Exercise of Rights
to Shared Collateral.”

 

 

TPS Collateral.  The Collateral Agent shall have and maintain (a) a first
priority senior secured Lien for the benefit of the TPS Secured Parties on and
against that portion of the TPS Collateral constituting the Lien on the

 

3

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COP Royalty, a Lien on all or any portion of the Non-COP TUAs, including amounts
payable (and other obligations performable) by each of the Non-COP Shippers
thereunder, a Lien on the TPS Reserve Account, the TPS Revenue Account, the TPS
TUA Revenue Account, the TPS Debt Reserve Account, the TPS Debt Payment Account,
the TPS TUA Debt Payment Account, the TPS Construction Account, the Reserve
Account Guarantee (TPSDRA), the Reserve Account Letter of Credit (TPSDRA), and
the COP Royalty Payment Account, and (b) a second priority senior secured Lien
for the benefit of the TPS Secured Parties on and against that portion of the
TPS Collateral constituting of all Accounts and related security other than
those in which the TPS Secured Parties have a first priority Lien as provided
above.

 

 

The Collateral Agent shall be entitled to have and maintain a second priority
senior secured Lien for the benefit of the COP Secured Parties on and against
the TPS Collateral described in sub-clause (a) of the immediately preceding
paragraph, and a first priority senior secured Lien for the benefit of the COP
Secured Parties on and against the TPS Collateral described in sub-clause (b) of
the immediately preceding paragraph.

 

Acknowledgment

 

of Liens;

 

Subordination

Each of the COP Lenders, COP Secured Parties and COP Agent acknowledge the
priority of the TPS Secured Parties’ Lien and security interests in and to the
TPS Collateral as set out in the section above entitled “Priority of Security
Interests”, and agree to subordinate their rights and interests to those of the
TPS Secured Parties accordingly. For so long as the TPS Secured Parties have
such Liens on and against the TPS Collateral, the COP Lenders, COP Secured
Parties and COP Agent shall not exercise or cause to be exercised any rights in
respect of such TPS Collateral in any manner whatsoever (other than taking any
necessary actions in order to perfect and maintain a second priority Lien)
without the prior written consent of the TPS Lenders.

 

 

Each of the TPS Lenders, TPS Secured Parties and TPS Agent acknowledge the
priority of the COP Secured Parties’ Lien and security interests in and to the
COP Collateral, and agree to subordinate their rights and interests to those of
the COP Secured Parties accordingly. For so long as the COP Secured Parties have
such a Lien on and against the COP Collateral, the TPS Lenders, TPS Secured
Parties and TPS Agent shall not exercise or cause to be exercised any rights in
respect of such COP Collateral in any manner whatsoever (other than taking any
necessary actions in order to perfect and maintain a second priority Lien)
without the prior written consent of the COP Lenders.

 

4

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Any proceeds in respect of the disposition in an enforcement action by any of
the Secured Parties of Collateral that are in excess of the amount necessary to
satisfy the outstanding indebtedness and other amounts due under the applicable
Credit Agreement and/or Security Documents shall be held in trust by the
Collateral Agent for the benefit of the non-enforcing Secured Parties.

 

Application of

 

Prepayments

All amounts in respect of Shared Collateral that are received by the Collateral
Agent from the Borrower which are to be utilized in connection with a permitted
prepayment under Section [6.2] of the COP Credit Agreement under circumstances
where an optional prepayment is permitted to be made under Section [     ] of
the TPS Credit Agreement, or vice versa, shall be allocated by the Collateral
Agent pursuant to an Allocation Certificate provided by the Borrower, which
Allocation Certificate shall provide that such payment shall be made to the COP
Lenders and the TPS Lenders in an amount equal to their ratable share of the
aggregate outstanding principal amount of the COP Loans and TPS Loans, together
with all accrued but unpaid interest in respect of each.

 

 

The Intercreditor and Subordination Agreement shall provide a mechanism for the
allocation and payment of (a) all amounts in respect of Shared Collateral that
are received by the Collateral Agent from the Borrower which are to be utilized
in connection with a mandatory prepayment under Section 6.3 of the COP Credit
Agreement under circumstances where a mandatory prepayment is also required to
be made under Section [     ] of the TPS Credit Agreement, or vice versa, and
(b) all amounts received by the Collateral Agent from the Borrower which are to
be utilized in connection with a permitted prepayment under Section 6.2 of the
COP Credit Agreement or a mandatory prepayment under Section 6.3 of the COP
Credit Agreement under circumstances where there is no corresponding intention
of the Borrower to make an optional prepayment under Section [     ] of the TPS
Credit Agreement or obligation of the Borrower to make a mandatory prepayment
under Section [     ] of the TPS Credit Agreement, or vice versa.

 

 

The Borrower will covenant and agree to deliver to the Collateral Agent an
Allocation Certificate in connection with any permitted or mandatory prepayment
in accordance with the terms to be established in the Intercreditor and
Subordination Agreement, and any payment by the Collateral Agent pursuant
thereto shall be made in accordance with the Allocation Certificate.  The form
of Allocation Certificate shall be mutually agreed and attached as Exhibit A to
the Intercreditor and Subordination Agreement.

 

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[NOTE:  Application of Prepayments to be revisited in connection with
finalization of TPS Credit Agreement]

 

Exercise of Rights to

 

Shared Collateral

Upon the occurrence and continuation of an Event of Default under either or both
of the COP Credit Agreement and the TPS Credit Agreement (a “Trigger Event”),
the COP Secured Parties and the TPS Secured Parties shall consult with one
another and coordinate any enforcement or other action in respect of the Shared
Collateral in a manner [that best preserves the overall value of such Shared
Collateral; provided that COP shall have a reasonable period to direct
application of Loss Proceeds and insurance in connection with any Restoration of
the LNG Facility].

 

 

Proceeds received in respect of such Shared Collateral (net of enforcement costs
and expenses and any fees that are properly due and payable to the Collateral
Agent) shall be applied by the Collateral Agent against outstanding indebtedness
and other amounts due under (A) the COP Credit Agreement and/or the COP Security
Documents, and (B) the TPS Credit Agreement and/or the TPS Security Documents in
the following manner: (1) distributions shall be made to each of the COP Secured
Parties and the TPS Secured Parties in an amount equal to such lenders’ ratable
share of the aggregate outstanding principal amount of the COP Loans and TPS
Loans, together with all other amounts due (including accrued but unpaid
interest), until such time as all outstanding indebtedness and other amounts due
under the TPS Credit Agreement and/or TPS Security Documents have been satisfied
in full, and (2) thereafter, one hundred percent (100%) of the remaining
proceeds in respect of the disposition of the Shared Collateral shall be
distributed to the COP Secured Parties and applied against the outstanding
indebtedness and other amounts due under the COP Credit Agreement and/or COP
Security Documents.

 

 

Liquidation

 

Proceeds

The Intercreditor and Subordination Agreement will contain a mechanism whereby,
in the event that all or any portion of the physical assets constituting the
Phase 1 LNG Facilities are transferred or disposed of under circumstances where
the LNG Facilities will no longer be operated in a manner that will provide Dow
and COP with the ability to receive the Service Quantity (as defined in the
respective TUA), any proceeds actually received by the COP Secured Parties in
respect of such assets, net of reasonable costs of enforcement, shall be shared
between the COP Secured Parties and the TPS Secured Parties ratably, in
accordance with their respective percentages of the total outstanding debt under
both the COP Loans and the TPS Loans at the time of such sale.

 

6

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Coordination as to

 

Certain Actions

COP Agent and TPS Agent shall agree and jointly exercise their approval rights
in connection with any replacement of the Collateral Agent, Independent Engineer
and/or Insurance Advisor.  [NOTE: COP and TPS Lenders to consult on the
retention and any proposed replacement of the Independent Engineer and/or
Insurance Advisor prior to the closing of the TPS Credit Facilities.]

 

 

 

Decisions of the senior secured lenders as to whether to pursue a Restoration of
the Project following a Loss Event (including any partial Expropriation) shall
be made by the COP Agent after consultation with the TPS Agent.

 

 

 

The Intercreditor and Subordination Agreement will contain agreed provisions
that address (a) the amendment or waiver of any provision of the COP Credit
Agreement or the other COP Financing Documents, or consent to any amendment or
waiver of any provision of certain other Project Documents, by the COP Agent
and/or the COP Lenders, and (b) the amendment or waiver of any provision of the
TPS Credit Agreement or the other TPS Financing Documents, or consent to any
amendment or waiver of any provision of certain other Project Documents, by the
TPS Agent and/or the TPS Lenders.  In any case where such amendment or waiver
shall require the prior written consent of the other party/parties, the
Intercreditor and Subordination Agreement will provide that such consent shall
not unreasonably be withheld.

 

 

Non-Disturbance

 

Obligations

The Intercreditor and Subordination Agreement will contain provisions whereby
the COP Secured Parties agree that (a) in enforcing their rights under the COP
Credit Agreement and/or the COP Financing Documents against the Borrower, the
COP Collateral and/or the COP Secured Parties’ interest in the Shared
Collateral, the COP Secured Parties will do so in a manner that does not
interfere with each of the Non-COP Shippers’ continued ability to receive the
Service Quantity as provided in the Non-COP TUAs; provided however, that such
non-disturbance obligation shall continue for only so long as the respective
Non-COP Shipper is not in default of any material obligations to Borrower under
the applicable Non-COP TUA, and (b) in enforcing their rights under the TPS
Credit Agreement and/or the TPS Financing Documents (i) against the TPS
Collateral and/or the TPS Secured Parties’ interest in the Shared Collateral (as
opposed to the Borrower itself), the TPS Secured Parties will do so in a manner
that does not interfere with COP Shipper’s continued ability to receive the
Service Quantity as provided in the COP TUA; provided however, that such
non-disturbance obligation shall continue for only so long as COP Shipper is not
in default of any material obligations to Borrower under the COP TUA, and (ii)
against the Borrower (as opposed

 

7

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to the TPS Collateral and/or the TPS Secured Parties’ interest in the Shared
Collateral), they will provide the COP Secured Parties with copies of all
notices sent to the Borrower in connection with such enforcement action at the
same time that such notices are sent to the Borrower; provided however, that
failure to timely provide any such notice to the COP Secured Parties will not
provide an independent basis for liability of the TPS Secured Parties to the COP
Secured Parties.

 

 

TPS Loan

 

Purchase Option

The COP Lenders shall, at all times on [     ] days written notice from the COP
Agent to the TPS Agent (the “Notice of Exercise”), have the right to purchase
the TPS Loan [NOTE: need to resolve with COP whether this includes or excludes
any related interest rate swap] at a cash price equal to the aggregate principal
and unpaid interest outstanding on such TPS Loan [and an amount to cover
purchase or breakage of the swap, as applicable] plus (a) a make-whole amount
equal to the net present value of the expected margin on the TPS Loans assuming
such loans were repaid as originally scheduled at the interest rate in effect at
the time of prepayment, discounted by a factor of 0.5% over the yield to
maturity implied by the yields reported for actively traded U.S. Treasury
securities having a maturity equal to the remaining average life of such TPS
Loans as of the date that such purchase transaction is closed, and (b) provided
that the Borrower is not in Default of its obligations under the TPS Credit
Agreement at the time the COP Agent tenders such Notice of Exercise, a premium
of 1.5% of the total amount of principal outstanding under the TPS Credit
Agreement on the date that such purchase transaction is closed, with such
percentage to decrease from 1.5% to 0% on a straight-line basis, reducing
quarterly, such decrease to commence on the date of Conversion, and end on the
fifth anniversary of the Closing Date (collectively, the “TPS Loan Purchase
Price”).

 

 

 

Upon receipt of such Notice of Exercise, each of the TPS Lenders, the TPS
Secured Parties and the TPS Agent will promptly assign to the COP Lenders or
their designees all of such persons’ right, title and interest in and to the TPS
Credit Agreement and the other TPS Financing Documents [by executing and
delivering an assignment and assumption agreement in the form attached as
Exhibit B to the Intercreditor and Subordination Agreement].  Upon receipt of
the duly executed assignment and assumption agreement, the COP Agent shall
promptly countersign the assignment and assumption agreement and deliver same to
the TPS Agent, tender (or cause to be tendered) the TPS Loan Purchase Price in
full to the TPS Agent, and the COP Lenders or their designees shall assume and
perform all of the respective assignors’ obligations under such TPS Credit
Agreement and the other TPS Financing Documents.

 

8

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Except for the  warranty that the assignor is the legal and beneficial owner of
the interest being assigned, and that such interest is free and clear of any
adverse claim, any such assignment shall be without recourse to, or warranty by,
any of the TPS Lenders, the TPS Secured Parties and the TPS Agent or their
respective affiliates and representatives.

 

 

Collateral Agent

 

Provisions

The Intercreditor and Subordination Agreement shall contain terms and conditions
designed to facilitate the implementation of the Amended [and Restated]
Collateral Account Agreement by the Collateral Agent in a manner that is
consistent with the terms and conditions of the Intercreditor and Subordination
Agreement.

 

 

Special Covenants

At all times while the TPS Debt is outstanding: (a) COP Lender agrees that it
shall retain all of the powers exercisable by the Required Lenders, and that it
shall not assign or transfer its funding obligations as Initial Lender under the
COP Credit Agreement; and (b) Administrative Agent agrees that it shall not
transfer or assign any of its duties, obligations or liabilities as
Administrative Agent under the COP Credit Agreement without the written consent
of the TPS Secured Parties, such consent not to be unreasonably withheld.

 

 

Additional

 

Provisions

The Intercreditor and Subordination Agreement shall be governed by the laws of
the State of New York, and shall contain such other terms and conditions as may
be agreed by the parties, as well as other standard terms and conditions, such
as provisions relating to severability, notices, successors and assigns,
counterparts, consent to the jurisdiction of New York courts, waiver of jury
trial, limitation on liability, no impairment of other rights, amendment,
waiver, headings, termination, entire agreement, conflicts with other security
documents, and consequential damages.

 

 

Exhibits

The Intercreditor and Subordination Agreement shall contain the following
Exhibits:

 

 

 

Exhibit A — Form of Allocation Certificate – Prepayment Proceeds

 

Exhibit B — Form of Assignment and Assumption Agreement

 

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APPENDIX C

to

Credit Agreement

 

INSURANCE PROVISIONS

 

(1)                            Construction “All Risks” Insurance:  Property
damage insurance on an “all risks” basis insuring the Borrower and the Secured
Parties, as their interests may appear, including coverage for the perils of
earth movement (including but not limited to earthquake, landslide, subsidence
and volcanic eruption), flood, boiler and machinery accidents, strike, riot,
civil commotion, sabotage and terrorism (for which coverage may be written on a
separate basis).

 

In the event of a catastrophic loss to the worldwide insurance markets resulting
in the effect that terrorism coverage is not commercially reasonable and
available, Lenders shall have the right to determine whether terrorism insurance
coverage needs to continue being purchased.

 

(A)                              The construction “all risks” insurance shall
provide coverage for (i) the buildings, structures, boilers, machinery,
equipment, facilities, fixtures, supplies, fuel and other properties
constituting a part of the Project, including all temporary works the values of
which are included in the EPC Contract, (ii) off-site storage with sub-limits
sufficient to insure the full replacement value of any property or equipment not
stored on the site of the Project, (iii) the removal of debris with a sub-limit
not less than $10,000,000 per occurrence, (iv) pollution clean up and removal
for a sub-limit not less than $500,000, (v) foundations and other property below
the surface of the ground, (vi) electronic equipment and media, (vii) the cost
of preventive measures to reduce or prevent further loss or damage, (viii)
operational and performance testing for a period sufficient to cover all testing
but not less than 60 days, (ix) inland transit with sub-limits sufficient to
insure the largest single shipment to or from the site of the Project (unless
insured by the marine cargo insurance), (x) attorneys’ fees, engineering and
other consulting costs, and permit fees directly incurred in order to repair or
replace damaged insured property,  and (xii) a 12-month defects warranty period
as is available and if commercially reasonable.

 

 (B)                             The construction “all risks” policy shall
include (i) a 72 hour flood/storm/earthquake clause, (ii) an unintentional
errors and omissions clause, (iii) a 50/50 clause, (iv) a requirement that the
insurer pay losses within 30 days after receipt of an acceptable proof of loss
or partial proof of loss and (v) any other insurance clause making this
insurance primary over any other insurance.

 

(C)                                The construction “all risks” policy shall not
contain any (i) coinsurance provisions, (ii) exclusion for freezing or
mechanical breakdown, (iii) exclusion for loss or damage covered under any
guarantee or warranty arising out of an insured peril, or (iv) exclusion for
resultant damage and/or ensuing loss by a peril not otherwise excluded caused by
ordinary wear and tear, gradual deterioration, normal subsidence, settling,
cracking, expansion or contraction, faulty workmanship or design.

 

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(D)                               The construction “all risks” policy shall (i)
not be subject to cancellation by the insurer except for non-payment of premium,
(ii) be on a completed value form, with no periodic reporting requirements,
(iii) insure the Project in an amount not less than full replacement value of
the Project, (iv) value losses at replacement cost, without deduction for
physical depreciation or obsolescence, including customs duties, taxes and fees
if the lost or damaged assets are replaced, otherwise value losses at
replacement cost less physical depreciation, (v) insure earth movement and flood
perils, with a sub-limit not less than $100,000,000 or sufficient to insure 125%
of the Estimated Maximum Loss, whichever is greater of replacement cost on an
annual aggregate basis for each peril, (vi) have no deductible greater than
$1,000,000, with the exception of testing, which shall have a deductible no
greater than $1,000,000, (vii) include expediting expenses in an amount not less
than $10,000,000 (viii) insure terrorism for a limit not less than $100,000,000
or 200% of the Estimated Maximum Loss for this peril, whichever is greater.

 

For the Estimated Maximum Loss valuation an independent engineer to be agreed by
both Lenders and Borrower will be appointed.

 

(E)                                 The construction “all risks” insurance shall
remain in effect until Substantial Completion has occurred and its replacement
by the operational property damage coverage specified in Section (12) below.

 

(2)                                  Delay-in-Startup Insurance:
 Delay-in-Startup coverage insuring the Borrower and the Secured Parties, as
their interests may appear, covering continuing expenses and Debt Service as a
result of loss or damage insured by the policies required pursuant to
Section (1) above, including earth movement and flood, resulting in a delay in
completion of the Project beyond the Substantial Completion date in the EPC
Contract in an amount not less than 125% of the Estimated Maximum Loss but in no
case less than 12 months’ indemnity for cost for the monthly payment of a claim
pending final determination of the full claim amount, (iv) not contain any form
of a coinsurance provision or include a waiver of such provision and (v) an
extension for delay arising out of port blockage (coverage for which may be
written on a separate basis).  Coverage shall remain in effect until Substantial
Completion has occurred and its replacement by the business interruption
insurance specified in Section (11) below.

 

For the ConocoPhillips’ portion of the Debt Service, ConocoPhillips will not
require delay-in-startup insurance.

 

For the Estimated Maximum Loss valuation an independent engineer to be agreed by
both Lenders and Borrower will be appointed.

 

(3)                                  Marine Cargo Insurance:  On or prior to the
first shipment and continuing until Substantial Completion has occurred, cargo
insurance insuring the Borrower and the Secured Parties, as their interests may
appear, on a “warehouse to warehouse” basis, including land, air and marine
transit insuring “all risks” of loss or damage on a replacement cost basis plus
freight and insurance from the time the goods are in the process of being loaded
for transit until they are finally delivered to the site of the Project,
including during

 

2

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shipment deviation, delay, forced discharge, re-shipment and transshipment. 
Such insurance shall (i) include coverage for war, strikes, riots, civil
commotions, theft, pilferage, non-delivery, charges of general average sacrifice
or contribution, salvage expenses, temporary storage in route, consolidation,
repackaging, refused and returned shipments, (ii) contain a replacement by air
extension clause, 50/50 clause, unintentional difference in conditions for
C.I.F. shipments, errors and omissions clause, import duty clause, non-vitiation
clause, and debris removal clause, (iii) contain no exclusion for inadequate
packing, (iv) insure for the replacement value of the largest single shipment
plus freight and insurance, subject to a minimum limit of not less than 125% of
the maximum dollar amount per conveyance and (v) be subject to a deductible of
no greater than $50,000 per occurrence.

 

 (4)                               Marine Delay-in-Startup Insurance (Advanced
Loss of Profits Insurance): Marine Delay-in-Startup insurance insuring the
Borrower and the Secured Parties, as their interest may appear, for continuing
expenses and Debt Service, as a result of (i) loss or damage insured by the
policies required pursuant to Section (3) above or (ii) loss, breakdown or
damage to the hull, machinery or equipment of the vessel or aircraft on which
the insured property is being transported, resulting in a delay in completion of
the Project beyond the Substantial Completion date in the EPC Contract in an
amount not less than 125% of the time necessary to replace any equipment lost in
transit, but in no case less than 12 months’ continuing expenses and Debt
Service.  Such insurance shall have a deductible of not greater than 45 days per
occurrence and remain in effect until Substantial Completion has occurred.

 

For the time necessary to replace valuation an independent engineer to be agreed
by both Lenders and Borrower will be appointed.

 

For the ConocoPhillip’s portion of the Debt Services, ConocoPhillips will not
require marine delay-in-startup insurance.

 

(5)                                  Workers’ Compensation and Employer’s
Liability Insurance: In the event the Borrower has employees, the Borrower will
maintain workers’ compensation insurance as required by applicable state laws
and employer’s liability insurance insuring the Borrower for liability arising
out of injury to or death of employees in the amount of $1,000,000 per accident.
A maximum deductible or self-insured retention of $500,000 per occurrence shall
be allowed.

 

(6)                                  General Liability Insurance: Liability
insurance insuring the Borrower against claims filed anywhere in the world and
occurring anywhere in the world for the liability arising out of claims for
personal injury and property damage.  Such insurance shall provide coverage for
products-completed operations, blanket contractual, explosion, collapse and
underground coverage, broad form property damage, personal injury insurance,
sudden and accidental pollution liability, independent contractors and terminal
operators liability with a $1,000,000 minimum limit per occurrence for combined
bodily injury and property damage.  A maximum deductible or self-insured
retention of $500,000 per occurrence shall be allowed.

 

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(7)                                  Automobile Liability Insurance: Automobile
liability insurance insuring the Borrower for liability arising out of claims
for personal injury (including bodily injury and death) and property damage
covering all owned (if any), leased, non-owned and hired vehicles of the
Borrower, including loading and unloading, with a $1,000,000 minimum limit per
occurrence for combined bodily injury and property damage and containing
appropriate no-fault insurance provisions wherever applicable.  A maximum
deductible or self-insured retention of $500,000 per occurrence shall be
allowed.

 

(8)                                  Marine Liability Insurance:  Marine
liability insurance against claims for bodily injury or property damage arising
out of any vessel or barge owned, rented or chartered by the Borrower,
Contractor or Operator with a $1,000,000 limit per occurrence provided that
policy aggregates, if any, shall apply separately to claims occurring with
respect to the Project.

 

(9)                                  Excess Insurance:  Excess or Umbrella
liability insurance covering claims in excess of the underlying insurance
described in the foregoing Sections (5), (6), (7) and (8), with a minimum limit
per occurrence of $100,000,000.  The amounts of insurance required in the
foregoing Sections (5), (6), (7), (8) and this Section (9) may be satisfied by
the Borrower purchasing coverage in the amounts specified or by any combination
of primary and excess insurance, so long as the total amount of insurance meets
the requirements specified above.

 

(10)                            Aircraft Liability Insurance:  If the
performance of any of the Transaction Documents requires the use of any aircraft
that is owned, leased or chartered by the Borrower, aircraft liability insurance
insuring the Borrower with a $15,000,000 minimum limit per occurrence for
combined property damage and bodily injury, including passengers and crew,
provided that policy aggregates, if any, shall apply separately to claims
occurring with respect to the Project.

 

(11)                            Professional Errors and Omissions Liability
Insurance:  Freeport LNG will endeavor to ensure that that the primary
Contractor obtain professional errors and omissions liability insurance, issued
on a “project basis” including, but not limited to, any negligent act, error,
mistake or omission in the performance of  the Work by the Contractor or any
sub-contractor, including contractual liability to cover tort liabilities
assumed in the indemnity provisions of this Agreement, with limits not less than
$5,000,000 per occurrence, provided that policy aggregates, if any, shall apply
separately to claims occurring with respect to the Work.  Such insurance shall
be maintained in full force and effect for a period of two ( 2) years after the
completion of any and all of Contractor’s services under this Agreement.  In
addition the policy or policies providing the professional liability insurance
shall contain a deductible not greater than $100,000.

 

(12)                            Operational Property Damage Insurance:  On or
prior to the date that Substantial Completion has occurred or the expiration of
the construction “all risks” insurance, whichever comes first, property damage
insurance on an “all risk” basis insuring the Borrower and the Secured Parties,
as their interests may appear, including coverage against damage or loss caused
by earth movement (including but not limited to earthquake,

 

4

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landslide, subsidence and volcanic eruption), flood, boiler and machinery
accidents, strike, riot, civil commotion, sabotage and terrorism.  Losses shall
be valued at their repair or replacement cost, without deductible for physical
depreciation or obsolescence, including customs duties, taxes and fees.

 

(A)                              The property damage insurance shall be on an
“all risks” basis and shall provide coverage for (i) the buildings, structures,
boilers, machinery, equipment, facilities, fixtures, supplies, fuel and other
properties constituting a part of the Project, (ii) steam and electrical
transmission lines along with related equipment for which the Borrower has an
insurable risk of loss, (iii) electronic data, equipment and media, (iv)
foundations and other property below the surface of the ground, (v) transit and
off-site repair including ocean, marine and air transit, if applicable, under a
separate policy or with sub-limits allowed that are sufficient to insure the
full replacement value of the property or equipment prior to its being moved to
or from the site of the Project and while located away from the site of the
Project site, (vi) attorneys fees, engineering and other consulting costs, and
permit fees directly incurred in order to repair or replace damaged insured
property in a minimum amount of $5,000,000, (vii) the cost of preventive
measures to reduce or prevent a loss in an amount not less than $5,000,000,
(viii) increased cost of construction and loss to undamaged property as the
result of enforcement of building Applicable Laws with sub-limits not less than
$10,000,000, (ix) loss to undamaged property as the result of enforcement of
building Applicable Laws and (x) debris removal with sub-limits not less than
the lesser of 25% of loss or $10,000,000.

 

(B)                                The property damage policy shall include (i)
a 72 hour clause for windstorm and earth movement, (ii) an occurrence definition
for flood, (iii) an unintentional errors and omissions clause, (iv) a
requirement that the insurer pay losses within 30 days after receipt of an
acceptable proof of loss or partial proof of loss and (v) an other insurance
clause making this insurance primary over any other insurance.

 

(C)                                The property damage policy shall insure the
Project in an amount not less than 125% of the “Estimated Maximum Loss”, unless
otherwise approved by the Required Lenders, and whose approval shall not be
unreasonably withheld.  For purposes of this Section (12), “Estimated Maximum
Loss” which means the estimated maximum loss assuming damage from extraordinary
perils which consequently results in a very widespread and destructive force. 
Periodically (not less than every 36 months), such maximum loss values will be
determined by the Independent Engineer.

 

The earth movement, windstorm and flood coverage may be insured with a sub-limit
not less than 125% of the Estimated Maximum Loss for these perils but in no case
less than $100,000,000 per occurrence.  Terrorism shall be insured with a limit
not less than $100,000,000 or 200% of its Estimated Maximum Loss, whichever is
greater.

 

In the event of a catastrophic loss to the worldwide insurance markets

 

5

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

 

resulting in the effect that terrorism coverage is not commercially reasonable
and available, Lenders shall have the right to determine whether terrorism
insurance coverage needs to continue being purchased.

 

(D)                               The property damage insurance may have
deductibles of not greater than $1,000,000 per occurrence, except for the perils
of wind and flood, which shall be no greater than 5% of the insurable values,
with such deductible subject to a minimum of no more than $1,000,000.

 

(E)                                 The property damage policy shall not contain
any (i) coinsurance provision, (ii) exclusion for freezing, mechanical
breakdown, loss or damage covered under any guarantee or warranty, (iii)
exclusion for loss or damage covered under any guarantee or warranty arising out
of an insured peril or (iv) exclusion for resultant damage caused by ordinary
wear and tear, gradual deterioration, normal subsidence, settling cracking,
expansion or contraction or (v) a faulty workmanship, design or materials clause
more restrictive than the LEG-2 clause.

 

(13)                            Business Interruption Insurance:  On or prior to
the date that Substantial Completion has occurred or the expiration of the
delay-in-startup insurance, whichever comes first, business interruption
insurance insuring the Borrower and the Secured Parties, as their interests may
appear, covering 100% of continuing expenses and Debt Service for a period of 12
months or a period equal to 125% of the Estimated Maximum Loss, whichever is
greater, arising from loss required to be insured by Section (12) above.  The
maximum deductible shall be no greater than 60 days per occurrence.  Such
insurance shall also insure extra expenses in an amount not less than
$10,000,000 and shall include contingent business interruption applying to
non-owned off site locating in an amount of not less than $10,000,000 if not
included in the business interruption.  Such insurance shall also include a
clause allowing interim payments on account pending finalization of the claim
payment.  Such insurance shall not contain any coinsurance clause or include a
waiver of such clause and shall also insure the peril of port blockage (coverage
for which may be written on a separate basis).

 

6

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

EXHIBIT A-1
to
Credit Agreement

 

[FORM OF NOTICE OF BORROWING]

 

NOTICE OF BORROWING

 

[Date]

 

ConocoPhillips Company,

as Administrative Agent for the Lenders party

to the Credit Agreement referred to below
600 North Dairy Ashford
Room ML-3092
Houston, Texas 77079-1175

 

Attention:

 

Ladies and Gentlemen:

 

The undersigned, Freeport LNG Development, L.P., refers to the Credit Agreement
dated as of July 2, 2004 (as amended, modified, or supplemented from time to
time, the “Credit Agreement,” with Appendix A thereto supplying the definitions
of capitalized terms used but not otherwise defined herein), by and among the
undersigned, Freeport LNG-GP, Inc., ConocoPhillips Company, as Lender, the other
Lenders party thereto, ConocoPhillips Company, as Administrative Agent, and
ConocoPhillips Company, as Collateral Agent, and hereby gives you notice,
irrevocably, pursuant to Section 2.3 of the Credit Agreement, that the
undersigned hereby requests a Borrowing under the Credit Agreement (the
“Proposed Borrowing”), and in that connection sets forth below the information
relating to the Proposed Borrowing as required by Section 2.3 of the Credit
Agreement:

 

(i)                                     The aggregate principal amount of the
Tranche A Construction Loans to be made pursuant to the Proposed Borrowing is
$                            .

 

(ii)                                  The aggregate principal amount of the
Tranche B Construction Loans to be made pursuant to the Proposed Borrowing is
$                            .

 

(iii)                               The date of the Proposed Borrowing (the
“Borrowing Date”) is                        ,         .

 

The undersigned hereby certifies that the following statements are true and
correct on the date hereof, and will be true on the Borrowing Date:

 

(A)                              The Borrowing Date is a Business Day and is not
later than the Conversion Date;

 

(B)                                Each of the conditions precedent contained in
Section [3.1/3.2/3.6] of the Credit Agreement has been fully satisfied;

 

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

 

(C)                                The representations and warranties contained
in Article 4 of the Credit Agreement are true and correct in all material
respects, before and after giving effect to the Proposed Borrowing and to the
application of the proceeds thereof, as though made on and as of the Borrowing
Date (or, if made solely as of an earlier date, were true and correct as of such
earlier date); and

 

(D)                               No Default or Event of Default has occurred
and is continuing, or would result from the Proposed Borrowing or from the
application of the proceeds thereof.

 

 

 

Very truly yours,

 

 

 

 

 

FREEPORT LNG DEVELOPMENT, L.P.

 

 

 

 

 

By:  Freeport LNG-GP, Inc., its sole General Partner

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

2

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

 

EXHIBIT B-1
to
Credit Agreement

 

[FORM OF TRANCHE A CONSTRUCTION NOTE]

 

TRANCHE A CONSTRUCTION NOTE

 

New York, New York

[Closing Date]

 

FREEPORT LNG DEVELOPMENT, L.P., a Delaware limited partnership (the “Borrower”),
FOR VALUE RECEIVED, hereby promises to pay on the Tranche A Construction Loan
Maturity Date to the order of [Lender] (the “Lender”), for the account of
Lender’s Applicable Lending Office, in accordance with the Credit Agreement
dated as of July 2, 2004 (as amended, modified, or supplemented from time to
time, the “Credit Agreement,” with Appendix A thereto supplying the definitions
of capitalized terms used but not otherwise defined herein), by and among the
Borrower, Freeport LNG-GP, Inc., ConocoPhillips Company, as Lender, the other
Lenders party thereto, ConocoPhillips Company, as Administrative Agent, and
ConocoPhillips Company, as Collateral Agent, the principal amount of the Tranche
A Construction Loans outstanding from time to time which have been lent by the
Lender to the Borrower pursuant to the Credit Agreement, in the freely
transferable, lawful money of the United States of America in immediately
available funds.

 

The Borrower promises also to pay interest on the unpaid principal amount hereof
in like money from the date hereof until paid in full at the rate per annum
which shall be determined in accordance with the provisions of the Credit
Agreement, said interest to be payable at the times and at the place provided
for in the Credit Agreement.

 

The Lender is hereby authorized by the Borrower to endorse on the
schedule attached to this Tranche A Construction Note (or any continuation
thereof) the date each Tranche A Construction Loan is made by the Lender to the
Borrower under the Credit Agreement, the principal amount of each such Tranche A
Construction Loan, the amount of each payment or prepayment of principal on each
such Tranche A Construction Loan received by the Lender, and the resulting
principal amount outstanding on each such Tranche A Construction Loan, provided
that any failure by the Lender to make any such endorsement or any error therein
shall not affect the obligations of the Borrower hereunder or under the Credit
Agreement in respect of any such Tranche A Construction Loan or accrued interest
thereon.

 

This Tranche A Construction Note is one of the Notes referred to in the Credit
Agreement and is entitled to the benefits thereof.  This Tranche A Construction
Note is secured by the Security Documents.  This Tranche A Construction Note is
subject to repayment and prepayment, in whole or in part, as specified in the
Credit Agreement.

 

In case an Event of Default shall occur and be continuing, the principal of and
accrued interest on this Tranche A Construction Note may immediately become due
and payable or may be declared to be due and payable in each case in the manner
and with the effect provided in the Credit Agreement.

 

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

 

Each of Borrower and any and all endorsers, guarantors, and sureties (for itself
and all who may claim through or under it, insofar as it or they now or
hereafter lawfully may claim, including any secured parties or lenders
subordinate to the Lender and any legal representatives, successors, and
assigns) severally waives grace, demand, presentment for payment, notice of
dishonor or default, protest and notice of protest, notice of acceleration,
notice of intent to accelerate, diligence in collecting and bringing of suit
against any party hereto, joinder of any co-maker, endorser, guarantor, or other
surety party to any suit in connection with any Financing Document and any right
of marshaling of assets or to require sale of assets in inverse order of their
alienability.  Each of Borrower and any and all endorsers, guarantors, and
sureties (for itself and all who may claim through or under it, insofar as it or
they now or hereafter lawfully may claim, including any secured parties or
lenders subordinate to the Lender and any legal representatives, successors, and
assigns) further agrees:  (a) to all renewals, extensions, amendments, and
modifications hereof without limit, or partial payments hereon; (b) to any
release or substitution of security herefor, in whole or in part, or any release
or discharge of any guarantor, endorser, surety, or co-maker, with or without
notice, before or after maturity; (c) that waiver of any default shall not
constitute waiver of any prior or subsequent default; and (d) that no remedy,
right, or power conferred upon Lender or the holder of this Tranche A
Construction Note is intended to be exclusive of any other remedy, right, or
power given hereunder or now or hereafter available at law, in equity or
otherwise.

 

If default is made in the payment of this Tranche A Construction Note, or it is
placed in the hands of an attorney for collection, or collected through probate,
bankruptcy, or other proceedings, or if suit is brought on this Tranche A
Construction Note, Borrower shall pay reasonable attorneys’ fees and expenses in
addition to all other amounts owing hereunder.  Borrower also agrees to pay all
costs, expenses, and other charges, including reasonable attorneys’ fees and
expenses, incurred by the Lender in the enforcement of any right or remedy under
this Tranche A Construction Note including any amendment, renewal, modification,
or extension hereof.

 

Recourse under this Tranche A Construction Note is limited in accordance with
Section 9.17 of the Credit Agreement.

 

THIS TRANCHE A CONSTRUCTION NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK BUT EXCLUDING ANY CONFLICT OF
LAW RULES AND PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW) THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF A DIFFERENT
JURISDICTION.

 

 

FREEPORT LNG DEVELOPMENT, L.P.

 

 

 

By:  Freeport LNG-GP, Inc., its sole General Partner

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

3

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

 

Schedule
to
Tranche A Construction Note

 

LOAN AND REPAYMENT SCHEDULE

 

This Tranche A Construction Note evidences Tranche A Construction Loans made
under the Credit Agreement described herein, in the principal amounts and on the
dates set forth below, subject to the payments or prepayments of principal set
forth below:

 

Date Made

 

Principal Amount of
Loan

 

Principal Amount
 Paid or Prepaid

 

Balance
Outstanding

 

Notation Made By

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

EXHIBIT B-2
                                                to
Credit Agreement

 

[FORM OF TRANCHE B CONSTRUCTION NOTE]

 

TRANCHE B CONSTRUCTION NOTE

 

New York, New York

[Closing Date]

 

FREEPORT LNG DEVELOPMENT, L.P., a Delaware limited partnership (the “Borrower”),
FOR VALUE RECEIVED, hereby promises to pay on the Tranche B Construction Loan
Maturity Date to the order of [Lender] (the “Lender”), for the account of
Lender’s Applicable Lending Office, in accordance with the Credit Agreement
dated as of July 2, 2004 (as amended, modified, or supplemented from time to
time, the “Credit Agreement,” with Appendix A thereto supplying the definitions
of capitalized terms used but not otherwise defined herein), by and among the
Borrower, Freeport LNG-GP, Inc., ConocoPhillips Company, as Lender, the other
Lenders party thereto, ConocoPhillips Company, as Administrative Agent, and
ConocoPhillips Company, as Collateral Agent, the principal amount of the Tranche
B Construction Loans outstanding from time to time which have been lent by the
Lender to the Borrower pursuant to the Credit Agreement, in the freely
transferable, lawful money of the United States of America in immediately
available funds.

 

The Borrower promises also to pay interest on the unpaid principal amount hereof
in like money from the date hereof until paid in full at the rate per annum
which shall be determined in accordance with the provisions of the Credit
Agreement, said interest to be payable at the times and at the place provided
for in the Credit Agreement.

 

The Lender is hereby authorized by the Borrower to endorse on the
schedule attached to this Tranche B Construction Note (or any continuation
thereof) the date each Tranche B Construction Loan is made by the Lender to the
Borrower under the Credit Agreement, the principal amount of each such Tranche B
Construction Loan, the amount of each payment or prepayment of principal on each
such Tranche B Construction Loan received by the Lender, and the resulting
principal amount outstanding on each such Tranche B Construction Loan, provided
that any failure by the Lender to make any such endorsement or any error therein
shall not affect the obligations of the Borrower hereunder or under the Credit
Agreement in respect of any such Tranche B Construction Loan or accrued interest
thereon.

 

This Tranche B Construction Note is one of the Notes referred to in the Credit
Agreement and is entitled to the benefits thereof.  This Tranche B Construction
Note is secured by the Security Documents.  This Tranche B Construction Note is
subject to repayment and prepayment, in whole or in part, as specified in the
Credit Agreement.

 

In case an Event of Default shall occur and be continuing, the principal of and
accrued interest on this Tranche B Construction Note may immediately become due
and payable or may be declared to be due and payable in each case in the manner
and with the effect provided in the Credit Agreement.

 

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

 

Each of Borrower and any and all endorsers, guarantors, and sureties (for itself
and all who may claim through or under it, insofar as it or they now or
hereafter lawfully may claim, including any secured parties or lenders
subordinate to the Lender and any legal representatives, successors, and
assigns) severally waives grace, demand, presentment for payment, notice of
dishonor or default, protest and notice of protest, notice of acceleration,
notice of intent to accelerate, diligence in collecting and bringing of suit
against any party hereto, joinder of any co-maker, endorser, guarantor, or other
surety party to any suit in connection with any Financing Document and any right
of marshaling of assets or to require sale of assets in inverse order of their
alienability.  Each of Borrower and any and all endorsers, guarantors, and
sureties (for itself and all who may claim through or under it, insofar as it or
they now or hereafter lawfully may claim, including any secured parties or
lenders subordinate to the Lender and any legal representatives, successors, and
assigns) further agrees:  (a) to all renewals, extensions, amendments, and
modifications hereof without limit, or partial payments hereon; (b) to any
release or substitution of security herefor, in whole or in part, or any release
or discharge of any guarantor, endorser, surety, or co-maker, with or without
notice, before or after maturity; (c) that waiver of any default shall not
constitute waiver of any prior or subsequent default; and (d) that no remedy,
right, or power conferred upon Lender or the holder of this Tranche B
Construction Note is intended to be exclusive of any other remedy, right, or
power given hereunder or now or hereafter available at law, in equity or
otherwise.

 

If default is made in the payment of this Tranche B Construction Note, or it is
placed in the hands of an attorney for collection, or collected through probate,
bankruptcy, or other proceedings, or if suit is brought on this Tranche B
Construction Note, Borrower shall pay reasonable attorneys’ fees and expenses in
addition to all other amounts owing hereunder.  Borrower also agrees to pay all
costs, expenses, and other charges, including reasonable attorneys’ fees and
expenses, incurred by the Lender in the enforcement of any right or remedy under
this Tranche B Construction Note including any amendment, renewal, modification,
or extension hereof.

 

Recourse under this Tranche B Construction Note is limited in accordance with
Section 9.17 of the Credit Agreement.

 

THIS TRANCHE B CONSTRUCTION NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK BUT EXCLUDING ANY CONFLICT OF
LAW RULES AND PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW) THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF A DIFFERENT
JURISDICTION.

 

 

FREEPORT LNG DEVELOPMENT, L.P.

 

 

 

By:  Freeport LNG-GP, Inc., its sole General Partner

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

2

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

 

Schedule
to
Tranche B Construction Note

 

LOAN AND REPAYMENT SCHEDULE

 

This Tranche B Construction Note evidences Tranche B Construction Loans made
under the Credit Agreement described herein, in the principal amounts and on the
dates set forth below, subject to the payments or prepayments of principal set
forth below:

 

Date Made

 

Principal Amount of
Loan

 

Principal Amount
Paid or Prepaid

 

Balance
Outstanding

 

Notation Made By

 

 

 

 

 

 

 

 

 

 

 

 

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

 

EXHIBIT B-3
to
Credit Agreement

 

[FORM OF TRANCHE A TERM NOTE]

 

TRANCHE A TERM NOTE

 

U.S. $[                            ]

 

[New York, New York]

 

 

[Conversion Date]

 

FREEPORT LNG DEVELOPMENT, L.P., a Delaware limited partnership (the “Borrower”),
FOR VALUE RECEIVED, hereby promises to pay on the Tranche A Term Loan Maturity
Date to the order of [LENDER] (the “Lender”), for the account of Lender’s
Applicable Lending Office, in accordance with the Credit Agreement dated as of
July 2, 2004 (as amended, modified, or supplemented from time to time, the
“Credit Agreement,” with Appendix A thereto supplying the definitions of
capitalized terms used but not otherwise defined herein), by and among the
Borrower, Freeport LNG-GP, Inc., ConocoPhillips Company, as Lender, the other
Lenders party thereto, ConocoPhillips Company, as Administrative Agent, and
ConocoPhillips Company, as Collateral Agent, the principal sum of
$[                            ], or so much thereof as shall constitute
outstanding Tranche A Term Loans which have been lent by the Lender to the
Borrower pursuant to the Credit Agreement, in the freely transferable, lawful
money of the United States of America in immediately available funds.

 

The Borrower promises also to pay interest on the unpaid principal amount hereof
in like money from the date hereof until paid in full at the rate per annum
which shall be determined in accordance with the provisions of the Credit
Agreement, said interest to be payable at the times and at the place provided
for in the Credit Agreement.

 

The Lender is hereby authorized by the Borrower to endorse on the
schedule attached to this Tranche A Term Note (or any continuation thereof) the
date each Tranche A Term Loan is made by the Lender to the Borrower under the
Credit Agreement, the principal amount of each such Tranche A Term Loan, the
amount of each payment or prepayment of principal on each such Tranche A Term
Loan received by the Lender, and the resulting principal amount outstanding on
each such Tranche A Term Loan; provided that any failure by the Lender to make
any such endorsement or any error therein shall not affect the obligations of
the Borrower hereunder or under the Credit Agreement in respect of any such
Tranche A Term Loan or accrued interest thereon.

 

This Tranche A Term Note is one of the Notes referred to in the Credit Agreement
and is entitled to the benefits thereof.  This Tranche A Term Note is secured by
the Security Documents.  This Tranche A Term Note is subject to repayment and
prepayment, in whole or in part, as specified in the Credit Agreement.

 

In case an Event of Default shall occur and be continuing, the principal of and
accrued interest on this Tranche A Term Note may immediately become due and
payable or may

 

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

 

be declared to be due and payable in each case in the manner and with the effect
provided in the Credit Agreement.

 

Each of Borrower and any and all endorsers, guarantors, and sureties (for itself
and all who may claim through or under it, insofar as it or they now or
hereafter lawfully may claim, including any secured parties or lenders
subordinate to the Lender and any legal representatives, successors, and
assigns) severally waives grace, demand, presentment for payment, notice of
dishonor or default, protest and notice of protest, notice of acceleration,
notice of intent to accelerate, diligence in collecting and bringing of suit
against any party hereto, joinder of any co-maker, endorser, guarantor, or other
surety party to any suit in connection with any Financing Document and any right
of marshaling of assets or to require sale of assets in inverse order of their
alienability.  Each of Borrower and any and all endorsers, guarantors, and
sureties (for itself and all who may claim through or under it, insofar as it or
they now or hereafter lawfully may claim, including any secured parties or
lenders subordinate to the Lender and any legal representatives, successors, and
assigns) further agrees:  (a) to all renewals, extensions, amendments, and
modifications hereof without limit, or partial payments hereon; (b) to any
release or substitution of security herefor, in whole or in part, or any release
or discharge of any guarantor, endorser, surety, or co-maker, with or without
notice, before or after maturity; (c) that waiver of any default shall not
constitute waiver of any prior or subsequent default; and (d) that no remedy,
right, or power conferred upon Lender or the holder of this Tranche A Term Note
is intended to be exclusive of any other remedy, right, or power given hereunder
or now or hereafter available at law, in equity or otherwise.

 

If default is made in the payment of this Tranche A Term Note, or it is placed
in the hands of an attorney for collection, or collected through probate,
bankruptcy, or other proceedings, or if suit is brought on this Tranche A Term
Note, Borrower shall pay reasonable attorneys’ fees and expenses in addition to
all other amounts owing hereunder.  Borrower also agrees to pay all costs,
expenses, and other charges, including reasonable attorneys’ fees and expenses,
incurred by the Lender in the enforcement of any right or remedy under this
Tranche A Term Note, including any amendment, renewal, modification, or
extension hereof.

 

Recourse under this Tranche A Term Note is limited in accordance with
Section 9.17 of the Credit Agreement.

 

THIS TRANCHE A TERM NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW YORK BUT EXCLUDING ANY CONFLICT OF LAW RULES AND
PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW)
THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF A DIFFERENT JURISDICTION.

 

2

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

 

 

FREEPORT LNG DEVELOPMENT, L.P.

 

 

 

By:  Freeport LNG-GP, Inc., its sole General Partner

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

3

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

 

Schedule
to
Tranche A Term Note

 

LOAN AND REPAYMENT SCHEDULE

 

This Tranche A Term Note evidences the Tranche A Term Loan made under the Credit
Agreement described herein, in the principal amount and on the date set forth
below, subject to the payments or prepayments of principal set forth below:

 

Date Made

 

Principal Amount of
Loan

 

Principal Amount
 Paid or Prepaid

 

Balance
Outstanding

 

Notation Made By

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

EXHIBIT B-4
to
Credit Agreement

 

[FORM OF TRANCHE B TERM NOTE]

 

TRANCHE B TERM NOTE

 

U.S. $[                            ]

 

[New York, New York]

 

 

[Conversion Date]

 

FREEPORT LNG DEVELOPMENT, L.P., a Delaware limited partnership (the “Borrower”),
FOR VALUE RECEIVED, hereby promises to pay on the Tranche B Term Loan Maturity
Date to the order of [LENDER] (the “Lender”), for the account of Lender’s
Applicable Lending Office, in accordance with the Credit Agreement dated as of
July 2, 2004 (as amended, modified, or supplemented from time to time, the
“Credit Agreement,” with Appendix A thereto supplying the definitions of
capitalized terms used but not otherwise defined herein), by and among the
Borrower, Freeport LNG-GP, Inc., ConocoPhillips Company, as Lender, the other
Lenders party thereto, ConocoPhillips Company, as Administrative Agent, and
ConocoPhillips Company, as Collateral Agent, the principal sum of
$[                            ], or so much thereof as shall constitute
outstanding Tranche B Term Loans which have been lent by the Lender to the
Borrower pursuant to the Credit Agreement, in the freely transferable, lawful
money of the United States of America in immediately available funds.

 

The Borrower promises also to pay interest on the unpaid principal amount hereof
in like money from the date hereof until paid in full at the rate per annum
which shall be determined in accordance with the provisions of the Credit
Agreement, said interest to be payable at the times and at the place provided
for in the Credit Agreement.

 

The Lender is hereby authorized by the Borrower to endorse on the
schedule attached to this Tranche B Term Note (or any continuation thereof) the
date each Tranche B Term Loan is made by the Lender to the Borrower under the
Credit Agreement, the principal amount of each such Tranche B Term Loan, the
amount of each payment or prepayment of principal on each such Tranche B Term
Loan received by the Lender, and the resulting principal amount outstanding on
each such Tranche B Term Loan; provided that any failure by the Lender to make
any such endorsement or any error therein shall not affect the obligations of
the Borrower hereunder or under the Credit Agreement in respect of any such
Tranche B Term Loan or accrued interest thereon.

 

This Tranche B Term Note is one of the Notes referred to in the Credit Agreement
and is entitled to the benefits thereof.  This Tranche B Term Note is secured by
the Security Documents.  This Tranche B Term Note is subject to repayment and
prepayment, in whole or in part, as specified in the Credit Agreement.

 

In case an Event of Default shall occur and be continuing, the principal of and
accrued interest on this Tranche B Term Note may immediately become due and
payable or may

 

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

 

be declared to be due and payable in each case in the manner and with the effect
provided in the Credit Agreement.

 

Each of Borrower and any and all endorsers, guarantors, and sureties (for itself
and all who may claim through or under it, insofar as it or they now or
hereafter lawfully may claim, including any secured parties or lenders
subordinate to the Lender and any legal representatives, successors, and
assigns) severally waives grace, demand, presentment for payment, notice of
dishonor or default, protest and notice of protest, notice of acceleration,
notice of intent to accelerate, diligence in collecting and bringing of suit
against any party hereto, joinder of any co-maker, endorser, guarantor, or other
surety party to any suit in connection with any Financing Document and any right
of marshaling of assets or to require sale of assets in inverse order of their
alienability.  Each of Borrower and any and all endorsers, guarantors, and
sureties (for itself and all who may claim through or under it, insofar as it or
they now or hereafter lawfully may claim, including any secured parties or
lenders subordinate to the Lender and any legal representatives, successors, and
assigns) further agrees:  (a) to all renewals, extensions, amendments, and
modifications hereof without limit, or partial payments hereon; (b) to any
release or substitution of security herefor, in whole or in part, or any release
or discharge of any guarantor, endorser, surety, or co-maker, with or without
notice, before or after maturity; (c) that waiver of any default shall not
constitute waiver of any prior or subsequent default; and (d) that no remedy,
right, or power conferred upon Lender or the holder of this Tranche B Term Note
is intended to be exclusive of any other remedy, right, or power given hereunder
or now or hereafter available at law, in equity or otherwise.

 

If default is made in the payment of this Tranche B Term Note, or it is placed
in the hands of an attorney for collection, or collected through probate,
bankruptcy, or other proceedings, or if suit is brought on this Tranche B Term
Note, Borrower shall pay reasonable attorneys’ fees and expenses in addition to
all other amounts owing hereunder.  Borrower also agrees to pay all costs,
expenses, and other charges, including reasonable attorneys’ fees and expenses,
incurred by the Lender in the enforcement of any right or remedy under this
Tranche B Term Note, including any amendment, renewal, modification, or
extension hereof.

 

Recourse under this Tranche B Term Note is limited in accordance with
Section 9.17 of the Credit Agreement.

 

THIS TRANCHE B TERM NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW YORK BUT EXCLUDING ANY CONFLICT OF LAW RULES AND
PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW)
THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF A DIFFERENT JURISDICTION.

 

2

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

 

 

FREEPORT LNG DEVELOPMENT, L.P.

 

 

 

By:  Freeport LNG-GP, Inc., its sole General Partner

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

3

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

 

Schedule
to
Tranche B Term Note

 

LOAN AND REPAYMENT SCHEDULE

 

This Tranche B Term Note evidences the Tranche B Term Loan made under the Credit
Agreement described herein, in the principal amount and on the date set forth
below, subject to the payments or prepayments of principal set forth below:

 

Date Made

 

Principal Amount of
Loan

 

Principal Amount
Paid or Prepaid

 

Balance
Outstanding

 

Notation Made By

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

EXHIBIT C
to
Credit Agreement

 

[FORM OF PROCESS AGENT LETTER]

 

[LETTERHEAD OF PROCESS AGENT]

 

[Date]

 

To those Persons Listed on Schedule I

c/o Freeport LNG Development, L.P.

1200 Smith Street

Suite 600

Houston, Texas 77002

 

Attention:  Michael S. Smith

 

ConocoPhillips Company

as Collateral Agent for the Lenders party

to the Credit Agreement referred to below
600 North Dairy Ashford
Room ML-3092
Houston, Texas 77079-1175

 

Attention:  Vice President and Treasurer

 

Ladies and Gentlemen:

 

Reference is made to that certain Credit Agreement dated as of June 30, 2004 (as
amended, modified, or supplemented from time to time, the “Credit Agreement,”
with Appendix A thereto supplying the definitions of capitalized terms used but
not otherwise defined herein), by and among Freeport LNG Development, L.P.,
Freeport LNG-GP, Inc., ConocoPhillips Company, as Lender, the other Lenders
party thereto, ConocoPhillips Company, as Administrative Agent and
ConocoPhillips Company, as Collateral Agent, and such Financing Documents, as
defined below, to which the Credit Parties, as defined below, are or are
intended to be a party.

 

Each of the entities set forth on Schedule I hereto (the “Credit Parties”),
pursuant to the Financing Documents (as set forth therein) and in connection
with the transactions contemplated thereby, has irrevocably appointed
Corporation Service Company (with an office on the date hereof at 80 State
Street, Albany, New York 12207, U.S.A.) as its agent to receive on its behalf
and on behalf of its Property service of copies of summons and complaints and
any other process that may be served in any action, suit, or other proceeding in
the United States District Court for the Southern District of New York and in
any New York State court sitting in New York City arising out of or relating to
the Credit Agreement and/or any of the agreements set forth in Schedule II
hereto (the “Financing Documents”) or the transactions contemplated thereby.

 

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

 

The undersigned hereby irrevocably accepts each such appointment as agent and
agrees with each Credit Party that (a) the undersigned will maintain an office
in New York City until such time as a successor agent shall be appointed by
irrevocable powers of attorney in form and substance acceptable to such Credit
Party and such successor agent shall have delivered a letter to such Credit
Party accepting its appointment, (b) the undersigned will perform its duties as
agent in accordance with the Credit Agreement, the other Financing Documents and
this letter, and (c) the undersigned shall forward promptly to the relevant
Credit Party at c/o Freeport LNG Development, L.P., 1200 Smith Street, Suite
600, Houston, Texas 77002, Attention:  Michael S. Smith (or at such other
address as such Credit Party shall hereafter notify us), copies of any summons,
complaint, or other process with which the undersigned is served or which it
otherwise receives in connection with its appointment as agent.

 

This acceptance and agreement will confirm (i) that Freeport LNG Development,
L.P. will be billed by Corporation Service Company a total of $[          ] to
cover Corporation Service Company’s fees for the services described above
through [                  ] and (ii) Corporation Service Company will not
resign from the appointment as described above without the written consent, not
to be unreasonably withheld, of the Credit Parties.

 

THIS ACCEPTANCE AND AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK BUT EXCLUDING ANY CONFLICT OF LAW RULES
AND PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW) THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF A DIFFERENT
JURISDICTION.

 

This acceptance and agreement shall be binding upon the undersigned and all
successors and assigns of the undersigned.

 

 

Very truly yours,

 

 

 

CORPORATION SERVICE COMPANY

 

 

 

 

 

 

Name:

 

Title:

 

2

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

 

SCHEDULE I
to
Exhibit C

 

SCHEDULE I

 

LIST OF CREDIT PARTIES

 

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

 

SCHEDULE II
to
Exhibit C

 

SCHEDULE II

 

FINANCING DOCUMENTS

 

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

 

EXHIBIT D-1
to
Credit Agreement

 

[FORM OF CONSTRUCTION REQUISITION]

 

CONSTRUCTION REQUISITION

NO. [            ]

 

[Date]

 

ConocoPhillips Company,
as Administrative Agent for the Lenders party
to the Credit Agreement referred to below

600 North Dairy Ashford

Room ML-3092

Houston, Texas  77079-1175

 

Attention:  Vice President and Treasurer

 

ConocoPhillips Company,
as Collateral Agent for the Lenders party
to the Credit Agreement referred to below

600 North Dairy Ashford

Room ML-3092

Houston, Texas  77079-1175

 

Attention:  Vice President and Treasurer

 

The Bank of New York Trust Company, N.A.,

as Depositary Agent

101 Barclay Street
New York, New York 10286

 

Attention:  Corporate Trust

 

Re:                               Credit Agreement dated as of July 2, 2004 (as
amended, modified, or supplemented from time to time, the “Credit Agreement,”
with Appendix A thereto supplying the definitions of capitalized terms used but
not otherwise defined herein) among Freeport LNG Development, L.P. (the
“Borrower”), Freeport LNG-GP, Inc., ConocoPhillips Company, as Lender, the other
Lenders party thereto, ConocoPhillips Company, as Administrative Agent, and
ConocoPhillips Company, as Collateral Agent; and Collateral Account Agreement
dated as of July 2, 2004 (as amended, modified, or supplemented from time to
time, the “Account Agreement”) among the Borrower, the Collateral Agent and The
Bank of New York Trust Company, N.A., as Depositary Agent.

 

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

 

Ladies and Gentlemen:

 

This Construction Requisition (this “Construction Requisition”) is delivered to
you pursuant to Sections [3.1(e) or 3.2(a)(1)(A)] and 5.33 of the Credit
Agreement and covers the payment of Project Costs which have been paid, or are
due and payable, or are to become due and payable during the calendar month that
includes the Disbursement Date set forth in paragraph 1 below, or if this
Construction Requisition is being delivered exclusively in connection with the
application of Project Revenues to the payment of Project Costs pursuant to
Section 5.33 of the Credit Agreement, the calendar month that includes the
earliest date set forth in Schedule 1 hereto (the “Construction Period”).  With
respect to this Construction Requisition, the Borrower hereby certifies as
follows:

 

1.(1)                         The Borrower intends to deliver to the
Administrative Agent a Notice of Borrowing in respect of Construction Loans in
the aggregate principal amount of $                            .  The
Disbursement Date with respect to such Construction Loans shall be
                       ,         .  [This Construction Requisition must be dated
no more than 10 Business Days prior to the Disbursement Date.]

 

The Borrower wishes to apply Project Revenues and/or other amounts on deposit in
the Construction Account in the aggregate amount of
$                             to the payment of Project Costs as hereinafter
described.

 

The total amount of Supplemental Costs included in this Construction Requisition
is $                          .

 

2.                                       Set forth on Schedule 1 attached hereto
is the following information:  (a) the name of each Person to whom any payment
is to be made from the amounts described in paragraph 1 above, (b) an accurate
description of the work performed, services rendered, materials, equipment or
supplies delivered, or such other purpose for which each such payment was or is
to be made, which in the case of a payment that is a reimbursement shall include
an accurate description of the purpose of the original payment, (c) the
aggregate amount of each such payment, (d) the proposed date of each such
payment, and (e) the payment or wire transfer instructions for each such
payment.  The amounts to be withdrawn from the Construction Account pursuant to
this Construction Requisition will be used to pay Project Costs which have been
paid, or are due and payable, or are to become due and payable during the
Construction Period.  Attached hereto as Schedule 2 is the Disbursement Request
Summary.  The information set forth on Schedule 2 attached hereto is true and
correct as of the date hereof.

 

3.                                       Attached hereto as Appendix I are
copies of all invoices, payment applications, and other material written
information with respect to each item set forth on Schedule 1.  The proposed
application of amounts to be withdrawn from the Construction Account pursuant to
this Construction Requisition complies with the

 

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

(1) Select all appropriate language.

 

2

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

 

applicable requirements contained in the Credit Agreement (including
Section 5.20 thereof) and the Account Agreement.

 

4.                                       Attached hereto as Appendix II are true
and complete copies of the most recent monthly progress reports provided by each
Construction Contractor under the Construction Contracts for which this
Construction Requisition is made.

 

5.                                       The Project Costs for which payment is
requested under this Construction Requisition have not been the basis for any
prior Construction Requisition by the Borrower and all amounts previously drawn
from the Construction Account have been applied to pay only the Project Costs
listed on the applicable Construction Requisition with respect to which such
amounts were drawn.

 

6.                                       Attached hereto as Appendix III are
copies of all partial lien waivers executed pursuant to Construction Contracts
(if applicable, since the date of the preceding Construction Requisition)
covering all work, labor and materials done, performed or furnished for or to
the Borrower for which payment is requested under this Construction Requisition.

 

7.                                       All change orders to a Construction
Contract entered into by the Borrower have been entered into in accordance with
Section 5.25 of the Credit Agreement.

 

8.                                       The work performed under Construction
Contracts in respect of which payment is requested pursuant to this Construction
Requisition has been substantially performed in accordance with the respective
Construction Contract, Good LNG Practices, the Construction Budget, the Drawdown
Schedule, and the Necessary Approvals.

 

9.                                       There exists as of the date hereof no
circumstance, event, or condition that has had or could reasonably be expected
to have a Material Adverse Effect.

 

10.                                 Based on current progress and the reasonable
evaluation of what can reasonably be foreseen, Completion will occur on or
before the Date Certain and the Project Completion Date is reasonably expected
to occur no later than                        ,         .

 

11.                                 The representations and warranties of the
Borrower in Article 4 of the Credit Agreement and in any other Financing
Document to which the Borrower is a party shall be true and correct in all
material respects on and as of the date hereof and on and as of the Disbursement
Date as if made on and as of each such date (or, if stated to have been made
solely as of an earlier date, were true and correct in all material respects as
of such earlier date).

 

12.                                 Notwithstanding Paragraph 11, no Default or
Event of Default has occurred and is continuing on the date hereof.

 

13.                                 Notwithstanding Paragraph 11, and except to
the extent otherwise limited by Section 4.6(f) of the Credit Agreement, all
Necessary Approvals have been duly

 

3

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

 

obtained or made, were validly issued or executed and delivered, are in full
force and effect, are final and not subject to modification, or pending or
threatened dispute or appeal, and are held in the name of the Borrower (except
as specifically indicated in Schedule 4.6(a) to the Credit Agreement) except
those Necessary Approvals that have not been obtained but will be obtained by
the time such approvals are required for the performance by any Project
Participant of any of its obligations respecting the Project and for which the
Borrower has no reason to believe that any such Necessary Approvals will not be
obtained in due course prior to the time required.

 

14.(2)                   All conditions set forth in Section 3.1 of the Credit
Agreement, if this Construction Requisition is submitted during the Initial
Period, or Section 3.2 of the Credit Agreement if this Construction Requisition
is submitted after the Initial Period, both immediately prior to the making of
the Construction Loans contemplated by this Construction Requisition and also
after giving effect thereto on and as of such Disbursement Date and to the
application of proceeds therefrom, shall have been satisfied.

 

All conditions contemplated by Section 5.33 of the Credit Agreement, both
immediately prior to the application of Project Revenues to the payment of
Project Costs and also after giving effect thereto on and as of the dates such
payments are made shall have been satisfied.

 

To the extent any of the above certifications relate solely to the performance
of the Construction Contractor and to the extent Borrower has no contrary
knowledge, Borrower is relying upon the Project Manager’s representations
provided under the Construction Advisory Services Agreement; provided, however,
that in no event shall this provision apply to paragraph 11.

 

 

Very truly yours,

 

 

 

FREEPORT LNG DEVELOPMENT, L.P.

 

 

 

By:  Freeport LNG-GP, Inc., its sole General Partner

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

cc:  The Bank of New York

 

Trust Company, N.A.

 

600 North Pearl Street, Suite 420

 

Dallas, Texas 75201

 

 

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

(2) Select all appropriate language.

 

4

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

 

SCHEDULE 1
to Exhibit D-1
(Construction Requisition)

 

Name of Payee

 

Purpose

 

Amount
of Payment

 

Date of
Payment

 

Payment
Instructions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

SCHEDULE 2 to
Exhibit D-1
(Construction Requisition)

 

Freeport LNG Development, L.P.

Disbursement Request Summary

 

Date

 

Construction Requisition No.

 

Construction
Budget
Category
Description

 

Original
Construction
Budget Amount

 

Adjustment To
Construction
Budget Amount
This Period*

 

Prior
Adjustments to
Construction
Budget Amount*

 

Revised
Construction
Budget Amount

 

Previous
Construction
Requisition
Amount

 

Current
Construction
Requisition
Amount

 

Total
Construction
 Requisition
Amount To Date

 

Available
Balance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

*  Each adjustment shall have been made in accordance with the Credit Agreement.

 

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

 

Appendix I
to Exhibit D-1
(Construction Requisition)

 

[INVOICES, PAYMENT APPLICATIONS, AND OTHER MATERIAL WRITTEN INFORMATION]

 

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

 

Appendix II

to Exhibit D-1

(Construction Requisition)

 

[PROGRESS REPORTS]

 

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

 

Appendix III

to Exhibit D-1

(Construction Requisition)

 

[LIEN WAIVERS]

 

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

 

EXHIBIT D-2

to

Credit Agreement

 

[FORM OF INDEPENDENT ENGINEER’S CERTIFICATE]

 

INDEPENDENT ENGINEER’S CERTIFICATE

 

[Date]

 

Re:  Construction Requisition No.                     

 

ConocoPhillips Company,
as Administrative Agent for the Lenders party
to the Credit Agreement referred to below

600 North Dairy Ashford
Room ML-3092
Houston, Texas 77079-1175

 

Attention:  Vice President and Treasurer

 

ConocoPhillips Company,
as Collateral Agent for the Lenders party
to the Credit Agreement referred to below

600 North Dairy Ashford
Room ML-3092
Houston, Texas 77079-1175

 

Attention:  Vice President and Treasurer

 

The Bank of New York Trust Company, N.A.,
as Depositary Agent

101 Barclay Street
New York, New York 10286

 

Attention:  Corporate Trust

 

Re:                               Freeport LNG Development, L.P.

 

[INDEPENDENT ENGINEER], acting as the “Independent Engineer” under the Credit
Agreement dated as of July 2, 2004 (as amended, modified, or supplemented from
time to time, the “Credit Agreement,” with Appendix A thereto supplying the
definitions of capitalized terms used but not otherwise defined herein), by and
among Freeport LNG Development, L.P., Freeport LNG-GP, Inc., ConocoPhillips
Company, as Lender, the other Lenders party thereto, ConocoPhillips Company, as
Administrative Agent, and ConocoPhillips Company, as Collateral Agent, hereby
submits this Certificate pursuant to Sections 3.2(a)(1)(B) and 3.2(l) of the
Credit

 

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

 

Agreement in connection with (a) the proposed Disbursement of Construction Loans
pursuant to the Credit Agreement, and/or (b) the proposed application of Project
Revenues pursuant to the Credit Agreement.

 

The Independent Engineer has discussed all matters reasonably believed pertinent
to this Certificate with the Borrower, the Project Manager, the EPC Contractor,
the other Construction Contractors, and any other third party deemed
appropriate, and has made such inspections, site visits, reviews, examinations,
and investigations as the Independent Engineer believed were reasonably
necessary to establish the accuracy of this Certificate.  On the basis of the
foregoing and on the reasonable belief that the Independent Engineer has been
provided true, correct, and complete information from such other parties
requested by it as to the matters covered by this Certificate, the Independent
Engineer hereby certifies, in its professional opinion, as of the date hereof,
that:

 

1.                                       The individual executing this
Certificate is a duly authorized representative of the Independent Engineer,
authorized to execute and deliver this Certificate on behalf of the Independent
Engineer.

 

2.                                       The Independent Engineer has performed
its review in connection with the Construction Requisition referenced above (the
“Requisition”) in a professional manner using sound project, management and
supervisory principles and procedures and in accordance with the standards of
care practiced by leading consulting engineers in performing similar tasks on
projects of similar size and complexity.  The Independent Engineer represents
that it has the required skills and capacity to perform its services in the
foregoing manner.

 

3.                                       The Independent Engineer has received
all information it has requested relating to the EPC Contract, other
Construction Contracts, and any other Transaction Document and has no reason to
believe that any of the information is untrue, incorrect or materially
incomplete.

 

4.                                       With respect to the Requisition, the
Independent Engineer has no reason to believe, except as noted below, that any
statement made by the Borrower in the Requisition is not true or not materially
complete.

 

5.                                       To the best of the Independent
Engineer’s knowledge, the Project is being built in accordance with the
Construction Contracts in all material respects, and the quality of the Work
completed to date is in accordance with the Construction Contracts in all
material respects, subject to the following:

 

2

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

 

6.                                       With respect to the amount requested in
the Requisition pertaining to any element of the Work performed under the EPC
Contract, (a) the EPC Contractor is entitled to receive such amount as of the
date hereof pursuant to the terms of such EPC Contract, and (b) each such
element (or portion of such element in which payment is sought) has been
completed except as noted below.

 

Element Not Completed

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7.                                       The expenditures contemplated by the
Requisition set forth below are contemplated by the category of the Construction
Budget specified below opposite each such expenditure.  Such payments, when
added to other such payments previously authorized, represent the percentage
specified below of the aggregate amount of such payments provided for in the
Construction Budget.  The sum of the amounts of all expenditures for each
Construction Budget category in this paragraph 7 is equal to the “Current
Construction Requisition Amount” for such Construction Budget category set forth
in the Disbursement Request Summary attached to the Requisition.  The sum of all
expenditures set forth below equals the total of the Current Construction
Requisition Amounts set forth in the Disbursement Request Summary.

 

Expenditure

 

Construction
Budget Category

 

Percentage

 

 

 

 

 

 

%

 

 

 

 

 

 

 

 

 

 

 

%

 

8.                                       The Construction Budget and the
Drawdown Schedule are reasonably satisfactory to the Independent Engineer, and
the Construction Loan represented by the Requisition is in accordance with them.

 

9.                                       All Necessary Approvals have been duly
obtained or made, were validly issued or executed and delivered, are in full
force and effect, are final and not subject to modification, or pending or
threatened dispute or appeal, and are held in the name of the Borrower (except
as specifically indicated in Schedule 4.6(a) of the Credit Agreement) except
those Necessary Approvals, listed below, that have not been obtained but will be
obtained by the time such approvals are required for the performance by any
Project Participant of any of its obligations respecting the Project and for
which the Independent Engineer has no reason to believe that any such Necessary
Approvals will be not be obtained in due course prior to the time required.

 

[None]

                                                                                                                                                                  ]

 

3

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

 

10.                                 All Necessary Approvals obtained or to be
obtained in paragraph 9, are, (or in the case of those not obtained as set forth
therein will be), free from conditions or requirements at all relevant times,
the compliance with which could reasonably be expected to have a material
adverse effect on the Construction Budget, each Phase 1 Addition Budget for
construction (to the extent not in conflict with the Construction Budget), the
Project Schedule, operation, maintenance, or ownership of the Project or which
the Independent Engineer does not reasonably expect to be able to satisfy.

 

11.                                 Except as set forth below and attached
hereto as Schedule 1, there have been no change orders to a Construction
Contract initiated or approved since the date of the last Requisition.  Except
as set forth below, each such change order is included in Budgeted Construction
Costs on and as of the date hereof.

 

Change Order No.

 

Description

 

 

 

 

 

 

 

 

 

 

12.                                 Based on the current progress of the
Project, Completion is reasonably expected to occur on or before the Date
Certain, and the Project Completion Date is reasonably expected to occur no
later than                        ,         .

 

13.                                 The Independent Engineer has no reason to
believe that any Construction Contractor has failed to perform on a timely basis
any material obligation under its Construction Contract as of the date hereof,
except as noted below.  The Independent Engineer has no reason to believe,
except as noted below, that there has occurred an event or there exists a
default on the part of the Borrower or any Construction Contract contractor
under its Construction Contractor which would permit any party to terminate such
Construction Contract or to suspend such party’s performance thereunder.

 

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate on the date
first above written.

 

 

[INDEPENDENT ENGINEER]

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

cc:  The Bank of New York

 

Trust Company, N.A.

 

  600 North Pearl Street, Suite 420

 

  Dallas, Texas 75201

 

 

4

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

 

SCHEDULE 1

 

CHANGE ORDERS ISSUED SINCE THE LAST REQUISITION

 

Change Order

 

Description

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

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

 

EXHIBIT E-1
to
Credit Agreement

 

[FORM OF BORROWER COMPLETION CERTIFICATE]

 

BORROWER COMPLETION CERTIFICATE

 

[ON OR BEFORE THE CONVERSION]

 

To:                              ConocoPhillips Company,
   as Administrative Agent for the Lenders party
   to the Credit Agreement referred to below

600 North Dairy Ashford

Room ML-3092

Houston, Texas 77079-1175

 

Attention:  Vice President and Treasurer

 

Re:                               Freeport LNG Development, L.P.

 

The undersigned,                               , hereby certifies that I am the
duly elected or appointed, qualified, and acting Chief Operating Officer of
Freeport LNG-GP, Inc. (the “General Partner”), a Delaware corporation that is
the sole general partner of Freeport LNG Development, L.P. (the “Borrower”), a
Delaware limited partnership, and that, as such, I am duly authorized as an
Authorized Officer of the Borrower to execute and deliver this Certificate
certifying on behalf of the Borrower as follows:

 

1.                                       This Certificate is delivered pursuant
to Sections 3.3(d)(i) and 3.3(e) of the Credit Agreement, dated as of July 2,
2004 (as amended, modified, or supplemented from time to time, the “Credit
Agreement,” with Appendix A thereto supplying the definitions of capitalized
terms used but not otherwise defined herein), by and among Borrower, General
Partner, ConocoPhillips Company, as Lender, the other Lenders party thereto,
ConocoPhillips Company, as Administrative Agent, and ConocoPhillips Company, as
Collateral Agent.

 

2.                                       Attached hereto as Appendix I are
certified copies of the insurance policies required by Section 5.9 of the Credit
Agreement, or certificates of insurance with respect thereto together with
evidence of the payment of all premiums owed to date therefor and a certificate
of the Insurance Advisor, certifying that insurance complying with Section 5.9
of the Credit Agreement, covering the risks referred to therein, has been
obtained and is in full force and effect.

 

3.                                       Subject to the proviso set forth in
Section 3.3(c)(1) of the Credit Agreement, all Necessary Approvals have been
duly obtained and are final, non-appealable and in full force and effect.

 

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

 

4.                                       Completion under the Credit Agreement
has occurred.  The Project Completion Date is                        ,         .

 

5.                                       The Work (except for those items to be
paid with the proceeds of the final Construction Loan) under the Construction
Contracts has been completed in substantial accordance with such Construction
Contracts and in compliance with all Applicable Laws and Necessary Approvals,
and all clearing, landscaping, lighting and paving of the Facility site, and all
ancillary construction, upgrades, utilities, and improvements necessary for the
operation of Phase 1 of the Project as contemplated by the Transaction Documents
have been substantially completed in a satisfactory manner.

 

6.                                       (A) The representations and warranties
made by the Borrower in Article 4 of the Credit Agreement and the
representations and warranties made by the Borrower in each of the other
Financing Documents to which it is a party are true and correct in all material
respects on and as of the date hereof with the same force and effect as if made
on and as of the date hereof (or, if stated to have been made solely as of an
earlier date, were true and correct in all material respects as of such date);
(B) no Default or Event of Default has occurred and is continuing as of the date
hereof; (C) no Material Adverse Effect, and no event or condition that could
reasonably be expected to have a Material Adverse Effect, has occurred and is
continuing; (D) no default by the Borrower or, to the best knowledge of the
Borrower, by any Project Participant (other than any Non-Smith LP and any
Shipper) under any of the Transaction Documents (which default could reasonably
be expected to have a Material Adverse Effect) has occurred and is continuing on
the date hereof; and (E) all conditions set forth in Section 3.3 of the Credit
Agreement to which the occurrence of the Conversion Date is subject have been
satisfied with the following exceptions:

 

None

 

To the extent any of the above certifications relate solely to the performance
of the Construction Contractors and to the extent Borrower has no contrary
knowledge, Borrower is relying upon the Project Manager’s representations
provided under the Construction Advisory Services Agreement.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

2

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IN WITNESS WHEREOF, the undersigned has executed this Borrower Completion
Certificate as of the date first above written.

 

 

FREEPORT LNG DEVELOPMENT, L.P.

 

 

 

By:  Freeport LNG-GP, Inc., its sole General Partner

 

 

 

 

 

By:

 

 

 

Name:

 

Title:

 

3

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

 

Appendix I
to Exhibit E-1
Borrower Completion Certificate

 

INSURANCE DOCUMENTATION

 

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

 

EXHIBIT E-2
to
Credit Agreement

 

[FORM OF INDEPENDENT ENGINEER COMPLETION CERTIFICATE]

 

INDEPENDENT ENGINEER COMPLETION CERTIFICATE

 

[INSERT ON OR BEFORE THE CONVERSION DATE]

 

To:                              ConocoPhillips Company,
   as Administrative Agent for the Lenders party
   to the Credit Agreement referred to below

600 North Dairy Ashford

Room ML-3092

Houston, Texas 77079-1175

 

Attention:  Vice President and Treasurer

 

Re:                               Freeport LNG Development, L.P.

 

[INDEPENDENT ENGINEER], acting as the “Independent Engineer” under the Credit
Agreement, dated as of July 2, 2004 (as amended, modified, or supplemented from
time to time, the “Credit Agreement,” with Appendix A thereto supplying the
definitions of capitalized terms used but not otherwise defined herein), by and
among Borrower, General Partner, ConocoPhillips Company, as Lender, the other
Lenders party thereto, ConocoPhillips Company, as Administrative Agent, and
ConocoPhillips Company, as Collateral Agent, hereby submits this Certificate in
connection with the Project Completion Date pursuant to Section 3.3(d)(ii) of
the Credit Agreement.

 

The Independent Engineer has discussed all matters believed pertinent to this
Certificate with the Borrower, the Project Manager, the EPC Contractor, the
other Construction Contractors and any other third party deemed appropriate, and
has made such inspections, site visits, reviews, examinations, and
investigations as the Independent Engineer believed were reasonably necessary to
establish the accuracy of this Certificate.  On the basis of the foregoing and
on the understanding and belief that the Independent Engineer has been provided
true, correct, and complete information from such other parties as to the
matters covered by this Certificate, the Independent Engineer hereby certifies,
in its professional opinion, as of the date hereof, that:

 

1.                                       The individual executing this
Certificate is a duly authorized representative of the Independent Engineer,
authorized to execute and deliver this Certificate on behalf of the Independent
Engineer.

 

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

 

2.                                       The Independent Engineer has performed
its review of the Project in a professional manner using sound project
management and supervisory principles and procedures and in accordance with the
standards of care practiced by leading consulting engineers in performing
similar tasks on like projects.  The Independent Engineer represents that it has
the required skills and capacity to perform its services in the foregoing
manner.

 

3.                                       The Independent Engineer has received
all information it has requested relating to the Construction Contracts and any
other Transaction Document and has no reason to believe that any of the
information is untrue, incorrect, or incomplete.

 

4.                                       Completion under the Credit Agreement
has occurred.

 

5.                                       Phase 1 of the Facility has been tested
in accordance with the performance tests prescribed in the Construction
Contracts (the “Performance Tests”) and satisfied the minimum acceptance
criteria as defined in the Construction Contracts.

 

6.                                       The Work (except for those items to be
paid with the proceeds of the final Construction Loan) under the Construction
Contracts has been completed in substantial accordance with such Construction
Contracts and in compliance with all Applicable Laws and Necessary Approvals,
and all clearing, landscaping, lighting, and paving of the Facility site for
Phase 1, and all ancillary construction, upgrades, utilities, and improvements
necessary for the operation of Phase 1 of the Project as contemplated by the
Transaction Documents have been substantially completed in a satisfactory
manner.

 

7.                                       Subject to the proviso set forth in
Section 3.3(c)(1) of the Credit Agreement, all Necessary Approvals have been
duly obtained and are final, non-appealable and in full force and effect.

 

8.                                       The Project Completion Date has
occurred and is                   ,     ,         .

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate on the date
first above written.

 

 

[INDEPENDENT ENGINEER]

 

 

 

 

 

 

2

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

EXHIBIT F
to
Credit Agreement

 

[FORM OF CONSENT AGREEMENT]

 

CONSENT AGREEMENT

 

[Date]

 

[Name, Form, and Jurisdiction of Entity] (the “Contracting Party”)hereby
acknowledges the Pledge and Security Agreement, dated as of June 30, 2004 (as
amended, modified, or supplemented from time to time, the “Security Agreement”),
by and among Freeport LNG Development, L.P. (the “Company”), Subsidiaries of the
Company from time to time parties thereto, Subsidiaries of Freeport LNG-GP, Inc.
from time to time parties thereto, and ConocoPhillips Company, as Collateral
Agent (in such capacity, the “Collateral Agent”) and the Leasehold Deed of
Trust, Security Agreement, Financing Statement and Assignment of Rentals dated
as of                           , 2004 made by FLNG Land, Inc. in favor of
                             as trustee for the benefit of the Collateral Agent
(as amended from time to time, the “Deed of Trust” and together with the
Security Agreement and any other collateral document for the benefit of the
Collateral Agent or other Secured Parties covering any interest in the Assigned
Agreement referred to below, the “Security Documents”), as agent for the benefit
of the various parties providing financing to the Company (collectively, the
“Secured Parties”), and hereby agrees as follows:

 

1.               Lien Acknowledgment.  The Contracting Party hereby acknowledges
and consents to the pledge and assignment of all right, title, and interest of
the Company in, to, and under (but not its obligations, liabilities, or duties
with respect to) the [                    ] Agreement dated as of
[                       ,         ] between the Contracting Party and the
Company (as amended by [describe all existing amendments], the “Assigned
Agreement”) by the Company to the Collateral Agent pursuant to the Security
Documents.

 

2.               Assigned Agreement Subordinate to Security Documents.  Subject
to the provisions hereof, Contracting Party agrees that the Assigned Agreement,
all of its terms, covenants and provisions, and all rights, remedies, options
and other benefits derived in any manner by or for the benefit of Contracting
Party now or hereafter existing thereunder are, and shall at all times continue
to be, subject and subordinate in all respects to the Security Documents, all of
their terms, covenants and provisions, and their lien, security interest and
absolute assignment of rents, and to any and all increases, renewals,
modifications, consolidations, replacements and extensions thereof.

 

3.               Contracting Party Not to Be Made a Party.  The Collateral Agent
agrees that if, during the period that the Assigned Agreement shall be in full
force and effect, any action or proceeding is commenced by the Collateral Agent
to foreclose or enforce any rights or remedies in the Security Documents or to
sell or otherwise dispose or take possession of the related LNG terminal or any
part thereof (the “Project”) from the Company or any other person who then has
possession thereof, Contracting Party shall not be named as a party in any such
action nor shall Contracting Party be named a party in connection with any
foreclosure or sale of the

 

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

 

Assigned Agreement or Project if, at the time of the commencement of any such
action or proceeding or at the time of any such foreclosure or sale, (i) no
termination event described in [              ] of the Assigned Agreement (each,
a “Termination Event”) shall have occurred and be continuing and (ii)
Contracting Party shall not be in default of any of the terms, covenant or
conditions of the Assigned Agreement or this Consent Agreement (this “Consent”)
that are to be observed or performed on the part of Contracting Party, unless
such joinder is necessary to foreclose the Collateral Agent’s lien or security
interest, and then only for such purposes and not for the purpose of termination
of the Assigned Agreement.

 

4.               Assignment Agreement to Continue.  The Collateral Agent
consents to the Assigned Agreement and all provisions contained therein and (i)
in the event the Collateral Agent shall come into possession of or acquire the
Company’s interest in the Project or any part thereof or the Company’s rights
and remedies under the Assigned Agreement as a result of the enforcement or
foreclosure of the Security Documents, or by means of the delivery to the
Collateral Agent of a deed-in-lieu of foreclosure, or as a result of any other
means, or any person or entity other than the Collateral Agent shall come into
possession of or acquire the Company’s interest in the Project or any part
thereof as a result of the enforcement or foreclosure of the Security Documents,
or (ii) in the event that the Company conveys its interest in the Project or any
part thereof or the Assigned Agreement to any person or entity other than the
Collateral Agent, or (iii) in the event that the Company’s interest in the
Project or the Assigned Agreement passes to a person or entity other than the
Collateral Agent by operation of law or any other means (such person or entity
being referred to hereinafter as a “Successor Owner”),then the Assigned
Agreement shall not be terminated or affected thereby and, so long as no
Termination Event shall have occurred and be continuing and Contracting Party
has performed its obligations under the Assigned Agreement and this Consent,
Contracting Party’s rights and privileges under the Assigned Agreement shall not
be diminished, disturbed or interfered with by the Collateral Agent or the
Successor Owner but shall instead continue in full force and effect as a direct
Assigned Agreement between the Collateral Agent or the Successor Owner, as the
case may be, and Contracting Party upon all of the terms, covenants and
conditions set forth in the Assigned Agreement, and in that event, Contracting
Party agrees to attorn to the Collateral Agent or the Successor Owner and the
Collateral Agent or the Successor Owner agrees to accept such attornment, such
attornment to be effective and self-operative without the execution of any
further instruments on the part of any of the parties hereto immediately upon
the Collateral Agent or such Successor Owner coming into possession of, or
acquiring, the Company’s interest in the Project or the interest in the Assigned
Agreement, provided that neither the Collateral Agent nor the Successor Owner
shall be:

 

(a)          liable for any act or omission of the Company or any prior owner or
operator (the “Operator”) of the Project (but nothing herein shall release the
Collateral Agent or Successor Owner, as the case may be, as the Operator of the
Project, from complying with the Operator of the Project’s obligations accruing
from and after such time as the Collateral Agent or the Successor Owner, as the
case may be, shall become the Operator of the Project to the extent such
obligations constitute the gross negligence or willful misconduct of such Person
and Contracting Party hereby waives any right to assert against the Collateral
Agent or the Successor Owner any right of self-help, offset,

 

2

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

 

abatement, rent credit, reimbursement or termination, if applicable, under the
Assigned Agreement);

 

(b)         subject to any claims or counterclaims which Contracting Party might
be entitled to assert against any previous Operator (but nothing herein shall
release the Collateral Agent or the Successor Owner, as the case may be, as the
Operator of the Project, from complying with the Company’s obligations accruing
from and after such time as the Collateral Agent or the Successor Owner, as the
case may be, shall become the Operator of the Project and Contracting Party
hereby waives any right to assert against the Collateral Agent or the Successor
Owner any right of self-help, offset, abatement, rent credit, reimbursement or
termination, if applicable, under the Assigned Agreement);

 

(c)          liable for any deposit or security which was not actually delivered
to the Collateral Agent or the Successor Owner;

 

(d)         bound by any payment made by Contracting Party to the Company or any
previous owner or operator of the Project, for more than one month in advance of
its accrual; or

 

(e)          subject to any right of Contracting Party, if any, of self-help,
offset, abatement, rent, credit or reimbursement arising out of the default of a
prior owner or operator of the Project or bound by any amendment or modification
or surrender or termination of the Assigned Agreement made without the
Collateral Agent’s written consent (other than any of the same which does not
require the Collateral Agent’s consent under the Security Documents)

 

and provided, further, however, in the event that the Collateral Agent or
Successor Owner, as the case may be, is not able to collect from other customers
of the Project the entire amount of the Project’s [operating expenses – to be
refined], Contracting Party agrees to pay an amount of such expenses equal to
the percentage of the Project’s total capacity that the Contracting Party
controls pursuant to the Assigned Agreement.

 

Contracting Party agrees that this Consent satisfies any condition or
requirement in the Assigned Agreement relating to the granting of a
non-disturbance agreement.

 

5.               Representations.  The Contracting Party represents and warrants
as follows:

 

(a)          Each of this Consent and the Assigned Agreement has been duly
authorized, executed and delivered by the Contracting Party, is in full force
and effect and is a legal, valid, and binding obligation of the Contracting
Party enforceable against the Contracting Party in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, debt adjustment, moratorium or other similar laws affecting
creditors’ rights generally.  Except as described in Section 1 above, there are
no amendments, modifications or supplements (whether by waiver, consent or
otherwise) to the Assigned Agreement, either oral or written, and the Assignment
Agreement sets forth the entire agreement of the Contracting Party, the Company
and any other person with respect thereto.

 

3

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

 

(b)         The Company has complied with all conditions precedent, covenants
and agreements required to be complied with by or on behalf of the Company on or
prior to the date hereof pursuant to the Assigned Agreement.

 

(c)          The Contracting Party is a                        duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
formation.  The Contracting Party has the requisite power to carry on its
business as currently being conducted and as proposed to be conducted by it. 
The Contracting Party has the requisite power and authority to execute and
deliver this Consent and the Assigned Agreement and to perform its obligations
under each thereof.

 

(d)         The execution and delivery of this Consent and the Assigned
Agreement by the Contracting Party do not and did not, and the fulfillment and
compliance with the respective provisions hereof and thereof by the Contracting
Party do not and will not, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any lien,
security interest, charge, or encumbrance upon any of the properties or assets
of the Contracting Party pursuant to the provisions of, or result in any
violation of, the charter, by-laws and other governing documents of the
Contracting Party, or any applicable law, statute, rule, or regulation, or any
agreement, including any Transaction Document to which the Contracting Party is
a party, instrument, order, judgment, or decree, to which the Contracting Party
is subject.

 

(e)          No consent or approval of, or other action by or any notice to or
filing with, any court or administrative or governmental body (except those
previously obtained) was required in connection with the execution and delivery
of the Assigned Agreement, or is required in connection with the execution and
delivery of this Consent or the performance by the Contracting Party of its
obligations hereunder or thereunder.  The Contracting Party has obtained all
permits, licenses, approvals, consents, and exemptions with respect to the
performance of its obligations under this Consent and the Assigned Agreement
required by applicable laws, statutes, rules, and regulations in effect as of
the date hereof.

 

(f)            There are no proceedings pending or, to the best of the
Contracting Party’s knowledge, threatened against or affecting the Contracting
Party in any court or by or before any governmental authority, arbitration
board, or tribunal that questions the validity of the Assigned Agreement, or
that may result in a material adverse effect upon the property, business,
prospects, profits, or condition (financial or otherwise) of the Contracting
Party, or the ability of the Contracting Party to perform its obligations under
this Consent and the Assigned Agreement, and the Contracting Party is not in
default with respect to any order of any court, governmental authority,
arbitration board, or tribunal.

 

(g)         The Contracting Party affirms that it has no notice of any
assignment relative to the right, title, and interest of the Company in, to, and
under the Assigned Agreement other than the pledge and assignment referred to in
Section 1.

 

(h)         After giving effect to the pledge and assignment referred to in
Section 1, and after giving effect to the consent to such pledge and assignment
by the Contracting Party, there exists

 

4

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no event or condition (a “Contracting Party Termination Event”) that would,
either immediately or with the passage of time or giving of notice, or both,
entitle either the Contracting Party or the Company to terminate or suspend its
obligations under the Assigned Agreement and there are no claims or rights of
set-off pending by any party to the Assigned Agreement.  All amounts due under
the Assigned Agreement as of the date hereof have been paid in full.

 

(i)             The Contracting Party affirms that (A) the representations and
warranties set forth in each of the Project Documents to which it is a party are
true and correct in all material aspects on and as of the date hereof (or, if
made solely as of an earlier date, were true and correct in all material
respects as of such earlier date); and (B) it is in compliance in all material
respects with all of its agreements contained in any Transaction Document to
which it is a party.

 

6.               Collateral Agent’s Rights.

 

1.               (a)                                  From and after the date
hereof and unless and until the Contracting Party shall have received written
notice from the Collateral Agent that the lien of the Security Documents has
been released in full, the Collateral Agent or its nominee shall have the right,
but not the obligation, to pay any sums due under the Assigned Agreement by the
Company and to perform any other act, duty, or obligation required of the
Company thereunder at any time; provided, that no such payment or performance
shall be construed as an assumption by the Collateral Agent or its nominee or
any Secured Party of any covenants, agreements, or obligations of the Company
under or in respect of the Assigned Agreement.

 

(b)         The Contracting Party agrees that it will not terminate or suspend
its obligations under the Assigned Agreement without first giving the Collateral
Agent notice and opportunity to cure as provided in Section 6(c) below.

 

(c)          If a Contracting Party Termination Event shall occur, and the
Contracting Party shall desire to terminate or suspend its obligations under the
Assigned Agreement, the Contracting Party first shall give written notice to the
Collateral Agent of such Contracting Party Termination Event, specifying in such
notice all then existing Contracting Party Termination Events of which it has
knowledge, such notice to be delivered to the Collateral Agent by hand delivery
or by means of an independent commercial courier service and to be confirmed, if
possible, after reasonable effort, by telephone.  If the Collateral Agent elects
to exercise its right to cure (or to cause its nominee to cure, in which event,
all references herein to Collateral Agreement shall be deemed references to such
nominee) as herein provided, it shall, within 30 days after the receipt by it of
the notice from the Contracting Party referred to in the preceding sentence,
deliver to the Contracting Party a written notice stating that it has elected to
exercise such right to cure, together with a written statement of the Collateral
Agent that it will promptly commence to cure all Contracting Party Termination
Events susceptible of being cured by the Collateral Agent, and that it will,
during the cure period, diligently attempt in good faith to complete the curing
of, to the reasonable satisfaction of the Contracting Party, all such
Contracting Party Termination Events.

 

5

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(d)         The Collateral Agent shall have a period of 120 days after the
delivery of the notice by the Collateral Agent referred to in Section 6(c) in
which to cure the Contracting Party Termination Event(s) specified in such
notice.  In the event that any such Contracting Party Termination Event (except
monetary defaults) shall be incurable by the Collateral Agent within such
120-day period, the Contracting Party shall not exercise any remedies under the
Assigned Agreement if the Collateral Agent shall, within such 120-day period,
initiate action to cure such Contracting Party Termination Event and diligently
attempt to complete the curing thereof.  Any curing of or attempt to cure any
Contracting Party Termination Event shall not be construed as an assumption by
the Collateral Agent or the Secured Parties of any covenants, agreements, or
obligations of the Company under or in respect of the Assigned Agreement.

 

(e)          If, before the Collateral Agent shall have cured any Contracting
Party Termination Event pursuant to Section 6(d), the Company shall have cured
such Contracting Party Termination Event, the Contracting Party promptly shall
provide the Collateral Agent with notice of such cure and the discontinuance of
such Contracting Party Termination Event.

 

7.               Replacement Assigned Agreement.

 

2.               (a)                                  Notwithstanding any
provision in the Assigned Agreement to the contrary, in the event of the
rejection of the Assigned Agreement by a receiver of the Company or otherwise
pursuant to bankruptcy or insolvency proceedings or the Assigned Agreement is
terminated for any reason before the expiration of its term (as such may be
renewed or extended), the Contracting Party will enter into a new agreement with
the Collateral Agent or, at the Collateral Agent’s request, with the Collateral
Agent’s nominee, for the remainder of the originally scheduled term of the
Assigned Agreement, effective as of the date of such rejection or termination,
with the same covenants, agreements, terms, provisions, and limitations as are
contained in the Assigned Agreement; provided, that the Collateral Agent shall
have made a request to the Contracting Party for such new agreement within 90
days after the date the Collateral Agent receives notice from the Contracting
Party of the rejection of the Assigned Agreement.

 

(b)         If the Collateral Agent or its nominee is prohibited, by any process
or injunction issued by any court having jurisdiction of any bankruptcy or
insolvency proceeding involving the Company or otherwise, from continuing the
Assigned Agreement in place of the Company or from otherwise exercising any of
its rights or remedies hereunder or under the Security Documents in respect of
the Assigned Agreement, then the times specified herein for the exercise by the
Collateral Agent of any right or benefit granted to it hereunder (including
without limitation the time period for the exercise of any cure rights granted
hereunder) shall be extended for the period of such prohibition; provided, that
the Collateral Agent is diligently pursuing such rights or remedies (to the
extent permitted) in such bankruptcy or insolvency proceeding or otherwise.

 

8.               Assumption Right.  The Contracting Party acknowledges that upon
an event of default by the Company under the Security Documents, the Collateral
Agent may (but shall not be obligated to) assume (directly or through its
nominee), or cause a Subsequent Owner under

 

6

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any instrument of assignment or transfer in lieu of foreclosure to assume, all
of the interests, rights, and obligations of the Company thereafter arising
under the Project and Assigned Agreement.  If the interest of the Company in the
Project or Assigned Agreement shall be assumed, sold or transferred as
hereinbefore provided, the assuming party shall agree in writing to be bound by
and to assume the terms and conditions of the Assigned Agreement and any and all
obligations to the Contracting Party arising or accruing thereunder from and
after the date of such assumption, and the Contracting Party shall continue to
perform its obligations under the Assigned Agreement in favor of the assuming
party as if such party had thereafter been named as the Company under the
Assigned Agreement; provided, that if the Collateral Agent or a Subsequent Owner
assumes the Assigned Agreement as provided above, it shall not be personally
liable for the performance of the obligations thereunder except to the extent of
all of its right, title, and interest in and to the Project or the Assigned
Agreement, as the case may be.  Notwithstanding any such assumption or
disposition by the Collateral Agent or Subsequent Owner, the Company shall not
be released or discharged from and shall remain liable for any and all of its
obligations to the Contracting Party arising or accruing under the Assigned
Agreement prior to such assumption.  Without the further consent of the
Contracting Party, the Collateral Agent or Subsequent Owner, as the case may be,
may sell and assign the Assigned Agreement or its rights therein.

 

9.               Payments.  The Contracting Party shall make all payments due to
the Company under the Assigned Agreement to The Bank of New York Trust Company,
N.A., as Depositary Agent, to Account No. [            ], ABA No.
[                  ].  All parties hereto agree that each payment by the
Contracting Party to the Depositary Agent of amounts due to the Company from the
Contracting Party under the Assigned Agreement shall satisfy the Contracting
Party’s corresponding payment obligation under the Assigned Agreement.

 

10.         Amendments to Assigned Agreement.  [This provision does not apply to
a non-COP TUA.]  No amendment or modification of, or waiver by or consent of the
Company or termination in respect of, any provision of the Assigned Agreement
shall be binding on the Collateral Agent or any Successor Owner or Operator
unless the same shall be in writing and the Collateral Agent shall have given
its prior written consent thereto.  Without the Collateral Agent’s prior written
consent, Contracting Party will not (a) enter into any agreement amending the
Company’s or Contracting Party’s payment obligations under the Assigned
Agreement or terminating the Assigned Agreement, (b) prepay any of the sums due
under the Assigned Agreement except for scheduled payments for no more than one
(1) month in advance of its accrual or (c) voluntarily surrender the portion of
the capacity under the Assigned Agreement or terminate the Assigned Agreement
without cause or shorten the Assigned Agreement term, and no such purported
amendment, modification, termination, prepayment or voluntary surrender made
without the Collateral Agent’s prior written consent shall be binding on the
Collateral Agent.

 

11.         Notice.  Notice to any party hereto shall be deemed to be delivered
on the earlier of:  (a) the date of personal delivery and (b) if deposited in a
United States Postal Service depository, postage prepaid, or as registered or
certified mail, return receipt requested, addressed to such party at the address
indicated below (or at such other address as such party may have theretofore
specified by written notice delivered in accordance herewith), upon delivery or
refusal to accept delivery, in each case as evidenced by the return receipt:

 

7

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The Collateral Agent:

 

ConocoPhillips Company

 

 

600 North Dairy Ashford, Room ML-3092

 

 

Houston, Texas 77079-1175

 

 

Attention:  Vice President and Treasurer

 

 

 

Company:

 

Freeport LNG Development, L.P.

 

 

1200 Smith Street, Suite 600

 

 

Houston, Texas 77002

 

 

Attention:  Michael S. Smith

 

 

 

The Contracting Party:

 

 

 

 

 

 

 

 

 

12.         Estoppel Certificates.  Within 30 days after request by the
Collateral Agent, from time to time made, the Contracting Party will execute and
deliver to the Collateral Agent or to such other person or entity as may be
specified by the Security Documents an estoppel certificate containing such
information concerning the Assigned Agreement as the Collateral Agent may
reasonably request.  This Consent shall be binding upon and shall inure to the
benefit of the successors and assigns of the Contracting Party, and shall inure
to the benefit of the Collateral Agent, the Secured Parties, and their
respective successors, transferees and assigns.  Contracting Party hereby
ratifies and confirms that the Assigned Agreement is in full force and effect
and agrees that as modified, the Assigned Agreement is and will continue to be
in full force and effect and enforceable in accordance with its respective
terms.  Contracting Party shall provide a document similar to this Consent to
any lender making a loan secured by the Project or the Assigned Agreement or any
interest therein, which document may contain such reasonable modifications as
may be requested by such lender and approved by the Contracting Party.

 

13.         Counterparts.  This Consent may be executed in one or more
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument.

 

14.         GOVERNING LAW.  THIS CONSENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK BUT EXCLUDING ANY CONFLICT OF
LAW RULES AND PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW) THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF A DIFFERENT
JURISDICTION.

 

15.         WAIVER OF JURY TRIAL.  THE PARTIES TO THIS CONSENT IRREVOCABLY WAIVE
TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THE ASSIGNED AGREEMENT
OR THIS CONSENT.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

8

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

 

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Consent as of the date first written above.

 

[CONTRACTING PARTY]

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

CONOCOPHILLIPS COMPANY,

 

as Collateral Agent

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Name:

 

 

 

 

 

Acknowledged and Agreed:

 

 

 

FREEPORT LNG DEVELOPMENT, L.P.

 

 

 

By:  Freeport LNG-GP, Inc., its sole General Partner

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

9

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

 

EXHIBIT G
to
Credit Agreement

 

[FORM OF ASSIGNMENT AND ACCEPTANCE]

 

ASSIGNMENT AND ACCEPTANCE

 

[Date]

 

Reference is made to the Credit Agreement described in Item 2 of Annex I annexed
hereto (as such credit agreement may hereafter be amended, modified, or
supplemented from time to time, the “Credit Agreement,” with Appendix A thereto
supplying the definitions for capitalized terms used but not otherwise defined
herein).

 

[Name of Assignor] (the “Assignor”) and [Name of Assignee] (the “Assignee”)
hereby agree as follows:

 

1.                                       For an agreed consideration, the
Assignor hereby assigns to the Assignee without recourse and without
representation or warranty (other than as expressly provided herein), and the
Assignee hereby accepts and assumes from the Assignor (i) a portion of the
Assignor’s rights and obligations under the Credit Agreement, the other
Financing Documents, and any other documents or instruments delivered pursuant
thereto as of the Settlement Date (as hereinafter defined) as specified in Item
5 of Annex I (the “Assigned Share”) including, without limitation, all rights
and obligations with respect to the Assigned Share of the outstanding Loans,
including any guarantees or letters of credit related thereto, and (ii) if the
Assigned Share is 100% of Assignor’s rights and obligations, to the extent
permitted to be assigned under applicable law, all claims, suits, causes of
action and any other right of the Assignor (in its capacity as a Lender) against
any Person, whether known or unknown, arising under or in connection with the
Credit Agreement, the other Financing Documents, or any other documents or
instruments delivered pursuant thereto or the loan transactions governed thereby
or in any way based on or related to any of the foregoing, including contract
claims, tort claims, malpractice claims, statutory claims and all other claims
at law or in equity related to the rights and obligations assigned pursuant to
clause (i) above (the rights and obligations assigned pursuant to clauses (i)
and (ii) above being referred to herein collectively as the “Assigned
Interest”).  After giving effect to such assignment, the amount of the
outstanding Loans owing to the Assignee will be as set forth in Item 5 of Annex
I.

 

2.                                       The Assignor (i) represents and
warrants that it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Acceptance and to
consummate the transaction contemplated hereby; (ii) represents and warrants
that it is the legal and beneficial owner of the Assigned Interest and that the
Assigned Interest is free and clear of any adverse claim; (iii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties, or representations made in or in connection with the
Credit Agreement or the other Financing Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency, or value of the Credit
Agreement, the other Financing Documents, or any other instrument or document
furnished pursuant thereto; and

 

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

 

(iv) makes no representation or warranty and assumes no responsibility with
respect to the financial condition or prospects of the Borrower or the
performance or observance by the Borrower of any of its obligations under the
Credit Agreement, the other Financing Documents, or any other instrument or
document furnished pursuant thereto.

 

3.                                       The Assignee (i) represents and
warrants that it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Acceptance and to
consummate the transaction contemplated hereby and to become a Lender under the
Credit Agreement; (ii) confirms that it has received a copy of the Credit
Agreement and the other Financing Documents, and such other documents and
information as it has deemed appropriate in order to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (iii) agrees
that it will, independently and without reliance upon the Administrative Agent,
the Assignor, or any other Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Credit Agreement; (iv) appoints and
authorizes the Agents to take such action each as an agent on its behalf and to
exercise such powers under the Credit Agreement and the other Financing
Documents as are delegated to the Agents by the terms thereof, together with
such powers as are reasonably incidental thereto; and (v) agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Credit Agreement are required to be performed by it as a Lender.

 

4.                                       Following the execution of this
Assignment and Acceptance by the Assignor and the Assignee, an executed original
hereof will be delivered to the Administrative Agent.  The effective date of
this Assignment and Acceptance shall be the date first written above (the
“Settlement Date”).

 

5.                                       Upon the delivery of a fully executed
original hereof to the Administrative Agent, as of the Settlement Date, (i) the
Assignee shall be a party to the Credit Agreement and, to the extent provided in
this Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and under the other Financing Documents and (ii) the Assignor shall,
to the extent provided in this Assignment and Acceptance, relinquish its rights
and be released from its obligations under the Credit Agreement and the other
Financing Documents, except that if Assignor is the Initial Lender, Assignor is
not released from its obligations under Section 2.6 of the Credit Agreement.

 

6.                                       On the Settlement Date the Assignee
shall pay to the Assignor an amount specified by the Assignor in writing which
represents the Assigned Share of the principal balance of the Loans made
pursuant to the Credit Agreement which are outstanding on the Settlement Date,
and which are being assigned hereunder.  The Assignor and the Assignee shall
make all appropriate adjustments in payments under the Credit Agreement for
periods prior to the Settlement Date directly between themselves on the
Settlement Date.  It is agreed that the Assignee shall be entitled to all
interest on the Assigned Share of the outstanding Loans at the rates specified
in the Credit Agreement which accrues from and after the Settlement Date, such
interest to be paid by the Administrative Agent directly to the Assignee.  It is
further agreed that all payments of principal made on the Assigned Share of the
outstanding Loans which occur from and after the Settlement Date will be paid
directly by the Administrative Agent to the Assignee.

 

2

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

 

7.                                       If the Assignee is organized under the
laws of any jurisdiction other than the United States or any state or other
political subdivision thereof, it agrees that it will furnish to the
Administrative Agent and the Borrower, concurrently with the execution of this
Assignment and Acceptance, either U.S. Internal Revenue Service Form 4224 or
U.S. Internal Revenue Service Form 1001 or successor form in accordance with
applicable U.S. laws and regulations (wherein the Assignee claims entitlement to
complete exemption from U.S. federal withholding tax on all payments under the
Credit Agreement) and, upon the expiration or obsolescence of any such
previously delivered form and to the extent it is legally able to do so, it will
furnish to the Administrative Agent and the Borrower a new U.S. Internal Revenue
Service Form 4224 or Form 1001 or successor form in accordance with applicable
U.S. laws and regulations duly executed and completed by the Assignee.  For the
limited purposes of this Paragraph 7, the Borrower is a third party beneficiary
of this Assignment and Acceptance.

 

8.                                       THIS ASSIGNMENT AND ACCEPTANCE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
BUT EXCLUDING ANY CONFLICT OF LAW RULES AND PRINCIPLES (OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) THAT WOULD RESULT IN THE
APPLICATION OF THE LAWS OF A DIFFERENT JURISDICTION.

 

9.                                       The addresses of the Assignee for
notice and payment purposes are set forth in Items 3 and 4, respectively, of
Annex I hereto.

 

10.                                 This Assignment and Acceptance shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns.  This Assignment and Acceptance may be
executed in any number of counterparts, which together shall constitute one
instrument.  Delivery of an executed counterpart of a signature page of this
Assignment and Acceptance by facsimile shall be as effective as delivery of a
manually executed counterpart of this Assignment and Acceptance.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

3

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

 

IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their duly authorized officers, as of the date
first above written.

 

 

[NAME OF ASSIGNOR]

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

[NAME OF ASSIGNEE]

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

4

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

 

The undersigned, as Administrative Agent, hereby consents
to this Assignment and Acceptance:

 

ConocoPhillips Company,
   as Administrative Agent

 

 

By:

 

 

 

Name:

 

Title:

 

 

The undersigned hereby consents
to this Assignment and Acceptance:

 

FREEPORT LNG DEVELOPMENT, L.P.

 

By:

Freeport LNG-GP, Inc., its sole General Partner

 

 

 

 

By:

 

 

 

Name:

 

Title:

 

5

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

 

ANNEX I

to Exhibit G

Assignment and Acceptance

 

ANNEX I

 

TO

 

ASSIGNMENT AND ACCEPTANCE

 

1.                                       Borrower:  FREEPORT LNG DEVELOPMENT,
L.P.

 

2.                                       Name and date of Credit Agreement and
other documents or agreements evidencing or securing the Obligations: (1) Credit
Agreement, dated as of July 2, 2004 by and among Freeport LNG Development, L.P.,
a limited partnership organized and existing under the laws of the State of
Delaware (the “Borrower”), Freeport LNG-GP, Inc., ConocoPhillips Company, as
Lender, the other Lenders party thereto, ConocoPhillips Company, as
Administrative Agent, and ConocoPhillips Company, as Collateral Agent; (2) the
Financing Documents; and (3) the Security Documents.

 

3.                                       Notice (for Assignee):

 

 

4.                                       Assignee’s Payment Instructions:

 

 

5.                                       Assigned Share:

 

 

Commitment

 

Principal Amount of
Commitment/Loans

 

Amount of
Commitment/Loans
Assigned

 

Percentage Assigned
of
Commitment/Loans(3)

 

 

 

$

 

$

 

 

%

 

 

$

 

$

 

 

%

 

 

$

 

$

 

 

%

 

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

(3) Set forth to at least 9 decimals.

 

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

 

EXHIBIT H-1

to

Credit Agreement

 

FREEPORT LNG DEVELOPMENT, L.P.

 

Authorized Officer’s Certificate

 

[Date]

 

I, the undersigned Michael S. Smith, hereby certify that I am the duly elected
or appointed, qualified, and acting Chief Executive Officer of Freeport LNG-GP,
Inc. (the “General Partner”), a Delaware corporation that is the sole general
partner of Freeport LNG Development, L.P. (the “Borrower”), a Delaware limited
partnership, and that, as such, I am duly authorized as an Authorized Officer of
the Borrower to certify and do hereby certify on behalf of the Borrower as
follows:

 

1.                                       This Certificate is issued pursuant to
Sections 3.1(a)(2), 3.1(c)(2), and 3.1(l) of the Credit Agreement, dated as of
July 2, 2004 (as amended, modified, or supplemented from time to time, the
“Credit Agreement,” with Appendix A thereto supplying the definitions of
capitalized terms used but not otherwise defined herein), by and among Borrower,
General Partner, ConocoPhillips Company, as Lender, the other Lenders party
thereto, ConocoPhillips Company, as Administrative Agent, and ConocoPhillips
Company, as Collateral Agent.

 

2.                                       (A) The Borrower is not in default in
the performance, observance or fulfilment of any of its obligations, covenants
or conditions contained in any of the Project Documents in full force and effect
and, to the best of the Borrower’s knowledge, no Project Participant (other than
the Borrower, any Shipper and any Non Smith LP, and solely as a party to the
Shared Facilities Agreement, if any, Expansion) is in default in the
performance, observance or fulfilment of any of its material obligations,
covenants or conditions contained therein unless such default could not
reasonably be expected to have a Material Adverse Effect; (B) each Project
Document (other than the TUAs, the Construction Contracts and EPC Guaranty as
disclosed to the Administrative Agent) to be in full force and effect on the
Closing Date is in full force and effect unless such failure could not
reasonably be expected to have a Material Adverse Effect; (C) the copy of each
such Project Document contemplated by Section 3.1(a)(2)(B) of the Credit
Agreement has been delivered to the Administrative Agent and is true, correct
and complete on such date; and (D) except as delivered to the Administrative
Agent pursuant to Section 3.1(a)(2)(C) of the Credit Agreement, there are no
agreements, side letters or other documents to which the Borrower is a party
that have the effect of modifying or supplementing in any respect any of the
respective rights or obligations of the Borrower or any Project Participant
under any of the Project Documents.

 

3.                                       (A) The representations and warranties
of the Borrower contained in Article 4 of the Credit Agreement and in each of
the other Financing Documents to which the Borrower is a party are true and
correct in all material respects on and as of the date hereof (or, if made
solely as of an earlier date, were true and correct as of

 

6

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

 

such earlier date); (B) all Financing Documents are in full force and effect
under the terms and conditions set forth in such Financing Documents; (C) no
Default or Event of Default has occurred and is continuing; and (D) all
conditions set forth in Section 3.1 of the Credit Agreement have been satisfied
with the following exceptions:

 

[None]                                                                                                                        

 

4.                                       The insurance carried by the Borrower
Entities as of the Closing Date is in accordance with the Administrative Agent’s
requirements under Section 5.9(a) of the Credit Agreement.

 

5.                                       Attached hereto as Exhibit A is a true,
complete and correct copy of the Certificate of Limited Partnership of the
Borrower as filed with the Secretary of State of the State of Delaware on
September 3, 2002 as amended through and including the date hereof and as in
full force and effect on the date hereof (the “Partnership Certificate”).  No
document to amend, supplement, rescind, or modify the Partnership Certificate
has been filed in the office of the Secretary of State of the State of Delaware
or approved by the Borrower.

 

6.                                       Attached hereto as Exhibit B is a true,
complete and correct copy of a Certificate of Good Standing of the Borrower as
issued by the Secretary of State of the State of Delaware on [date].

 

7.                                       Attached hereto as Exhibit C is a true,
complete and correct copy of a Certificate of Authority to Transact Business in
the State of Texas of the Borrower as issued by the Secretary of State of the
State of Texas on [Date].

 

8.                                       Attached hereto as Exhibit D is a true,
complete and correct copy of the Limited Partnership Agreement and all other
Charter Documents of the Borrower (except such documents attached hereto as
Exhibit A and Exhibit C) as amended through and including the date hereof and as
in full force and effect on the date hereof.

 

9.                                       Attached hereto as Exhibit E are true,
complete and correct copies of resolutions unanimously adopted by the Board of
Directors of the General Partner on [Date] authorizing the execution, delivery,
and performance by the Borrower of the Transaction Documents to be executed as
of the date hereof to which the Borrower shall be a party (the “Resolutions”). 
The Resolutions have not been amended, supplemented, rescinded, or modified
since their adoption and remain in full force and effect as of the date hereof. 
The Resolutions are the only resolutions adopted by the Board of Directors of
the General Partner or any committee thereof relating to the transactions
contemplated by the Transaction Documents.

 

10.                                 Attached hereto as Exhibit F is a list of
the names, titles, and specimen signatures of each person who was or is duly
elected or appointed, qualified, and authorized,

 

2

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

 

or their delegate, to execute and deliver on behalf of the Borrower or for its
account (i) the Transaction Documents to be executed as of the date hereof to
which the Borrower is or is intended to be a party and amendments,
modifications, supplements, or waivers thereto and (ii) any other document,
agreement, certificate, consent, or other instrument as may be necessary to
fulfill the intent and purposes thereof or to consummate the transactions
contemplated thereby.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

3

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

 

IN WITNESS WHEREOF, the undersigned has executed this Authorized Officer’s
Certificate as of the date first written above.

 

 

FREEPORT LNG DEVELOPMENT, L.P.

 

 

 

By: Freeport LNG-GP, Inc., its sole General Partner

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

I, the undersigned, duly elected or appointed, qualified, and acting [Titel] of
the General Partner, DO HEREBY CERTIFY that [                      ] is the duly
elected or appointed, qualified, and acting [Title] of the General Partner and
the signature above is such person’s genuine signature.

 

IN WITNESS WHEREOF, I have hereunto set my hand this 2nd day of July, 2004

 

 

 

 

 

Name:

 

Title:

 

4

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

 

EXHIBIT A

 

Certificate of Limited Partnership

 

5

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

 

EXHIBIT B

 

Certificate of Good Standing

 

6

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

 

EXHIBIT C

 

Certificate of Authority to Transact Business in the State of Texas

 

7

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

 

EXHIBIT D

 

Charter Documents

 

8

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

 

EXHIBIT E

 

Resolutions

 

9

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

 

EXHIBIT F

 

Authorized Signatories

 

Name

 

Title

 

Specimen Signature

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

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

 

EXHIBIT H-2

to

Credit Agreement

 

[NAME OF ENTITY]

 

Authorized Officer’s Certificate

 

                       ,      

 

I, the undersigned [Name], hereby certify that I am the duly elected or
appointed, qualified and acting [Title] of [Name of Entity] (the “Company”), a
[State] [Type of Entity], and that, as such, I am duly authorized as an
Authorized Officer of the Company to certify and do hereby certify on behalf of
the Company as follows:

 

1.                                       Attached hereto as Exhibit A is a true,
complete and correct copy of the [Formation Document] of the Company as filed
with the Secretary of State of the State of [State] (the “Secretary of State”)
on                        ,          as amended through and including the date
hereof and as in full force and effect on the date hereof (the “Filing
Certificate”).  No document to amend, supplement, rescind, or modify the Filing
Certificate has been filed in the office of the Secretary of State or approved
by the Company.

 

2.                                       Attached hereto as Exhibit B are true,
complete and correct copies of the Charter Documents of the Company (other than
such documents attached hereto as Exhibit A) as amended through and including
the date hereof and as in full force and effect on the date hereof.

 

3.                                       Attached hereto as Exhibit C are true,
complete and correct copies of resolutions unanimously adopted by the [Governing
Body] of the Company on                        ,          authorizing the
execution, delivery, and performance of the Transaction Documents to which the
Company is or is intended to be a party (the “Resolutions”).  The Resolutions
have not been amended, supplemented, rescinded, or modified since their adoption
and remain in full force and effect as of the date hereof.  The Resolutions are
the only resolutions adopted by the [Governing Body] of the Company or any
committee thereof relating to the transactions contemplated by the Transaction
Documents.

 

4.                                       Attached hereto as Exhibit D is a list
of the names, titles, and specimen signatures of each person who was or is duly
elected or appointed, qualified, and authorized, or their delegate, to execute
and deliver on behalf of the Company or for its account (i) the Transaction
Documents to which the Company is or is intended to be a party and amendments,
modifications, supplements, or waivers thereto and (ii) any other document,
agreement, certificate, consent, or other instrument as may be necessary to
fulfill the intent and purposes thereof or to consummate the transactions
contemplated thereby.

 

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

 

IN WITNESS WHEREOF, the undersigned has executed this Authorized Officer’s
Certificate as of the date first written above.

 

 

[NAME OF ENTITY]

 

 

 

 

 

 

 

 

Name:

 

Title:

 

 

I, the undersigned, duly elected or appointed, qualified, and acting [Secretary]
of the Company, DO HEREBY CERTIFY that                                      is
the duly elected or appointed, qualified, and acting
                               of the Company and the signature above is such
person’s genuine signature.

 

IN WITNESS WHEREOF, I have hereunto set my hand this          day of
                    ,         .

 

 

 

 

 

Name:

 

Title:  [Secretary]

 

2

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

 

EXHIBIT A

 

Filing Certificate

 

3

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

 

EXHIBIT B

 

Charter Documents

 

4

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

 

EXHIBIT C

 

Resolutions

 

5

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

 

EXHIBIT D

 

Authorized Signatories

 

Name

 

Title

 

Specimen Signature

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

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

 

EXHIBIT I-1

to

Credit Agreement

 

[FORM OF QUARTERLY FINANCIAL STATEMENTS OFFICER’S CERTIFICATE]

 

FREEPORT LNG DEVELOPMENT, L.P.

 

Quarterly Financial Statements

 

Officer’s Certificate

 

[Date]

 

The undersigned,                               , hereby certifies that I am the
duly elected, qualified, and acting                                  of Freeport
LNG-GP, Inc. (the “General Partner”), a Delaware corporation that is the sole
general partner of Freeport LNG Development, L.P. (the “Borrower”), a Delaware
limited partnership, and that, as such, I am duly authorized as an Authorized
Officer of the Borrower to certify and do hereby certify on behalf of the
Borrower as follows:

 

1.                                       This certificate is furnished pursuant
to Sections 5.1(a) and 5.1(c) of the Credit Agreement, dated as of July 1, 2004
(as amended, modified, or supplemented from time to time, the “Credit
Agreement,” with Appendix A thereto supplying definitions of capitalized terms
used but not otherwise defined herein), by and among Freeport LNG
Development, L.P., as Borrower, Freeport LNG-GP, Inc., as General Partner,
ConocoPhillips Company, as Lender, the other Lenders party thereto,
ConocoPhillips Company, as Administrative Agent, and ConocoPhillips Company, as
Collateral Agent.

 

2.                                       Attached hereto as Exhibit A is a copy
of the complete unaudited financial statements of the Borrower for the quarterly
period ending                        , 20     (the “Financial Statements”).

 

3.                                       The Financial Statements present fairly
in all material respects the financial condition and results of operations of
the Borrower in accordance with GAAP, as at the end of, and for such period
(subject to normal year-end audit adjustments and the absence of footnotes).

 

4.                                       All Financing Documents are in full
force and effect under the terms and conditions set forth therein and no Default
or Event of Default has occurred and is continuing under the Financing Documents
as of the date of the Financial Statements.

 

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

 

5.                                       Described below are the exceptions, if
any, to paragraph 4, describing in reasonable detail the Default or Event of
Default and what action any Borrower Entity has taken and proposes to take with
respect thereto:

 

2

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

 

IN WITNESS WHEREOF, the foregoing certifications, together with the Financial
Statements delivered with this Certificate in support hereof, are made and
delivered this      day of               , 20    .

 

 

FREEPORT LNG DEVELOPMENT, L.P.

 

 

 

By:

Freeport LNG-GP, Inc., its sole General Partner

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

I, the undersigned,                                of the General Partner, DO
HEREBY CERTIFY that                            is the duly elected and qualified
                                     of the General Partner and the signature
above is [her, his] genuine signature.

 

IN WITNESS WHEREOF, I have hereunto set my hand this          day of
                    , 20    .

 

 

 

 

 

Name:

 

Title:

 

3

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

 

EXHIBIT A

 

Quarterly Financial Statements

 

4

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

 

EXHIBIT I-2

to

Credit Agreement

 

[FORM OF ANNUAL FINANCIAL STATEMENTS OFFICER’S CERTIFICATE]

 

FREEPORT LNG DEVELOPMENT, L.P.

 

Annual Financial Statements

 

Officer’s Certificate

 

[Date]

 

The undersigned,                               , hereby certifies that I am the
duly elected, qualified, and acting                                  of Freeport
LNG-GP, Inc. (the “General Partner”), a Delaware corporation that is the sole
general partner of Freeport LNG Development, L.P. (the “Borrower”), a Delaware
limited partnership, and that, as such, I am duly authorized as an Authorized
Officer of the Borrower to certify and do hereby certify on behalf of the
Borrower as follows:

 

1.                                       This certificate is furnished pursuant
to Sections 5.1(b) and 5.1(c) of the Credit Agreement, dated as of July 1, 2004
(as amended, modified, or supplemented from time to time, the “Credit
Agreement,” with Appendix A thereto supplying definitions of capitalized terms
used but not otherwise defined herein), by and among Freeport LNG
Development, L.P., as Borrower, Freeport LNG-GP, Inc., as General Partner,
ConocoPhillips Company, as Lender, the other Lenders party thereto,
ConocoPhillips Company, as Administrative Agent, and ConocoPhillips Company, as
Collateral Agent.

 

2.                                       Attached hereto as Exhibit A is a copy
of the complete audited annual financial statements of the Borrower as of the
year ending                        , 20     and accompanying opinion thereon of
                           , 20     (the “Financial Statements”).

 

3.                                       All Financing Documents are in full
force and effect under the terms and conditions set forth therein and no Default
or Event of Default has occurred and is continuing under the Financing Documents
as of the date of the Financial Statements.

 

4.                                       Described below are the exceptions, if
any, to paragraph 3, describing in reasonable detail the Default or Event of
Default and what action any Borrower Entity has taken and proposes to take with
respect thereto:

 

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

 

IN WITNESS WHEREOF, the foregoing certifications, together with the Financial
Statements delivered with this Certificate in support hereof, are made and
delivered this      day of               , 20    .

 

 

FREEPORT LNG DEVELOPMENT, L.P.

 

 

 

By:

Freeport LNG-GP, Inc., its sole General Partner

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

I, the undersigned,                              of the General Partner, DO
HEREBY CERTIFY that                            is the duly elected and qualified
                                     of the General Partner and the signature
above is [her, his] genuine signature.

 

IN WITNESS WHEREOF, I have hereunto set my hand this          day of
                    , 20    

 

 

 

 

 

Name:

 

Title:

 

2

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

 

EXHIBIT A

 

Annual Financial Statements

 

3

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

 

EXHIBIT I-3

to

Credit Agreement

 

[FORM OF QUARTERLY OPERATING REPORT OFFICER’S CERTIFICATE]

 

FREEPORT LNG DEVELOPMENT, L.P.

 

Quarterly Operating Report

 

Officer’s Certificate

 

[Date]

 

The undersigned,                               , hereby certifies that I am the
duly elected, qualified, and acting                                  of Freeport
LNG-GP, Inc. (the “General Partner”), a Delaware corporation that is the sole
general partner of Freeport LNG Development, L.P. (the “Borrower”), a Delaware
limited partnership, and that, as such, I am duly authorized as an Authorized
Officer of the Borrower to certify and do hereby certify on behalf of the
Borrower as follows:

 

1.                                       This certificate is furnished pursuant
to Section 5.1(f)(2) of the Credit Agreement, dated as of July 1, 2004 (as
amended, modified, or supplemented from time to time, the “Credit Agreement,”
with Appendix A thereto supplying definitions of capitalized terms used but not
otherwise defined herein), by and among Freeport LNG Development, L.P., as
Borrower, Freeport LNG-GP, Inc., as General Partner, ConocoPhillips Company, as
Lender, the other Lenders party thereto, ConocoPhillips Company, as
Administrative Agent, and ConocoPhillips Company, as Collateral Agent.

 

2.                                       Attached hereto as Exhibit A is a copy
of the complete and correct operating report of the Borrower with respect to the
Project for the quarterly period ending                        , 20     (the
“Operating Report”).

 

3.                                       The Operation and Maintenance Costs
reflected in the Operating Report comply with the requirements contained in
Section 5.23 of the Credit Agreement.  Any necessary qualifications to the
preceding sentence are stated in detail below:

 

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

 

IN WITNESS WHEREOF, the foregoing certifications, together with the Operating
Report delivered with this Certificate in support hereof, are made and delivered
this      day of               , 20    .

 

 

FREEPORT LNG DEVELOPMENT, L.P.

 

 

 

By:

Freeport LNG-GP, Inc., its sole General Partner

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

I, the undersigned,                            of the General Partner, DO HEREBY
CERTIFY that                            is the duly elected and qualified
                                     of the General Partner and the signature
above is [her, his] genuine signature.

 

IN WITNESS WHEREOF, I have hereunto set my hand this          day of
                    , 20    .

 

 

 

 

 

Name:

 

Title:

 

2

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

 

EXHIBIT A

 

Operating Report

 

3

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

 

ANNEX I

to

Credit Agreement

 

CONSTRUCTION LOAN COMMITMENT

 

Lender

 

Tranche A

 

Tranche B

ConocoPhillips

 

finance (i) $*** of the Project Costs (excluding Channel Widening Costs) of
Phase 1, (ii) Channel Widening Costs, (iii) *** of the Supplemental Costs
incurred in the completion of Phase 1 and (iv) an additional amount to pay
scheduled interest during construction on such loans

 

finance *** of the Supplemental Costs incurred in the completion of Phase 1 (as
such amount is reduced by such Supplemental Costs paid other than by the
proceeds of Tranche A Loans).

 

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

SCHEDULE 4.2

to

Credit Agreement

 

FINANCING-RELATED FILINGS, ETC.

 

 

1.                                       Office Space Lease dated November 28,
2002 at Two Allen Center, 1200 Smith Street, Houston, Texas 77002, between
Trizechahn Colony Square GP, LLC, as Landlord, and Borrower.

 

2.                                       Storage Space Agreement dated
November 17, 2003 between Trizechahn Colony Square GP, LLC, a Delaware limited
liability company, d/b/a TrizecHahn Allen Center Management, as Landlord, and
Borrower, as Tenant.

 

3.                                       Office Equipment Lease dated
December 5, 2002 between Freeport, LNG (sic), as Lessee, and Office Systems of
Texas, as Supplier.

 

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

 

SCHEDULE 4.9

to

Credit Agreement

 

TAXES

 

None.

 

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

 

SCHEDULE 5.3

to

Credit Agreement

 

OUTSTANDING PARCELS

 

See Attached.

 

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

 

Schedule of Outstanding Interests within 211.70 acres of Land

 

Item
Ref.

 

Property Description

 

Owner/Claimant Names

A.3
C.6

 

Lots 5,6, Block 12

 

Kenneth A. Gonzales; Harry Bolin

C.7

 

Lot 6, Block 20

 

Katie E. Hill

C.8

 

Lot 9, Block 20

 

Und. int. (1/8) of Mordello Steven Perry, Jr.;
possible adverse claim of Jacqueline Berretta Tomerlin

C.9

 

Lot 7, Block 34

 

Outstanding Tax Judgment vintage 1965

C.10

 

Lot 5, Block 37

 

Velasco Drainage District

C.14

 

Lot 4, Block 43

 

Possible claim of H.W. Hawes, deceased

C.16

 

Lot 4, Block 59

 

Und. int. of heirs of E. Shelby Smith, deceased

C.19

 

Lots 1,2,10,11,12, Block 110
Lots1,2,3,10,11,12, Block 119
Lots 9, 10, Block 121
Lots 11,12, Block 124
Lots 6, Block 130
Lots1, 11, 12, Block 136

 

Und. int. (estimated at 1/14th) of George Lester, deceased

A.3 C.27

 

Lots 1,7, Block 11

 

Paladin Combine (nature and whereabouts of entity unknown)(und. 1/2 ) and
devisee of A.A. Miller, deceased (und. 1/2 )

A.3

 

Lot 5, Block 11

 

Paladin Combine (see Item A.3/C.27 immediately above)

C.28

 

Lot 7, 8, Block 22

 

Und. int. of Grace K. Brown (1/2) and Iona Brown (estimated at 1/10)

C.29

 

Lot 10, Block 21

 

Und. int. (1/4) of P.E. Warren/Ralph Fleck/Lillian Lyles Fleck; und. int. (1/4)
of  Louise Chilton Bryan; und. int. of heirs of Stonewall Jackson Bryan,
deceased

C.30

 

Lot 11, Block 32

 

Claim (und. int.) of various—too numerous to list

A.3

 

Lot 3, Block 21

 

Und. int. (1/4) of Daniel D. Rucker and Janet R. Rucker

A.3

 

Lot 4,5,6, Block 21

 

Und. int. (1/3) of Guy W.  Adriance,  deceased;
Und.  int.  (1/3  x  2/3)  of Hannah Frances  Gayle;
Und.  int.  (1/3  x  2/3  of  Munson  Smith;
Und.  int.  (1/3  x  2/3  collectively)  of Shay  Cook  Smith;  et  al

A.3

 

Lot 12, Block 21

 

L.R. Smith

A.3

 

Lots 1,2,3, Block 22

 

Charles Albert Cook (note adverse claim per recorded affidavit of Rose Irwin)

A.3

 

Lots 4,5,6 Block 22

 

Rose Irwin, aka, Rose Ann Irwin

A.3

 

Lots 7,8, Block 22

 

B. Maurice Cummins and Agnes Brown Cummins Trust

A.3

 

Lot 7, Block 32

 

Horace High

 

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

 

A.3

 

Lot 10, Block 32

 

Rose Irwin, aka, Rose AIrwin

A.3

 

Lot 6, Block 37

 

John M. Wilson, et al

A.3

 

Lot 3, Block 77

 

Und. int. (381/1080)of Robert Moore Gayle and wife, Charlene Lane Gayle

A.3

 

Lot 7, Block 110

 

John Reagan Winn

A.3

 

Lots 1,2,10, Block 116

 

O.T. Maxwell, and wife Alma G. Maxwell

A.3

 

Lots 5,6 Block 116

 

Joseph F. Reffitt

A.3

 

Lots 2,4,5,6, Block 126 (und. int.)
Lot 5,6, Block 134

 

Emily Bierschwale

 

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

Notes:

 

1.               All Item references in “Item Ref.” column are to item numbers
on Schedule C (“C._”) and Schedule A (“A._”) in Title Commitment issued by
Stewart Title Company, under their G.F.# 02508720.

 

2.               All references to Lots and Blocks are to Plat of Quintana
Townsite of record at Volume 2, Page 139 of the Plat Records maintained in the
office of the County Clerk of Brazoria County, Texas

 

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

 

SCHEDULE 5.12

to

Credit Agreement

 

CERTAIN TRANSACTION DOCUMENTS WITH LIENS

 

None.

 

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

 

SCHEDULE 5.19

to

Credit Agreement

 

CERTAIN TRANSACTION DOCUMENTS WITH AFFILIATES

 

1. Partnership Agreement.

 

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

 

Execution Copy

 

FREEPORT LNG DEVELOPMENT, L.P.
(A Delaware limited partnership)

 

AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT

 

THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE.  WITHOUT SUCH REGISTRATION, SUCH
SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED AT ANY TIME, EXCEPT UPON
DELIVERY TO THE PARTNERSHIP OF AN OPINION OF COUNSEL SATISFACTORY TO THE GENERAL
PARTNER OF THE PARTNERSHIP THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER
OR THE SUBMISSION TO THE GENERAL PARTNER OF THE PARTNERSHIP OF SUCH OTHER
EVIDENCE AS MAY BE SATISFACTORY TO THE GENERAL PARTNER TO THE EFFECT THAT ANY
SUCH TRANSFER OR SALE WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION
PROMULGATED THEREUNDER.

 

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

 

TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

 

 

 

 

 

 

1.1

“ACT”

 

 

1.2

“ADDITIONAL CONTRIBUTED EQUITY”

 

 

1.3

“ADJUSTED CAPITAL ACCOUNT BALANCE”

 

 

1.4

“ADVISORY COMMITTEE”

 

 

1.5

“AFFILIATE”

 

 

1.6

“AFFILIATE PAYMENT”

 

 

1.7

“AFFILIATE TRANSACTION”

 

 

1.8

“AGREEMENT”

 

 

1.9

“ASSET VALUE”

 

 

1.10

“BALANCE SHEET” HAS THE MEANING SET FORTH IN SECTION 6.3(B).

 

 

1.11

“BANKRUPTCY”

 

 

1.12

“BANKRUPTCY ACTION”

 

 

1.13

“BANKRUPTCY LAW”

 

 

1.14

“BASIS”

 

 

1.15

“BUDGET”

 

 

1.16

“BUSINESS”

 

 

1.17

“CAPACITY RESERVATION”

 

 

1.18

“CAPITAL ACCOUNT”

 

 

1.19

“CERTIFICATE OF LIMITED PARTNERSHIP”

 

 

1.20

“CHENIERE CLOSING DATE CONTRIBUTION”

 

 

1.21

“CHENIERE CLOSING DATE DISTRIBUTION”

 

 

1.22

“CHENIERE INITIAL EQUITY AMOUNT”

 

 

1.23

“CLOSING DATE”

 

 

1.24

“CONSTRUCTION  FINANCING”

 

 

1.25

“CONTRIBUTED EQUITY”

 

 

1.26

“CONTRIBUTING PARTNER”

 

 

1.27

“CONTRIBUTION AGREEMENT”

 

 

1.28

“CONTRIBUTION DATE”

 

 

1.29

“DELINQUENT CONTRIBUTION”

 

 

1.30

“DELINQUENT PARTNER”

 

 

1.31

“DEPRECIATION”

 

 

1.32

“EARLY CONTRIBUTION DATE”

 

 

1.33

“ENTITY”

 

 

1.34

“ENVIRONMENTAL LAWS”

 

 

1.35

“EXPENSES”

 

 

1.36

“FERC”

 

 

1.37

“FINANCIAL STATEMENTS” HAS THE MEANING SET FORTH IN SECTION 14.2.

 

 

1.39

“FISCAL YEAR”

 

 

1.40

“FREEPORT LNG FACILITY”

 

 

1.41

“FREEPORT GP INITIAL EQUITY AMOUNT”

 

 

1.42

“GAAP”

 

 

1.43

“GENERAL PARTNER”

 

 

1.44

“GOVERNMENTAL ENTITY”

 

 

1.45

“GOVERNMENTAL PERMITS”

 

 

1.46

“GRYPHON STOCK”

 

 

1.47

“INDEMNITEE”

 

 

1.48

“INITIAL EQUITY AMOUNTS”

 

 

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

 

 

1.49

“INTEREST”

 

 

1.50

“I.R.C.”

 

 

1.51

“LEASE AGREEMENT”

 

 

1.52

“LIMITED PARTNERS”

 

 

1.53

“LIQUIDATOR”

 

 

1.54

“LNG INVESTMENTS CLOSING DATE CONTRIBUTION”

 

 

1.55

“LNG INVESTMENTS EXPENSES”

 

 

1.56

“LNG INVESTMENTS INITIAL EQUITY AMOUNT”

 

 

1.57

“MAJOR DECISION”

 

 

1.58

“MAJORITY”

 

 

1.59

“MAJORITY IN INTEREST”

 

 

1.60

“MATERIAL ADVERSE EFFECT”

 

 

1.61

“MINIMUM GAIN”

 

 

1.62

“MS ENTITIES”

 

 

1.63

“NET CASH FLOW”

 

 

1.64

“NONRECOURSE DEDUCTIONS”

 

 

1.65

“OTHER PARTNERS”

 

 

1.66

“PARTNER”

 

 

1.67

“PARTNER NONRECOURSE DEBT”

 

 

1.68

“PARTNER NONRECOURSE DEBT MINIMUM GAIN”

 

 

1.69

“PARTNER NONRECOURSE DEDUCTIONS”

 

 

1.70

“PARTNERSHIP”

 

 

1.71

“PARTNERSHIP ACCOUNTANT”

 

 

1.72

“PARTNERSHIP ASSETS”

 

 

1.73

“PARTNERSHIP MINIMUM GAIN”

 

 

1.74

“PERCENTAGE INTEREST”

 

 

1.75

“PERSON”

 

 

1.76

“PRE-CLOSING PROJECT EXPENSES”

 

 

1.77

“PROFIT” AND “LOSS”

 

 

1.78

“PROFIT” OR “LOSS”

 

 

1.79

“PROJECT”

 

 

1.80

“PROJECT APPROVAL”

 

 

1.81

“REIMBURSEMENT AMOUNT”

 

 

1.82

“REGULATIONS”

 

 

1.83

“REMOVAL EVENT”

 

 

1.84

“REMOVAL NOTICE”

 

 

1.85

“REQUIREMENTS OF LAW”

 

 

1.86

“RETURNED AMOUNT”

 

 

1.87

“REVENUES”

 

 

1.88

“RULES”

 

 

1.89

“WITHDRAWAL PAYMENT”

 

 

 

 

 

ARTICLE II FORMATION OF THE PARTNERSHIP

 

 

 

 

 

 

2.1

FORMATION OF LIMITED PARTNERSHIP.

 

 

2.2

NAME.

 

 

2.3

CHARACTER OF BUSINESS.

 

 

2.4

REGISTERED OFFICE AND AGENT.

 

 

2.5

OTHER FILING.

 

 

2.6

TERM AND FISCAL YEAR.

 

 

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

 

ARTICLE III CAPITAL/PERCENTAGE INTERESTS/FUTURE FINANCING

 

 

 

 

 

 

3.1

CAPITAL CONTRIBUTIONS; USE OF FUNDS.

 

 

3.2

PERCENTAGE INTERESTS.

 

 

3.3

FUTURE FINANCING.

 

 

3.4

ADDITIONAL CONTRIBUTED EQUITY.

 

 

3.5

DELINQUENT CONTRIBUTIONS.

 

 

3.6

POST-PROJECT APPROVAL EQUITY.

 

 

3.7

NO FURTHER CONTRIBUTED EQUITY.

 

 

3.8

RETURN OF CAPITAL.

 

 

3.9

BENEFIT OF OBLIGATIONS.

 

 

 

 

 

ARTICLE IV CAPITAL ACCOUNTS, ALLOCATIONS, AND TAX MATTERS

 

 

 

 

 

 

4.1

CAPITAL ACCOUNTS.

 

 

4.2

ALLOCATION OF PROFIT AND LOSS.

 

 

4.3

SPECIAL ALLOCATIONS.

 

 

4.4

I.R.C. SECTION 704(C) TAX ALLOCATION.

 

 

4.5

SPECIAL ALLOCATIONS REGARDING PAYMENTS TO AFFILIATES.

 

 

4.6

ALLOCATION OF GAINS AND LOSSES UPON LIQUIDATION.

 

 

4.7

DEEMED SALE.

 

 

4.8

ALLOCATION FOR GAAP AND FINANCIAL REPORTING.

 

 

 

 

 

ARTICLE V DISTRIBUTIONS

 

 

 

 

 

 

5.1

SPECIAL DISTRIBUTIONS OF CAPACITY RESERVATION FUNDS.

 

 

5.2

DISTRIBUTIONS OF NET CASH FLOW.

 

 

5.3

DISTRIBUTIONS OF SECTION 3.4(B) CONTRIBUTIONS.

 

 

5.4

DISTRIBUTIONS IN LIQUIDATION.

 

 

 

 

 

ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE PARTNERS

 

 

 

 

 

 

6.1

IN GENERAL.

 

 

6.2

REPRESENTATIONS AND WARRANTIES.

 

 

6.3

REPRESENTATIONS AND WARRANTIES OF GENERAL PARTNER AND LNG INVESTMENTS.

 

 

 

 

 

ARTICLE VII RIGHTS AND OBLIGATIONS OF PARTNERS

 

 

 

 

 

 

7.1

LIMITED LIABILITY.

 

 

7.2

LIABILITY OF A PARTNER TO THE PARTNERSHIP.

 

 

7.3

EXCULPATION.

 

 

7.4

PARTICIPATION IN MANAGEMENT.

 

 

7.5

SURVIVAL OF OBLIGATIONS.

 

 

7.6

COVENANT OF NON-COMPETITION AND NON-SOLICITATION.

 

 

 

 

 

ARTICLE VIII MEETINGS OF PARTNERS

 

 

 

 

 

 

8.1

PLACE OF MEETINGS AND MEETINGS BY TELEPHONE.

 

 

8.2

CALL OF MEETINGS.

 

 

8.3

NOTICE OF MEETINGS OF PARTNERS.

 

 

8.4

MANNER OF GIVING NOTICE.

 

 

8.5

ADJOURNED MEETING; NOTICE.

 

 

8.6

QUORUM; VOTING.

 

 

8.7

WAIVER OF NOTICE BY CONSENT OF ABSENT PARTNERS.

 

 

8.8

PARTNER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.

 

 

8.9

RECORD DATE FOR PARTNER NOTICE, VOTING, AND GIVING CONSENTS.

 

 

8.10

PROXIES.

 

 

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

 

ARTICLE IX INDEMNIFICATION OF PARTNERS

 

 

 

 

 

 

9.1

GENERAL.

 

 

9.2

ENVIRONMENTAL.

 

 

9.3

LIMITATIONS.

 

 

 

 

 

ARTICLE X MANAGEMENT OF THE PARTNERSHIP

 

 

 

 

 

 

10.1

THE GENERAL PARTNER.

 

 

10.2

MAJOR DECISIONS.

 

 

10.3

RESIGNATION.

 

 

10.4

REMOVAL.

 

 

10.5

REMUNERATION OF GENERAL PARTNER; REIMBURSEMENT OF EXPENSES.

 

 

10.6

LIMITATION ON LIABILITY OF GENERAL PARTNER; INDEMNIFICATION.

 

 

10.7

NO GUARANTEE OF RETURN BY GENERAL PARTNER.

 

 

10.8

OTHER BUSINESSES OR VENTURES.

 

 

10.9

AFFILIATE TRANSACTIONS.

 

 

10.10

REMOVAL OF FREEPORT GP AS GENERAL PARTNER.

 

 

10.11

OFFICERS AND EMPLOYEES.

 

 

 

 

 

ARTICLE XI ADVISORY COMMITTEE

 

 

 

 

 

 

11.1

FORMATION OF ADVISORY COMMITTEE.

 

 

11.2

ROLE OF ADVISORY COMMITTEE.

 

 

11.3

NO LIABILITY.

 

 

11.4

RESIGNATION.

 

 

11.5

REIMBURSEMENT.

 

 

 

 

 

ARTICLE XII COVENANTS

 

 

 

 

 

 

12.1

COVENANTS OF THE PARTNERSHIP AND THE PARTNERS.

 

 

12.2

SEPARATENESS COVENANTS OF THE PARTNERSHIP AND THE GENERAL PARTNER.

 

 

 

 

 

ARTICLE XIII RECORDS AND REPORTS

 

 

 

 

 

 

13.1

MAINTENANCE AND INSPECTION OF PARTNER REGISTER.

 

 

13.2

MAINTENANCE AND INSPECTION OF PARTNERSHIP AGREEMENT.

 

 

13.3

MAINTENANCE AND INSPECTION OF OTHER RECORDS.

 

 

 

 

 

ARTICLE XIV BOOKS, FINANCIALS AND TAX MATTERS

 

 

 

 

 

 

14.1

BOOKS AND RECORDS.

 

 

14.2

FINANCIAL REPORTS.

 

 

14.3

TAX RETURNS.

 

 

14.4

TAX ELECTIONS.

 

 

14.5

TAX MATTERS PARTNER.

 

 

14.6

THE PARTNERSHIP ACCOUNTANT.

 

 

 

 

 

ARTICLE XV NONDISCLOSURE OF INFORMATION

 

 

 

 

 

 

15.1

CONFIDENTIALITY.

 

 

15.2

DUTY OF CARE.

 

 

 

 

 

ARTICLE XVI TRANSFERABILITY

 

 

 

 

 

 

16.1

TRANSFERABILITY OF INTERESTS.

 

 

16.2

WITHDRAWAL BY LNG INVESTMENTS AND FREEPORT GP.

 

 

16.3

RESTRICTIONS ON WITHDRAWAL.

 

 

 

 

 

ARTICLE XVII SUBSTITUTED PARTNERS

 

 

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

 

ARTICLE XVIII WAIVER OF PARTITION/COVENANT AGAINST RESIGNATION/BREACHES

 

 

 

 

 

 

18.1

WAIVER OF PARTITION.

 

 

18.2

COVENANT NOT TO RESIGN OR DISSOLVE.

 

 

 

 

 

ARTICLE XIX ADDITIONAL PARTNERS

 

 

 

 

 

ARTICLE XX DISSOLUTION

 

 

 

 

 

 

20.1

DISSOLUTION.

 

 

20.2

DEEMED LIQUIDATION.

 

 

20.3

BANKRUPTCY, ETC., OF A LIMITED PARTNER.

 

 

 

 

 

ARTICLE XXI DISPUTE RESOLUTION

 

 

 

 

 

 

21.1

ARBITRATION.

 

 

21.2

BINDING NATURE.

 

 

 

 

 

ARTICLE XXII MISCELLANEOUS

 

 

 

 

 

 

22.1

AMENDMENTS.

 

 

22.2

CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS.

 

 

22.3

CONTRACTS AND INSTRUMENTS.

 

 

22.4

NOTICES.

 

 

22.5

GOVERNING LAW.

 

 

22.6

HEADINGS.

 

 

22.7

EXTENSION NOT A WAIVER.

 

 

22.8

PUBLICITY.

 

 

22.9

CONSTRUCTION AND AMENDMENT.

 

 

22.10

FURTHER ACTION.

 

 

22.11

VARIATION OF PRONOUNS.

 

 

22.12

SUCCESSORS AND ASSIGNS.

 

 

22.13

COUNTERPARTS.

 

 

22.14

AMBIGUITIES.

 

 

22.15

ENTIRE AGREEMENT.

 

 

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

 

AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
FREEPORT LNG DEVELOPMENT, L.P.

 

Amended and Restated Limited Partnership Agreement (this “Agreement”) of
Freeport LNG Development, L.P., a Delaware limited partnership (the
“Partnership”), is made effective as of                        , 2003 (the
“Effective Date”), by and among Freeport LNG-GP, Inc., a Delaware corporation
(“Freeport GP”), as the general partner, Freeport LNG Investments, LLC, a
Delaware limited liability company, as a limited partner (“LNG Investments”),
and Cheniere LNG, Inc., a Delaware corporation, as a limited partner
(“Cheniere”).  Cheniere and LNG Investments and any other party admitted as a
limited partner in accordance with the terms hereof are hereinafter collectively
referred to as the “Limited Partners” and individually, as a “Limited Partner”. 
The General Partner and the Limited Partners are herein collectively referred to
as the “Partners”.

 

R E C I T A L S:

 

A.                                   The Partnership was formed on September 3,
2002 to develop, build, own and operate a Freeport LNG Facility (the “Project”);

 

B.                                     On December 1, 2002, Freeport GP and LNG
Investments (the “Original Partners”) entered into a Limited Partnership
Agreement of the Partnership (the “Original Partnership Agreement”);

 

C.                                     The Original Partners now desire to admit
Cheniere to the Partnership as a Limited Partner and to establish the respective
rights and obligations of the General Partner and the Limited Partners with
respect to the Partnership and to provide for the orderly management of the
business and affairs of the Partnership; and

 

D.                                    The Original Partners desire to amend and
restate in its entirety the Original Partnership Agreement  and to replace and
supersede such agreement with this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the General Partner
and the Limited Partners hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

The following terms, as used herein, shall have the following respective
meanings:

 

1.1                                 “Act” shall mean the Delaware Revised
Uniform Limited Partnership Act, Del. Code Ann. Tit. 6, ch. 17, or from and
after the date any successor statute becomes, by its terms, applicable to the
Partnership, such successor statute, in each case as amended at such time by
amendments that are, at that time applicable to the Partnership.

 

1.2                                 “Additional Contributed Equity” means, with
respect to any Partner the amount of capital contributed by such Partner to the
Partnership in accordance with Section 3.4 of this Agreement.

 

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1.3                                 “Adjusted Capital Account Balance” means,
with respect to any Partner for any period, the balance, if any, in such
Partner’s Capital Account as of the end of such period after giving effect to
adjustments in accordance with Section 1.704 of the Regulations.

 

1.4                                 “Advisory Committee” has the meaning set
forth in Section 11.1.

 

1.5                                 “Affiliate” means with respect to any
Person, a second Person which is controlled by, controls or is under common
control with such first Person and, with respect to the Partnership, any
constituent party of the Partnership. For purposes of the foregoing, “control”
of any Person means the power to direct the management and policies of such
Person, whether by the ownership of voting securities, by contract or otherwise.

 

1.6                                 “Affiliate Payment” means any compensation
paid by the Partnership to any direct or indirect Affiliate of the Partnership
or to any of its Partners, including any amount paid in the form of salary,
bonus, fees or otherwise to any Partner or Affiliate of any Partners, but
excluding (i) any distributions pursuant to Article V of this Agreement and (ii)
any amounts paid for the reimbursement of reasonable and actual costs and
expenses incurred on behalf of the Partnership, including, without limitation,
the reimbursement for secretarial, accounting, professional expenses and any
payments to cover overhead costs such as rent, office equipment or otherwise,
and travel, entertainment and similar expenses.

 

1.7                                 “Affiliate Transaction” has the meaning set
forth in Section 10.9.

 

1.8                                 “Agreement” means this Amended and Restated
Limited Partnership Agreement, as amended or restated from time to time.

 

1.9                                 “Asset Value” with respect to any
Partnership Asset means:

 

(A)                                  THE FAIR MARKET VALUE ON THE DATE OF
CONTRIBUTION OF ANY ASSET CONTRIBUTED TO THE PARTNERSHIP BY ANY PARTNER;

 

(B)                                 THE FAIR MARKET VALUE ON THE DATE OF
DISTRIBUTION OF ANY ASSET DISTRIBUTED BY THE PARTNERSHIP TO ANY PARTNER AS
CONSIDERATION FOR AN INTEREST IN THE PARTNERSHIP;

 

(C)                                  THE FAIR MARKET VALUE OF ALL PARTNERSHIP
ASSETS AT THE TIME OF THE HAPPENING OF ANY OF THE FOLLOWING EVENTS: (A) THE
ADMISSION OF A PARTNER TO, OR THE INCREASE OF AN INTEREST OF AN EXISTING PARTNER
IN, THE PARTNERSHIP IN EXCHANGE FOR CONTRIBUTED EQUITY; OR (B) THE LIQUIDATION
OF THE PARTNERSHIP UNDER SECTION 1.704-1(B)(2)(II)(G) OF THE REGULATIONS; OR

 

(D)                                 THE BASIS OF THE ASSET IN ALL OTHER
CIRCUMSTANCES.

 

1.10                           “Balance Sheet” has the meaning set forth in
Section 6.3(b).

 

1.11                           “Bankruptcy” with respect to any Person means any
one of:

 

(A)                                  THE FILING OF A VOLUNTARY PETITION IN
BANKRUPTCY OR REORGANIZATION OR THE FILING FOR ADOPTION OF AN ARRANGEMENT UNDER
THE UNITED STATES BANKRUPTCY CODE;

 

(B)                                 THE MAKING OF A GENERAL ASSIGNMENT FOR THE
BENEFIT OF CREDITORS; OR

 

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(C)                                  THE COMMENCEMENT AGAINST SUCH PERSON OF AN
INVOLUNTARY CASE SEEKING THE LIQUIDATION OR REORGANIZATION OF SUCH PERSON UNDER
THE BANKRUPTCY LAWS OR AN INVOLUNTARY CASE OR PROCEEDING SEEKING THE APPOINTMENT
OF A RECEIVER, CUSTODIAN, TRUSTEE OR SIMILAR OFFICIAL FOR IT, OR TO TAKE
POSSESSION OF ALL OR SUBSTANTIALLY ALL OF ITS PROPERTY, AND ANY OF THE FOLLOWING
EVENTS OCCUR (I) SUCH PERSON CONSENTS TO SUCH INVOLUNTARY CASE OR PROCEEDING,
(II) THE PETITION COMMENCING THE INVOLUNTARY CASE OR PRECEDING REMAINS
UNDISMISSED AND UNSTAYED FOR A PERIOD OF SIXTY (60) DAYS, OR (III) AN ORDER FOR
RELIEF SHALL HAVE BEEN ISSUED OR ENTERED THEREIN OR A RECEIVER, CUSTODIAN,
TRUSTEE OR SIMILAR OFFICIAL APPOINTED.

 

1.12                           “Bankruptcy Action” means:

 

(A)                                  TAKING ANY ACTION THAT MIGHT CAUSE THE
PARTNERSHIP OR THE GENERAL PARTNER TO BECOME INSOLVENT; OR

 

(B)                                 (I)                                    
COMMENCING ANY CASE, PROCEEDING OR OTHER ACTION ON BEHALF OF THE PARTNERSHIP OR
THE GENERAL PARTNER UNDER ANY EXISTING OR FUTURE LAW OF ANY JURISDICTION
RELATING TO BANKRUPTCY, INSOLVENCY, REORGANIZATION OR RELIEF OF DEBTORS;

 

(ii)                                  Instituting proceedings to have the
Partnership or the General Partner adjudicated as bankrupt or insolvent;

 

(iii)                               Consenting to, or acquiescing in, the
institution of bankruptcy or insolvency proceedings against the Partnership or
the General Partner or the Partnership or the General Partner being adjudicated
as bankrupt or insolvent;

 

(iv)                              Filing a petition or consenting to a petition
seeking reorganization, arrangement, adjustment, winding-up, dissolution,
composition, liquidation or other relief on behalf of the Partnership or the
General Partner of its debts under federal or state law relating to bankruptcy;

 

(v)                                 Seeking or consenting to the appointment of
a receiver, Liquidator, assignee, trustee, sequestrator, custodian or any
similar official for the Partnership or the General Partner or a substantial
portion of either of their properties or the appointment thereof;

 

(vi)                              Making any assignment for the benefit of the
Partnership’s or the General Partner’s creditors; or

 

(vii) Taking any action or causing the Partnership or the General Partner to
take any action in furtherance of any of the foregoing.

 

1.13                           “Bankruptcy Law” means Title 11 U.S. Code, or any
similar federal or state law for the relief of debtors.

 

1.14                           “Basis” means, with respect to any asset of the
Partnership, the adjusted basis of such asset for federal income tax purposes;
provided, however, (a) if any asset is contributed to the Partnership, the
initial Basis of such asset shall equal its fair market value on the date of
contribution, and (b) if the Capital Accounts of the Partners are adjusted
pursuant to Section 1.704-1(b) of the Regulations to reflect the fair market
value of any asset of the Partnership, the Basis of such asset shall be adjusted
to equal its respective fair market value as of the time of such adjustment in
accordance with such Regulation. The Basis of all assets of the Partnership

 

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shall be adjusted thereafter by Depreciation as provided in
Section 1.704-l(b)(2)(iv)(g) of the Regulations and any other adjustment to the
Basis of such assets other than depreciation or amortization.

 

1.15                           “Budget” has the meaning set forth in
Section 14.2.

 

1.16                           “Business” has the meaning set forth in
Section 2.3.

 

1.17                           “Capacity Reservation” means a third party’s
commitment, option or other agreement under which the Partnership receives
consideration in exchange for the reservation of future regasification capacity
of the Project.

 

1.18                           “Capital Account” means the capital account
maintained for each Partner in accordance with Section 4.1 of this Agreement.

 

1.19                           “Certificate of Limited Partnership” means the
Certificate of Limited Partnership, as amended or restated from time to time,
filed with the Secretary of State of Delaware in accordance with the Act,
attached hereto as to Exhibit A.

 

1.20                           “Cheniere Closing Date Contribution” has the
meaning set forth in Section 3.1.

 

1.21                           “Cheniere Closing Date Distribution” has the
meaning set forth in Section 3.1.

 

1.22                           “Cheniere Initial Equity Amount” has the meaning
set forth in Section 3.1.

 

1.23                           “Closing Date” means the date of the closing of
the transactions contemplated by the Contribution Agreement.

 

1.24                           “Construction  Financing” has the meaning set
forth in Section 10.2(c).

 

1.25                           “Contributed Equity” of any Partner means that
amount of capital actually contributed by the Partner to the Partnership
pursuant to this Agreement.

 

1.26                           “Contributing Partner” has the meaning set forth
in Section 3.5.

 

1.27                           “Contribution Agreement” means the Contribution
Agreement by and among the Partnership, Freeport GP, LNG Investments and
Cheniere dated as of August 26, 2002, as amended by the Extension and Amendment
to the Contribution Agreement, dated September 19, 2002, the Second Extension
and Amendment to the Contribution Agreement, effective as of October 4, 2002 and
the Third Amendment to the Contribution Agreement, dated as of the Effective
Date.

 

1.28                           “Contribution Date” has the meaning set forth in
Section 3.4.

 

1.29                           “Delinquent Contribution” has the meaning set
forth in Section 3.5.

 

1.30                           “Delinquent Partner” has the meaning set forth in
Section 3.5.

 

1.31                           “Depreciation” for each Fiscal Year shall mean an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to a Partnership Asset for such Fiscal Year, except that
if the Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such Fiscal Year,

 

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Depreciation with respect to that asset shall be an amount that bears the same
ratio to such beginning Asset Value as the federal income tax depreciation,
amortization or other cost recovery deduction with respect to that asset for
such Fiscal Year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization or other cost recovery
deduction with respect to that asset for such Fiscal Year is zero, Depreciation
shall be determined with reference to such beginning Asset Value using any
reasonable method determined by the General Partner and approved by Cheniere.

 

1.32                           “Early Contribution Date” has the meaning set
forth in Section 3.4(c).

 

1.33                           “Entity” shall mean any general partnership,
limited partnership, limited liability company, corporation, joint venture,
trust, business trust, cooperative, association or other recognized business
form.

 

1.34                           “Environmental Laws” means any federal, state, or
local statute, code, ordinance, rule, regulation, permit, consent, approval,
license, judgment, order, writ, judicial decision, common law rule, decree,
agency interpretation, injunction or other authorization or requirement whenever
promulgated, issued, or modified, including the requirement to register
underground storage tanks, relating to:

 

(A)                                  EMISSIONS, DISCHARGES, SPILLS, RELEASES, OR
THREATENED RELEASES OF POLLUTANTS, CONTAMINANTS, HAZARDOUS SUBSTANCES, MATERIALS
CONTAINING HAZARDOUS SUBSTANCES, OR HAZARDOUS OR TOXIC MATERIALS OR WASTES INTO
AMBIENT AIR, SURFACE WATER, GROUNDWATER, WATERCOURSES, PUBLICLY OR PRIVATELY
OWNED TREATMENT WORKS, DRAINS, SEWER SYSTEMS, WETLANDS, SEPTIC SYSTEMS, OR ONTO
LAND;

 

(B)                                 THE USE, TREATMENT, STORAGE, DISPOSAL,
HANDLING, MANUFACTURING, TRANSPORTATION. OR SHIPMENT OF HAZARDOUS SUBSTANCES,
MATERIALS CONTAINING HAZARDOUS SUBSTANCES, OR HAZARDOUS AND/OR TOXIC WASTES,
MATERIAL, PRODUCTS, OR BY-PRODUCTS (OR OF EQUIPMENT OR APPARATUS CONTAINING
HAZARDOUS SUBSTANCES) AS DEFINED IN OR REGULATED UNDER ANY STATUTES AND THEIR
IMPLEMENTING REGULATIONS INCLUDING BUT NOT LIMITED TO: THE HAZARDOUS MATERIALS
TRANSPORTATION ACT, 49 U.S.C. § 1801 ET SEQ., THE RESOURCE CONSERVATION AND
RECOVERY ACT, 42 U.S.C. § 6901 ET SEQ., THE COMPREHENSIVE ENVIRONMENTAL
RESPONSE, COMPENSATION AND LIABILITY ACT, AS AMENDED BY THE SUPERFUND AMENDMENTS
AND REAUTHORIZATION ACT, 42 U.S.C. § 9601 ET SEQ., AND/OR THE TOXIC SUBSTANCE
CONTROL ACT. 15 U.S.C. § 2601 ET SEQ., EACH AS AMENDED FROM TIME TO TIME; AND

 

(C)                                  OTHERWISE RELATING TO THE POLLUTION OR THE
PROTECTION OF HUMAN HEALTH OR THE ENVIRONMENT.

 

1.35                           “Expenses” means, with respect to any period, the
sum of the total gross expenditures of the Partnership during such period,
including (a) all cash operating expenses (including all fees, commissions,
expenses, and allowances paid or reimbursed to any Partner or any of its
Affiliates pursuant to any separate agreement or otherwise as permitted
hereunder), (b) all payments by the Partnership under any loans to the
Partnership, including loans made by the Partners or any of their respective
Affiliates, including all principal, interest, fees and charges (pursuant to
Section 3.3, Section 3.5 or otherwise), (c) all expenditures by the Partnership
which are treated as capital expenditures (as distinguished from expense
deductions) under GAAP, (d) all real estate taxes, personal property taxes, and
sales taxes, (e) all deposits to the Partnership’s reserve accounts, and (f) all
expenditures related to any acquisition, sale, disposition, financing,
refinancing, or securitization of any Partnership Assets;

 

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provided, however, that Expenses shall not include (i) any payment or
expenditure to the extent the sources or funds used for such payment or
expenditure are not included in Revenues, or (ii) any expenditure properly
attributable to the liquidation of the Partnership.

 

1.36                           “FERC” means the Federal Energy Regulatory
Commission.

 

1.37                        “FINANCIAL STATEMENTS” HAS THE MEANING SET FORTH IN
SECTION 14.2.

 

1.39                           “Fiscal Year” means the taxable year of the
Partnership for federal income tax purposes as determined by I.R.C. Section 706
and the Regulations thereunder.

 

1.40                           “Freeport LNG Facility” means a liquefied natural
gas receiving and regasification facility to be developed, built, owned or
operated in, or within a 25 mile radius of, Freeport, Texas.

 

1.41                           “Freeport GP Initial Equity Amount” has the
meaning set forth in Section 3.1.

 

1.42                           “GAAP” means generally accepted accounting
principles consistently applied in the United States of America.

 

1.43                           “General Partner” means Freeport LNG-GP, Inc.
(also referred to herein as “Freeport GP”), the sole general partner of the
Partnership or any replacement or successor appointed pursuant to the provisions
of this Agreement.

 

1.44                           “Governmental Entity” means any United States
federal, state or local, or any foreign government, governmental authority,
regulatory or administrative agency, governmental commission, court or tribunal
(or any department, bureau or division thereof).

 

1.45                           “Governmental Permits” means all franchises,
approvals, authorizations, permits, licenses, easements, registrations,
qualifications, leases, variances and similar rights required by the Cheniere
Entities or the Partnership, as the case may be, from any Governmental Entity
for the Project.

 

1.46                           “Gryphon Stock” has the meaning set forth in
Section 16.2.

 

1.47                           “Indemnitee” has the meaning set forth in
Section 10.7(b).

 

1.48                           “Initial Equity Amounts” means the LNG
Investments Initial Equity Amount and the Cheniere Initial Equity Amount.

 

1.49                           “Interest” means the ownership interest of a
Partner in the Partnership (which shall be considered personal property for all
purposes), consisting of (i) such Partner’s Percentage Interest in Profit, Loss,
allocations of other items of income, gain, deduction, and loss and
distributions, (ii) such Partner’s right to vote or grant or withhold consents
with respect to Partnership matters as provided herein or in the Act, and (iii)
such Partner’s other rights and privileges as herein provided.

 

1.50                           “I.R.C.” means the Internal Revenue Code of 1986,
as amended.

 

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1.51                           “Lease Agreement” means the Ground Lease and
Development Agreement, dated December 12, 2002, between the Brazos River Harbor
Navigation District of Brazoria County, Texas and the Partnership, as amended.

 

1.52                           “Limited Partners” means LNG Investments and
Cheniere and each of the parties who may hereafter become additional or
substituted Limited Partners in accordance with this Agreement.

 

1.53                           “Liquidator” has the meaning set forth in
Section 20.1(c).

 

1.54                           “LNG Investments Closing Date Contribution” has
the meaning set forth in Section 3.1.

 

1.55                           “LNG Investments Expenses” means, collectively,
the Pre-Closing Accounts Payable (as defined in the Contribution Agreement), the
Pre-Closing Project Expenses and any other amounts LNG Investments or any of its
Affiliates previously incurred on behalf of or contributed to the Partnership
pursuant to Sections 2.3(b) and (c) of the Contribution Agreement, which
collectively as of the Effective Date is estimated to be $2,600,000 in the
aggregate.

 

1.56                           “LNG Investments Initial Equity Amount” has the
meaning set forth in Section 3.1.

 

1.57                           “Major Decision” has the meaning set forth in
Section 10.2.

 

1.58                           “Majority” means more than 50%.

 

1.59                           “Majority In Interest” means Partners holding a
Majority of the Percentage Interests.

 

1.60                           “Material Adverse Effect” means a material
adverse effect on (a) the Business, operations, the Partnership Assets or
financial condition of the Partnership or any Partner, (b) the ability of the
Partnership or any Partner to perform its obligations under this Agreement, or
(c) the validity or enforceability of this Agreement.

 

1.61                           “Minimum Gain” has the same meaning as the term
“partnership minimum gain” in Section 1.704-2(b)(2) and (d) of the Regulations.

 

1.62                           “MS Entities” means both LNG Investments and
Freeport GP.

 

1.63                           “Net Cash Flow” means, for any period, the excess
of (a) Revenues for such period, over (b) Expenses for such period.

 

1.64                           “Nonrecourse Deductions” has the same meaning as
in Section 1.704-2(b)(1) of the Regulations.

 

1.65                           “Other Partners” means each Partner in the
Partnership other than the General Partner.

 

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1.66                           “Partner” means each of the parties who executes
this Agreement or a counterpart of this Agreement as either a General Partner or
a Limited Partner and each of the parties who may hereafter become additional or
substituted Limited Partners in accordance herewith. References to the Partner
in the singular or as him, her, it, itself, or other like references shall also,
where the context so requires be deemed to include the plural or the masculine
or feminine reference, as the case may be; references to the Partners in the
plural, or other like references shall also, where the context so requires, be
deemed to include the singular, as the case may be.

 

1.67                           “Partner Nonrecourse Debt” has the same meaning
as the term “partner nonrecourse debt” in Section 1.704-2(b)(4) of the
Regulations.

 

1.68                           “Partner Nonrecourse Debt Minimum Gain” has the
same meaning as the term “partner nonrecourse debt minimum gain” in
Section 1.704-2(i)(2) of the Regulations and shall be determined in the manner
set forth in Section 1.704-2(i)(3) of the Regulations.

 

1.69                           “Partner Nonrecourse Deductions” has the meaning
set forth in Section 1.704-2(i)(1) of the Regulations.

 

1.70                           “Partnership” means Freeport LNG Development,
L.P.

 

1.71                           “Partnership Accountant” has the meaning set
forth in Section 14.6.

 

1.72                           “Partnership Assets” means all of the personal
and real property, tangible or intangible, owned by the Partnership during the
term of its existence.

 

1.73                           “Partnership Minimum Gain” has the meaning set
forth in Section 1.704-2(d) of the Regulations.

 

1.74                           “Percentage Interest” means for each Partner the
percentage set forth opposite such Partner’s name in Section 3.2 as adjusted
pursuant to the provisions of Section 3.5.  The combined Percentage Interest of
all Partners shall at all times equal 100 percent.

 

1.75                           “Person” means an individual, partnership,
limited liability company. corporation, business trust, joint stock company,
trust, unincorporated association, joint venture, governmental authority or
other entity of whatever nature.

 

1.76                           “Pre-closing Project Expenses” shall mean all
actual expenses over and above $150,000, including but not limited to, all
reasonable attorneys’ and professionals’ fees, travel expenses and other
overhead expenses, incurred by LNG Investments, Freeport GP or any of their
Affiliates related to or associated with Project, including, but not limited to,
expenses related to or associated with the negotiations, preparation and
consummation of the Contribution Agreement, Related Documents (as defined in the
Contribution Agreement), and the Lease Agreement.

 

1.77                           “Profit” and “Loss” means for each Fiscal Year or
other period, an amount equal to the Partnership’s taxable income or tax loss
for the Fiscal Year or other period, determined in. accordance with
Section 703(a) of the I.R.C. (including all items of income, gain, loss or
deduction required to be stated separately under Section 703(a)(1) of the
I.R.C.), with the following adjustments:

 

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(A) ANY INCOME OF THE PARTNERSHIP THAT IS EXEMPT FROM FEDERAL INCOME TAX AND NOT
OTHERWISE TAKEN INTO ACCOUNT IN COMPUTING PROFIT OR LOSS WILL BE ADDED TO
TAXABLE INCOME OR TAX LOSS;

 

(B) ANY EXPENDITURES OF THE PARTNERSHIP DESCRIBED IN SECTION 705(A)(2)(B) OF THE
I.R.C. OR TREATED AS SECTION 705(A)(2)(B) EXPENDITURES UNDER
SECTION 1.704-L(B)(2)(IV)(I) OF THE REGULATIONS, AND NOT OTHERWISE TAKEN INTO
ACCOUNT IN COMPUTING PROFIT OR LOSS, WILL BE SUBTRACTED FROM TAXABLE INCOME OR
TAX LOSS:

 

(C) GAIN OR LOSS RESULTING FROM ANY DISPOSITION OF PARTNERSHIP ASSETS WITH
RESPECT TO WHICH GAIN OR LOSS IS RECOGNIZED FOR FEDERAL INCOME TAX PURPOSES WILL
BE COMPUTED BY REFERENCE TO THE ASSET VALUE OF THE PROPERTY, NOTWITHSTANDING
THAT THE ADJUSTED TAX BASIS OF THE PROPERTY DIFFERS FROM ITS ASSET VALUE;

 

(D) IN LIEU OF DEPRECIATION, AMORTIZATION AND OTHER COST RECOVERY DEDUCTIONS
TAKEN INTO ACCOUNT IN COMPUTING TAXABLE INCOME OR TAX LOSS, THERE WILL BE TAKEN
INTO ACCOUNT DEPRECIATION FOR THE FISCAL YEAR OR OTHER PERIOD AS DETERMINED IN
ACCORDANCE WITH SECTION 1.704-L(B)(2)(IV)(G) OF THE REGULATIONS;

 

(E) ANY ITEMS SPECIALLY ALLOCATED PURSUANT TO SECTION 4.3 AND 4.5 SHALL NOT BE
CONSIDERED IN DETERMINING PROFIT OR LOSS; AND

 

(F) ANY INCREASE OR DECREASE TO CAPITAL ACCOUNTS AS A RESULT OF ANY ADJUSTMENT
TO THE BOOK VALUE OF PARTNERSHIP ASSETS PURSUANT TO SECTION 1.704-1(B)(2)(IV)(F)
OR (G) OF THE REGULATIONS SHALL CONSTITUTE AN ITEM OF PROFIT OR LOSS AS
APPROPRIATE.

 

1.78                           “Profit” or “Loss” means for each Fiscal Year,
the Profit or Loss for such Fiscal Year.

 

1.79                           “Project” has the meaning set forth in the
Recitals to this Agreement.

 

1.80                           “Project Approval” means the Partnership’s
receipt of all final and non-appealable Governmental Permits, including all FERC
approvals, necessary to commence construction of the Project.

 

1.81                           “Reimbursement Amount” has the meaning set forth
in Section 16.2.

 

1.82                           “Regulations” means the Treasury regulations,
including temporary regulations, promulgated under the I.R.C., as from time to
time in effect.

 

1.83                           “Removal Event” has the meaning set forth in
Section 10.10.

 

1.84                           “Removal Notice” has the meaning set forth in
Section 10.10.

 

1.85                           “Requirements of Law” means, as to any Person,
the Certificate or Articles of Formation, Certificate or Articles of
Incorporation, by-laws and operating agreement or other organizational or
governing documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other governmental authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.

 

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1.86                           “Returned Amount” has the meaning set forth in
Section 5.1.

 

1.87                           “Revenues” means, with respect to any period, the
sum of the total gross dollars received by the Partnership during such period,
including all receipts of the Partnership from (a) proceeds from the sale or
disposition of any Partnership Assets, (b) funds made available to the extent
such funds are withdrawn from the Partnership’s reserve accounts and deposited
into the Partnership’s operating accounts, (c) rent or business interruption
insurance, if any, (d) proceeds from the financing, refinancing, or
securitization of any Partnership Assets, and (e) other revenues and receipts
realized by the Partnership; provided, however, that Revenues shall not include
(i) any Contributed Equity or (ii) any revenue or receipt realized by the
Partnership incident to the liquidation of the Partnership.

 

1.88                           “Rules” has the meaning set forth in
Section 21.1.

 

1.89                           “Withdrawal Payment” has the meaning set forth in
Section 16.2.

 

ARTICLE II
FORMATION OF THE PARTNERSHIP

 

2.1                                 Formation of Limited Partnership.  The
Partners have formed a limited partnership pursuant to and in accordance with
the provisions of the Act.  The General Partner has filed, on behalf of the
Partnership, a certificate of limited partnership with the office of the
Secretary of State of Delaware, effective as of September 3, 2002.  All
references to sections of the Act include any corresponding provision or
provisions of any such successor statute.

 

2.2                                 Name.  The name of the Partnership is
Freeport LNG Development, L.P.  The General Partner may, in its sole discretion,
change the name of the Partnership from time to time and shall give prompt
written notice thereof to the Limited Partners; provided, however, that such
name may not contain any portion of the name or mark of any Limited Partner
without such Limited Partner’s consent.  In any such event, the General Partner
shall promptly file in the office of the Secretary of State of Delaware an
amendment to the Partnership’s certificate of limited partnership reflecting
such change of name.

 

2.3                                 Character of Business.  The purposes of the
Partnership shall be to develop, build, own and operate a liquefied natural gas
(“LNG”) receiving and regasification facility on Quintana Island in or around
Freeport, Texas (the “Business”) and any and all activities necessary or
incidental to the foregoing; provided, however, that under no circumstances
shall the Partnership engage in any trading, hedging, futures activities, or any
other derivative transactions relating to the buying and selling of natural gas
(including LNG) that would expose the Partnership to commodity price
fluctuations (but this shall not preclude the Partnership from taking custody of
natural gas in connection with the normal operation of the Business for the
purpose of processing such natural but which does not expose the Partnership to
commodity price fluctuations).

 

2.4                                 Registered Office and Agent.  The name and
address of the Partnership’s initial registered agent and registered office is
The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801.  The Partnership’s initial office and principal place of
business shall be 1200 Smith, Suite 600, Houston, Texas 77002.  The General
Partner may change such registered agent, registered office, or principal place
of business from time to

 

10

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time.  The General Partner shall give prompt written notice of any such change
to each Limited Partner.  The Partnership may from time to time have such other
place or places of business as may be determined by the General Partner.

 

2.5                                 Other Filing.  The General Partner shall
file, from time to time, such limited partnership certificates, certificates of
amendment, certificates of cancellation, or other certificates, consents to and
appointments of agents for service of process, as the General Partner deems
necessary under the Act or under the laws of any jurisdiction in which the
Partnership is doing business to establish and continue the Partnership as a
limited partnership, to conduct its activities, or to protect the limited
liability of the Partners.  The General Partner shall file, from time to time,
such fictitious or tradename statements or certificates in such jurisdictions
and offices as the General Partner considers necessary or appropriate.

 

2.6                                 Term and Fiscal Year.  The existence of the
Partnership shall be perpetual, unless dissolved as hereinafter provided.  The
fiscal year of the Partnership shall end on December 31 of each calendar year
unless, for United States federal income tax purposes, another fiscal year is
required.  The Partnership shall have the same fiscal year for United States
federal income tax purposes and for accounting purposes.

 

ARTICLE III
CAPITAL/PERCENTAGE INTERESTS/FUTURE FINANCING

 

3.1                                 Capital Contributions; Use of Funds.  The
parties agree that pursuant to the terms of the Contribution Agreement, (i)
Cheniere shall contribute all of the Contributed Assets (as defined in the
Contribution Agreement) to the Partnership (“Cheniere Closing Date
Contribution”) on the Closing Date, (ii) LNG Investments shall contribute an
amount equal to $1,000,000 plus the LNG Investments Expenses to the Partnership
(“LNG Investments Closing Date Contribution”), and (iii) LNG Investments shall
make the additional contributions set forth in Section 3.4(b).  The Partners
hereby agree that immediately following the Cheniere Closing Date Contribution,
the General Partner shall distribute $1,000,000 to Cheniere (“Cheniere Closing
Date Distribution”).  The initial contribution amounts for the Partners shall be
$14,333,333 for Cheniere (“Cheniere Initial Equity Amount”), $1,000,000 for LNG
Investments (“LNG Investments Initial Equity Amount”) and $0 for Freeport GP. 
The Partners agree that the $5,000,000 to be received by Cheniere pursuant to
Sections 5.1 and 5.3 shall constitute a deemed sale to the Partnership of a
portion of the Contributed Assets, and therefore Cheniere’s initial Capital
Account balance shall equal $9,333,333.  In the event that any additional
capital is required by the Partnership, it shall be obtained by the Partnership
pursuant to the terms of Section 3.4.

 

3.2                                 Percentage Interests.

 

As of the Closing Date, the Partners shall be assigned Percentage Interests as
follows:

 

Partners

 

Percentage
Interest

 

 

 

 

 

LNG Investments

 

60

%

Cheniere

 

40

%

Freeport GP

 

0

%

 

The above Percentage Interests shall be subject to adjustment pursuant to
Section 3.5, but shall not be adjusted by contributions made by LNG Investments
pursuant to Section 3.4(b).

 

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3.3                                 Future Financing.

 

The Partners anticipate that in the future the Partnership may require
additional funds for capital expenditures or working capital requirements, and
any such additional funding shall be obtained from any of the following sources
as may be approved in advance by the General Partner; provided, however, that in
the case of (b), any loans incurred by the Partnership prior to the Partnership
obtaining final FERC approval of its filings with respect to the Project shall
only encumber and/or be paid from the Interest of LNG Investments; provided,
further, that in the case of (c) below, the Partnership shall only pursue such
source of funds after the earlier to occur of (i) LNG Investments (including any
transferees and assignees of its Percentage Interests) contributing $9,000,000
(plus any Returned Amount) pursuant to Section 3.4(a), and (ii) the Partnership
obtaining final FERC approval of its filing with respect to the Project:

 

(A) CASH RESERVES OF THE PARTNERSHIP;

 

(B) LOANS TO BE OBTAINED FROM BANKS AND OTHER NON-AFFILIATE INDEPENDENT SOURCES;

 

(C) ADDITIONAL CONTRIBUTED EQUITY MADE TO THE PARTNERSHIP BY THE PARTNERS, IN
PROPORTION TO THEIR PERCENTAGE INTERESTS, IN AMOUNTS DETERMINED ACCORDING TO
SECTION 3.4 OF THIS AGREEMENT;

 

(D) SUBJECT TO SECTION 10.2, LOANS TO BE MADE TO THE PARTNERSHIP BY (I) THE
PARTNERS AND/OR (II) AN AFFILIATE OF ONE OF THE PARTNERS; OR

 

(E) SUBJECT TO SECTION 10.2, ANY OTHER FUNDING SOURCE TO BE DETERMINED BY THE
GENERAL PARTNER.

 

3.4                                 Additional Contributed Equity.

 

(A) ON THE CLOSING DATE, LNG INVESTMENTS SHALL CONTRIBUTE TO THE PARTNERSHIP
THAT PORTION OF THE LNG INVESTMENTS EXPENSES THAT HAVE NOT ALREADY BEEN PAID TO
CHENIERE, ITS AFFILIATES OR ANY THIRD PARTY.  LNG INVESTMENTS SHALL BE DEEMED TO
HAVE CONTRIBUTED TO THE PARTNERSHIP THAT PORTION OF THE LNG INVESTMENTS EXPENSES
THAT HAVE ALREADY BEEN PAID TO CHENIERE, ITS AFFILIATES OR ANY THIRD PARTY.  IN
THE EVENT THAT THE PARTNERSHIP SHALL REQUIRE FUNDS IN EXCESS OF THOSE AVAILABLE
TO THE PARTNERSHIP FROM OPERATIONS, THE GENERAL PARTNER MAY CALL FOR ADDITIONAL
CAPITAL CONTRIBUTIONS TO BE CONTRIBUTED TO THE PARTNERSHIP PURSUANT TO THE TERMS
OF THIS SECTION 3.4 (“ADDITIONAL CONTRIBUTED EQUITY”).  FURTHER, ANY PARTNER MAY
GIVE WRITTEN NOTICE TO THE GENERAL PARTNER THAT SUCH PARTNER BELIEVES THAT THE
PARTNERSHIP REQUIRES FUNDS IN EXCESS OF THOSE AVAILABLE TO THE PARTNERSHIP FROM
OPERATIONS TO PAY REASONABLE AND NECESSARY EXPENSES OF THE PARTNERSHIP.  IN
EITHER SUCH EVENT, IF THE GENERAL PARTNER DETERMINES THE PARTNERSHIP REQUIRES
SUCH EXCESS FUNDS, THE GENERAL PARTNER SHALL GIVE WRITTEN NOTICE TO THE OTHER
PARTNERS OF (I) THE PURPOSE FOR WHICH SUCH ADDITIONAL CONTRIBUTED EQUITY IS
REQUIRED, (II) THE DATE ON WHICH THE ADDITIONAL CONTRIBUTED EQUITY IS DUE TO THE
PARTNERSHIP, WHICH DATE (THE “CONTRIBUTION DATE”) SHALL NOT BE LESS THAN FIFTEEN
(15) NOR MORE THAN FORTY-FIVE (45) DAYS FOLLOWING THE DATE OF SUCH NOTICE AND
(III) THE AMOUNT OF ADDITIONAL CONTRIBUTED EQUITY DUE FROM EACH PARTNER, WHICH
AMOUNT SHALL BE BASED ON SUCH PARTNER’S PERCENTAGE INTEREST.  IN THE EVENT OF A
CALL FOR ADDITIONAL CONTRIBUTED EQUITY THAT IS NOT EXPRESSLY CONTEMPLATED IN THE
BUDGET, (A) THE GENERAL PARTNER SHALL GIVE WRITTEN NOTICE TO THE OTHER PARTNERS
OF (I) THE PURPOSE FOR WHICH SUCH ADDITIONAL CONTRIBUTED EQUITY IS REQUIRED,
(II) THE CONTRIBUTION DATE, WHICH DATE SHALL NOT BE LESS THAN NINETY (90) NOR
MORE THAN ONE HUNDRED TWENTY (120) DAYS FOLLOWING THE DATE OF SUCH NOTICE, AND
(III) THE AMOUNT OF ADDITIONAL CONTRIBUTED EQUITY DUE FROM EACH PARTNER, WHICH
AMOUNT SHALL BE BASED

 

12

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ON SUCH PARTNER’S PERCENTAGE INTEREST AND (B) THE TERMS OF SECTION 3.4(C) SHALL
APPLY.  NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT OR THIS
SECTION 3.4, THE FIRST $9,000,000 OF ADDITIONAL CONTRIBUTED EQUITY PLUS THE
RETURNED AMOUNT SHALL BE CONTRIBUTED SOLELY BY LNG INVESTMENTS (INCLUDING ANY
TRANSFEREES AND ASSIGNEES OF ANY PORTION OF LNG INVESTMENTS’ INTEREST), WHICH
CONTRIBUTION SHALL NOT ALTER THE PERCENTAGE INTERESTS AND PROVIDED FURTHER THAT
(X) NEITHER THE $1 MILLION CONTRIBUTION BY LNG INVESTMENTS PURSUANT TO
SECTION 3.1 NOR ANY CONTRIBUTIONS BY LNG INVESTMENTS PURSUANT TO SECTION 3.4(B)
SHALL BE COUNTED TOWARD THIS $9,000,000, (Y) NO AMOUNT SUBSEQUENTLY USED FOR AN
AFFILIATE PAYMENT SHALL BE COUNTED TOWARD THIS $9,000,000 AND (Z) SUCH
$9,000,000 SHALL BE REDUCED BY THE AMOUNT OF THE LNG INVESTMENTS EXPENSES.  ON
OR BEFORE THE CONTRIBUTION DATE, EACH PARTNER SHALL PAY TO THE PARTNERSHIP THE
AMOUNT DUE FROM SUCH PARTNER IN IMMEDIATELY AVAILABLE FUNDS. IT IS ACKNOWLEDGED
BY THE PARTIES THAT THE PARTNERSHIP MAY NEED ADDITIONAL FUNDS FOLLOWING THE
CLOSING DATE AND THAT THE GENERAL PARTNER MAY BE REQUIRED TO CALL FOR ADDITIONAL
CONTRIBUTED EQUITY.

 

(B) NOTWITHSTANDING THE FOREGOING, LNG INVESTMENTS SHALL CONTRIBUTE THE
FOLLOWING AMOUNTS (WHICH AMOUNTS SHALL NOT CONSTITUTE ADDITIONAL CONTRIBUTED
EQUITY):

 

(I)                  ON JULY 15, 2003 (THE “SECOND PAYMENT DATE”), $750,000 IN
CASH LESS ANY AMOUNTS PREVIOUSLY DISTRIBUTED TO CHENIERE PURSUANT TO SECTION 5.1
(THE “SECOND PAYMENT”);

 

(II)               ON OCTOBER 15, 2003 (THE “THIRD PAYMENT DATE”), $750,000 IN
CASH LESS ANY AMOUNTS PREVIOUSLY PAID TO CHENIERE AFTER THE SECOND PAYMENT DATE
AND PRIOR TO THE THIRD PAYMENT DATE PURSUANT TO SECTION 5.1 (THE “THIRD
PAYMENT”); AND

 

(III)            WITHIN 30 DAYS OF PROJECT APPROVAL (THE “FINAL PAYMENT DATE”,
AND TOGETHER WITH THE SECOND PAYMENT DATE AND THE THIRD PAYMENT DATE, THE
“PAYMENT DATES”), $2,500,000 IN CASH LESS ANY AMOUNTS PREVIOUSLY PAID TO
CHENIERE AFTER THE THIRD PAYMENT DATE AND PRIOR TO THE FINAL PAYMENT DATE
PURSUANT TO SECTION 5.1 (THE “FINAL PAYMENT”).

 

(C) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION 3.4 OR
SECTION 3.5, IF THE GENERAL PARTNER CALLS FOR ADDITIONAL CONTRIBUTED EQUITY THAT
IS NOT EXPRESSLY CONTEMPLATED IN THE BUDGET AND THE GENERAL PARTNER DETERMINES,
IN ITS REASONABLE BUSINESS JUDGMENT, THAT THE PARTNERSHIP REQUIRES SUCH FUNDS
PRIOR TO THE CONTRIBUTION DATE, THE GENERAL PARTNER SHALL PROVIDE NOTICE TO THE
OTHER PARTNERS OF SUCH EARLIER NEED FOR FUNDS AND THE DATE BY WHICH SUCH FUNDS
ARE REQUIRED (THE “EARLY CONTRIBUTION DATE”).   IF ANY PARTNER MEETS SUCH
CAPITAL CALL ON THE EARLY CONTRIBUTION DATE, THE REMAINING PARTNERS SHALL HAVE
UNTIL THE CONTRIBUTION DATE TO CONTRIBUTE THE REQUIRED ADDITIONAL CONTRIBUTED
EQUITY; PROVIDED, THAT THE AMOUNT OF SUCH REQUIRED CONTRIBUTION SHALL ACCRUE
INTEREST AT THE RATE OF 25% PER ANNUM FROM THE EARLY CONTRIBUTION DATE THROUGH
THE DATE THAT SUCH OTHER PARTNERS MAKE THE REQUIRED CONTRIBUTIONS.  IN ADDITION,
IF SUCH OTHER PARTNERS FAIL TO MAKE ANY REQUIRED CONTRIBUTION (TOGETHER WITH ALL
ACCRUED INTEREST) BY THE CONTRIBUTION DATE, SUCH PARTNER SHALL BE DEEMED A
DELINQUENT PARTNER SUBJECT TO SECTION 3.5.

 

3.5                                 Delinquent Contributions. If a Partner fails
to contribute any Additional Contributed Equity required pursuant to Section 3.4
(a “Delinquent Partner”) by the Contribution Date, any other Partner (other than
an Affiliate of the Delinquent Partner) which is not a Delinquent Partner (a
“Contributing Partner”) may, but shall not be required, to contribute the
portion of such Additional Contributed Equity that the Delinquent Partner failed
to contribute (the “Delinquent Contribution”).  If the Contributing Partner
makes a contribution in the amount of the

 

13

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Delinquent Contribution, the Delinquent Partner’s Percentage Interest shall be
reduced to an amount equal to (A) the aggregate amount of Contributed Equity by
all Partners (determined immediately prior to the Delinquent Contribution)
multiplied by (B) the Delinquent Partner’s Percentage Interest, and (C) 0.9,
divided by (D) the aggregate amount of Contributed Equity by all Partners
(including the contribution of the Delinquent Loan), and then multiplied by (E)
100, and the Percentage Interest of the Contributing Partner who made the
Delinquent Contribution shall be increased proportionately.  In the event a
Partner fails to contribute any Additional Contributed Equity required pursuant
to Section 3.4 on more than one occasion, such Delinquent Partner shall
thereafter have no voting or approval rights under this Agreement (including but
not limited to the approval rights under Section 10.2) except the right to
approve or vote on amendments to this Agreement but only to the extent any such
amendment would effect the distributions or allocations to such Limited Partner
or its limited liability as a Limited Partner; provided that for the purposes of
the preceding provisions of this sentence the MS Entities shall be considered on
a collective basis.

 

3.6                                 Post-Project Approval Equity.  Upon
obtaining approval of the Project from FERC, the General Partner shall prepare
and distribute to the Partners a budget for the operating and construction
expenses related to the Project during the period ending upon the completion of
the construction of the facility on Quintana Island (the “Construction
Period”).  The General Partner shall have the right, power and obligation to do
all things necessary to obtain debt and/or equity financing to satisfy all of
the Partnership’s capital or funding needs during the Construction Period.  The
General Partner will notify each Partner of the terms of any such financing at
least twenty (20) days prior to the consummation of any transaction.  Any equity
financing obtained by the Partnership shall dilute each of the Limited Partners
pro rata based on the Percentage Interests of such Limited Partners.  Any
Construction Period financing shall be provided by third-parties that are not
Affiliates of the General Partner or any Limited Partner.

 

3.7                                 No Further Contributed Equity.  Except as
expressly provided in this Agreement and the Contribution Agreement or with the
prior written consent of all Partners, no Partner shall be required or entitled
to contribute any other or further capital to the Partnership, nor shall any
Partner be required or entitled to loan any funds to the Partnership. No Partner
will have any obligation to restore any negative balance in its Capital Account
upon liquidation or dissolution of the Partnership.

 

3.8                                 Return of Capital.  Except as herein
provided with respect to distributions during the term of the Partnership or
following dissolution, no Partner has the right to demand a return of such
Partners’ Contributed Equity (or the balance of such Partner’s Capital
Account).  Further, no Partner has the right (i) to demand and receive any
distribution from the Partnership in any form other than cash or (ii) to bring
an action of partition against the Partnership or the Partnership Assets. No
Partner shall be entitled to or shall receive interest on such Partner’s
Contributed Equity. No Partner may withdraw any capital from the capital of the
Partnership except as expressly provided herein or under the Act.  No Partner
shall have any priority over any other Partner with respect to the return of any
Contributed Equity, except as expressly provided herein.

 

3.9                                 Benefit of Obligations.  Any obligation of
the Partners to make capital contributions to the Partnership shall not inure to
the benefit of any Person other than the Partnership and the Partners.

 

14

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ARTICLE IV
CAPITAL ACCOUNTS, ALLOCATIONS, AND TAX MATTERS

 

4.1                                 Capital Accounts.  A separate Capital
Account will be maintained for each Partner in accordance with
Section 1.704-1(b)(2)(iv) of the Regulations; provided, however, that the
initial Capital Accounts for each Partner shall be equal to such Partners’
Initial Equity Amount (adjusted as provided in Section 3.1). Consistent
therewith, the Capital Account of each Partner will be determined and adjusted
as follows:

 

(A) EACH PARTNER’S CAPITAL ACCOUNT WILL BE CREDITED WITH:

 

(1)                                  Any contributions of cash made by such
Partner to the capital of the Partnership plus the Asset Value of any property
contributed by such Partner to the capital of the Partnership (net of any
liabilities to which such property is subject or which are assumed by the
Partnership), including, without limitation any contributions made pursuant to
Section 3.4;

 

(2)                                  The Partner’s distributive share of Profit
and items thereof allocated to such Partner; and

 

(3)                                  Any other increases required by
Section 1.704-1(b)(2)(iv) of the Regulations.

 

(B)                                 EACH PARTNER’S CAPITAL ACCOUNT WILL BE
DEBITED WITH:

 

(1)                                  Any distributions of cash made from the
Partnership to such Partner plus the Asset Value of any property distributed in
kind to such Partner (net of any liabilities to which such property is subject
or which are assumed by such Partner);

 

(2)                                  The Partner’s distributive share of Loss
and items thereof allocated to such Partner; and

 

(3)                                  Any other decreases required by
Section 1.704-1(b)(2)(iv) of the Regulations.

 

The provisions of this Section 4.1 relating to the maintenance of Capital
Accounts have been included in this Agreement to comply with Section 704(b) of
the I.R.C. and the Regulations promulgated thereunder and will be interpreted
and applied in a manner consistent with those provisions.  For the purposes of
maintaining Capital Accounts, it is agreed that the Asset Value of the
Partnership Assets shall be reflected at their gross fair market values on the
Closing Date. Notwithstanding anything to the contrary in the preceding
provisions of this Section 4.1, in no event shall any change, modification or
other event resulting from such provisions modify the distributions provided in
Article V.

 

4.2                                 Allocation of Profit and Loss.

 

(A)                                  PROFIT. SUBJECT TO THE SPECIAL ALLOCATION
PROVISIONS OF SECTIONS 4.3, 4.4, 4.5 AND 4.6 OF THIS AGREEMENT, THE PROFITS FOR
ANY FISCAL YEAR (OR PORTION THEREOF) SHALL BE ALLOCATED TO THE PARTNERS, (I)
FIRST, TO EACH PARTNER TO THE EXTENT THAT AND IN PROPORTION TO WHICH THEY WERE
ALLOCATED LOSSES UNDER SECTIONS 4.2(B) OR 4.3 BELOW, THEN (II) PRO RATA, IN
ACCORDANCE WITH THEIR PERCENTAGE INTERESTS.

 

15

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(B)                                 LOSS. SUBJECT TO THE SPECIAL ALLOCATION
PROVISIONS OF SECTION 4.3 OF THIS AGREEMENT, THE LOSSES FOR ANY FISCAL YEAR (OR
PORTION THEREOF) SHALL BE ALLOCATED AS FOLLOWS:

 

(I)                  FIRST, TO LNG INVESTMENTS, UNTIL ITS ADJUSTED CAPITAL
ACCOUNT BALANCES IS REDUCED TO ZERO;

 

(II)               SECOND, TO CHENIERE, UNTIL ITS ADJUSTED CAPITAL ACCOUNT
BALANCES IS REDUCED TO ZERO; AND

 

(III)            THEREAFTER, TO THE GENERAL PARTNER.

 

4.3                                 Special Allocations.

 

(A) MINIMUM GAIN CHARGEBACK. NOTWITHSTANDING ANY OTHER PROVISION OF THIS
ARTICLE IV, IF THERE IS A NET DECREASE IN PARTNERSHIP MINIMUM GAIN DURING ANY
FISCAL YEAR, THEN EACH PARTNER SHALL BE ALLOCATED SUCH AMOUNT OF INCOME AND GAIN
FOR SUCH YEAR (AND SUBSEQUENT YEARS, IF NECESSARY) DETERMINED UNDER AND IN THE
MANNER REQUIRED BY SECTIONS 1.704-2(F) AND (G) OF THE REGULATIONS AS IS
NECESSARY TO MEET THE REQUIREMENTS FOR A CHARGEBACK OF PARTNERSHIP MINIMUM GAIN
AS PROVIDED IN THAT REGULATION.

 

(B) PARTNER RECOURSE DEBT MINIMUM GAIN CHARGEBACK. NOTWITHSTANDING ANY OTHER
PROVISION OF THIS ARTICLE IV EXCEPT SECTION 4.3(A), IF THERE IS A NET DECREASE
IN PARTNER NONRECOURSE DEBT MINIMUM GAIN ATTRIBUTABLE TO A PARTNER NONRECOURSE
DEBT DURING ANY FISCAL YEAR, ANY PARTNER WHO HAS A SHARE OF THE PARTNER
NONRECOURSE DEBT MINIMUM GAIN ATTRIBUTABLE TO SUCH PARTNER NONRECOURSE DEBT
DETERMINED IN ACCORDANCE WITH SECTION 1.704-2(I)(5) OF THE REGULATIONS, SHALL BE
ALLOCATED SUCH AMOUNT OF INCOME AND GAIN FOR SUCH YEAR (AND SUBSEQUENT YEARS, IF
NECESSARY) DETERMINED UNDER AND IN THE MANNER REQUIRED BY SECTION 1.704-2(I)(4)
OF THE REGULATIONS AS IS NECESSARY TO MEET THE REQUIREMENTS FOR A CHARGEBACK OF
PARTNER NONRECOURSE DEBT MINIMUM GAIN AS IS PROVIDED IN THAT REGULATION.

 

(C) QUALIFIED INCOME OFFSET. IF A PARTNER UNEXPECTEDLY RECEIVES ANY ADJUSTMENT.
ALLOCATION OR DISTRIBUTION DESCRIBED IN SECTION 1.704-1(B)(2)(II)(D)(4), (5) OR
(6) OF THE REGULATIONS, ITEMS OF PARTNERSHIP INCOME AND GAIN SHALL BE
SPECIFICALLY ALLOCATED TO SUCH PARTNER IN AN AMOUNT AND MANNER SUFFICIENT TO
ELIMINATE, TO THE EXTENT REQUIRED BY THE REGULATIONS, ANY DEFICIT IN THE
ADJUSTED CAPITAL ACCOUNT BALANCE OF SUCH PARTNER AS QUICKLY AS POSSIBLE,
PROVIDED THAT AN ALLOCATION PURSUANT TO THIS SUBSECTION (C) SHALL BE MADE ONLY
IF AND TO THE EXTENT THAT SUCH PARTNER WOULD HAVE A DEFICIT IN THE ADJUSTED
CAPITAL ACCOUNT BALANCE AFTER ALL OTHER ALLOCATIONS PROVIDED FOR IN SECTION 4.2
AND THIS SECTION 4.3 OF THIS AGREEMENT TENTATIVELY HAVE BEEN MADE AS IF THIS
SUBSECTION (C) WERE NOT IN THIS AGREEMENT.

 

(D) LIMITATION ON ALLOCATION OF LOSS. NOTWITHSTANDING ANYTHING ELSE CONTAINED IN
THIS AGREEMENT, LOSS ALLOCATED TO ANY LIMITED PARTNER PURSUANT TO SECTION 4.2 OF
THIS AGREEMENT SHALL NOT EXCEED THE MAXIMUM AMOUNT OF LOSS THAT MAY BE ALLOCATED
WITHOUT CAUSING SUCH PARTNER TO HAVE A DEFICIT IN THE ADJUSTED CAPITAL ACCOUNT
BALANCE OF SUCH PARTNER AT THE END OF THE FISCAL YEAR FOR WHICH THE ALLOCATION
IS MADE.

 

(E) I.R.C. SECTION 754 ELECTION. TO THE EXTENT THAT AN ADJUSTMENT TO THE BASIS
OF ANY ASSET PURSUANT TO I.R.C. SECTION 734(B) OR I.R.C. SECTION 743(B) IS
REQUIRED TO BE TAKEN INTO ACCOUNT IN DETERMINING CAPITAL ACCOUNTS AS PROVIDED IN
SECTION 1.704-L(B)(2)(IV)(M) OF THE REGULATIONS, THE ADJUSTMENT SHALL BE TREATED
(IF AN INCREASE) AS AN ITEM OF GAIN OR (IF A DECREASE)

 

16

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AS AN ITEM OF LOSS, AND SUCH GAIN OR LOSS SHALL BE ALLOCATED TO THE PARTNERS
CONSISTENT WITH THE ALLOCATION OF THE ADJUSTMENT PURSUANT TO SUCH REGULATION.

 

(F) NONRECOURSE DEDUCTIONS. NONRECOURSE DEDUCTIONS FOR ANY FISCAL YEAR SHALL BE
ALLOCATED AMONG THE PARTNERS IN PROPORTION TO THEIR PERCENTAGE INTERESTS.

 

(G) PARTNER NONRECOURSE DEDUCTIONS. ANY PARTNER NONRECOURSE DEDUCTIONS SHALL BE
ALLOCATED PURSUANT TO SECTION 1.704-2(I) OF THE REGULATIONS TO THE PARTNER WHO
BEARS THE ECONOMIC RISK OF LOSS WITH RESPECT TO THE PARTNER NONRECOURSE DEBT TO
WHICH THEY ARE ATTRIBUTABLE.

 

(H) PURPOSE AND APPLICATION. THE PURPOSE AND THE INTENT OF THE SPECIAL
ALLOCATIONS PROVIDED FOR IN THIS SECTION 4.3 ARE TO COMPLY WITH THE PROVISIONS
OF SECTIONS 1.704-1(B) AND 1.704-2 OF THE REGULATIONS, AND SUCH SPECIAL
ALLOCATIONS ARE TO BE MADE SO AS TO ACCOMPLISH THAT RESULT. HOWEVER, TO THE
EXTENT POSSIBLE, THE GENERAL PARTNER IN ALLOCATING ITEMS OF INCOME, GAIN, LOSS,
OR DEDUCTION AMONG THE PARTNERS, SHALL TAKE INTO ACCOUNT THE SPECIAL ALLOCATIONS
IN SUCH A MANNER THAT THE NET AMOUNT OF ALLOCATIONS TO EACH PARTNER SHALL BE THE
SAME AS SUCH PARTNER’S DISTRIBUTIVE SHARE OF PROFIT AND LOSS WOULD HAVE BEEN HAD
THE EVENTS REQUIRING THE SPECIAL ALLOCATIONS NOT TAKEN PLACE. THE GENERAL
PARTNER SHALL APPLY THE PROVISIONS OF THIS SECTION 4.3 IN WHATEVER ORDER THE
GENERAL PARTNER WITH THE APPROVAL OF THE LIMITED PARTNERS REASONABLY BELIEVES
WILL MINIMIZE ANY ECONOMIC DISTORTION THAT OTHERWISE MIGHT RESULT FROM THE
APPLICATION OF THE SPECIAL ALLOCATIONS.

 

(I) GROSS INCOME ALLOCATION.  DURING THE PERIOD FROM THE EFFECTIVE DATE THROUGH
THE DATE OF PROJECT APPROVAL, NOTWITHSTANDING ANY OTHER PROVISION OF THIS
AGREEMENT (OTHER THAN PARAGRAPHS 4.3(A) THROUGH 4.3(H) ABOVE AND SECTION 4.6),
BEFORE ANY OTHER ALLOCATION IS MADE UNDER THIS AGREEMENT, LNG INVESTMENTS SHALL
BE ALLOCATED ITEMS OF PARTNERSHIP GROSS INCOME AND GAINS FOR SUCH FISCAL YEAR
(AND IF NECESSARY, FOR FUTURE YEARS) UNTIL THE CUMULATIVE TOTAL ALLOCATIONS
UNDER THIS PARAGRAPH 4.3(I) EQUAL THE GROSS INCOME OF THE PARTNERSHIP FROM THE
SALE OF CAPACITY RESERVATIONS.  MOREOVER, FOLLOWING THE EFFECTIVE DATE AND
NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT (OTHER THAN PARAGRAPHS
4.3(A) THROUGH 4.3(H) ABOVE AND SECTION 4.6), BEFORE ANY OTHER ALLOCATION IS
MADE UNDER THIS AGREEMENT, LNG INVESTMENTS SHALL BE ALLOCATED ITEMS OF
PARTNERSHIP GROSS INCOME FOR SUCH FISCAL YEAR THAT ARISE FROM THE FORGIVENESS OR
CANCELLATION OF ANY LOAN OR DEBT THAT IS AN OBLIGATION OF THE PARTNERSHIP AND
THAT IS GIVEN SIMULTANEOUSLY OR IN CONNECTION WITH THE SALE OF ANY CAPACITY
RESERVATIONS TO THE EXTENT THAT ANY GROSS INCOME ARISING FROM SUCH FORGIVENESS
OR CANCELLATION IS NOT ALREADY ALLOCATED TO LNG INVESTMENTS PURSUANT TO ANY OF
PARAGRAPHS 4.3(A) THROUGH 4.3(H) ABOVE AND SECTION 4.6.

 

(A)                                  SPECIAL ALLOCATION OF PRE-PROJECT APPROVAL
DEDUCTIONS.  NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT (OTHER THAN
SECTIONS 4.3(A) THROUGH (H) ABOVE AND SECTION 4.6), ALL DEDUCTIONS OF THE
PARTNERSHIP FROM ITS DATE OF FORMATION UNTIL THE DATE OF PROJECT APPROVAL SHALL
BE ALLOCATED TO THE PARTNERS IN THE AMOUNTS AND TO THE EXTENT AVAILABLE TO CAUSE
THE PARTNERS’ RESPECTIVE CAPITAL ACCOUNT BALANCES TO EQUAL THE PROCEEDS
DISTRIBUTED UNDER SECTION 5.4 IN THE EVENT OF A DISSOLUTION OF THE PARTNERSHIP
PRIOR TO THE DATE OF PROJECT APPROVAL.

 

4.4                                 I.R.C. Section 704(c) Tax Allocation. 
Except as otherwise provided in Section 4.7, solely for tax purposes, and in
accordance with I.R.C. Section 704(c), income, gain, loss, and deductions with
respect to property contributed to the Partnership by a Partner shall be shared

 

17

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among the Partners so as to take account of the variation between the adjusted
basis of the property to the Partnership for federal income tax purposes and its
fair market value at the time of its contribution. If the value of any property
of the Partnership reflected in the Partners’ Capital Accounts is adjusted
pursuant to Section 4.1(a)(3) or (b)(3), thereafter, allocations of
depreciation. depletion, amortization and gain or loss with respect to such
property shall be determined so as to take into account the variation between
the adjusted tax basis and the adjusted value of such property as reflected in
the Partners’ Capital Accounts in the same manner as under I.R.C.
Section 704(c).  The Partners agree that the General Partner shall choose the
method under I.R.C. Section 704(c) to address the variation between the adjusted
tax basis and adjusted values of the Partnership Assets on the Closing Date and
that the Partnership shall elect to use the method chosen by the General
Partner; provided, that Cheniere’s consent shall be required to elect the
remedial allocation method described in Section 1.704-3(d)(1) of the
Regulations.

 

4.5                                 Special Allocations Regarding Payments to
Affiliates.  To the extent that compensation paid to an Affiliate of one or more
Partners by the Partnership ultimately is determined not to be a payment to a
third party, a payment to a manager other than in its capacity as such under
I.R.C. Section 707(a), or a guaranteed payment under I.R.C. Section 707(c), such
Partner or Partners shall be specially allocated gross income of the Partnership
in an amount equal to the amount of such compensation, and such Partner or
Partners’ Capital Account shall be adjusted to reflect the above special
allocation and to reflect the payment of such compensation as if it were a
distribution. If the Partnership’s gross income for a Fiscal Year is less than
the amount of such compensation paid in such year, such Partner or Partners
shall be specially allocated gross income of the Partnership in the succeeding
year or years until the total amount so allocated equals the total amount of
such compensation.

 

4.6                                 Allocation of Gains and Losses upon
Liquidation.  Except to the extent provided in Sections 4.3 and 4.4, gains and
losses recognized by the Partnership upon the sale, exchange or other
disposition of all or substantially all of the property owned by the Partnership
shall be allocated in the following manner:

 

(A)                                  GAINS SHALL BE ALLOCATED (I) FIRST, TO THE
PARTNERS WITH NEGATIVE CAPITAL ACCOUNT BALANCES, THAT PORTION OF GAINS
(INCLUDING ANY GAINS TREATED AS ORDINARY INCOME FOR FEDERAL INCOME TAX PURPOSES)
WHICH IS EQUAL IN AMOUNT TO, AND IN PROPORTION TO, SUCH PARTNERS’ RESPECTIVE
NEGATIVE CAPITAL ACCOUNT BALANCES; PROVIDED THAT NO GAIN SHALL BE ALLOCATED
UNDER THIS SECTION 4.6(A)(I) TO A PARTNER ONCE SUCH PARTNER’S CAPITAL ACCOUNT
BALANCE IS BROUGHT TO ZERO AND (II), SECOND, (A) IN THE EVENT OF A DISSOLUTION
OF THE PARTNERSHIP BEFORE THE DATE OF PROJECT APPROVAL, GAINS IN EXCESS OF THE
AMOUNT ALLOCATED UNDER (I) SHALL BE ALLOCATED IN THE AMOUNTS AND TO THE EXTENT
AVAILABLE TO CAUSE THE PARTNERS’ RESPECTIVE CAPITAL ACCOUNT BALANCES TO EQUAL
THE PROCEEDS DISTRIBUTED UNDER SECTION 5.4, OR (B) IN THE EVENT OF A DISSOLUTION
OF THE PARTNERSHIP AFTER THE DATE OF PROJECT APPROVAL, GAINS IN EXCESS OF THE
AMOUNT ALLOCATED UNDER (I) SHALL BE ALLOCATED TO THE PARTNERS IN THE AMOUNTS AND
TO THE EXTENT AVAILABLE TO CAUSE THE PARTNERS’ RESPECTIVE CAPITAL ACCOUNT
BALANCES TO BE IN THE SAME PROPORTION AS THE PARTNERS’ RESPECTIVE PERCENTAGE
INTERESTS.

 

(B)                                 LOSSES SHALL BE ALLOCATED, (I) FIRST, (A) IN
THE EVENT OF A DISSOLUTION OF THE PARTNERSHIP BEFORE THE DATE OF PROJECT
APPROVAL, TO THE PARTNERS IN THE AMOUNTS AND TO THE EXTENT AVAILABLE TO CAUSE
THE PARTNERS’ RESPECTIVE POSITIVE CAPITAL ACCOUNT BALANCES TO EQUAL THE PROCEEDS
DISTRIBUTED UNDER SECTION 5.4, OR (B) IN THE EVENT OF A DISSOLUTION OF THE
PARTNERSHIP AFTER THE DATE OF PROJECT APPROVAL TO THE PARTNERS IN THE AMOUNTS
AND TO THE EXTENT AVAILABLE TO CAUSE THE PARTNERS’ RESPECTIVE CAPITAL ACCOUNT
BALANCES TO BE IN THE SAME

 

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PROPORTION AS THE PARTNERS’ RESPECTIVE PERCENTAGE INTERESTS AND (II) SECOND, ANY
REMAINING LOSS TO THE PARTNERS IN ACCORDANCE WITH THE MANNER IN WHICH THEY BEAR
THE ECONOMIC RISK OF LOSS ASSOCIATED WITH SUCH LOSS OR, IF NONE, TO THE PARTNERS
IN ACCORDANCE WITH THEIR PERCENTAGE INTERESTS.

 

4.7                                 Deemed Sale.   The Partners agree that the
contribution of its Initial and Additional Capital Contributions followed by
distribution to Cheniere of up to $5,000,000 shall result in a deemed sale of a
portion of the assets contributed by Cheniere as reasonably determined by the
General Partner, and such assets shall be treated as property acquired by the
Partnership with a basis determined under Section 10.12 of the Code.

 

4.8                                 Allocation for GAAP and Financial Reporting.
The Partners agree that Profits and Losses for any Fiscal Year shall be
allocated to the Partners for financial reporting purposes pro rata in
accordance with their Percentage Interests.

 

ARTICLE V
DISTRIBUTIONS

 

5.1                                 Special Distributions of Capacity
Reservation Funds.  (a) Notwithstanding any other distribution provision to the
contrary, prior to any distribution pursuant to Sections 5.2 or 5.4, if prior to
the Final Payment Date the Partnership sells any Capacity Reservations and
receives cash consideration therefore and/or the proceeds from loans from
purchasers of such Capacity Reservations or such purchaser’s Affiliate, the
Partnership shall distribute to Cheniere, as a prepayment of amounts that would
otherwise be contributed by LNG Investments to the Partnership and promptly
distributed to Cheniere pursuant to Section 5.3, 25% of the cash received for
such Capacity Reservation and/or the proceeds of such loans (each, a “Capacity
Distribution”); provided, however, that if, and when, LNG Investments and its
transferees and assigns makes the Second Payment or Third Payment, no subsequent
Capacity Distributions shall be made by the Partnership until such time as the
aggregate amount of such Capacity Distribution obligations that would otherwise
be payable to Cheniere exceeds the Second Payment, and/or Third Payment, as the
case may be.  Any Capacity Distributions made by the Partnership prior to the
applicable Payment Date shall reduce the obligation of LNG Investments to make
the ensuing Second Payment, Third Payment or Final Payment, as the case may be,
and the ensuing obligation of the Partnership to make the corresponding
distribution pursuant to Section 5.3.  The Partnership’s Capacity Distribution
obligation to Cheniere shall terminate upon the Final Payment Date after
Cheniere has received aggregate distributions pursuant to Section 5.3 and
Capacity Distributions equal to $5.0 million.  In no event (whether pursuant to
Section 5.1 or Section 5.3) shall Cheniere be entitled to receive an aggregate
amount pursuant to Section 5.1 or Section 5.3 in excess of $5.0 million.

 

(b)   Any cash received by the Partnership from sales of any Capacity
Reservations and/or the proceeds from loans from purchasers of such Capacity
Reservations or such purchaser’s Affiliate prior to Project Approval, after
payment of all Capacity Distributions to Cheniere under Section 5.1(a), shall be
paid, held or distributed in the following order of priority:

 

(i)    first, to LNG Investments with respect to each Fiscal Year of the
Partnership an amount equal to 44% of the taxable income allocated to LNG
Investments pursuant to Section 4.3(i) of this Agreement for such Fiscal Year
(less any Losses allocated to LNG Investments from prior Fiscal Years not
previously taken into account under this Section 5.1(b)(i));

 

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(ii)    second, an amount shall be set aside equal to all current Project
expenses plus future Project expenses reasonably anticipated through Project
Approval by FERC;

 

(iii)    third, an amount shall be distributed to LNG Investments (and Cheniere,
if applicable) equal to the sum of all additional capital contributions made by
LNG Investments (or Cheniere, if applicable) to the Partnership pursuant to
Section 3.4(a);

 

(iv)    fourth, an amount shall be distributed to LNG Investments equal to the
sum of any Second Payment, Third Payment or Final Payment made by LNG
Investments to the Partnership pursuant to Section 3.4(b); and

 

(v)    the excess, if any, shall be retained by the Partnership for capital
reserves or distributed, at the discretion of the General Partner, pro rata to
the Partners in accordance with their Percentage Interests.

 

Any amounts distributed to LNG Investments pursuant to Section 5.1(b)(iii) and
(iv) (the “Returned Amount”) shall be added to LNG Investments’ required capital
contribution under Section 3.4 and LNG Investments will contribute such capital
to the Partnership prior to the General Partner making any other capital call
pursuant to Section 3.4.

 

5.2                                 Distributions of Net Cash Flow. Except as
provided in Sections 5.1, 5.3 and 5.4, the Partnership shall, to the extent
available and to the extent such funds are not necessary for future working
capital and operating and development Expenses of the Partnership, as determined
by the General Partner in its sole discretion, make distributions of Net Cash
Flow on a quarterly basis to the Partners, pro rata, in accordance with their
Percentage Interests.

 

5.3                                 Distributions of Section 3.4(b)
Contributions.  The Partnership shall promptly distribute any and all
contributions made by LNG Investments pursuant to Section 3.4(b) to Cheniere as
such payments are made to the Partnership by LNG Investments.

 

5.4                                 Distributions in Liquidation.  Subject to
the provisions of Article XX, upon the dissolution and winding-up of the
Partnership, the proceeds of sale and other assets of the Partnership shall be
distributed, not later than the latest time specified for such distributions
pursuant to Section 1.704-l(b)(2)(ii)(b)(2) of the Regulations, to the Partners,
pro rata, in accordance with their positive Capital Account balances; provided,
however, that in the event of the dissolution of the Partnership at any time
prior to Project Approval, the proceeds of sale and other assets of the
Partnership shall be distributed to the Partners in accordance with their
Percentage Interests; and provided, further, that in addition to the proceeds
attributable to its Percentage Interest, LNG Investments shall receive, from the
portion of the proceeds otherwise distributable to Cheniere based on its
Percentage Interest, an amount equal to the sum of the Cheniere Closing Date
Distribution plus any Second Payment, Third Payment or Final Payment made by LNG
Investments to the Partnership pursuant to Sections 2.2(a) and 3.1.  With the
unanimous approval of all of the Partners, a pro rata portion of the
distributions that would otherwise be made to the Partners under the preceding
sentence may be distributed to a trust established for the benefit of the
Partners for the purposes of liquidating Partnership Assets, collecting amounts
owed to the Partnership, and paying any contingent or unforeseen liabilities or
obligations of the Partnership arising out of or in connection with the
Partnership. The assets of any trust established under this Section 5.4 will be
distributed to the Partners from time to time by the trustee of the trust upon
approval of the Partners in the same proportions as the

 

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amount distributed to the trust by the Partnership would otherwise have been
distributed to the Partners under this Agreement.

 

ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PARTNERS

 

6.1                                 In General.  As of the date hereof, each of
the Partners hereby makes each of the representations and warranties applicable
to such Partner as set forth in Section 6.2 hereof, and such warranties and
representations shall survive the execution of this Agreement.

 

6.2                                 Representations and Warranties.  Each
Partner hereby represents and warrants that:

 

(A) DUE INCORPORATION OR FORMATION; AUTHORIZATION OF AGREEMENT. IF SUCH PARTNER
IS A LIMITED LIABILITY COMPANY, CORPORATION OR A PARTNERSHIP, IT IS DULY
ORGANIZED OR DULY FORMED, VALIDLY EXISTING, AND IN GOOD STANDING UNDER THE LAWS
OF THE JURISDICTION OF ITS INCORPORATION OR FORMATION AND HAS THE COMPANY,
CORPORATE OR PARTNERSHIP POWER AND AUTHORITY TO OWN ITS PROPERTY AND CARRY ON
ITS BUSINESS AS OWNED AND CARRIED ON AT THE DATE HEREOF AND AS CONTEMPLATED
HEREBY. SUCH PARTNER IS DULY LICENSED OR QUALIFIED TO DO BUSINESS AND IN GOOD
STANDING IN EACH OF THE JURISDICTIONS IN WHICH THE FAILURE TO BE SO LICENSED OR
QUALIFIED WOULD HAVE A MATERIAL ADVERSE EFFECT ON ITS FINANCIAL CONDITION OR ITS
ABILITY TO PERFORM ITS OBLIGATIONS HEREUNDER. SUCH PARTNER HAS THE COMPANY,
CORPORATE, OR PARTNERSHIP POWER AND AUTHORITY TO EXECUTE AND DELIVER THIS
AGREEMENT AND TO PERFORM ITS OBLIGATIONS HEREUNDER AND THE EXECUTION, DELIVERY,
AND PERFORMANCE OF THIS AGREEMENT HAS BEEN DULY AUTHORIZED BY ALL NECESSARY
COMPANY CORPORATE OR PARTNERSHIP ACTION. THIS AGREEMENT CONSTITUTES THE LEGAL,
VALID, AND BINDING OBLIGATION OF SUCH PARTNER SUBJECT TO APPLICABLE BANKRUPTCY
AND SIMILAR LAWS AFFECTING CREDITORS’ RIGHTS GENERALLY.

 

(B) NO CONFLICT WITH RESTRICTIONS, NO DEFAULT.  NEITHER THE EXECUTION, DELIVERY,
AND PERFORMANCE OF THIS AGREEMENT NOR THE CONSUMMATION BY SUCH PARTNER OF THE
TRANSACTIONS CONTEMPLATED HEREBY (I) WILL CONFLICT WITH, VIOLATE, OR RESULT IN A
BREACH OF ANY OF THE TERMS, CONDITIONS, OR PROVISIONS OF ANY LAW, REGULATION,
ORDER, WRIT, INJUNCTION, DECREE, DETERMINATION, OR AWARD OF ANY COURT, ANY
GOVERNMENTAL DEPARTMENT, BOARD, AGENCY, OR INSTRUMENTALITY, DOMESTIC OR FOREIGN,
OR ANY ARBITRATOR, APPLICABLE TO SUCH PARTNER OR ANY OF ITS AFFILIATES, (II)
WILL CONFLICT WITH, VIOLATE, RESULT IN A BREACH OF, OR CONSTITUTE A DEFAULT
UNDER ANY OF THE TERMS, CONDITIONS, OR PROVISIONS OF THE ARTICLES OF
INCORPORATION, CERTIFICATE OF FORMATION, BY-LAWS, LIMITED LIABILITY COMPANY
AGREEMENT, OR PARTNERSHIP AGREEMENT OF SUCH PARTNER OR ANY OF ITS AFFILIATES, IF
SUCH PARTNER IS A LIMITED LIABILITY COMPANY, CORPORATION OR PARTNERSHIP, OR OF
ANY MATERIAL AGREEMENT OR INSTRUMENT TO WHICH SUCH PARTNER OR ANY OF ITS
AFFILIATES IS A PARTY OR BY WHICH SUCH PARTNER OR ANY OF ITS AFFILIATES IS OR
MAY BE BOUND OR TO WHICH ANY OF ITS MATERIAL PROPERTIES OR ASSETS IS SUBJECT,
(III) WILL CONFLICT WITH, VIOLATE, RESULT IN A BREACH OF, CONSTITUTE A DEFAULT
UNDER (WHETHER WITH NOTICE OR LAPSE OF TIME OR BOTH), ACCELERATE OR PERMIT THE
ACCELERATION OF THE PERFORMANCE REQUIRED BY, GIVE TO OTHERS ANY MATERIAL
INTERESTS OR RIGHTS, OR REQUIRE ANY CONSENT, AUTHORIZATION, OR APPROVAL UNDER
ANY INDENTURE, MORTGAGE, LEASE AGREEMENT, OR INSTRUMENT TO WHICH SUCH PARTNER OR
ANY OF ITS AFFILIATES IS A PARTY OR BY WHICH SUCH PARTNER OR ANY OF ITS
AFFILIATES IS OR MAY BE BOUND, OR (IV) WILL RESULT IN THE CREATION OR IMPOSITION
OF ANY LIEN UPON ANY OF THE MATERIAL PROPERTIES OR ASSETS OF SUCH PARTNER OR ANY
OF ITS AFFILIATES.

 

(C) GOVERNMENTAL AUTHORIZATIONS. ANY REGISTRATION, DECLARATION OR FILING WITH OR
CONSENT, APPROVAL, LICENSE, PERMIT OR OTHER AUTHORIZATION OR ORDER BY, ANY
GOVERNMENTAL OR REGULATORY AUTHORITY, DOMESTIC OR FOREIGN, THAT IS REQUIRED IN
CONNECTION WITH THE VALID EXECUTION, DELIVERY, ACCEPTANCE, AND PERFORMANCE BY
SUCH PARTNER UNDER THIS AGREEMENT OR THE

 

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CONSUMMATION BY SUCH PARTNER OF ANY TRANSACTION CONTEMPLATED HEREBY HAS BEEN
COMPLETED, MADE, OR OBTAINED ON OR BEFORE THE EFFECTIVE DATE OF THIS AGREEMENT.

 

(D) LITIGATION. THERE ARE NO ACTIONS, SUITS, PROCEEDINGS, OR INVESTIGATIONS
PENDING OR, TO THE KNOWLEDGE OF SUCH PARTNER OR ANY OF ITS AFFILIATES,
THREATENED AGAINST SUCH PARTNER OR ANY OF ITS AFFILIATES OR AFFECTING ANY OF
THEIR PROPERTIES, ASSETS, OR BUSINESSES IN ANY COURT OR BEFORE OR BY ANY
GOVERNMENTAL DEPARTMENT, BOARD, AGENCY, OR INSTRUMENTALITY, DOMESTIC OR FOREIGN,
OR ANY ARBITRATOR WHICH COULD (OR, IN THE CASE OF AN INVESTIGATION COULD LEAD TO
ANY ACTION, SUIT, OR PROCEEDING, WHICH COULD) REASONABLY BE EXPECTED TO
MATERIALLY IMPAIR SUCH PARTNER’S ABILITY TO PERFORM ITS OBLIGATIONS UNDER THIS
AGREEMENT OR TO HAVE A MATERIAL ADVERSE EFFECT ON THE CONSOLIDATED FINANCIAL
CONDITION OF SUCH PARTNER; AND SUCH PARTNER OR ANY OF ITS AFFILIATES HAS NOT
RECEIVED ANY CURRENTLY EFFECTIVE NOTICE OF ANY DEFAULT, AND SUCH PARTNER OR ANY
OF ITS AFFILIATES IS NOT IN DEFAULT, UNDER ANY APPLICABLE ORDER, WRIT,
INJUNCTION, DECREE, PERMIT, DETERMINATION, OR AWARD OF ANY COURT, ANY
GOVERNMENTAL DEPARTMENT, BOARD, AGENCY, OR INSTRUMENTALITY, DOMESTIC OR FOREIGN,
OR ANY ARBITRATOR WHICH COULD REASONABLY BE EXPECTED TO MATERIALLY IMPAIR SUCH
PARTNER’S ABILITY TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT OR TO HAVE A
MATERIAL ADVERSE EFFECT ON THE CONSOLIDATED FINANCIAL CONDITION OF SUCH PARTNER.

 

(E) INVESTIGATION. SUCH PARTNER IS ACQUIRING ITS INTEREST IN THE PARTNERSHIP
BASED UPON ITS OWN INVESTIGATION, AND THE EXERCISE BY SUCH PARTNER OF ITS RIGHTS
AND THE PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT WILL BE BASED UPON
ITS OWN INVESTIGATION, ANALYSIS, AND EXPERTISE. SUCH PARTNER’S ACQUISITION OF
ITS INTEREST IN THE PARTNERSHIP IS BEING MADE FOR ITS OWN ACCOUNT FOR
INVESTMENT, AND NOT WITH A VIEW TO THE SALE OR DISTRIBUTION THEREOF.

 

(F) INVESTMENT REPRESENTATIONS.

 

(I)                                     THE INTEREST IN THE PARTNERSHIP
SUBSCRIBED FOR HEREBY ARE BEING ACQUIRED BY SUCH PARTNER FOR SUCH PARTNER’S OWN
ACCOUNT AND FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO ANY RESALE OR
DISTRIBUTION THEREOF, IN WHOLE OR IN PART, TO OTHERS, AND SUCH PARTNER IS NOT
PARTICIPATING, DIRECTLY OR INDIRECTLY, IN A DISTRIBUTION OF SUCH INTERESTS AND
WILL NOT TAKE, OR CAUSE TO BE TAKEN, ANY ACTION THAT WOULD CAUSE SUCH PARTNER TO
BE DEEMED AN “UNDERWRITER” OF SUCH INTERESTS AS DEFINED IN SECTION 2(11) OF THE
SECURITIES ACT OF 1933, AS AMENDED.

 

(II)                                  SUCH PARTNER HAS HAD ACCESS TO ALL
MATERIALS, BOOKS, RECORDS, DOCUMENTS, AND INFORMATION RELATING TO THE
PARTNERSHIP AND HAS BEEN ABLE TO VERIFY THE ACCURACY OF, AND TO SUPPLEMENT, THE
INFORMATION CONTAINED THEREIN.

 

(III)                               SUCH PARTNER HAS HAD AN OPPORTUNITY TO ASK
QUESTIONS OF, AND RECEIVE SATISFACTORY ANSWERS FROM, REPRESENTATIVES OF THE
PARTNERSHIP CONCERNING THE TERMS AND CONDITIONS PURSUANT TO WHICH THE OFFERING
OF INTERESTS IS BEING MADE AND ALL MATERIAL ASPECTS OF THE PARTNERSHIP AND ITS
PROPOSED BUSINESS, AND ANY REQUEST FOR SUCH INFORMATION HAS BEEN FULLY COMPLIED
WITH TO THE EXTENT THE PARTNERSHIP POSSESSES SUCH INFORMATION OR CAN ACQUIRE IT
WITHOUT UNREASONABLE EFFORT OR EXPENSE.

 

(IV)                              SUCH PARTNER IS AN “ACCREDITED INVESTOR”
WITHIN THE MEANING OF RULE 501 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

(V)                                 SUCH PARTNER IS AN INVESTOR WHO HAS SUCH
KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS AS TO BE CAPABLE OF
EVALUATING THE MERITS AND RISKS OF AN INVESTMENT IN THE PARTNERSHIP BASED UPON
(I) THE INFORMATION FURNISHED BY THE PARTNERSHIP;

 

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(II) SUCH PARTNER’S PERSONAL KNOWLEDGE OF THE BUSINESS AND AFFAIRS OF THE
PARTNERSHIP; (III) THE RECORDS, FILES, AND PLANS OF THE PARTNERSHIP TO ALL OF
SUCH PARTNER HAS HAD FULL ACCESS; (IV) SUCH ADDITIONAL INFORMATION AS SUCH
PARTNER MAY HAVE REQUESTED AND HAS RECEIVED FROM THE PARTNERSHIP; AND (V) THE
INDEPENDENT INQUIRIES AND INVESTIGATIONS UNDERTAKEN BY SUCH PARTNER.

 

(VI)                              NO PERSON HAS MADE ANY DIRECT OR INDIRECT
REPRESENTATION OR WARRANTY OF ANY KIND TO SUCH PARTNER WITH RESPECT TO THE
ECONOMIC RETURN WHICH MAY ACCRUE TO SUCH PARTNER. SUCH PARTNER HAS CONSULTED
WITH HIS, HER OR ITS OWN ADVISORS WITH RESPECT TO AN INVESTMENT IN THE
PARTNERSHIP.

 

(VII)                           ALL INFORMATION, REPRESENTATIONS, AND WARRANTIES
CONTAINED HEREIN OR OTHERWISE GIVEN OR MADE TO THE PARTNERSHIP BY SUCH PARTNER
IN ANY OTHER WRITTEN STATEMENT OR DOCUMENT DELIVERED IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED HEREBY ARE CORRECT AND COMPLETE AS OF THE DATE OF THIS
AGREEMENT AND MAY BE RELIED UPON BY THE PARTNERSHIP, AND, IF THERE SHOULD BE ANY
MATERIAL CHANGE IN SUCH INFORMATION PRIOR TO THE SUCH PARTNER’S EXECUTION OF
THIS AGREEMENT, SUCH PARTNER WILL IMMEDIATELY FURNISH SUCH REVISED OR CORRECTED
INFORMATION TO THE PARTNERSHIP.

 

(G) CREST AGREEMENT.  EACH PARTNER ACKNOWLEDGES THAT (I) IT HAS RECEIVED AND
REVIEWED A COPY OF THE SETTLEMENT AND PURCHASE AGREEMENT BY AND AMONG CHENIERE
ENERGY, INC., CXY CORPORATION, CREST ENERGY, L.L.C., CREST INVESTMENT COMPANY
AND FREEPORT LNG TERMINAL, LLC DATED AS OF JUNE 14, 2001 (THE “CREST
AGREEMENT”), (II) THE PARTNERSHIP SHALL BE OBLIGATED ONLY TO PAY THE ROYALTY (AS
DEFINED IN THE CREST AGREEMENT) SOLELY WITH RESPECT TO THE PROJECT AND (III)
CHENIERE SHALL BE RESPONSIBLE FOR ALL OTHER PAYMENTS AND OBLIGATIONS OWING TO
CREST, IF ANY, UNDER THE CREST AGREEMENT.

 

6.3                                 Representations and Warranties of General
Partner and LNG Investments.  As of the date hereof, the General Partner and LNG
Investments jointly and severally represent and warrant that:

 

(A) DUE ORGANIZATION AND AUTHORITY.  THE PARTNERSHIP IS DULY ORGANIZED AND
VALIDLY EXISTING UNDER THE LAWS OF DELAWARE.  THE PARTNERSHIP HAS DELIVERED TO
CHENIERE A TRUE AND CORRECT COPY OF THE CERTIFICATE OF LIMITED PARTNERSHIP.

 

(B) EXPENSES.  AS OF THE CLOSING DATE, OTHER THAN (I) THE LEASE AGREEMENT, (II)
THE LNG INVESTMENTS EXPENSES AND (III) OBLIGATIONS WHICH AN ENTITY IN THIS
INDUSTRY WOULD HAVE ORDINARILY INCURRED AT THIS STAGE IN ITS DEVELOPMENT, THE
PARTNERSHIP HAS INCURRED NO OBLIGATIONS OR EXPENSES, INCLUDING OBLIGATION FOR
BORROWED MONEY.

 

ARTICLE VII
RIGHTS AND OBLIGATIONS OF PARTNERS

 

7.1                                 Limited Liability.  No Limited Partner shall
be personally liable for any debts, liabilities, or obligations of the
Partnership; provided that each Partner shall be responsible (i) for the making
of any capital contributions required to be made to the Partnership by such
Partner pursuant to the terms hereof and (ii) for the amount of any distribution
made to such Partner that must be returned to the Partnership pursuant to the
terms hereof or the Act.

 

7.2                                 Liability of a Partner to the Partnership. 
When a Partner has received a distribution made by the Partnership in violation
of this Agreement or the Act, the Partner is liable to the

 

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Partnership for a period of three years after such a prohibited distribution for
the amount of the distribution.

 

7.3                                 Exculpation.  Unless expressly agreed to in
writing by such Person, no shareholder, general or limited partner, member or
holder of any equity interest in any Partner or manager, officer, director or
employee of any of the foregoing, shall be personally liable for the performance
of any such Partner’s obligations under this Agreement, but the foregoing shall
not relieve any shareholder, partner, member, holder of an equity interest,
manager, officer, director or employee of any Partner of its obligations to such
Partner.

 

7.4                                 Participation in Management.  No Limited
Partner, as such, shall take any part in the management and control of the
Business of the Partnership nor shall any Limited Partner, by reason of its
status as such, have any right to transact any business for the Partnership or
any authority or power to sign for or bind the Partnership. Notwithstanding the
foregoing, Limited Partners shall have the right to approve or disapprove or
otherwise consent or withhold consent with respect to such matters as are
specified in this Agreement or the Act.

 

7.5                                 Survival of Obligations.  Dissolution of the
Partnership shall not release any party from any liability which at the time of
dissolution or termination has already accrued to any party, nor affect in any
way the survival of the rights, duties, and obligations of any party provided
for in Articles VI, VII, and IX of this Agreement.

 

7.6                                 Covenant of Non-Competition and
Non-Solicitation.

 

(A) CHENIERE.  UNTIL THE EARLIEST OF (I) DECEMBER 19, 2003, (II) THE DATE THAT
THE PARTNERSHIP HAS RECEIVED PERMITTING APPROVAL FROM FERC FOR THE PROJECT OR
(III) SUCH TIME AS LNG INVESTMENTS WITHDRAWS FROM THE PARTNERSHIP, CHENIERE
SHALL MAKE NO FILINGS WITH FERC FOR THE DEVELOPMENT OF ANY OTHER LNG RECEIVING
AND REGASIFICATION FACILITY; PROVIDED, THAT THE PARTNERSHIP AGREES TO USE ALL
COMMERCIALLY REASONABLE EFFORTS TO TIMELY MAKE THE FERC FILINGS WITH RESPECT TO
THE PROJECT.  UNTIL THE EARLIEST OF (I) DECEMBER 19, 2003, (II) SUCH TIME AS THE
PARTNERSHIP HAS ENTERED INTO BINDING TERMINAL CAPACITY AND USE AGREEMENTS (NOT
OPTIONS FOR THE SAME) OF AT LEAST 800 MMCF/DAY OF THE PROJECT’S CAPACITY, (III)
SUCH TIME AS THE GENERAL PARTNER PROVIDES CHENIERE A WRITTEN RESPONSE, WHICH
EXPRESSLY AND AFFIRMATIVELY AGREES WITH CHENIERE’S WRITTEN NOTICE TO THE GENERAL
PARTNER STATING THAT CHENIERE BELIEVES THAT THE PARTNERSHIP HAS CEASED MARKETING
AND SELLING ADDITIONAL PROJECT CAPACITY AND THAT CHENIERE WOULD LIKE TO BEGIN
SELLING CAPACITY FOR OTHER LNG RECEIVING AND REGASIFICATION FACILITIES, OR (IV)
SUCH TIME AS LNG INVESTMENTS WITHDRAWS FROM THE PARTNERSHIP, CHENIERE SHALL NOT
CONTINUE, ENGAGE IN, SOLICIT, INITIATE OR ENCOURAGE THE SALE OF CAPACITY AT ANY
OTHER LNG RECEIVING AND REGASIFICATION FACILITY, OTHER THAN THE PROJECT. 
CHENIERE SHALL NOT SOLICIT ANY OFFICER OR EMPLOYEE OF THE PARTNERSHIP OR THE
GENERAL PARTNER TO LEAVE THE EMPLOY OF SUCH PERSON; PROVIDED, HOWEVER, THAT THIS
RESTRICTION SHALL NOT APPLY TO CHARLES REIMER, BILL HENRY OR VOLKER EYERMANN
ONCE SUCH PERSON IS PROVIDING LESS THAN 50% OF HIS BUSINESS TIME TO THE
PROJECT.  NEITHER CHENIERE NOR ANY OF ITS AFFILIATES SHALL PURSUE THE
CONSTRUCTION, DEVELOPMENT OR OPERATION OF ANY FREEPORT LNG FACILITY UNTIL SUCH
TIME AS LNG INVESTMENTS OR ANY OF ITS AFFILIATES HAS NO CONTRACTUAL, EQUITY OR
PARTNERSHIP INTEREST IN, OR RELATED TO THE DEVELOPMENT OF, THE PROJECT, EXCEPT
AS PROVIDED IN THE OPTION AGREEMENT BETWEEN CHENIERE AND LNG INVESTMENTS.

 

(B) LNG INVESTMENTS.  FOR SO LONG AS LNG INVESTMENTS OR ITS AFFILIATES HAS AN
INTEREST IN THE PARTNERSHIP, NONE OF LNG INVESTMENTS OR ANY OF ITS AFFILIATES
WILL DIRECTLY ACQUIRE AN INTEREST IN OR OTHERWISE PURSUE THE DEVELOPMENT OF ANY
LNG RECEIVING AND REGASIFICATION FACILITIES IN THE SABINE PASS, CORPUS CHRISTI
OR BROWNSVILLE AREAS UNTIL THE LATER OF (I) TWO YEARS

 

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FOLLOWING THE CLOSING DATE OR (II) SUCH TIME THAT CHENIERE HAS NO CONTRACTUAL,
EQUITY, PARTNERSHIP INTEREST OR OTHER INTEREST IN, OR RELATED TO THE DEVELOPMENT
OF, AN LNG RECEIVING AND REGASIFICATION FACILITY IN THE SABINE PASS, CORPUS
CHRISTI OR BROWNSVILLE AREAS.  NEITHER THE PARTNERSHIP, LNG INVESTMENTS, THE
GENERAL PARTNER NOR ANY OF THEIR RESPECTIVE AFFILIATES SHALL SOLICIT ANY OF
CHENIERE’S EMPLOYEES (OTHER THAN CHARLES REIMER, BILL HENRY AND VOLKER EYERMANN)
OR ANY EMPLOYEES OF ANY AFFILIATE OF CHENIERE TO LEAVE THE EMPLOY OF SUCH
PERSON.

 

ARTICLE VIII
MEETINGS OF PARTNERS

 

8.1                                 Place of Meetings and Meetings by
Telephone.  Meetings of Partners shall be held at any place designated by the
General Partner with the approval of both Limited Partners unless conducted by
conference telephone or similar communications equipment in which the physical
presence of a Partner is not necessary.  Any meeting of the Partners may be held
by conference telephone or similar communications equipment so long as all
Partners participating in the meeting can hear one another, and all Partners
participating by telephone or similar communications equipment shall be deemed
to be present in person at the meeting.  Each Limited Partner may participate in
any meeting by telephone conference.

 

8.2                                 Call of Meetings.  Meetings of the Partners
may be called at any time by any Partner for the purpose of taking action upon
any matter requiring the vote or authority of the Partners as provided in this
Agreement or upon any other matter as to which such vote or authority is deemed
by any Partner to be necessary or desirable.

 

8.3                                 Notice of Meetings of Partners.  All notices
of meetings of Partners shall be sent or otherwise given to all Partners in
accordance with Section 8.4 not less than five (5) nor more than ninety (90)
days before the date of the meeting.  The notice shall specify (i) the place,
date, and hour of the meeting, and (ii) the general nature of the business to be
transacted.

 

8.4                                 Manner of Giving Notice.  Notice of any
meeting of Partners shall be given personally or by telephone to each Partner or
sent by first class mail, by telecopy (or similar electronic means), or by a
nationally recognized overnight courier, charges prepaid, addressed to the
Partner at the address of that Partner appearing on the books of the Partnership
or given by the Partner to the Partnership for the purpose of notice.  Notice
shall be deemed to have been given at the time when delivered either personally
or by telephone, or at the time when deposited in the mail or with a nationally
recognized overnight courier, or when sent by telecopy (or similar electronic
means).

 

8.5                                 Adjourned Meeting; Notice.  Any meeting of
Partners, whether or not a quorum is present, may be adjourned from time to time
by the vote of the Majority of the Percentage Interests represented at that
meeting, either in person or by proxy.  When any meeting of Partners is
adjourned to another time or place, notice need not be given of the adjourned
meeting, unless a new record date of the adjourned meeting is fixed or unless
the adjournment is for more than sixty (60) days from the date set for the
original meeting, in which case the General Partner shall set a new record date
and shall give notice in accordance with the provisions of Sections 8.3 and 8.4.
At any adjourned meeting, the Partnership may transact any business that might
have been transacted at the original meeting.

 

8.6                                 Quorum; Voting.  At any meeting of the
Partners, a Majority in Interest of the Partners, present in person or by proxy,
shall constitute a quorum for all purposes, unless or except to the extent that
the presence of Partners holding a higher aggregate Percentage

 

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Interest is required by the Agreement or applicable law; provided, however, for
so long as Cheniere and LNG Investments shall be the sole Limited Partners, the
presence of both Cheniere and LNG Investments shall be required to constitute a
quorum.

 

8.7                                 Waiver of Notice by Consent of Absent
Partners.  The transactions of a meeting of Partners, however called and noticed
and wherever held, shall be as valid as though taken at a meeting duly held
after regular call and notice if a quorum is present either in person or by
proxy and if either before or after the meeting, each person entitled to vote
who was not present in person or by proxy signs a written waiver of notice or a
consent to a holding of the meeting or an approval of the minutes.  The waiver
of notice or consent need not specify either the business to be transacted or
the purpose of any meeting of Partners.  Attendance by a person at a meeting
shall also constitute a waiver of notice of that meeting, except when the person
objects at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters not included in the notice of the meeting if that
objection is expressly made at the beginning of the meeting.

 

8.8                                 Partner Action by Written Consent Without a
Meeting.  Except as provided in this Agreement, any action that may be taken at
any meeting of Partners may be taken without a meeting and without prior notice
if a consent in writing setting forth the action so taken is signed by a
Majority in Interest (or Partners holding such higher aggregate Percentage
Interest as is required to authorize or take such action under the terms of this
Agreement or applicable law); provided, that all Partners receive not less than
15 days prior written notice of any action so taken.  Any such written consent
may be executed and given by telecopy or similar electronic means.  Such
consents shall be filed with the Partnership and shall be maintained in the
Partnership’s records.

 

8.9                                 Record Date for Partner Notice, Voting, and
Giving Consents.  For purposes of determining the Partners entitled to vote or
act at any meeting or adjournment thereof, the General Partner may fix in
advance a record date which shall not be greater than ninety (90) days nor fewer
than five (5) days before the date of any such meeting.  If the General Partner
does not so fix a record date, the record date for determining Partners entitled
to notice of or to vote at a meeting of Partners shall be at the close of
business on the business day immediately preceding the day on which notice is
given, or if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held.

 

(A) THE RECORD DATE FOR DETERMINING PARTNERS ENTITLED TO GIVE CONSENT TO ACTION
IN WRITING WITHOUT A MEETING, (I) WHEN NO PRIOR ACTION OF THE GENERAL PARTNER
HAS BEEN TAKEN, SHALL BE THE DAY ON WHICH THE FIRST WRITTEN CONSENT IS GIVEN OR
(II) WHEN PRIOR ACTION OF THE GENERAL PARTNER HAS BEEN TAKEN, SHALL BE (X) SUCH
DATE AS DETERMINED FOR THAT PURPOSE BY THE GENERAL PARTNER, WHICH RECORD DATE
SHALL NOT PRECEDE THE DATE UPON WHICH THE RESOLUTION FIXING IT IS ADOPTED BY THE
GENERAL PARTNER AND SHALL NOT BE MORE THAN 20 DAYS AFTER THE DATE OF SUCH
RESOLUTION OR (Y) IF NO RECORD DATE IS FIXED BY THE GENERAL PARTNER THE RECORD
DATE SHALL BE THE CLOSE OF BUSINESS ON THE DAY ON WHICH THE GENERAL PARTNER
ADOPTS THE RESOLUTION RELATING TO THAT ACTION.

 

(B) ONLY PARTNERS OF RECORD ON THE RECORD DATE AS HEREIN DETERMINED SHALL HAVE
ANY RIGHT TO VOTE OR TO ACT AT ANY MEETING OR GIVE CONSENT TO ANY ACTION
RELATING TO SUCH RECORD DATE, PROVIDED THAT NO PARTNER WHO TRANSFERS ALL OR PART
OF SUCH PARTNER’S INTEREST AFTER A RECORD DATE (AND NO TRANSFEREE OF SUCH
INTEREST) SHALL HAVE THE RIGHT TO VOTE OR ACT WITH RESPECT TO THE TRANSFERRED
INTEREST AS REGARDS THE MATTER FOR WHICH THE RECORD DATE WAS SET.

 

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8.10                           Proxies.  Every Partner entitled to vote or act
on any matter at a meeting of Partners shall have the right to do so either in
person or by proxy, provided that an instrument authorizing such a proxy to act
is executed by the Partner in writing and dated not more than eleven (11) months
before the meeting, unless the instrument specifically provides for a longer
period.  A proxy shall be deemed executed by a Partner if the Partner’s name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission, or otherwise) by the Partner or the Partner’s attorney-in-fact.  A
valid proxy that does not state that it is irrevocable shall continue in full
force and effect unless (i) revoked by the person executing it before the vote
pursuant to that proxy by a writing delivered to the Partnership stating that
the proxy is revoked, by a subsequent proxy executed by or attendance at the
meeting and voting in person by the person executing that proxy or (ii) written
notice of the death or incapacity of the maker of that proxy is received by the
Partnership before the vote pursuant to that proxy is counted.  A proxy
purporting to be executed by or on behalf of a Partner shall be deemed valid
unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger.

 

ARTICLE IX
INDEMNIFICATION OF PARTNERS

 

9.1                                 General.  The Partnership, its receiver, or
its trustee (in the case of its receiver or trustee, to the extent of the
Partnership Assets) shall indemnify, save harmless, and pay all judgments and
claims against each Partner or any managers, officers or directors of such
Partner relating to any liability or damage incurred by reason of any act
performed or omitted to be performed by such Partner, manager, officer, or
director in connection with the Business of the Partnership, including
attorneys’ fees incurred by such Partner, officer, or director in connection
with the defense of any action based on any such act or omission, which
attorneys’ fees may be paid as incurred.

 

9.2                                 Environmental.  The Partnership, its
receiver, or its trustee (in the case of its receiver or trustee, to the extent
of the Partnership Assets) shall indemnify and hold harmless, to the maximum
extent permitted by law, each Partner from and against any and all liabilities,
sums paid in settlement of claims, obligations, charges, actions (formal or
informal), claims (including, without limitation, claims for personal injury
under any theory or for real or personal property damage), liens, taxes,
administrative proceedings, losses, damages (including, without limitation,
punitive damages), penalties, fines, court costs, administrative service fees,
response and remediation costs, stabilization costs, encapsulation costs
treatment, storage or disposal costs, groundwater monitoring or environmental
study, sampling or monitoring costs, other causes of action, and any other costs
and reasonable expenses (including, without limitation, reasonable attorneys’,
experts’, and consultants’ fees and disbursements and investigating, laboratory,
and data review fees) imposed upon or incurred by any Partner (whether or not
indemnified against by any other party) arising from and after the date of this
Agreement directly or indirectly out of:

 

(A) THE PAST, PRESENT, OR FUTURE TREATMENT, STORAGE, DISPOSAL, GENERATION, USE,
TRANSPORT, MOVEMENT, PRESENCE, RELEASE, THREATENED RELEASE, SPILL, INSTALLATION,
SALE, EMISSION INJECTION, LEACHING, DUMPING, ESCAPING, OR SEEPING OF ANY
HAZARDOUS SUBSTANCES OR MATERIAL CONTAINING OR ALLEGED TO CONTAIN HAZARDOUS
SUBSTANCES AT OR FROM ANY PAST, PRESENT, OR FUTURE PROPERTIES OR ASSETS OF THE
PARTNERSHIP; AND/OR

 

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(B) THE VIOLATION OR ALLEGED VIOLATION BY THE PARTNERSHIP OR ANY THIRD PARTY OF
ANY ENVIRONMENTAL LAWS WITH REGARD TO THE PAST, PRESENT, OR FUTURE OWNERSHIP,
OPERATION, USE, OR OCCUPYING OF ANY PARTNERSHIP ASSETS.

 

9.3                                 Limitations.

 

(A) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN ANY OF SECTIONS 9.1 AND 9.2
ABOVE, NO PARTNER SHALL BE INDEMNIFIED FROM ANY LIABILITIES INCURRED AS A RESULT
OF CONDUCT BY THE PARTNER WHICH CONSTITUTES A BREACH OF THE PROVISIONS OF THIS
AGREEMENT, FRAUD, BAD FAITH, WILLFUL MISCONDUCT, OR GROSS NEGLIGENCE.

 

(B) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN ANY OF SECTIONS 9.1 AND 9.2
ABOVE, IN THE EVENT THAT ANY PROVISION IN ANY OF SUCH SECTIONS IS DETERMINED TO
BE INVALID IN WHOLE OR IN PART, SUCH SECTIONS SHALL BE ENFORCED TO THE MAXIMUM
EXTENT PERMITTED BY LAW.

 

ARTICLE X
MANAGEMENT OF THE PARTNERSHIP

 

10.1                           The General Partner.

 

(A) THE GENERAL PARTNER OF THE PARTNERSHIP SHALL BE FREEPORT GP UNLESS A
SUCCESSOR HAS BEEN APPOINTED PURSUANT TO THE PROVISIONS OF THIS AGREEMENT.

 

(B) SUBJECT TO THE APPROVAL RIGHTS DESCRIBED HEREIN, THE BUSINESS AND AFFAIRS OF
THE PARTNERSHIP SHALL BE MANAGED EXCLUSIVELY BY OR UNDER THE DIRECTION OF THE
GENERAL PARTNER AND THE POWER TO ACT FOR OR TO BIND THE PARTNERSHIP SHALL BE
VESTED EXCLUSIVELY IN THE GENERAL PARTNER, SUBJECT TO THE GENERAL PARTNER’S
AUTHORITY TO DELEGATE POWERS AND DUTIES TO OFFICERS AND OTHERS AS SET FORTH
HEREIN. SUBJECT TO OBTAINING ANY NECESSARY APPROVALS HEREUNDER, THE GENERAL
PARTNER SHALL HAVE THE POWER AND AUTHORITY TO EXECUTE AND DELIVER CONTRACTS,
INSTRUMENTS, FILINGS, NOTICES, CERTIFICATES, AND OTHER DOCUMENTS OF WHATSOEVER
NATURE ON BEHALF OF THE PARTNERSHIP (INCLUDING WITHOUT LIMITATION, THE
CERTIFICATE OF LIMITED PARTNERSHIP AND ANY AMENDMENTS THERETO AND ANY OTHER
CERTIFICATES REQUIRED OR PERMITTED TO BE FILED BY OR ON BEHALF OF THE
PARTNERSHIP PURSUANT TO THE ACT OR LIKE LAW OF ANY OTHER JURISDICTION). EXCEPT
AS OTHERWISE REQUIRED BY APPLICABLE LAW, ANY SUCH CONTRACT, INSTRUMENT,
CERTIFICATE, OR OTHER DOCUMENT SHALL REQUIRE THE SIGNATURE OF THE GENERAL
PARTNER OR THE SIGNATURE OF SUCH EMPLOYEE OR AGENT TO WHOM AUTHORITY HAS BEEN
DELEGATED BY THE GENERAL PARTNER.

 

(C) UNLESS AUTHORIZED TO DO SO BY THIS AGREEMENT OR BY THE GENERAL PARTNER OF
THE PARTNERSHIP, NO LIMITED PARTNER, AGENT, OR EMPLOYEE OF THE PARTNERSHIP SHALL
HAVE ANY POWER OR AUTHORITY TO BIND THE PARTNERSHIP IN ANY WAY, TO PLEDGE ITS
CREDIT OR TO RENDER IT LIABLE PECUNIARILY FOR ANY PURPOSE.

 

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10.2                           Major Decisions.

 

(A) NOTWITHSTANDING THE GENERAL AUTHORITY OF THE GENERAL PARTNER UNDER
SECTION 10.1, THE FOLLOWING MATTERS (“MAJOR DECISIONS”) SHALL REQUIRE THE PRIOR
WRITTEN CONSENT OF BOTH LIMITED PARTNERS (EXCEPT TO THE EXTENT (1) A LIMITED
PARTNER HAS LOST ITS APPROVAL AND CONSENT RIGHTS PURSUANT TO SECTION 3.5 OR (2)
A LIMITED PARTNER TRANSFERS ALL OR PART OF SUCH PARTNER’S INTEREST, IN WHICH
CASE ONLY THE CONSENT OF LNG INVESTMENTS AND CHENIERE SHALL BE REQUIRED PURSUANT
TO THIS SECTION 10.2 AND SUCH LIMITED PARTNER’S ASSIGNEE OR TRANSFEREE SHALL
HAVE NO RIGHT TO CONSENT THERETO):

 

(I)                  THE TAKING OF ANY BANKRUPTCY ACTION;

 

(II)               THE SALE OF ALL OR SUBSTANTIALLY ALL OF THE PARTNERSHIP’S
ASSETS;

 

(III)            THE ASSIGNMENT OF ANY OF THE PARTNERSHIP ASSETS IN TRUST FOR
THE BENEFIT OF CREDITORS, OR THE MAKING OR FILING, OR ACQUIESCENCE IN THE MAKING
OR FILING BY ANY OTHER PERSON, OF A PETITION OR OTHER ACTION REQUESTING THE
REORGANIZATION OR LIQUIDATION OF THE PARTNERSHIP UNDER THE BANKRUPTCY LAWS;

 

(IV)           MERGER OR CONSOLIDATION OF THE PARTNERSHIP WITH ANY OTHER PERSON;
AND

 

(V)              ANY AFFILIATE TRANSACTION, UNLESS THE TERMS OF SUCH AFFILIATE
TRANSACTION ARE FAIR AND REASONABLE TO THE PARTNERSHIP AND ARE NOT LESS
FAVORABLE TO THE PARTNERSHIP THAN COULD BE OBTAINED IN ARMS LENGTH NEGOTIATIONS
WITH UNRELATED THIRD PARTIES, IN WHICH EVENT SUCH AFFILIATE TRANSACTION SHALL
NOT REQUIRE ANY CONSENT OF THE LIMITED PARTNERS PURSUANT TO THIS SECTION 10.2.

 

(B)                                  IN THE EVENT THE LIMITED PARTNERS ARE
UNABLE TO AGREE AS TO THE APPROVAL OR DISAPPROVAL OF ANY MAJOR DECISION, THE
ITEM SHALL BE SUBMITTED TO AND DECIDED BY ARBITRATION PURSUANT TO ARTICLE XXI
BUT ONLY TO THE EXTENT SUCH MATTER IS SUBJECT TO ARBITRATION PURSUANT TO
ARTICLE XXI AND NO ACTION MAY BE TAKEN REGARDING THE SUBJECT OF THE MAJOR
DECISION IF IT IS SUBJECT TO ARBITRATION PURSUANT TO ARTICLE XXI UNLESS AND
UNTIL A DECISION IN SUCH ARBITRATION IS RENDERED OR THE LIMITED PARTNERS AGREE
IN WRITING AS TO THE RESOLUTION OF SUCH MATTER.

 

(C)                                   THE GENERAL PARTNER SHALL INFORM AND
CONSULT WITH CHENIERE WITH RESPECT TO THE GENERAL PARTNER’S SEEKING, NEGOTIATING
AND OBTAINING CONSTRUCTION FINANCING FOR THE PROJECT FROM THIRD PARTY LENDERS
AND EQUITY INVESTORS IN ACCORDANCE WITH SECTION 3.3 (“CONSTRUCTION FINANCING”),
BUT CHENIERE SHALL HAVE NO RIGHT TO APPROVE THE TERMS OF SUCH CONSTRUCTION
FINANCING INCLUDING, WITHOUT LIMITATION, THE ADMISSION OF ANY LENDER OR EQUITY
INVESTOR TO THE PARTNERSHIP AND ANY AMENDMENT TO THIS AGREEMENT IN CONNECTION
THEREWITH; PROVIDED, HOWEVER, THAT IN THE EVENT CHENIERE PROVIDES THE GENERAL
PARTNER WITH A BONA FIDE TERM SHEET FOR CONSTRUCTION FINANCING FOR THE PROJECT,
FROM A PARTY OR PARTIES WITH SUFFICIENT FINANCIAL RESOURCES TO PROVIDE SUCH
FINANCING (AND CHENIERE SHALL PROVIDE REASONABLE EVIDENCE OF SUCH RESOURCES),
CONTAINING TERMS THAT ARE MORE FAVORABLE TO THE PARTNERSHIP THAN THE TERMS OF
THE CONSTRUCTION FINANCING SECURED BY THE GENERAL PARTNER, CHENIERE’S CONSENT
SHALL BE REQUIRED FOR THE ADMISSION OF ANY LENDER OR EQUITY INVESTOR AND ANY
AMENDMENT TO THIS AGREEMENT IN CONNECTION THEREWITH, WHICH CONSENT SHALL NOT BE
UNREASONABLY WITHHELD OR DELAYED; AND PROVIDED, FURTHER, THAT IN THE EVENT
CHENIERE DOES NOT CONSENT TO THE ADMISSION OF ANY LENDER OR EQUITY INVESTOR OR
ANY AMENDMENT TO THIS AGREEMENT, AS THE CASE MAY BE, IN CONNECTION WITH THE
CONSTRUCTION FINANCING, CHENIERE SHALL PROVIDE WRITTEN NOTICE OF DISAPPROVAL TO
THE GENERAL PARTNER WITH SPECIFIC REASONS FOR ITS DISAPPROVAL.

 

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10.3                           Resignation.  Freeport GP agrees not to resign as
the General Partner, other than pursuant to Section 16.2.

 

10.4                           Removal.  Freeport GP shall only be removed as a
General Partner pursuant to Section 10.10.

 

10.5                           Remuneration of General Partner; Reimbursement of
Expenses. Subject to the approval pursuant to Section 10.2, if applicable, the
General Partner shall be paid by the Partnership as determined in the discretion
of the General Partner for performing its services as a General Partner. In
addition, each of the General Partner and the Limited Partners shall be
reimbursed for its reasonable out of pocket costs in connection with the
Business of the Partnership including, without limitation, fees paid to
professionals and advisors and travel and lodging expenses.

 

10.6                           Limitation on Liability of General Partner;
Indemnification.

 

(A) THE GENERAL PARTNER OF THE PARTNERSHIP SHALL NOT HAVE ANY LIABILITY TO THE
PARTNERSHIP OR THE OTHER PARTNERS FOR ANY LOSSES SUSTAINED OR LIABILITIES
INCURRED AS A RESULT OF ANY ACT OR OMISSION OF SUCH GENERAL PARTNER IF (I) THE
GENERAL PARTNER ACTED IN GOOD FAITH AND IN A MANNER IT REASONABLY BELIEVED TO BE
IN, OR NOT OPPOSED TO, THE BEST INTERESTS OF THE PARTNERSHIP AND (II) THE
CONDUCT OF THE GENERAL PARTNER DID NOT CONSTITUTE A BREACH OF THE PROVISIONS OF
THIS AGREEMENT, FRAUD, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT.

 

(B) THE PARTNERSHIP SHALL INDEMNIFY AND HOLD HARMLESS (I) THE GENERAL PARTNER,
(II) ITS MANAGERS, OFFICERS AND EMPLOYEES, AND (III) ANY OFFICERS OF THE
PARTNERSHIP DESIGNATED PURSUANT TO SECTION 10.11 (EACH, AN “INDEMNITEE”) FROM
AND AGAINST ANY AND ALL LOSSES, CLAIMS, DEMANDS, COSTS, DAMAGES, LIABILITIES,
EXPENSES OF ANY NATURE (INCLUDING REASONABLE ATTORNEYS’ FEES AND DISBURSEMENTS),
JUDGMENTS, FINES, SETTLEMENTS, AND OTHER AMOUNTS ARISING FROM ANY AND ALL
CLAIMS, DEMANDS, ACTIONS, SUITS, OR PROCEEDINGS, CIVIL, CRIMINAL,
ADMINISTRATIVE, OR INVESTIGATIVE, IN WHICH AN INDEMNITEE MAY BE INVOLVED, OR
THREATENED TO BE INVOLVED, AS A PARTY OR OTHERWISE, ARISING OUT OF OR INCIDENTAL
TO THE BUSINESS OF THE PARTNERSHIP, REGARDLESS OF WHETHER AN INDEMNITEE
CONTINUES TO BE A GENERAL PARTNER OR A MANAGER, OFFICER OR EMPLOYEE OF THE
GENERAL PARTNER AT THE TIME ANY SUCH LIABILITY OR EXPENSE IS PAID OR INCURRED,
IF (I) THE INDEMNITEE ACTED IN GOOD FAITH AND IN A MANNER IT OR HE OR SHE
REASONABLY BELIEVED TO BE IN, OR NOT OPPOSED TO, THE BEST INTERESTS OF THE
PARTNERSHIP, AND, WITH RESPECT TO ANY CRIMINAL PROCEEDING, HAD NO REASON TO
BELIEVE HIS OR HER CONDUCT WAS UNLAWFUL AND (II) THE INDEMNITEE’S CONDUCT DID
NOT CONSTITUTE A BREACH OF THE PROVISIONS OF THIS AGREEMENT, FRAUD, GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.

 

(C) EXPENSES INCURRED BY AN INDEMNITEE IN DEFENDING ANY CLAIM, DEMAND, ACTION,
SUIT, OR PROCEEDING SUBJECT TO THIS SECTION 10.6 SHALL, FROM TIME TO TIME, BE
ADVANCED BY THE PARTNERSHIP PRIOR TO THE FINAL DISPOSITION OF SUCH CLAIM,
DEMAND, ACTION, SUIT, OR PROCEEDING, UPON RECEIPT BY THE PARTNERSHIP OF AN
UNDERTAKING BY OR ON BEHALF OF THE INDEMNITEE TO REPAY SUCH AMOUNTS IF IT IS
ULTIMATELY DETERMINED THAT SUCH PERSON IS NOT ENTITLED TO BE INDEMNIFIED AS
AUTHORIZED IN THIS SECTION 10.6.  THE INDEMNIFICATION PROVIDED BY THIS
SECTION 10.6 SHALL BE IN ADDITION TO ANY OTHER RIGHTS TO WHICH AN INDEMNITEE MAY
BE ENTITLED UNDER ANY AGREEMENT, CONSENT OF THE PARTNERS, AS A MATTER OF LAW OR
EQUITY, OR OTHERWISE, SHALL CONTINUE AS TO AN INDEMNITEE WHO HAS CEASED TO SERVE
IN SUCH CAPACITY AND SHALL INURE TO THE BENEFIT OF THE HEIRS, SUCCESSORS,
ASSIGNS AND ADMINISTRATORS OF THE INDEMNITEE.  SUBJECT TO THE FOREGOING
SENTENCE, THE PROVISIONS OF THIS SECTION 10.6 ARE FOR THE BENEFIT OF THE
INDEMNITEES AND SHALL NOT BE DEEMED TO CREATE ANY RIGHTS FOR THE BENEFIT OF ANY
OTHER PERSONS.

 

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10.7                           No Guarantee of Return by General Partner.  The
General Partner does not, in any way, guarantee the return of the Partners’
Contributed Equity or a profit for the Partners from the operations of the
Partnership.  The General Partner shall not be responsible to any Partners
because of a loss of their investment in the Partnership or a loss in the
operations of the Partnership, unless the loss shall have been the result of the
General Partner’s breach of the provisions of this Agreement, fraud, gross
negligence, willful misconduct, or breach of fiduciary duty.  The General
Partner shall incur no liability to the Partnership or to any of the Partners as
a result of engaging in any other business or venture.

 

10.8                           Other Businesses or Ventures.  Except as provided
in Section 7.6, each of the Partners, or any Affiliate, manager, officer, agent,
or employee of any Partner, may engage in and possess any interest in other
businesses or ventures of every nature and description, independently or with
other Persons and neither the Partnership nor any of the Partners shall have any
rights, by virtue of this Agreement or otherwise, in and to such businesses or
ventures or the income or profits derived therefrom, or any rights, duties, or
obligations in respect thereof.  Subject to Sections 7.6 and 15.1 of this
Agreement, each of the Partners acknowledges and agrees that each of the
Partners will use information and know-how obtained by participating in this
Partnership in other businesses and ventures, including the development and
operation of other LNG receiving and regasification facilities. The Partners
will have access to and copies of third-party research and reports, documents
and agreements and other work product produced for the Partnership in connection
with the Project and each of the Partners may use such information other
businesses and ventures, including the development and operation of other LNG
receiving and regasification facilities.  Any Partner can hire any consultant,
advisor or other third-party including any such party hired by the Partnership
and such party may use the information and know-how developed for the
Partnership in connection with the work on other projects or ventures of such
Partner or its Affiliates.

 

10.9                           Affiliate Transactions.  Subject to the approval
pursuant to Section 10.2, if applicable, the Partnership may enter into any
contract, obligation or other commitment to which an Affiliate or any Partner
is, or is to be, a party (an “Affiliate Transaction”).

 

10.10                     Removal of Freeport GP as General Partner.  Freeport
GP may be removed as the General Partner of the Partnership by Cheniere or LNG
Investments only upon compliance with the terms and conditions of this
Section 10.10.  Freeport GP may be removed as the General Partner of the
Partnership for (i) the resignation, Bankruptcy or dissolution of Freeport GP or
LNG Investments, (ii) in the event that the General Partner or Michael S. Smith
commit fraud or misappropriate funds of the Partnership, (iii) Michael S. Smith
is convicted of a felony that has a Material Adverse Effect on the Business,
(iv) LNG Investments’ Percentage Interest is reduced below ten percent (10%) and
Cheniere maintains a Percentage Interest of at least ten percent (10%) or (v)
Freeport GP materially breaches a material provision of this Agreement (each a
“Removal Event”).  Upon a Removal Event, Cheniere may exercise its right to
remove Freeport GP as the General Partner by giving notice (“Removal Notice”) to
Freeport GP and LNG Investments of the Removal Event, including within such
Removal Notice the particulars of the Removal Event in reasonable detail;
provided, however if the Removal Event results from a breach of a material term
or provision of this Agreement by LNG Investments or Freeport GP, Cheniere shall
be required to give notice of the existence of such a breach and if during the
period of thirty (30) days following such notice, Freeport GP or LNG Investments
cure such breach Cheniere will not be able to remove Freeport GP as the General
Partner as a result of such Removal Event.  If Cheniere exercises its right to
remove Freeport GP as the General Partner, Cheniere shall admit a new general
partner as a Partner of the Partnership with such portion of Cheniere’s Interest
as Cheniere shall determine in its sole discretion.  Each of

 

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Freeport GP and LNG Investments hereby irrevocably make, constitute, and appoint
Cheniere or its successor in interest with full power of substitution, true and
lawful attorney-in-fact, for it and in its name, place and stead, to make,
execute, sign, acknowledge, swear to, deliver, record and file any document or
instrument that may be considered necessary or desirable by Cheniere to convert
Freeport GP to a limited partner and admit a new general partner to the
Partnership pursuant to this Section 10.10.  The foregoing special power of
attorney shall be one which is a special power of attorney coupled with an
interest, is irrevocable, and shall survive the legal incapacity of Freeport GP
or LNG Investments.  Notwithstanding the preceding provisions of this
Section 10.10, Cheniere shall not exercise its rights under the grant of the
above special power of attorney unless a Removal Event has occurred and Cheniere
has requested by notice to Freeport GP or LNG Investments that Freeport GP or
LNG Investments take the action which Cheniere proposes to take by the exercise
of the power of attorney and Freeport GP or LNG Investments fails to take such
action within three (3) days of such notice.  The removal of Freeport GP as
General Partner shall not in any way affect, modify or limit LNG Investments’
right to approve Major Decisions pursuant to Section 10.2 unless it has lost its
approval and consent rights pursuant to the provisions of Section 3.5. 
Notwithstanding the foregoing provisions of this Section 10.10, LNG Investments
or Freeport GP may contest whether or not a Removal Event has occurred by notice
to Cheniere but only if the Removal Event as described in the Removal Notice
results from the breach of a material term or provision of this Agreement by
Freeport GP.  If LNG Investments or Freeport GP contests whether such Removal
Event has occurred the matter shall be submitted to arbitration pursuant to
ARTICLE XXI and Freeport GP shall not be removed as General Partner unless and
until the arbitrators find that such Removal Event has occurred.

 

10.11                     Officers and Employees.

 

(A) THE GENERAL PARTNER MAY, FROM TIME TO TIME, DESIGNATE ONE OR MORE PERSONS TO
BE OFFICERS OF THE PARTNERSHIP. ANY OFFICERS SO DESIGNATED SHALL HAVE SUCH
AUTHORITY AND PERFORM SUCH DUTIES AS THE GENERAL PARTNER MAY, FROM TIME TO TIME,
DELEGATE TO THEM.  THE GENERAL PARTNER MAY ASSIGN TITLES TO PARTICULAR OFFICERS.
UNLESS THE GENERAL PARTNER DECIDES OTHERWISE, IF THE TITLE IS ONE COMMONLY USED
FOR OFFICERS OF A BUSINESS CORPORATION FORMED UNDER THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE, THE ASSIGNMENT OF SUCH TITLE SHALL CONSTITUTE THE
DELEGATION TO SUCH OFFICER OF THE AUTHORITY AND DUTIES THAT NORMALLY ARE
ASSOCIATED WITH THAT OFFICE, SUBJECT TO (I) ANY SPECIFIC DELEGATION OF AUTHORITY
AND DUTIES MADE TO SUCH OFFICER BY THE GENERAL PARTNER, (II) ALL STANDARDS OF
CARE AND RESTRICTIONS APPLICABLE TO THE GENERAL PARTNER HEREUNDER, AND (III) THE
GENERAL DIRECTION AND CONTROL OF THE GENERAL PARTNER. THE OFFICERS SHALL HOLD
OFFICE UNTIL THEIR SUCCESSORS SHALL BE DULY DESIGNATED AND SHALL QUALIFY, UNTIL
THEIR DEATH, OR UNTIL THEY SHALL RESIGN OR SHALL HAVE BEEN REMOVED IN THE MANNER
HEREINAFTER PROVIDED. ANY NUMBER OF OFFICES MAY BE HELD BY THE SAME PERSON. 
REASONABLE SALARIES SHALL BE PAID TO OFFICERS OF THE PARTNERSHIP FOR THEIR
SERVICES AS OFFICERS AS DETERMINED BY THE GENERAL PARTNER.

 

(B) ANY OFFICER MAY RESIGN AS SUCH AT ANY TIME. SUCH RESIGNATION SHALL BE MADE
IN WRITING AND SHALL TAKE EFFECT AT THE TIME SPECIFIED THEREIN, OR IF NO TIME BE
SPECIFIED, AT THE TIME OF ITS RECEIPT BY THE GENERAL PARTNER. THE ACCEPTANCE OF
A RESIGNATION SHALL NOT BE NECESSARY TO MAKE IT EFFECTIVE, UNLESS EXPRESSLY SO
PROVIDED IN THE RESIGNATION. ANY OFFICER MAY BE REMOVED AS SUCH, EITHER WITH OR
WITHOUT CAUSE, BY THE GENERAL PARTNER WHENEVER IN ITS JUDGMENT THE BEST
INTERESTS OF THE PARTNERSHIP WILL BE SERVED THEREBY; PROVIDED, HOWEVER, THAT
SUCH REMOVAL SHALL BE WITHOUT PREJUDICE TO THE CONTRACT RIGHTS, IF ANY, OF THE
PERSON SO REMOVED. ANY VACANCY OCCURRING IN ANY OFFICE OF THE PARTNERSHIP MAY BE
FILLED BY THE GENERAL PARTNER.

 

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(C) THE GENERAL PARTNER SHALL BE ENTITLED IN ITS SOLE DISCRETION TO HIRE
EMPLOYEES, INCLUDING OFFICERS, AS IT DEEMS NECESSARY (INCLUDING ANY OFFICERS,
MEMBERS OR MANAGERS OF THE GENERAL PARTNER) AND TO PAY SUCH EMPLOYEES AS THE
GENERAL PARTNER DEEMS FIT, IN ITS SOLE DISCRETION.

 

(D) NO OFFICER OF THE PARTNERSHIP SHALL HAVE ANY LIABILITY TO THE PARTNERSHIP OR
THE PARTNERS FOR ANY LOSSES SUSTAINED OR LIABILITIES INCURRED AS A RESULT OF ANY
ACT OR OMISSION OF SUCH OFFICER IF (I) THE OFFICER ACTED IN GOOD FAITH AND IN A
MANNER HE OR SHE REASONABLY BELIEVED TO BE IN, OR NOT OPPOSED TO, THE INTERESTS
OF THE PARTNERSHIP AND (II) THE CONDUCT OF THE OFFICER DID NOT CONSTITUTE ACTUAL
FRAUD, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT.

 

ARTICLE XI
ADVISORY COMMITTEE

 

11.1                           Formation of Advisory Committee.  The General
Partner shall form an advisory committee (the “Advisory Committee”) consisting
of representatives (as specified below) of the Limited Partners to advise the
General Partner on such matters about which the General Partner may, in its sole
and absolute discretion, elect to consult with the Advisory Committee.  The
General Partner may select up to four representatives to serve on the Advisory
Committee and Cheniere may select one representative to serve on the Advisory
Committee.  The functions of the Advisory Committee shall be to consult with the
General Partner on such other matters as may be requested by the General
Partner.  The Advisory Committee shall meet as often as necessary to fulfill its
duties hereunder; provided that the Advisory Committee shall not be required to
meet more than once in any calendar quarter.  Meetings of the Advisory Committee
may be conducted in person, telephonically or through use of other
communications equipment by means of which all persons participating in the
meeting can communicate with each other.

 

11.2                           Role of Advisory Committee.  The recommendations
of the Advisory Committee, if any, shall be advisory only and shall not obligate
the General Partner to act in accordance therewith.  The Advisory Committee will
not have any responsibility for the management of the Partnership or its
investments.

 

11.3                           No Liability.  Neither the General Partner nor
any Affiliate of the General Partner shall have any liability to the
Partnership, the Partners, or any other Person arising out of (a) the failure of
the General Partner to consult with the Advisory Committee at any time or on any
matters or (b) the failure of the General Partner to follow the recommendation
of one or more Advisory Committee members; provided that this Section 11.3 shall
not supersede the requirements to obtain any consent or approval of the Advisory
Committee as expressly set forth herein.

 

11.4                           Resignation.  Any member of the Advisory
Committee may resign at any time upon written notice to the General Partner.

 

11.5                           Reimbursement.  The Partnership shall pay
compensation to the Advisory Committee members as determined by the General
Partner and reimburse the Advisory Committee members for all reasonable
out-of-pocket expenses incurred by the Advisory Committee members in acting
pursuant to this Article XI.

 

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ARTICLE XII
COVENANTS

 

12.1                           Covenants of the Partnership and the Partners. 
The Partnership and each Partner hereby covenant as follows:

 

(A) EACH OF THE PARTNERSHIP AND EACH PARTNER SHALL COMPLY WITH ALL OF ITS
OBLIGATIONS UNDER THIS AGREEMENT.

 

(B) EACH OF THE PARTNERSHIP AND THE GENERAL PARTNER SHALL AT ALL TIMES REMAIN IN
COMPLIANCE WITH THE PROVISIONS OF SECTION 12.2 HEREOF.

 

(C) THE PARTNERSHIP AND THE GENERAL PARTNER SHALL KEEP PROPER BOOKS OF RECORDS
AND ACCOUNTS IN WHICH FULL, TRUE AND CORRECT ENTRIES SHALL BE MADE OF ALL
DEALINGS AND TRANSACTIONS IN RELATION TO ITS RESPECTIVE BUSINESS AND ACTIVITIES.

 

(D) EACH OTHER PARTNER AGREES THAT IT SHALL NOT FILE OR CAUSE TO BE FILED ANY
PETITION OR OTHER PROCEEDINGS BY OR AGAINST THE PARTNERSHIP OR THE GENERAL
PARTNER THAT WOULD BECOME THE SUBJECT OF BANKRUPTCY, INSOLVENCY OR OTHER SIMILAR
PROCEEDINGS OR CAUSE ANY OTHER BANKRUPTCY ACTION, NOR SHALL IT CONSENT TO OR
ACQUIESCE IN ANY SUCH FILING OR OTHER PROCEEDINGS OR BANKRUPTCY ACTION, EXCEPT
IN EACH CASE A BANKRUPTCY ACTION THAT HAS BEEN APPROVED ALL OF THE PARTNERS AND
BY ALL OF THE MANAGERS OF THE GENERAL PARTNER PURSUANT TO SECTION 10.2(C).

 

(E) THE GENERAL PARTNER SHALL NOT CAUSE THE PARTNERSHIP TO ELECT TO BE TAXED AS
A CORPORATION FOR FEDERAL INCOME TAX PURPOSES.

 

12.2                           Separateness Covenants of the Partnership and the
General Partner.  Each of the Partnership and the General Partner covenant that:

 

(A) SUBJECT TO SECTION 16.2, THE PARTNERSHIP AND THE GENERAL PARTNER EACH SHALL
PRESERVE, RENEW AND KEEP IN FULL FORCE AND EFFECT ITS EXISTENCE (EXCEPT, IN THE
CASE OF THE PARTNERSHIP, IN CONNECTION WITH A DISSOLUTION REQUIRED BY THIS
AGREEMENT) AND SHALL TAKE ALL REASONABLE ACTION TO MAINTAIN ALL MATERIAL RIGHTS,
PRIVILEGES AND FRANCHISES NECESSARY OR DESIRABLE IN THE NORMAL CONDUCT OF ITS
BUSINESS, AND SHALL COMPLY WITH ALL REQUIREMENTS OF LAW.

 

(B) EACH OF THE PARTNERSHIP AND THE GENERAL PARTNER SHALL CONTINUE TO ENGAGE IN
BUSINESS OF THE SAME GENERAL TYPE AS NOW CONDUCTED BY IT AND PRESERVE, RENEW AND
KEEP IN FULL FORCE AND EFFECT THEIR PARTNERSHIP OR CORPORATE EXISTENCE, AS THE
CASE MAY BE, AND TAKE ALL REASONABLE ACTION TO MAINTAIN ALL MATERIAL RIGHTS,
PRIVILEGES AND FRANCHISES NECESSARY OR DESIRABLE IN THE NORMAL CONDUCT OF ITS
BUSINESS; COMPLY WITH ALL REQUIREMENTS OF LAW EXCEPT TO THE EXTENT THAT FAILURE
TO COMPLY THEREWITH COULD NOT, IN THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE
A MATERIAL ADVERSE EFFECT.

 

(C) IT WILL (I) MAINTAIN AND PREPARE FINANCIAL REPORTS, FINANCIAL STATEMENTS,
BOOKS AND RECORDS AND BANK ACCOUNTS SEPARATE FROM THOSE OF ITS AFFILIATES, ANY
CONSTITUENT PARTY AND ANY OTHER PERSON AND MAINTAIN ITS BOOKS, RECORDS,
RESOLUTIONS AND AGREEMENTS AS OFFICIAL RECORDS, (II) WILL NOT PERMIT ANY
AFFILIATE OR CONSTITUENT PARTY INDEPENDENT ACCESS TO ITS BANK ACCOUNTS, AND
(III) UNLESS OTHERWISE REQUIRED UNDER THE INTERNAL REVENUE CODE, WILL FILE ITS
OWN TAX RETURNS.

 

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(D) IT WILL NOT COMMINGLE THE FUNDS AND OTHER ASSETS OF THE PARTNERSHIP WITH
THOSE OF ANY AFFILIATE OR CONSTITUENT PARTY, OR ANY OTHER PERSON, AND SHALL HOLD
ITS ASSETS IN ITS OWN NAME.

 

(E) IT SHALL CONDUCT ITS OWN BUSINESS IN ITS OWN NAME.

 

(F) IT IS AND WILL REMAIN SOLVENT AND SHALL PAY ITS DEBTS AND LIABILITIES
(INCLUDING EMPLOYMENT AND OVERHEAD EXPENSES) FROM ITS ASSETS AS THE SAME SHALL
BECOME DUE.

 

(G) IT HAS DONE OR CAUSED TO BE DONE AND SHALL DO ALL THINGS NECESSARY TO
OBSERVE PARTNERSHIP OR CORPORATE FORMALITIES, AS APPLICABLE, AND PRESERVE ITS
EXISTENCE, AND IT SHALL NOT, NOR WILL IT PERMIT ANY CONSTITUENT PARTY TO, AMEND,
MODIFY OR OTHERWISE CHANGE THE CERTIFICATE OF LIMITED PARTNERSHIP, THIS
AGREEMENT, THE CERTIFICATE OF INCORPORATION OR BYLAWS, OR THE PARTNERSHIP
AGREEMENT OR OTHER ORGANIZATIONAL DOCUMENTS OF THE PARTNERSHIP OR THE GENERAL
PARTNER, AS APPLICABLE, OR SUCH CONSTITUENT PARTY IN A MANNER CONTRARY TO THE
PROVISIONS OF THIS SECTION 12.2.

 

(H) IT SHALL PAY THE SALARIES OF ITS OWN EMPLOYEES AND MAINTAIN A SUFFICIENT
NUMBER OF EMPLOYEES IN LIGHT OF ITS CONTEMPLATED BUSINESS OPERATIONS.

 

(I) IT SHALL COMPENSATE EACH OF ITS CONSULTANTS AND AGENTS FROM ITS OWN FUNDS
FOR SERVICES PROVIDED TO IT AND PAY FROM ITS OWN ASSETS ALL OBLIGATIONS OF ANY
KIND INCURRED.

 

(J) IT DOES NOT AND SHALL NOT GUARANTEE, BECOME OBLIGATED FOR, OR HOLD ITSELF OR
ITS CREDIT OUT TO BE RESPONSIBLE FOR, THE DEBTS OR OBLIGATIONS OF ANY OTHER
PERSON OR THE DECISIONS OR ACTIONS RESPECTING THE DAILY BUSINESS OR AFFAIRS OF
ANY OTHER PERSON.

 

(K) IT SHALL NOT CAUSE OR PERMIT THE PARTNERSHIP TO ACQUIRE OBLIGATIONS OR
SECURITIES OF ANY AFFILIATE, ANY OF THE PARTNERS OR ANY OF THE MEMBERS OF THE
GENERAL PARTNER. IT SHALL NOT BUY OR HOLD ANY EVIDENCE OF INDEBTEDNESS ISSUED BY
ANY OTHER PERSON, OTHER THAN CASH AND INVESTMENT-GRADE SECURITIES.

 

(L) SUBJECT TO THE APPROVAL PURSUANT TO SECTION 10.2, IF APPLICABLE, IT WILL
ALLOCATE FAIRLY AND REASONABLY THE COST OF (I) ANY OVERHEAD FOR ANY OFFICE SPACE
SHARED WITH ANY PARTNER OR WITH ANY AFFILIATE OF ANY PARTNER, AND (II) ANY
SERVICES (SUCH AS ASSET MANAGEMENT, LEGAL AND ACCOUNTING) THAT ARE PROVIDED
JOINTLY TO THE PARTNERSHIP AND ONE OR MORE AFFILIATES.

 

(M) IT WILL MAINTAIN AND UTILIZE SEPARATE STATIONERY, INVOICES AND CHECKS AND
ALLOCATE SEPARATE OFFICE SPACE (WHICH MAY BE A SEPARATELY IDENTIFIED AREA IN
OFFICE SPACE SHARED WITH ONE OR MORE AFFILIATES) AND MAINTAIN A SEPARATE SIGN IN
THE OFFICE DIRECTORY OF THE BUILDING IN WHICH IT IS LOCATED.

 

(N) IT WILL BE, AND AT ALL TIMES WILL HOLD ITSELF OUT TO THE PUBLIC AS, A LEGAL
ENTITY SEPARATE AND DISTINCT FROM ANY OTHER PERSON. IN THE EVENT THAT THE
PARTNERSHIP OR THE GENERAL PARTNER KNOWS OF ANY MISUNDERSTANDING REGARDING THE
SEPARATE IDENTITY OF THE PARTNERSHIP OR THE GENERAL PARTNER, THE PARTNERSHIP OR
THE GENERAL PARTNER SHALL CORRECT SUCH MISUNDERSTANDING.

 

(O) IT SHALL NOT IDENTIFY ITSELF OR ANY OF ITS AFFILIATES AS A DIVISION OR PART
OF ANY OTHER PERSON.

 

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(P) IT WILL MAINTAIN ADEQUATE CAPITAL FOR THE NORMAL OBLIGATIONS REASONABLY
FORESEEABLE IN A BUSINESS OF ITS SIZE AND CHARACTER AND IN LIGHT OF ITS
CONTEMPLATED BUSINESS OPERATIONS.

 

(Q) IT HAS AND SHALL MAINTAIN ITS ASSETS IN SUCH A MANNER THAT IT WILL NOT BE
COSTLY OR DIFFICULT TO SEGREGATE, ASCERTAIN OR IDENTIFY ITS INDIVIDUAL ASSETS
FROM THOSE OF ANY AFFILIATE OR CONSTITUENT PARTY, OR ANY OTHER PERSON.

 

(R) THE GENERAL PARTNER AND LNG INVESTMENTS INTEND TO PROCEED WITH THE
DEVELOPMENT AND COMPLETION OF THE PROJECT IN A TIMELY AND EXPEDITIOUS MANNER.
THE GENERAL PARTNER AND LNG INVESTMENTS WILL USE COMMERCIALLY REASONABLE
EFFORTS, INCLUDING CONTRIBUTING UP TO $9,000,000 IN ADDITIONAL CONTRIBUTED
EQUITY IN ACCORDANCE WITH SECTION 3.4(A), TO OBTAIN PROJECT APPROVAL.

 

(S) CAPACITY USE.  IN THE EVENT THE LNG REGASIFICATION AND RECEIVING TERMINAL
OPERATED BY THE PARTNERSHIP HAS EXCESS CAPACITY THAT IS MADE AVAILABLE TO ANY
PARTNER OR ANY AFFILIATE OF ANY PARTNER, SUCH CAPACITY WILL BE MADE AVAILABLE TO
ALL PARTNERS ON THE SAME TERMS AND PRICE PRO RATA BASED UPON THEIR PERCENTAGE
INTEREST.

 

(T) RESERVED.

 

(U) THE PARTNERSHIP AND THE GENERAL PARTNER WILL CONDUCT AN OPERATIONAL MEETING
EACH MONTH ON A DATE MUTUALLY ACCEPTABLE TO CHENIERE AND LNG INVESTMENTS AT SUCH
PLACE AS MAY BE AGREED TO BY THE GENERAL PARTNER, CHENIERE AND LNG INVESTMENTS
TO REVIEW THE PARTNERSHIP’S MARKETING, FINANCING, REGULATORY AND DEVELOPMENTAL
ACTIVITIES, INCLUDING PROVIDING A REPORT ON MARKETING DEVELOPMENTS, FINANCING
DEVELOPMENTS, REGULATORY OR GOVERNMENTAL APPROVAL DEVELOPMENTS, AND AN UPDATE ON
ENGINEERING AND OTHER TECHNICAL DEVELOPMENTS.  EACH LIMITED PARTNER SHALL BE
ENTITLED TO VISIT THE PARTNERSHIP’S PRINCIPAL PLACE OF BUSINESS DURING NORMAL
BUSINESS HOURS WITH REASONABLE NOTICE TO MEET WITH AND QUESTION OFFICERS AND
EMPLOYEES OF THE PARTNERSHIP AND THE GENERAL PARTNER AND TO INSPECT THE
PARTNERSHIP’S BOOKS, RECORDS AND ANY THIRD-PARTY AGREEMENTS.

 

ARTICLE XIII
RECORDS AND REPORTS

 

13.1                           Maintenance and Inspection of Partner Register. 
The Partnership shall maintain at its principal place of business a record of
its Partners, giving the names and addresses of all Partners and the Percentage
Interest held by each Partner. Subject to such reasonable standards (including
standards governing what information and documents are to be furnished and at
whose expense) as may be established by the General Partner from time to time,
each Partner has the right to obtain from the Partnership from time to time,
upon reasonable demand for any purpose reasonably related to the Partner’s
interest as a Partner of the Partnership, a record of the Partnership’s
Partners.

 

13.2                           Maintenance and Inspection of Partnership
Agreement.  The Partnership shall keep at its principal place of business the
original or a copy of this Agreement as amended to date, which shall be open to
inspection by the Partners at all reasonable times during office hours.

 

13.3                           Maintenance and Inspection of Other Records.  The
accounting books and records, minutes of proceedings of the Partners and the
General Partner and any committees or

 

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delegates of the General Partner, and all other information pertaining to the
Partnership that is required to be made available to the Partners under the Act
shall be kept at such place or places designated by the General Partner or in
the absence of such designation, at the principal place of business of the
Partnership. The minutes shall be kept in written form and the accounting books
and records and other information shall be kept either in written form or in any
other form capable of being converted into written form. The books of account
and records of the Partnership shall be maintained in accordance with GAAP
consistently applied during the term of the Partnership, wherein all
transactions, matters, and things relating to the business and properties of the
Partnership shall be currently entered.  Minutes, accounting books and records,
and other information shall be open to inspection upon the written demand of any
Partner at any reasonable time during usual business hours for a purpose
reasonably related to the Partner’s interests as a Partner. Any such inspection
shall be made in person or by in agent or attorney and shall include the right
to copy and make extracts at the expense of the Partnership.

 

ARTICLE XIV
BOOKS, FINANCIALS AND TAX MATTERS

 

14.1                           Books and Records.  The Partnership shall
maintain at its principal place of business books of account that accurately
record all items of income and expenditure relating to the business of the
Partnership and that accurately and completely disclose the results of the
operations of the Partnership. Such books of account shall be maintained
according to GAAP consistently applied and on the basis of the Fiscal Year. 
Each Partner shall have the right to inspect and copy, at the Partnership
expense, the Partnership’s books and records at any time during normal business
hours without notice to any other Partner.  A general accounting and audit shall
be taken by the Partnership Accountant for each Fiscal Year, at the expense of
the Partnership.  The audit shall be conducted in accordance with generally
accepted auditing standards.

 

14.2                           Financial Reports. The Partnership will furnish
to the Partners a balance sheet as of February 28, 2003 on or before April 30,
2003.  The Partnership will furnish to the Partners (a) within thirty (30) days
after the close of each calendar quarter quarterly unaudited financial
statements of this Partnership, (b) within sixty (60) days after the close of
each calendar year, audited annual financial statements of this Partnership ((a)
and (b) collectively referred to herein as the “Financial Statements”), and (c)
annual budgets for the Partnership and updates to such budgets as necessary to
provide reasonably accurate information but not less frequently than annually
which budgets shall include a description of the anticipated sources of funds
including a description of the anticipated amount and timing of any Additional
Contributed Equity to be called by the General Partners during such Fiscal Year
(the “Budget”); provided, however, that in the event any Partners become subject
to more restrictive filing requirements, including any rules or regulations
adopted by the Securities and Exchange Commission, the Partnership will furnish
the Financial Statements at least 15 days prior to the date of such Partner’s
required filings.

 

14.3                           Tax Returns.  The General Partner shall cause the
Partnership Accountant to prepare all income tax and other tax returns of the
Partnership which shall be presented to Cheniere (together with the calculations
used to determine the Section 704(c) allocations for such returns) for its
approval within 90 days of the end of each Fiscal Year.  After each such tax
return has been approved by Cheniere it shall be filed by the Partnership
Accountant with the appropriate taxing authority.  The General Partner shall
furnish to each Partner a copy of all such filed returns together with all
schedules thereto and such other information which each

 

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Partner may request in connection with such Partner’s own tax affairs.  All such
returns, schedules and information shall be provided to the Partners at the
expense of the Partnership.

 

14.4                           Tax Elections.  The General Partner may elect to
cause or require the Partnership to make the election provided for in I.R.C.
Section 754 for the Fiscal Year that includes the Closing Date and maintain a
record of the adjustments to Basis of Partnership Assets resulting from that
election.  Such election may be made on the federal and, if applicable, the
state and local income tax returns for such Fiscal Year.  All costs incurred by
the Partnership in connection with such election and the maintenance of such
records shall be an expense of the Partnership.

 

14.5                           Tax Matters Partner.  The General Partner is
hereby designated the Tax Matters Partner (as defined in the I.R.C.) on behalf
of the Partnership.

 

(A) WITHOUT THE UNANIMOUS CONSENT OF THE PARTNERS, THE TAX MATTERS PARTNER SHALL
HAVE NO RIGHT TO EXTEND THE STATUTE OF LIMITATIONS FOR ASSESSING OR COMPUTING
ANY TAX LIABILITY AGAINST THE PARTNERSHIP OR THE AMOUNT OF ANY PARTNERSHIP TAX
ITEM.

 

(B) THE TAX MATTERS PARTNER MAY FILE A PETITION FOR READJUSTMENT OF ANY
PARTNERSHIP TAX ITEM (IN ACCORDANCE WITH I.R.C. SECTION 6226(A)) IN THE UNITED
STATES TAX COURT IF THE PARTNERS UNANIMOUSLY AGREE TO FILE SUCH PETITION.

 

(C) THE TAX MATTERS PARTNER SHALL, WITHIN TEN (10) BUSINESS DAYS OF RECEIPT
THEREOF, FORWARD TO EACH PARTNER A PHOTOCOPY OF ANY CORRESPONDENCE RELATING TO
THE PARTNERSHIP RECEIVED FROM THE INTERNAL REVENUE SERVICE. THE TAX MATTERS
PARTNER SHALL, WITHIN TEN (10) BUSINESS DAYS THEREOF, ADVISE EACH PARTNER IN
WRITING OF THE SUBSTANCE OF ANY CONVERSATION HELD WITH ANY REPRESENTATIVE OF THE
INTERNAL REVENUE SERVICE.

 

(D) ANY REASONABLE COSTS INCURRED BY THE TAX MATTERS PARTNER FOR RETAINING
ACCOUNTANTS AND/OR LAWYERS ON BEHALF OF THE PARTNERSHIP IN CONNECTION WITH ANY
INTERNAL REVENUE SERVICE AUDIT OF THE PARTNERSHIP SHALL BE EXPENSES OF THE
PARTNERSHIP. ANY ACCOUNTANTS AND/OR LAWYERS RETAINED BY THE PARTNERSHIP IN
CONNECTION WITH ANY INTERNAL REVENUE SERVICE AUDIT OF THE PARTNERSHIP SHALL BE
SELECTED BY THE TAX MATTER PARTNER WITH THE REASONABLE APPROVAL OF CHENIERE.

 

(E) NOTWITHSTANDING THE PRECEDING PROVISIONS OF THIS SECTION 13.6, NO ACTION
SHALL BE TAKEN BY THE GENERAL PARTNER IN ITS CAPACITY AS TAX MATTERS PARTNER
WHICH MAY AFFECT THE TAX LIABILITY OF CHENIERE WITHOUT THE APPROVAL OF CHENIERE.

 

14.6                           The Partnership Accountant.  The Partnership
shall retain an independent certified public accountant determined by the
General Partner as the regular accountant and auditor for the Partnership
(“Partnership Accountant”) or any other nationally-recognized independent
accounting firm designated by the General Partner and approved by Cheniere.  The
fees and expenses of the Partnership Accountant shall be a Partnership expense.

 

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ARTICLE XV
NONDISCLOSURE OF INFORMATION

 

15.1                           CONFIDENTIALITY.

 

(A) SUBJECT TO SECTION 15.1(B), ALL DISCLOSURES OF TRADE SECRETS, KNOW-HOW,
FINANCIAL INFORMATION OR OTHER CONFIDENTIAL INFORMATION MADE BY THE PARTNERSHIP
TO ANY PARTNER OR MADE BY ANY PARTNER UNDER OR IN CONNECTION WITH THIS
AGREEMENT, SHALL BE RECEIVED AND MAINTAINED IN CONFIDENCE BY THE RECIPIENT
DURING THE TERM HEREOF AND FOR THREE (3) YEARS AFTER DISSOLUTION OF THE
PARTNERSHIP AND EACH PARTNER SHALL TREAT ALL SUCH TRADE SECRETS, KNOW-HOW,
FINANCIAL INFORMATION OR OTHER CONFIDENTIAL INFORMATION AS CONFIDENTIAL EXCEPT:

 

(I)                                     AS TO THE PERSONS DIRECTLY RESPONSIBLE
FOR THE PERFORMANCE OF THE OBLIGATIONS OF THIS AGREEMENT AND FOR THE EFFECTIVE
OPERATION OF THE PARTNERSHIP;

 

(II)                                  AS TO THE PROFESSIONAL ADVISORS OF THE
PARTNERS AND THE PARTNERSHIP;

 

(III)                               AS TO SUCH DISCLOSURES TO CUSTOMERS OF THE
PARTNERSHIP AS ARE NECESSARY FOR THE EFFECTIVE CARRYING ON OF BUSINESS BY THE
PARTNERSHIP;

 

(IV)                              AS TO SUCH INFORMATION AS IS REQUIRED BY LAW
TO BE DISCLOSED BY THE PARTNERS OR THE PARTNERSHIP, INCLUDING, WITHOUT
LIMITATION, DISCLOSURES BY CHENIERE TO COMPLY WITH SECURITIES AND EXCHANGE
COMMISSION FILING REQUIREMENTS, AFTER PROVIDING FREEPORT GP PRIOR WRITTEN NOTICE
OF THE FORM AND CONTENT OF SUCH DISCLOSURE AND PROVIDING FREEPORT GP A
REASONABLE OPPORTUNITY TO COMMENT ON SUCH DISCLOSURE; AND

 

(V)                                 AS TO SUCH INFORMATION AS IS OR MAY FALL
WITHIN THE PUBLIC DOMAIN OTHERWISE THAN IN VIOLATION OF THE PROVISIONS OF THIS
SECTION 15.1.

 

(B) EACH PARTNER SHALL HAVE ACCESS TO CONFIDENTIAL INFORMATION, KNOW-HOW AND
WORK PRODUCT (INCLUDING THIRD-PARTY REPORTS AND AGREEMENTS) PRODUCED IN
CONNECTION WITH THE PROJECT.  EACH OF THE PARTNERS AND EACH OF THEIR RESPECTIVE
AFFILIATES IS ENTITLED TO USE ANY CONFIDENTIAL INFORMATION, INCLUDING ANY
KNOW-HOW AND THIRD-PARTY REPORTS, DOCUMENTS, AGREEMENTS OR WORK PRODUCTS, IN
CONNECTION WITH THE DEVELOPMENT OR OPERATION OF ANY OTHER BUSINESS OR VENTURE,
INCLUDING THE FUNDING THEREOF.  EACH PARTNER AND THEIR RESPECTIVE AFFILIATES MAY
HIRE ANY THIRD-PARTY CONSULTANT, ADVISOR, COUNSEL OR OTHER SERVICE PROVIDER
EMPLOYED BY THE PARTNERSHIP AND SUCH PARTY MAY USE ANY WORK-PRODUCT OR KNOW-HOW
DEVELOPED ON BEHALF OF THE PARTNERSHIP IN PROVIDING SERVICES TO SUCH PARTNER OR
ITS AFFILIATES.

 

15.2                           Duty of Care.  Each Partner will take such steps
as lie within its power to assure that all employees of the Partnership, to whom
confidential information is disclosed, take all proper precautions to prevent
the unauthorized disclosure and use of the confidential information referenced
in Section 15.1.

 

ARTICLE XVI
TRANSFERABILITY

 

16.1                           TRANSFERABILITY OF INTERESTS.

 

(a)  Subject to the prior written consent of the General Partner, which consent
shall not be withheld or delayed unless the General Partner determines, in its
reasonable discretion, that such transfer would have a Material Adverse Effect
on the Partnership or the Business, each of the Limited Partners may transfer
all or any part of its Interest in the Partnership (including the transfer of
any rights to receive or share in profits, losses, income, distributions or the
return of contributions); provided, that such transferring Limited Partner gives

 

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written notice (including the name and address of the proposed purchaser,
transferee, or assignee and the date of such transfer) to the Partnership and
the non-transferring Partners.

 

(b)  Notwithstanding Section 16.1(a), in the event that LNG Investments desires
to transfer any portion of its Interest in one transaction or in a series of
related transactions in which all (but no less than all) of the General
Partner’s Interest or the outstanding capital stock of the General Partner is
being sold or transferred, LNG Investments shall deliver a written notice to
Cheniere specifying the identity of the prospective transferee(s) and disclosing
in reasonable detail the price, the type of consideration and other terms and
conditions of the proposed transfer.  Cheniere may elect to participate in the
proposed transfer by delivering a notice to LNG Investments and the proposed
transferee(s) within fifteen (15) days of the date of the notice from LNG
Investments.  If Cheniere elects to participate in such transfer, Cheniere will
be entitled to sell in such proposed transfer, at the same price and on the same
terms as LNG Investments, a portion of its Interest equal to the product of (x)
the quotient determined by dividing the Interest then held by Cheniere by the
aggregate Interest then held by LNG Investments multiplied by (y) the aggregate
Interest to be sold in such proposed transfer.

 

16.2                           Withdrawal by LNG Investments and Freeport GP. 
Notwithstanding anything to the contrary contained in this Agreement, LNG
Investments and Freeport GP may withdraw from the Partnership without the
consent of any other Partner at any time; provided, that LNG Investments and
Freeport GP comply with the following: (a) LNG Investments and Freeport GP take
all action reasonably requested by Cheniere to transfer their respective
Interests to Cheniere or any entity or entities designated by Cheniere, or
alternatively, take any action reasonably requested by Cheniere to permit the
cancellation of their Interests by the Partnership; and (b) LNG Investments pays
to Cheniere an amount equal to the positive difference, if any, between (i) 
$4,000,000, plus (A) the amount of any Affiliate Payment and (B) the Returned
Amount, and (ii) all amounts actually contributed to the Partnership by LNG
Investments (including any transferees and assignees of any portion of LNG
Investments’ Interest) pursuant to Section 3.4(a) and the LNG Investments
Expenses (the “Withdrawal Payment”); provided, however, that such transfer or
cancellation of their Interest and Withdrawal Payment shall be conditioned upon
Cheniere executing a release and waiver of all claims against Freeport GP and
LNG Investments in form reasonably acceptable to LNG Investments. 
Notwithstanding the foregoing, if (a) on or before March 31, 2003, LNG
Investments and Freeport GP determine, in their sole discretion, and notifies
Cheniere, in writing that the Partnership should terminate the Lease Agreement
pursuant to Section 2.6 of the Lease Agreement and (b) Cheniere in its sole
discretion does not desire to dissolve the Partnership pursuant to
Section 20.1(a)(2), then LNG Investments shall not terminate the Lease Agreement
and LNG Investments and Freeport GP may withdraw from the Partnership, without
obligation to pay to Cheniere the Withdrawal Payment and, in addition, Cheniere
shall be obligated to reimburse to LNG Investments on the earlier of the date of
the sale of Cheniere’s Gryphon Stock, the date of any sale of all or
substantially all of the assets of Gryphon Exploration Company, or June 15, 2004
an amount equal to all amounts actually contributed to the Partnership by LNG
Investments (including any transferees and assignees of any option of LNG
Investments’ Interest) pursuant to Sections 3.1 and 3.4(a) (the “Reimbursement
Amount”).  Such Reimbursement Amount shall be secured by a first priority
security interest in the Gryphon Exploration Company stock owned by Cheniere or
an Affiliate thereof (the “Gryphon Stock”), which security interest shall be
evidenced by the Amended and Restated Stock Pledge Agreement, dated of even date
herewith, between LNG Investments, Cheniere and Cheniere-Gryphon Management,
Inc. (the “Pledge Agreement”).  In the event LNG Investments and Freeport GP do
not withdraw from the Partnership pursuant to the preceding sentence on or
before March 31, 2003, LNG Investments shall release the Gryphon Stock.  Upon a
withdrawal

 

40

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pursuant to this Section 16.2, LNG Investments shall have no further obligation
to make any contribution to the Partnership, including, without limitation, any
unpaid Additional Contributed Equity amounts arising pursuant to Section 3.4(a)
or amounts contributed pursuant to Section 3.4(b).

 

16.3                           Restrictions on Withdrawal.  Notwithstanding
anything to the contrary contained herein or under the Act, except as set forth
in Section 16.2, no Partners shall have the right to resign from the
Partnership.

 

ARTICLE XVII
SUBSTITUTED PARTNERS

 

Any transferee acquiring the Interest of a Partner as permitted under
Article XVI shall be deemed admitted as a substituted Partner with respect to
the Interest transferred concurrently with the effectiveness of such transfer
(provided that such transferee, unless already a Partner, shall, as a condition
to such admission, execute a counterpart of this Agreement, agreeing thereby to
be bound by all of the terms and conditions hereof), and such substituted
Partner shall be entitled to all of the rights and benefits under this Agreement
of the transferor of such Interest. No purported transfer of any Interest, or
any portion thereof or interest therein, in violation of the terms of this
Agreement (including any transfer occurring by operation of law) shall vest the
purported transferee with any rights, powers, or privileges hereunder, and no
such purported transferee shall be deemed for any purposes as a Partner
hereunder or have any right to vote or consent with respect to Partnership
matters, to inspect Partnership records, to maintain derivative proceedings, to
maintain any action for an accounting or to exercise any other rights of a
Partner hereunder or, under the Act.

 

ARTICLE XVIII
WAIVER OF PARTITION/COVENANT AGAINST RESIGNATION/BREACHES

 

18.1                           Waiver of Partition.  No Partner shall, either
directly or indirectly, take any action to require partition, file a bill for
Partnership accounting or appraisement of the Partnership or of any of its
assets or properties or cause the sale of any Partnership Assets, and
notwithstanding any provisions of applicable law to the contrary, each Partner
(and each of his legal representatives, successors, or assigns) hereby
irrevocably waives any and all rights it may have to maintain any action for
partition or to compel any sale with respect to his Partnership Interest, or
with respect to any assets or properties of the Partnership, except as expressly
provided in this Agreement.

 

18.2                           Covenant Not to Resign or Dissolve. 
Notwithstanding any provision of the Act to the contrary, each Partner hereby
covenants and agrees that the Partners have entered into this Agreement based on
their mutual expectation that all Partners will continue as Partners and carry
out the duties and obligations undertaken by them hereunder and that, except as
otherwise expressly required or permitted hereby, each Partner hereby covenants
and agrees not to (a) take any action to file a certificate of dissolution or
its equivalent with respect to itself, (b) voluntarily take any Bankruptcy
Action, (c) withdraw or attempt to withdraw from the Partnership, (d) exercise
any power under the Act to dissolve the Partnership, (e) transfer all or any
portion of his interest in the Partnership in violation of Article XVI, (f)
petition for judicial dissolution of the Partnership, or (g) demand a return of
such Partner’s contributions or profits (or a bond or other security for the
return of such contributions or profits) except to the extent provided under
this Agreement.

 

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ARTICLE XIX
ADDITIONAL PARTNERS

 

Subject to Section 10.2(c), additional Partners may be admitted to the
Partnership only with the approval of all the Limited Partners and the
Contributed Equity and the Percentage Interest of any additional Partner shall
be as determined by the Limited Partners approving the admission (and the
Percentage Interest of all other Partners shall be adjusted to reflect the
Percentage Interest granted to the additional Partner, pro rata based on
relative Percentage Interests immediately prior to the admission of the
additional Partner).  Any additional Partner shall execute a counterpart of this
Agreement, agreeing thereby to be bound by all of the terms and provisions
hereof; provided that prior to or concurrently with the admission of an
additional Partner, the Partners shall adopt such amendments to this Agreement
as they deem appropriate to cause the provisions hereof that contemplate only
three Partners to be appropriately modified to operate in the context of four or
more Partners.

 

ARTICLE XX
DISSOLUTION

 

20.1                           DISSOLUTION.

 

(A) THE PARTNERSHIP SHALL BE DISSOLVED UPON THE EARLIEST TO OCCUR OF THE
FOLLOWING:

 

(1)                                  all or substantially all of the Partnership
Assets have been sold, taken in condemnation, or otherwise disposed and reduced
to cash;

 

(2)                                  the Partners unanimously elect to dissolve
the Partnership;

 

(3)                                  the occurrence of any other event causing a
dissolution of the Partnership under the Act.

 

(B) IN THE EVENT OF THE OCCURRENCE OF A DISSOLUTION OF THE PARTNERSHIP DUE TO
THE BANKRUPTCY OR DISSOLUTION OF FREEPORT GP, CHENIERE SHALL HAVE THE RIGHT TO
RECONSTITUTE THE PARTNERSHIP FOLLOWING THE CONVERSION OF FREEPORT GP TO A
LIMITED PARTNER AND THE ADMISSION OF A NEW GENERAL PARTNER OF THE PARTNERSHIP
PURSUANT TO SECTION 10.10.  IN THE EVENT CHENIERE HAS ADMITTED A GENERAL PARTNER
TO THE PARTNERSHIP PURSUANT TO SECTION 10.10, CHENIERE SHALL HAVE THE RIGHT TO
RECONSTITUTE THE PARTNERSHIP FOLLOWING THE CONVERSION OF THE ABOVE GENERAL
PARTNER TO A LIMITED PARTNER AND THE ADMISSION OF A NEW GENERAL PARTNER OF THE
PARTNERSHIP.

 

(C) UPON DISSOLUTION OF THE PARTNERSHIP UNLESS IT IS RECONSTITUTED PURSUANT TO
SECTION 20.1(B), THE GENERAL PARTNER, OR SUCH OTHER PERSON AS IS DESIGNATED BY A
MAJORITY OF THE PARTNERS (SUCH PERSON BEING HEREIN REFERRED TO AS THE
“LIQUIDATOR”) SHALL PROCEED TO WIND UP THE BUSINESS AND AFFAIRS OF THE
PARTNERSHIP IN ACCORDANCE WITH THE TERMS HEREOF AND THE REQUIREMENTS OF THE ACT.
A REASONABLE AMOUNT OF TIME SHALL BE ALLOWED FOR THE PERIOD OF WINDING-UP IN
LIGHT OF PREVAILING MARKET CONDITIONS AND SO AS TO AVOID UNDUE LOSS IN
CONNECTION WITH ANY SALE OF PARTNERSHIP ASSETS. THIS AGREEMENT SHALL REMAIN IN
FULL FORCE AND EFFECT DURING THE PERIOD OF WINDING-UP.

 

(D) IN CONNECTION WITH THE WINDING-UP OF THE PARTNERSHIP, BEFORE THE LATER TO
OCCUR AT THE END OF THE FISCAL YEAR OF THE PARTNERSHIP OR THE NINETIETH DAY
AFTER THE LIQUIDATION OF THE PARTNERSHIP WITHIN THE MEANING OF
SECTION 1.704-1(B)(2)(II)(G) OF THE REGULATIONS, THE PROCEEDS FROM THE SALE OF
PARTNERSHIP ASSETS SHALL BE DISTRIBUTED AS FOLLOWS:

 

42

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(1)                                  to creditors, including Partners who are
creditors in satisfaction of liabilities of the Partnership (whether by payment
or the making of reasonable provision for payment thereof); and

 

(2)                                  thereafter to Partners in accordance with
Section 5.4 hereof.

 

(E) IF DISTRIBUTIONS ARE INSUFFICIENT TO RETURN TO ANY PARTNER THE FULL AMOUNT
OF SUCH PARTNER’S CONTRIBUTED EQUITY, SUCH PARTNER SHALL HAVE NO RECOURSE
AGAINST ANY OTHER PARTNER. NO PARTNER SHALL HAVE ANY OBLIGATION TO RESTORE, OR
OTHERWISE PAY TO THE PARTNERSHIP, ANY OTHER PARTNER, OR ANY THIRD PARTY, THE
AMOUNT OF ANY DEFICIT BALANCE IN SUCH PARTNER’S CAPITAL ACCOUNT UPON DISSOLUTION
AND LIQUIDATION. FOLLOWING THE COMPLETION OF THE WINDING-UP OF THE AFFAIRS OF
THE PARTNERSHIP AND THE DISTRIBUTION OF THE PROCEEDS FROM THE SALE OF
PARTNERSHIP ASSETS, THE PARTNERSHIP SHALL BE DEEMED TERMINATED AND THE
LIQUIDATOR SHALL FILE A CERTIFICATE OF CANCELLATION WITH THE SECRETARY OF STATE
OF THE STATE OF DELAWARE AS REQUIRED BY THE ACT.

 

20.2                           Deemed Liquidation.  If no dissolution event has
occurred, but the Partnership is deemed liquidated for federal income tax
purposes within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations,
as a result of a Partnership termination, as defined in I.R.C.
Section 708(b)(1)(B), such termination will be treated in accordance with
Section 1.708-1(b)(1)(iv) of the Regulations.

 

20.3                           Bankruptcy, etc., of a Limited Partner.  No event
with respect to a Limited Partner, including the death, withdrawal, termination
(in the case of a Limited Partner that is a partnership), dissolution (in the
case of a Limited Partner that is a corporation), retirement or adjudication as
a bankrupt of a Limited Partner, shall dissolve the Partnership, but the rights
of such Limited Partner to share in the profits and losses of the Partnership
and to receive distributions of the Partnership funds shall, upon the happening
of such an event, pass to the Limited Partner’s legal representative, or
successors in interest, as the case may be, subject to this Agreement, and the
Partnership shall continue as a limited partnership.  In no event shall such
Limited Partner’s legal representative, or successors in interest, become a
substitute Partner except as provided in Article XVI.

 

ARTICLE XXI
DISPUTE RESOLUTION

 

21.1                           Arbitration.  The parties agree that any
controversy, claim, or damages arising out of or relating in any manner to this
Agreement or any breach hereof, will be resolved by binding arbitration in
Houston, Texas pursuant to Texas Civ. Prac. & Rem. §171.001 et seq.  The
arbitration shall be conducted before a single neutral arbitrator and, unless
otherwise agreed by the parties, shall be conducted pursuant to the JAMS
Comprehensive Arbitration Rules and Procedures (“Rules”) as in effect at the
time of the arbitration; provided, however, that the arbitration will not be
administered by JAMS or conducted by a JAMS’ arbitrator unless both parties
agree otherwise.  If either party objects to the administration by JAMS, then
the arbitration shall be administered by an entity or person mutually agreed
upon by the parties or, absent such an agreement, by the arbitrator himself or
herself.  If the arbitration is not administered by JAMS, then, where reasonably
practical, the provisions in the Rules applicable to the JAMS administrator
shall be read to apply to the administrator appointed by the parties.  If it is
not reasonably practical to apply a provision relating to the JAMS administrator
to the administrator appointed by the parties, then that provision of the Rules
shall not apply to this arbitration.  If a conflict exists between the Rules and
this Section 21.1, then this Section 21.1 shall govern.

 

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The arbitration shall be commenced by one party submitting an arbitration demand
to the other.  The parties shall have 20 days following the commencement of the
arbitration to select a mutually agreeable arbitrator.  If the parties fail to
mutually select an arbitrator within this 20 day period, then each party shall,
within ten days from such failure, submit to the other party a list of five
neutral arbitrators who such party has contacted and confirmed are free of any
conflicts and are available to conduct the arbitration.  Within three days after
these lists are exchanged, each party shall peremptorily strike up to three of
the proposed arbitrators on the other party’s list and shall submit a list of
such strikes to the other party.  Within three days after the peremptory strikes
are exchanged, each party shall rank in order of preference the remaining
proposed arbitrators, with “1” being the most preferred.  The person with the
lowest total combined ranking (“1” being the lowest ranking) shall be appointed
as the arbitrator.  In the case of a tie, the proposed arbitrator(s) who have or
has the highest ranking of any single numeric ranking by either party (i.e., the
least preferred by one party of those that are tied), will be struck and the
remaining person shall be selected as the arbitrator.  If the tie continues
after those with the single highest numeric ranking are struck, then the
arbitrator shall be selected from those remaining in the tie by a single toss of
a coin.  If an arbitrator for any reason withdraws from serving as the
arbitrator after being appointed, then the replacement arbitrator shall be the
next lowest ranking person from the original arbitration selection process.  If
a tie exists, then it shall be resolved by a single toss of a coin.  If none of
the ranked arbitrators from the original selection process can serve as the
replacement arbitrator, then the parties shall re-start the entire arbitration
selection process with new lists of proposed arbitrators.

 

Discovery shall be permitted pursuant to the Rules, and the arbitration hearing
shall occur within 60 days following the appointment of the arbitrator. Any
provisional or injunctive remedy that would be available in a court of law will
be available from the arbitrator pending the arbitration of the dispute.  The
prevailing party shall be reimbursed its reasonable costs associated with the
arbitration, including reasonable attorneys’ fees.  Within 30 days following the
completion of the hearing, the arbitrator will issue a written ruling with an
explanation of the reasons for the award and a full statement of the facts as
found and the rules of law applied in reaching his decision.

 

21.2                           Binding Nature.  The determination of the
arbitrator shall be final and binding on the Partners.  Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.

 

ARTICLE XXII
MISCELLANEOUS

 

22.1                           Amendments.  Subject to Section 10.2(c),
amendments to this Agreement may be made at any time by the General Partner and
shall be adopted and be effective as an amendment hereto upon written approval
by Cheniere and LNG Investments (but not their transferees or assignees).

 

22.2                           Checks, Drafts, Evidence of Indebtedness.  All
checks, drafts, or other orders for payment of money, notes, or other evidence
of indebtedness issued in the name of or payable to the Partnership shall be
signed or endorsed in such manner and by such person or persons as shall be
designated from time to time in accordance with the resolution of the General
Partner.

 

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22.3                           Contracts and Instruments.  No agent or employee
of the Partnership shall have any power or authority to bind the Partnership by
any contract or engagement or to pledge its credit or to render it liable for
any purpose or for any amount.

 

22.4                           Notices.  All notices and other communications
required or permitted to be given or made under this Agreement shall be given or
made in writing. Such notices shall be delivered by hand delivery, by telecopy
(or similar electronic means) or by a nationally recognized overnight courier,
fees prepaid, addressed as follows:

 

If to Freeport GP:

 

1200 Smith Street

 

 

Suite 600

 

 

Houston, TX 77002

 

 

Attn:                    Michael S. Smith

 

 

Fax: (713) 980-2903

 

 

 

copy to:

 

Brownstein Hyatt & Farber, P.C.

 

 

410 Seventeenth Street, 22nd Floor

 

 

Denver, CO 80202-4437

 

 

Attn:                    Steven C. Demby, Esq.

 

 

Fax: (303) 223-1111

 

 

 

If to LNG Investments:

 

1200 Smith Street

 

 

Suite 600

 

 

Houston, TX 77002

 

 

Attn:                    Michael S. Smith

 

 

Fax: (713) 980-2903

 

 

 

copy to:

 

Brownstein Hyatt & Farber, P.C.

 

 

410 Seventeenth Street, 22nd Floor

 

 

Denver,  CO 80202-4437

 

 

Attn:  Steven C. Demby, Esq.

 

 

Fax: (303) 223-1111

 

 

 

If to Cheniere:

 

Cheniere LNG, Inc.

 

 

333 Clay St., Suite 3400

 

 

Houston, TX  77002

 

 

Attn: Charif Souki

 

 

Fax: (713) 659-5459

 

 

 

copy to:

 

Andrews & Kurth, LLP

 

 

600 Travis, Suite 4200

 

 

Houston, TX  77002

 

 

Attn:  Michael Overman

 

 

Fax:  (713) 220-4285

 

Any party may make changes, additions or deletions to its address for the
purpose of this Section 22.4 by notice to the other parties given in the manner
set forth above.

 

22.5                           GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS).

 

45

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22.6                           Headings.  The Article and Section headings of
this Agreement are for convenience only, do not form a part of this Agreement,
and shall not in any way affect the interpretation hereof.

 

22.7                           Extension Not a Waiver.  No delay or omission in
the exercise of any power, remedy or right herein provided or otherwise
available to a Partner or the Partnership shall impair or affect the right of
such Partner or the Partnership thereafter to exercise the same. Any extension
of time or other indulgence granted to a Partner hereunder shall not otherwise
alter or affect any power, remedy or right of any other Partner or of the
Partnership, or the obligations of the Partner to whom such extension or
indulgence is granted.

 

22.8                           Publicity.  No Partner shall issue any press
release or otherwise publicize or disclose the terms of this Agreement or the
terms of the Partners’ acquisition of the Interests in the Partnership, without
the consent of the other Partners, except as such disclosure may be made in the
course of normal reporting practices by a Partner to its partners, shareholders,
consultants or members or as otherwise required by law.

 

22.9                           Construction and Amendment.  No oral explanation
of or oral information relating to this Agreement offered by either party hereto
shall alter the meaning or interpretation of this Agreement.

 

22.10                     Further Action.  Each Partner agrees to perform all
further acts and execute, acknowledge, and deliver any documents which may be
reasonably necessary, appropriate, or desirable to carry out the provisions of
this Agreement.

 

22.11                     Variation of Pronouns.  All pronouns and any
variations thereof shall be deemed to refer to masculine, feminine, or neuter,
singular or plural, as the identity of the Person or Persons may require.

 

22.12                     Successors and Assigns.  Subject to the restrictions
on transfer set forth in Article XV, this Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.

 

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

 

22.14                     Ambiguities.  All of the parties to this Agreement
have participated in the negotiation and drafting hereof. Accordingly, it is
understood and agreed that the general rule that ambiguities are to be construed
against the drafter shall not apply to this Agreement. In the event that any
language of this Agreement is found to be ambiguous, each party shall have an
opportunity, in any legal proceeding, to present evidence as to the actual
intent of the parties with respect to any such ambiguous language.

 

22.15                     Entire Agreement.  The terms and conditions contained
herein and in the associated agreements constitute the entire agreement between
the Partners concerning the subject matter hereof, and shall supersede all
previous communications, either oral or written, between the parties hereto, and
no agreement or understanding varying or extending this Agreement shall be
binding upon either Partner unless in writing, signed by a duly authorized
officer or representative of each Partner.

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first set forth
above.

 

 

 

GENERAL PARTNER:

 

 

 

 

FREEPORT LNG-GP, INC.

 

 

 

 

 

By: 

 

 

 

 

Name:  Michael S. Smith

 

 

Title:  Chief Executive Officer

 

 

 

 

 

LIMITED PARTNERS:

 

 

 

FREEPORT LNG INVESTMENTS, LLC

 

 

 

 

 

By: 

 

 

 

 

Name: Michael S. Smith

 

 

Title:  Managing Member

 

 

 

 

 

CHENIERE LNG, INC.

 

 

 

 

 

By: 

 

 

 

 

Name:  Charif Souki

 

 

Title:  President

 

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Schedule 5.1

Example of Accelerated Distributions

 

The following are examples of the application of the Accelerated Distributions:

 

For purposes of these examples only, it is assumed:

 

1.                                       $9 million in total Capacity
Reservations fees are received by the Partnership (“CR Cash”); and

 

2.                                       $6 million in total Project expenses
will be necessary to obtain Project Approval by FERC following Closing (“Project
Expenses”), $2.5 million of which will be spent in fiscal 2003.

 

Example 1

 

If the CR Cash is received on day one of the Partnership, such CR Cash shall be
paid, held or distributed in the following amounts and following order of
priority:

 

(a)                                  a Capacity Distribution in the amount of
$2,250,000 shall be paid to Cheniere by the Partnership (Section 5.1(a));

 

(b)                                 a tax distribution of $2,860,000 shall be
paid to LNG Investments (Section 5.1(b)(i); and

 

(b)                                 $3,890,000 shall be used for payment of
Project Expenses (Section 5.1(b)(ii)).

 

Example 2

 

If the CR Cash is received after LNG Investments has contributed (a) $1.5
million for the payment of Project Expenses and (b) $1.5 million for the Second
Payment and Third Payment, such CR Cash shall be paid, held or distributed in
the following amounts and following order of priority:

 

(a)                                  a Capacity Distribution in the amount of
$750,000 ($2,250,000 less the Second Payment and Third Payment ($1.5 million))
shall be paid to Cheniere by the Partnership (Section 5.1(a));

 

(b)                                 a tax distribution of $2,860,000 shall be
paid to LNG Investments (Section 5.1(b)(i);

 

(c)                                  $4.5 million shall be used for payment of
Project Expenses (Section 5.1(b)(ii)); and

 

(d)                                 $890,000 shall be distributed to LNG
Investments as a return of the additional capital contributions made by LNG
Investments to the Partnership for Project Expenses (Section 5.1(b)(ii)).

 

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Exhibit A

 

Certificate of Formation of Partnership

 

See attached.

 

49

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FIRST AMENDMENT
TO
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT

 

First Amendment (this “Amendment”) to Amended and Restated Limited Partnership
Agreement dated as of December 20, 2003, by and among (1) Freeport LNG-GP, Inc.,
a Delaware corporation (the “General Partner”), (2) Freeport LNG Investments,
LLLP, a Delaware limited liability limited partnership (“LNG Investments”),
(3) Cheniere LNG, Inc., a Delaware corporation (“Cheniere”), and (4) Contango
Sundance, Inc., a Delaware corporation (“Contango”).  Each of General Partner,
Investments, Cheniere and Contango is sometimes referred to herein as a “Party,”
and all of them together, are sometimes referred to herein as the “Parties.”

 

RECITALS

 

WHEREAS, the General Partner, Freeport LNG Investments, LLC (which has been
converted to LNG Investments) and Cheniere executed an Amended and Restated
Limited Partnership Agreement of Freeport LNG Development, L.P. (the
“Partnership”) effective as of February 27, 2003 (the “Partnership Agreement”)
(capitalized terms used herein and not otherwise defined herein shall have the
same meaning assigned to them in the Partnership Agreement);

 

WHEREAS, Contango, Contango Oil & Gas Co., a Delaware corporation, Cheniere and
Cheniere Energy, Inc., a Delaware corporation, executed a Partnership Interest
Purchase Agreement, dated and effective as of March 1, 2003, whereby Contango
purchased from Cheniere a 10% Percentage Interest;

 

WHEREAS, Contango was admitted to the Partnership pursuant to an Adoption
Agreement, dated and effective as of March 1, 2003, between the Partnership and
Contango; and

 

WHEREAS, the Parties believe it is in their best interests to amend the
Partnership Agreement as set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and promises contained
in this Amendment and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Parties agree as follows:

 

AGREEMENT

 

1.                                       Other than for the amendment
effectuated by Section 18 hereof and the definition of “First Amendment”, this
Amendment is being entered into in connection with, and the amendments to the
Partnership Agreement set forth herein will become effective as of the “Closing”
as defined in and under the Omnibus Agreement (the “Omnibus Agreement”) dated as
of the date hereof by and among the Partnership, the General Partner and
ConocoPhillips Company, a Delaware corporation (“COP”). The preceding sentence
shall not affect the effectiveness of Section 18 hereof (amending
Section 10.2(c)) of the Partnership Agreement and

 

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the definition of “First Amendment”, which Section 18 and definition shall be
effective as of the date hereof.  If the Closing does not occur on or before
December 31, 2004, then upon such date this Amendment (including Section 18
hereof and the definition of “First Amendment”) shall become void and of no
further force or effect.

 

2.                                       The preamble of the Partnership
Agreement shall be amended to replace the party “Freeport LNG Investments, LLC,
a Delaware limited liability company” with the party “Freeport LNG Investments,
LLLP, a Delaware limited liability limited partnership” as a result of the
conversion of the first party to a limited liability limited partnership.

 

3.                                       Section 1.5 of the Partnership
Agreement is hereby deleted and replaced in its entirety by the following:

 

“1.5                           “Affiliate” means with respect to any Person, a
second Person which is controlled by, controls or is under common control with
such first Person and, with respect to the Partnership, any constituent party of
the Partnership. For purposes of the foregoing, “control” of any Person means
the power to direct the management and policies of such Person, whether by the
ownership of voting securities, by contract or otherwise.  For purposes of this
Agreement, COP and its Affiliates shall not be considered an Affiliate of the
Partnership or any Partner solely by virtue of its 50% ownership of the General
Partner; provided, however, that in the event COP at any time owns more than 50%
of the outstanding common stock of the General Partner, it shall be deemed an
Affiliate of the Partnership for purposes of this Agreement.”

 

4.                                       Article I of the Partnership Agreement
is hereby further amended by adding to Article I in its proper alphabetical
order:

 

“COP” means ConocoPhillips Company, a Delaware corporation.’

 

‘“First Amendment” means the First Amendment to this Agreement dated as of
December 20, 2003.’

 

‘“Loan Documents” has the meaning set forth in the Omnibus Agreement.

 

‘“Omnibus Agreement” means the Omnibus Agreement dated as of the date hereof by
and between the Partnership, the General Partner and COP.’

 

‘“Stockholders Agreement” means the Stockholders Agreement entered into pursuant
to the Omnibus Agreement.’

 

5.                                       Section 2.3 of the Partnership
Agreement is hereby deleted and replaced in its entirety by the following:

 

“2.3  Character of Business.  The purposes of the Partnership shall be to
develop, build, own and operate a liquefied natural gas (“LNG”) receiving and
regasification facility on Quintana Island in or around Freeport, Texas (the
“Business”) and any and all activities necessary or incidental to the foregoing;
provided, however, that under no circumstances shall the Partnership engage in
any trading, hedging, futures activities, or

 

2

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any other derivative transactions relating to the buying and selling of natural
gas (including LNG) that would expose the Partnership to commodity price
fluctuations (but this shall not preclude the Partnership from taking custody of
and/or title to LNG and/or natural gas that is so taken in connection with the
normal operation of the Business and that does not expose the Partnership to
commodity price fluctuations other than in the ordinary course of business in
connection with the performance of terminal servicing or similar agreements
entered into by the Partnership).”

 

6.                                       The first sentence of Section 3.2 of
the Partnership Agreement is hereby deleted and replaced in its entirety by the
following:

 

“As of March 1, 2003, upon admission of Contango Sundance, Inc. (“Contango”) as
a Limited Partner, the Percentage Interests of the Partners are as follows:

 

Partners

 

Percentage Interest

 

 

 

 

 

LNG Investments

 

60

%

 

 

 

 

Cheniere

 

30

%

 

 

 

 

Contango

 

10

%

 

 

 

 

Freeport GP

 

0

%”

 

7.                                       Section 3.3 is hereby deleted in its
entirety and replaced in its entirety by the following:

 

“3.3                           Future Financing.

 

The Partners anticipate that in the future the Partnership may require
additional funds for capital expenditures or working capital requirements, and
any such additional funding shall be obtained first from loans under the Loan
Documents (to the extent available, if any) and then from any of the following
sources as may be approved in advance by the General Partner:

 

(a)                                  cash reserves of the Partnership;

 

(b)                                 loans to be obtained from banks and other
non-Affiliate independent sources;

 

(c)                                  Additional Contributed Equity made to the
Partnership by the Partners, in proportion to their Percentage Interests
(subject to Section 3.5), in amounts determined according to Section 3.4 (or, if
applicable, Section 3.5);

 

(d)                                 subject to Section 10.2, loans to be made to
the Partnership by (i) the Partners and/or (ii) an Affiliate of one of the
Partners; or

 

(e)                                  subject to Section 10.2, any other funding
source to be determined by the General Partner.”

 

3

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8.                                       The following third to final sentence
of Section 3.4(a) of the Partnership Agreement shall be deleted in its entirety.

 

“Notwithstanding any other provision of this Agreement or this Section 3.4, the
first $9,000,000 of Additional Contributed Equity plus the Returned Amount shall
be contributed solely by LNG Investments (including any transferees and
assignees of any portion of LNG Investments’ Interest), which contribution shall
not alter the Percentage Interests and provided further that (x) neither the $1
million contribution by LNG Investments pursuant to Section 3.1 nor any
contributions by LNG Investments pursuant to Section 3.4(b) shall be counted
toward this $9,000,000, (y) no amount subsequently used for an Affiliate Payment
shall be counted toward this $9,000,000 and (z) such $9,000,000 shall be reduced
by the amount of the LNG Investments Expenses.”

 

9.                                       Section 3.4(b) is hereby deleted in its
entirety and replaced in its entirety by the following:

 

“Reserved.”

 

10.                                 Section 3.5 is hereby deleted in its
entirety and replaced in its entirety by the following:

 

3.5                                 Delinquent Contributions. If a Partner fails
to contribute any Additional Contributed Equity required pursuant to Article III
by the applicable Contribution Date (a “Delinquent Partner”), the other Partners
(other than an Affiliate of the Delinquent Partner) which are not Delinquent
Partners (the “Contributing Partners”) may, but shall not be required to,
contribute the portion of such Additional Contributed Equity that the Delinquent
Partner failed to contribute (the “Delinquent Contribution”).  The General
Partner shall notify the Contributing Partners in writing of the amount of the
Delinquent Contribution.  Each Contributing Party, within fifteen (15) days
after receipt of such notice, shall advise the General Partner whether it elects
to contribute its proportionate share (and if applicable any other Contributing
Partner’s proportionate share) of the Delinquent Contribution.  If one or more
Contributing Partners so elect and contribute the Delinquent Contribution, the
Delinquent Partner shall not be entitled to receive any distributions under
Article V hereof, and such distributions shall instead be made to such
Contributing Partners so electing and contributing to the Delinquent
Contribution, until such Contributing Partners have recovered 200% of their
proportionate shares of the Delinquent Contribution out of such distributions
under Article V.

 

11.                                 Section 3.6 is hereby deleted in its
entirety and replaced in its entirety by the following:

 

“3.6  Project Expansion.(a)  The General Partner shall have the right and power
to do all things necessary to obtain debt and/or equity financing in connection
with any expansion of the Partnership’s facility on Quintana Island.  The
General Partner will notify each Partner of the terms of any such financing at
least twenty (20) days prior to the consummation of any transaction (the
“Issuance Notice”).  Subject to Section 3.6(b), any equity financing obtained
for such expansion by the Partnership shall dilute each of the Limited Partners
pro rata based on the Percentage Interests of such Limited Partners.

 

(b)  In connection with any Issuance Notice,  the General Partner shall provide
to the Limited Partners notice of its intent to offer Interests in the
Partnership.  The Issuance Notice

 

4

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

 

shall contain (i) a description of the Interests, (ii) the total amount of
Interests to be sold, and (iii) the price and payment terms.  Each Limited
Partner that is an accredited investor as defined in Rule 501 under the
Securities Act shall have the right (pro rata according to its Percentage
Interest) to purchase that amount of Interests as will enable such Limited
Partner to maintain its Percentage Interest by electing to purchase Interests in
connection with such transaction.  In order to exercise its rights under this
Section 3.6, a Limited Partner must notify the General Partner of its election
(which election shall be irrevocable) within 10 days of receipt of the Issuance
Notice, and such electing Limited Partner shall tender the purchase price
therefor on the same terms and conditions as set forth in the Issuance Notice.
In the event that a Limited Partner fails to timely elect to exercise its rights
under this Section 3.6, its shall be deemed to have waived its rights under this
Section 3.6 with respect to such Issuance Notice. “

 

12.                                 Section 5.2 is hereby deleted in its
entirety and replaced in its entirety by the following:

 

“5.2                           Distributions of Available Cash.  Subject to
Section 5.5, until the dissolution and winding up of the Partnership:  (a) to
the extent that there is positive Net Cash Flow and after all required
distributions have been made under Sections 5.1 and 5.3, the General Partner
shall cause the Partnership to distribute to each Partner within ninety (90)
days after the end of each Fiscal Year of the Partnership cash equal to 44% of
the amount of taxable income or gain allocated to such Partner for such Fiscal
Year (less any Losses allocated to such Partner from prior Fiscal Years not
previously taken into account under this Section 5.2 and less any amounts
already distributed to such Partner under Section 5.1(b)(i) in respect of such
taxable net income or gain) (subject, however, to the requirement that any
amounts that would otherwise be distributable to any Delinquent Partner shall
instead be distributed as provided in Section 3.5); and (b) after payment or
reservation and accrual of the amounts of all required distributions under
Sections 5.1 and 5.3 and clause (a) of this sentence, and after reserving
amounts determined by the General Partner, in good faith and after consultation
with the Advisory Committee, to be required for working capital, capital
expenditures or other requirements of the Partnership’s Business, the General
Partner shall cause all remaining cash to be distributed on a quarterly basis to
the Limited Partners pro rata in accordance with their Percentage Interests
(subject, however, to the requirement that any amounts that would otherwise be
distributable to any Delinquent Partner shall instead be distributed as provided
in Section 3.5).”

 

13.                                 A new Section 5.5 is hereby added to the
Partnership Agreement to read as follows:

 

“Section 5.5  Distributions Limited by Loan Documents.  Notwithstanding anything
to the contrary contained in this Agreement, except as otherwise permitted by
the Loan Documents, no distributions shall be made to the Partners until
Completion (as defined in the Loan Documents) and following such time, then all
distributions shall be subject to the terms of the Loan Documents.”

 

14.                                 A new Section 7.7 is hereby added to the
Partnership Agreement:

 

“7.7                           ACTIVITIES OF INDEMNITEE.  EACH INDEMNITEE (OTHER
THAN THE GENERAL PARTNER) SHALL HAVE THE RIGHT TO ENGAGE IN BUSINESSES OF EVERY
TYPE AND DESCRIPTION AND OTHER ACTIVITIES FOR PROFIT AND TO ENGAGE IN AND
POSSESS AN INTEREST IN OTHER BUSINESS VENTURES OF ANY AND EVERY TYPE OR
DESCRIPTION, WHETHER IN BUSINESSES ENGAGED IN OR ANTICIPATED TO BE

 

5

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

 

ENGAGED IN BY ANY OF THE PARTNERSHIP AND THE PARTNERS AND THEIR AFFILIATES,
INDEPENDENTLY OR WITH OTHERS, INCLUDING BUSINESS INTERESTS AND ACTIVITIES IN
DIRECT COMPETITION WITH THE BUSINESS AND ACTIVITIES OF THE PARTNERSHIP AND THE
PARTNERS AND THEIR AFFILIATES, AND NONE OF THE SAME SHALL CONSTITUTE A BREACH OF
THIS AGREEMENT OR ANY DUTY EXPRESS OR IMPLIED BY LAW TO ANY PARTNER OR ITS
ASSIGNEES. NEITHER THE PARTNERSHIP, ANY LIMITED PARTNER NOR ANY OTHER PERSON
SHALL HAVE ANY RIGHTS BY VIRTUE OF THIS AGREEMENT OR THE PARTNERSHIP
RELATIONSHIP ESTABLISHED HEREBY OR THEREBY IN ANY BUSINESS VENTURES OF ANY
INDEMNITEE.  NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, (I) THE
ENGAGING IN COMPETITIVE ACTIVITIES BY ANY INDEMNITEES (OTHER THAN THE GENERAL
PARTNER) IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 7.7 IS HEREBY
APPROVED BY THE PARTNERSHIP AND ALL PARTNERS, (II) IT SHALL BE DEEMED NOT TO BE
A BREACH OF THE GENERAL PARTNER’S FIDUCIARY DUTY, ANY CONFLICT OF INTEREST OR
ANY OTHER OBLIGATION OF ANY TYPE WHATSOEVER OF THE GENERAL PARTNER FOR THE
INDEMNITEES (OTHER THAN THE GENERAL PARTNER) TO ENGAGE IN SUCH BUSINESS
INTERESTS AND ACTIVITIES IN PREFERENCE TO OR TO THE EXCLUSION OF THE PARTNERSHIP
AND (III) THE GENERAL PARTNER AND THE INDEMNITEES SHALL HAVE NO OBLIGATION TO
PRESENT BUSINESS OPPORTUNITIES TO THE PARTNERSHIP.  THIS SECTION 7.7 SHALL NOT
ALTER OR AFFECT THE RIGHTS OR OBLIGATIONS OF ANY INDEMNITEE WITH RESPECT TO ANY
TRANSACTION OR AGREEMENT ENTERED INTO BETWEEN SUCH INDEMNITEE AND THE
PARTNERSHIP.”

 

15.                                 Section 9.1 of the Partnership Agreement is
hereby deleted and replaced in its entirety by the following:

 

“9.1                           General.  The Partnership, its receiver, or its
trustee (in the case of its receiver or trustee, to the extent of the
Partnership Assets) shall indemnify, save harmless, and pay all judgments and
claims against each Partner, their respective shareholders, managers and members
and the Affiliates of each of them and their respective shareholders, managers,
officers, directors and agents (collectively, the “Indemnitees”), relating to
any liability or damage incurred by reason of any act performed or omitted to be
performed by any such Indemnitee in connection with the business of the
Partnership, including attorneys’ fees incurred by such Indemnitee in connection
with the defense of any action based on any such act or omission, which
attorneys’ fees may be paid as incurred.”

 

16.                                 The first paragraph of Section 9.2 of the
Partnership Agreement is hereby deleted and replaced in its entirety by the
following:

 

“9.2                           Environmental.  The Partnership, its receiver, or
its trustee (in the case of its receiver or trustee, to the extent of the
Partnership Assets) shall indemnify and hold harmless, to the maximum extent
permitted by law, each Indemnitee from and against any and all liabilities, sums
paid in settlement of claims, obligations, charges, actions (formal or
informal), claims (including without limitation, claims for personal injury
under any theory or for real or personal property damage), liens, taxes,
administrative proceedings, losses, damages (including, without limitation,
punitive damages), penalties, fines, court costs, administrative service fees,
response and remediation costs, stabilization costs, encapsulation costs,
treatment, storage or disposal costs, groundwater monitoring or environmental
study, sampling or monitoring costs, other causes of action, and any other costs
and reasonable expenses (including, without limitation, reasonable

 

6

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

 

attorneys’, experts’, and consultants’ fees and disbursements and investigating,
laboratory, and data review fees) imposed upon or incurred by any Indemnitee
(whether or not indemnified against by any other party) arising from and after
the date of this Agreement directly or indirectly out of:”

 

17.                                 Sections 9.3(c), (d), (e), (f) and (g) are
hereby added to the Partnership Agreement to read as follows:

 

“(c)                            The indemnification provided by this Article IX 
and Section 10.6 shall be in addition to any other rights to which an Indemnitee
may be entitled under any agreement, pursuant to any vote of the Partners, as a
matter of law or otherwise, and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.”

 

(d)                                 Except as provided in Section 9.3(g), an
Indemnitee shall not be denied indemnification in whole or in part under this
Article IX or Section 10.6 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.  No amendment,
modification or repeal of this Article IX or Section 10.6 or any provision
hereof shall in any manner terminate, reduce or impair the right of any past,
present or future Indemnitee to be indemnified by the Partnership, nor the
obligations of the Partnership to indemnify any such Indemnitee under and in
accordance with the provisions of this Article IX or Section 10.6  as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.

 

(e)                                  The provisions of this Article IX and
Section 10.6 are for the benefit of the Indemnitees, their heirs, successors,
assigns and administrators and shall not be deemed to create any rights for the
benefit of any other Persons.

 

(f)                                    Any indemnification pursuant to this
Article IX or Section 10.6 shall be made only out of the assets of the
Partnership, it being agreed that the General Partner shall not be personally
liable for such indemnification and shall have no obligation to contribute or
loan any monies or property to the Partnership to enable it to effectuate such
indemnification.

 

(g)                                 Notwithstanding anything contained in this
Article IX or Section 10.6 to the contrary, none of the Partnership, its
receiver or its trustee shall have any obligation to indemnify any Indemnitee or
its shareholders, managers, members and Affiliates for any amounts that any
Indemnitee shall have paid or have an obligation to pay to the Partnership
pursuant to any Project Document (as defined in the Omnibus Agreement).

 

18.                                 Section 10.2(c) of the Partnership Agreement
is hereby deleted and replaced in its entirety by the following:

 

7

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

 

“(c)                            Each of the Partners has received and reviewed
the documents set forth on Schedule I to the First Amendment (the “Transaction
Documents”).  Notwithstanding any other provision of this Agreement or any
applicable law, rule or regulation, each of the Partners and its assignees and
each other Person who may acquire an interest in the Partnership hereby (i)
approves, ratifies and confirms the execution, delivery and performance by the
parties thereto of the Transaction Documents; (ii) agrees that the General
Partner (on its own or through any officer of the Partnership or any officer,
director, shareholder, member or agent of the General Partner) is authorized to
execute, deliver and perform the obligations under the Transaction Documents
without any further act, approval or vote of the Partners or their assignees or
the other Persons who may acquire an interest in the Partnership; and (iii)
agrees that the execution, delivery or performance by the General Partner, any
shareholder of the General Partner or any Affiliate of the General Partner of
this Agreement or any Transaction Document shall not constitute a breach by the
General Partner of any duty that the General Partner may owe the Partnership or
the Partners under this Agreement or of any duty of the General Partner stated
or implied by law or equity.  Further, each Partner, its assigns and each other
Person who may acquire an interest in the Partnership hereby agrees that the
Transaction Documents, the transactions specified therein or the transactions
entered into by COP or any of its Affiliates and the General Partner, the
Partnership or its Affiliates while COP or its Affiliates owns 50% or less of
the General Partner, shall not be considered Affiliate Transactions subject to
Section 10.2(a).  Each Limited Partner waives its right to exercise any and all
rights to consent to any Major Decision and any right to receive notices thereof
(including rights under Section 10.2(a)) after the occurrence of any default
under the Loan Documents or any amendment, modification, refinancing or
replacement thereof.  It is understood and agreed that nothing contained in this
Section 10.2(c) is intended to amend the terms of this Agreement beyond that
which is expressly set forth in the First Amendment (exclusive of this
Section 10.2(c)), and that no provision of any Transaction Document is intended
to modify, as between the Partners, the rights and obligations of the Partners
under this Agreement as Partners.”

 

19.                                 Section 10.5 of the Partnership Agreement is
hereby deleted and replaced by the following:

 

“10.5 Remuneration of General Partner; Reimbursement of Expenses.  Pursuant to
Section 10.2, if applicable, the General Partner shall be paid a fee by the
Partnership as determined in the discretion of the General Partner for
performing its services as a General Partner; provided, that the aggregate fee
paid (including the Limited Partner Fee (as defined below)) shall not exceed
$1,000,000 per Fiscal Year, and that the fee payable to the General Partner
shall be reduced by the amount of such aggregate fee multiplied by the combined
Percentage Interest of Cheniere and Contango and divided by 2 (the “Limited
Partner Fee”).  The amount of the Limited Partner Fee shall be paid as a fee to
each of Cheniere and Contango pro rata based on their Percentage Interests at
the time the fee is paid to the General Partner. In addition, each of the
General Partner and the Limited Partners shall be reimbursed for its reasonable
out of pocket costs in connection with the Business of the Partnership
including, without limitation, fees paid to professionals and advisors and
travel and lodging expenses.

 

8

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

 

20.                                 Section 10.6(b) of the Partnership Agreement
is hereby deleted and replaced by the following:

 

“(b)                           The Partnership shall indemnify and hold harmless
the Indemnitees from and against any and all losses, claims, demands, costs,
damages, liabilities, expenses of any nature (including reasonable attorneys
fees and disbursements), judgments, fines, settlements, and other amounts
arising from any and all claims, demands, actions, suits, or proceedings, civil,
criminal, administrative, or investigative, in which an Indemnitee may be
involved, or threatened to be involved, as a party or otherwise, arising out of
or incidental to the Business of the Partnership, regardless of whether an
Indemnitee continues to be in the capacity entitled to such indemnification at
the time any such liability or expense is paid or incurred, if (i) the
Indemnitee acted in good faith and in a manner it or he or she reasonably
believed to be in, or not opposed to, the best interests of the Partnership,
and, with respect to any criminal proceeding, had no reason to believe his or
her conduct was unlawful, (ii) the Indemnitee’s conduct did not constitute a
breach of the provisions of this Agreement, fraud, gross negligence or willful
misconduct and (iii) the amount for which such Indemnitee seeks such
indemnification is not an amount paid or payable to the Partnership by any
Indemnitee under any Project Document.  This Section 10.6(b) shall not alter or
affect the rights or obligations of any Indemnitee with respect to any
transaction or agreement entered into between such Indemnitee and the
Partnership.”

 

21.                                 Section 10.10 of the Partnership Agreement
is hereby deleted and replaced in its entirety by the following:

 

“10.10  Removal of Freeport GP as General Partner.  Freeport GP may be removed
as the General Partner of the Partnership by Cheniere or LNG Investments only
upon compliance with the terms and conditions of this Section 10.10.  Freeport
GP may be removed as the General Partner of the Partnership in the event of (i)
the resignation, Bankruptcy or dissolution of Freeport GP, (ii) the commission
by Freeport GP of fraud or its misappropriation of funds of the Partnership, or
(iii) Freeport GP’s material breach of a material provision of this Agreement
(each a “Removal Event”).  Upon a Removal Event, Cheniere may exercise its right
to remove Freeport GP as the General Partner by giving notice (“Removal Notice”)
to Freeport GP and LNG Investments of the Removal Event, including within such
Removal Notice the particulars of the Removal Event in reasonable detail;
provided, however if the Removal Event results from a material breach of a
material term or provision of this Agreement by Freeport GP, Cheniere shall be
required to give notice of the existence of such a breach and if during the
period of sixty (60) days following such notice, Freeport GP cures such breach
Cheniere will not be able to remove Freeport GP as the General Partner as a
result of such Removal Event.  If Cheniere exercises its right to remove
Freeport GP as the General Partner, Cheniere shall admit a new general partner
as a Partner of the Partnership with such portion of Cheniere’s Interest as
Cheniere shall determine in its sole discretion.  Freeport GP hereby irrevocably
makes, constitutes, and appoints Cheniere or its successor in interest with full
power of substitution, true and lawful attorney-in-fact, for it and in its name,
place and stead, to make, execute, sign, acknowledge, swear to, deliver, record
and file any document or instrument that may be considered necessary or
desirable by Cheniere to

 

9

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remove Freeport GP as the General Partner and admit a new general partner to the
Partnership pursuant to this Section 10.10.  The foregoing special power of
attorney shall be one which is a special power of attorney coupled with an
interest, is irrevocable, and shall survive the legal incapacity of Freeport
GP.  Notwithstanding the preceding provisions of this Section 10.10, Cheniere
shall not exercise its rights under the grant of the above special power of
attorney unless a Removal Event has occurred and Cheniere has requested by
notice to Freeport GP that Freeport GP take the action which Cheniere proposes
to take by the exercise of the power of attorney and Freeport GP fails to take
such action within three (3) days of such notice.  Notwithstanding the foregoing
provisions of this Section 10.10, Freeport GP may contest whether or not a
Removal Event has occurred by notice to Cheniere.  If Freeport GP contests
whether such Removal Event has occurred the matter shall be submitted to
arbitration pursuant to ARTICLE XXI and Freeport GP shall not be removed as
General Partner unless and until the arbitrators find that such Removal Event
has occurred.”

 

22.                                 Section 12.2(u) of the Partnership Agreement
is hereby deleted and replaced with the following:

 

“(u)                           The Partnership and the General Partner will
conduct an operational meeting each month on a date mutually acceptable to the
General Partner, Cheniere and LNG Investments at such place as may be agreed to
by the General Partner, Cheniere and LNG Investments to review the Partnership’s
marketing, financial, regulatory and developmental activities, including
providing a report on marketing developments, financing developments, regulatory
or governmental approval developments, and an update on engineering and other
technical developments. In addition, each of Cheniere and Contango will receive
prior notice of and have the right to attend such monthly meetings.  The General
Partner shall provide to each of Cheniere and Contango (i) promptly following
approval by the board of directors of the General Partner, copies of any
budgets, and (ii) in connection with such meetings, budgets for the ongoing
construction of the Partnership’s facility and any expansion thereof, to the
extent prepared and/or revised, and notice of any material change orders in
connection with such construction.  The foregoing rights may be transferred by
Cheniere or Contango to any other Person, without the prior written consent of
the General Partner, in connection with a sale of its Interest, but the
foregoing rights cannot be subdivided; therefore, (i) in the event that Cheniere
or Contango sells all of its Interest, such right shall be transferred to the
assignee of such Interest; and (ii) if Cheniere or Contango sells only a portion
of its Interest and retains a portion of its Interest, such right may be
transferred with such Interest to one transferee or else retained by the
transferor. In addition, each Limited Partner shall be entitled to visit the
Partnership’s principal place of business during normal business hours with
reasonable notice and without unreasonable interference with the operations or
affairs of the Partnership or the General Partner to meet with and question
officers and employees of the Partnership and the General Partner and, subject
to applicable law (including antitrust laws) to inspect the Partnership’s books,
records and any third-party agreements. Notwithstanding the foregoing, it is
expressly acknowledged and agreed that  in no event will any Limited Partner be
given access to or copies of any data, information, records or drafts relating
to or in connection with any negotiation, agreement or communication with any
customer or potential customer of the Partnership, except for final, completed,
executed and delivered terminal use agreements or other terminal service
agreements with a customer.”

 

10

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23.                                 Sections 15.1(a)(ii) and (iv) of the
Partnership Agreement are hereby deleted and replaced in its entirety by the
following:

 

“(ii)                            as to the Partners and the Partnership and
their respective shareholders and members and the Affiliates of each of them and
to the professional advisors of any of the foregoing Persons;”

 

“(iv)                        as to such information as is required by law to be
disclosed by the Partners or the Partnership and COP and its Affiliates,
including, without limitation, disclosures by Cheniere, COP and its Affiliates
and Contango to comply with Securities and Exchange Commission filing and
disclosure requirements; and”

 

24.                                 Cheniere and Contango hereby acknowledge
that following the Closing COP will own 50% of the General Partner. 
Accordingly, Section 16.1(b) of the Partnership Agreement is hereby deleted and
replaced in its entirety by the following:

 

“(b)  Notwithstanding Section 16.1(a) but subject to the Loan Documents, in the
event that LNG Investments desires to transfer any portion of its Interest in
one transaction or in a series of related transactions (i) in which none of the
General Partner’s interest in the Partnership and none of the remaining capital
stock of the General Partner that is held by Michael S. Smith is being sold or
transferred and (ii) which would result in LNG Investments’ Percentage Interest
being less than 20%, LNG Investments shall deliver a written notice to Cheniere
and Contango specifying the identity of the prospective transferee(s) and
disclosing in reasonable detail the price, the type of consideration and other
terms and conditions of the proposed transfer. Cheniere and Contango may elect
to participate in the proposed transfer by delivering a notice to LNG
Investments and the proposed transferee(s) within fifteen (15) days (the
“Acceptance Period”) of the date of the notice from LNG Investments.  If
Cheniere or Contango elects to participate in such transfer, each of Cheniere
and Contango, respectively, will be entitled to sell in such proposed transfer,
at the same price and on the same terms as LNG Investments, a portion of its
Interest equal to the product of (x) the quotient determined by dividing the
Interest then held by Cheniere or Contango, as applicable, by the aggregate
Interest then held by LNG Investments multiplied by (y) the aggregate Interest
to be sold in such proposed transfer (the mechanics contained in this sentence,
referred to as the “Tag-Along Procedures”).  It is understood and agreed that
LNG Investments may elect to convert to a limited partnership or a limited
liability limited partnership, and, in the event of such conversion, “LNG
Investments” shall mean such entity as converted, and any such conversion shall
not trigger any rights of Cheniere or Contango in this Agreement.  In connection
with any transaction under this Section 16.1(b), LNG Investments agrees to use
commercially reasonable efforts to cause the buyer of any Interests in such
transaction to purchase 100% of the Interests which LNG Investments, Cheniere
and/or Contango desire to sell in such transaction; provided, however, LNG
Investments shall have no obligation or liability in the event that the buyer
does not desire to purchase any Interests beyond that to be transferred under
Section 16.1(b).  The rights contained in this Section 16.1(b) are personal to
each of Cheniere and Contango, and may not be transferred to any other Person,
including in connection with a sale of

 

11

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Interests, without the prior written consent of the General Partner, which may
be withheld in its sole discretion.”

 

25.                                 Section 16.1 of the Partnership Agreement is
further amended by adding the following clauses (c), (d) and (e) thereto:

 

“(c)  In the event that Michael S. Smith desires to commence marketing efforts
in connection with any transaction under Section 16.1(b) in which (i) all or a
portion of the remaining capital stock of the General Partner that is held by
Michael S. Smith is being transferred and (ii) would result in LNG Investments’
Percentage Interest being decreased, Michael S. Smith shall (x) provide written
notice to each of Cheniere and Contango and (y), to the extent Cheniere and
Contango desire to participate, use his commercially reasonable efforts to
include the Interests held by Cheniere and Contango in the marketing efforts for
such Interests of LNG Investments and his interest in the General Partner in
order to afford to each of Cheniere and Contango the opportunity to sell their
Interests in such transaction.  In the event that Cheniere and/or Contango elect
to not participate in such marketing efforts, the right of any such
non-participating Person to participate in any transfer of Interests under this
Section 16.1(c) with respect to the resulting transaction in which all or a
portion of LNG Investments’ Interests or Michael S. Smith’s interest is
transferred shall automatically terminate.  Each of Cheniere and Contango agree
to provide written notice to Michael S. Smith of their respective election of
whether to participate in such marketing efforts within fifteen (15) days of
receiving notice from Michael S. Smith under this Section 16.1(c).  To the
extent that either Cheniere or Contango do not respond in such time period, such
non-responding Person shall be deemed to have elected to not so participate. 
The terms of any transfer of Interests resulting from such marketing efforts
shall be subject to the prior notice, Acceptance Period and Tag-Along Procedures
set forth in Section 16.1(b); provided, however, that the Acceptance Period
shall be reduced to five (5) days.  In any transaction or series of related
transactions in which a portion of the interest of Michael S. Smith in the
General Partner and a portion of the Interest of LNG Investments in the
Partnership are being transferred, 100% of the consideration paid in such
transaction or series of related transactions shall be deemed to be paid for the
Interest of LNG Investments in the Partnership and 0% of the consideration shall
be deemed to be paid for the interest of Michael S. Smith in the General
Partner.  No transfer by Michael S. Smith of capital stock of the General
Partner shall be permitted after the transfer of 50% of such stock to COP at the
Closing pursuant to the Omnibus Agreement except for a transfer of the entirety
of the remaining 50% of such stock, and any such transfer must be made to a
transferee that is or will become in the transaction, or that is or will become
in the transaction an Affiliate of, a Limited Partner with an Interest of at
least 20%.

 

(d)  Notwithstanding anything contained in this Section 16.1 to the contrary,
none of Michael S. Smith, LNG Investments, Cheniere or Contango shall be
obligated to enter into any transaction with respect to the sale of their
Interests; provided that any election by either Cheniere or Contango under
Section 16.1(b) to participate in a transfer shall be irrevocable once made.

 

12

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

 

(e)  Any transfer by Michael S. Smith of any interest in LNG Investments shall
be deemed to be a transfer of LNG Investments’ Percentage Interest under
Sections 16.1(b) and (c).  For so long as Michael S. Smith holds any interest in
the General Partner, any transfer by the General Partner of any interest in the
Partnership shall be deemed to be a transfer by Michael S. Smith of capital
stock of the General Partner under Section 16.1(c).”

 

26.                                 Article XIX of the Partnership Agreement is
hereby amended by inserting the following phrase at the end of the first
sentence thereof: “subject to the rights of any pledgee of any direct or
indirect interest in the General Partner in connection with the Loan Documents,
and its successors and assigns, to become a General Partner and so long as no
default shall occur under the Loan Documents”.

 

27.                                 The Partnership Agreement, as modified by
this Amendment, is hereby ratified and confirmed and shall continue in full
force and effect.

 

28.                                 This Amendment may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.  Each Party hereto agrees
to accept the facsimile signature of the other Parties hereto and to be bound by
its own facsimile signature; provided, however, that the Parties shall exchange
original signatures by overnight mail.

 

 

[Remainder of Page Intentionally Left Blank]

 

13

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

 

IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly
executed on the date first set forth above.

 

 

 

GENERAL PARTNER:

 

 

 

 

FREEPORT LNG-GP, INC.

 

 

 

 

 

 

 

By:

 

 

 

 

Name:  Michael S. Smith

 

 

Title:  Chief Executive Officer

 

 

 

 

 

 

 

LIMITED PARTNERS:

 

 

 

 

FREEPORT LNG INVESTMENTS, LLLP

 

 

 

 

By:

Freeport LNG Investments GP, Inc.,

 

 

its General Partner

 

 

 

 

By: 

 

 

 

 

Name: Michael S. Smith

 

 

Title:  President

 

 

 

 

 

 

 

CHENIERE LNG, INC.

 

 

 

 

 

 

 

By:

 

 

 

 

Name:  Charif Souki

 

 

Title:  President

 

 

 

 

CONTANGO SUNDANCE, INC.

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

14

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

 

SCHEDULE I

 

Transaction Documents

 

[All in form transmitted to Cheniere and Contango at 7:30 p.m., December 20,
2003]

 

1.                                       Omnibus Agreement by and among Freeport
LNG Development, L.P., Freeport LNG-GP, Inc. and ConocoPhillips Company dated as
of December 20, 2003.

 

2.                                       Stock Purchase Agreement by and between
Michael S. Smith and [ConocoPhillips Entity] dated as of                , 2004.

 

3.                                       Stockholders Agreement by and between
Michael S. Smith and [ConocoPhillips Entity] dated as of                , 2004.

 

4.                                       Freeport LNG Development, L.P. Senior
Secured Loans Summary of Terms and Conditions.

 

15

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

 

SCHEDULE 5.20
to
Credit Agreement

 

APPROVED DEVELOPMENT AND CONSTRUCTION COST REIMBURSEMENTS

 

See Attached.

 

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

 

Title

 

Name

 

Memo

 

 

 

 

 

Type

 

Num

 

Gross
Expense
Amount

 

Reimbursable
Portion from
Dec 21, 03
F’wd

 

Notes

 

FLNG Entity

 

 

 

Reimbursable Expenses

Account

 

Sub-Account

Intentionally Blank

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

09/11/2003

 

Brazos River Harbor Navigation District

 

09.01.03 - 02.28.04

 

Quintana Site

 

Rental

 

Check

 

1374

 

175,000.00

 

58,333.33

 

Reflects 2 mos of 6 mos total

 

Development

09/17/2003

 

Brazos River Harbor Navigation District

 

09.01.03 - 02.28.04

 

Quintana Site

 

Rental

 

Check

 

1376

 

50,000.00

 

16,666.67

 

 

 

Development

01/12/2004

 

Wells Fargo

 

Service Charge

 

Bank Service Charges

 

 

 

Check

 

EFT

 

7.00

 

7.00

 

 

 

Land

01/14/2004

 

Brazos River Harbor Navigation District

 

Legal Fees 08.03 - 11.03, Legal Fee Deposit $40,000 + Other Deposits $99,500

 

Legal

 

Quintana Site

 

Check

 

1611

 

193,441.71

 

139,500.00

 

Reflects only deposit amounts

 

Development

01/14/2004

 

Brazos River Harbor Navigation District

 

Cashier’s Check

 

Quintana Site

 

Rental

 

General Journal

 

JRF

 

50,000.00

 

50,000.00

 

 

 

Development

01/27/2004

 

Patterson & Edquist

 

December 2003, Port Lease

 

Legal

 

Quintana Site

 

Check

 

1632

 

30,533.56

 

2,652.56

 

 

 

Development

01/29/2004

 

Brazos River Harbor Navigation District

 

Cashier’s Check

 

Quintana Site

 

Rental

 

General Journal

 

JRF

 

50,000.00

 

50,000.00

 

 

 

Development

02/13/2004

 

Brazos River Harbor Navigation District

 

Rental 3.1.04 - 8.31.04

 

Quintana Site

 

Rental

 

Check

 

1655

 

175,000.00

 

175,000.00

 

 

 

Development

03/02/2004

 

Mustang Engineering

 

11.28.03 - 12.26.03 (Non reimbursable Z Tracts)

 

Engineering

 

Pipeline (Engineering & ROW)

 

Check

 

1697

 

3,750.74

 

906.75

 

Reflects work from Dec 21 fwd

 

Development

03/02/2004

 

Patterson & Edquist

 

Pipeline ROW 01.04

 

Legal

 

Quintana Site

 

Check

 

1702

 

1,732.50

 

1,732.50

 

 

 

Development

03/02/2004

 

Patterson & Edquist

 

Port Lease 01.04

 

Legal

 

Quintana Site

 

Check

 

1702

 

35,413.84

 

35,413.84

 

 

 

Development

03/11/2004

 

Wells Fargo

 

Service Charge

 

Bank Service Charges

 

 

 

Check

 

 

 

7.00

 

7.00

 

 

 

Land

03/12/2004

 

Brazos River Harbor Navigation District

 

 

 

Quintana Site

 

Lease Title (Non-Reimbursable)

 

Check

 

2

 

100,000.00

 

100,000.00

 

 

 

Land

03/12/2004

 

Brazos River Harbor Navigation District

 

 

 

Quintana Site

 

Rental

 

Check

 

1

 

50,000.00

 

50,000.00

 

 

 

Land

03/15/2004

 

Mustang Engineering

 

01.16.04 - 01.30.04 - Pipeline ROW

 

Engineering

 

Pipeline (Engineering & ROW)

 

Check

 

1735

 

11,873.17

 

11,873.17

 

 

 

Development

03/15/2004

 

Patterson & Edquist

 

Pipeline ROW 02.04

 

Legal

 

Quintana Site

 

Check

 

1737

 

2,502.50

 

2,502.50

 

 

 

Development

03/15/2004

 

Patterson & Edquist

 

General Matters 02.04

 

Legal

 

Quintana Site

 

Check

 

1737

 

27,420.49

 

27,420.49

 

 

 

Development

03/16/2004

 

Mustang Engineering

 

Initial Funding for Right-Of-Way Options; Mustang Acting as Agent for FLNG

 

Engineering

 

Pipeline

 

Check

 

Wire

 

110,000.00

 

110,000.00

 

 

 

Land

03/18/2004

 

Deluxe Bus Sys Products

 

Laser Check Order

 

Bank Service Charges

 

 

 

Check

 

EFT

 

157.99

 

157.99

 

 

 

Land

03/30/2004

 

Brownstein, Hyatt And Partner

 

01.01.04 - 01.31.04

 

Legal

 

Quintana Site

 

Check

 

1756

 

26,282.00

 

26,282.00

 

 

 

Development

03/30/2004

 

CSC

 

Freeport LNG-GP, Inc. DE Annual Reg. Agent & Filing 01.01.04 - 12.31.04

 

Legal

 

Other

 

Check

 

1761

 

510.00

 

255.00

 

= 6/12ths for 1/1/04 to 12/31/04

 

Development

03/30/2004

 

CSC

 

Freeport LNG-GP, Inc. TX Annual Reg Agent & State Fee, 01.01.04 - 12.31.04

 

Legal

 

Other

 

Check

 

1761

 

1,088.00

 

544.00

 

= 6/12ths for 1/1/04 to 12/31/04

 

Development

04/13/2004

 

Wells Fargo

 

Service Charge

 

Bank Service Charges

 

 

 

Check

 

 

 

15.00

 

15.00

 

 

 

Land

04/15/2004

 

Brazos River Harbor Navigation District

 

 

 

Quintana Site

 

Lease Title (Non-Reimbursable)

 

Check

 

1030

 

391,600.00

 

391,600.00

 

 

 

Land

04/15/2004

 

Mustang Engineering

 

01.02.04 - 01.30.04

 

Quintana Site

 

Lease Title Non-reimbursable

 

Check

 

1796

 

1,174.69

 

1,174.69

 

 

 

Development

04/27/2004

 

Fulbright & Jaworski LLP

 

12.03

 

Legal

 

Quintana Site

 

Check

 

1819

 

7,879.68

 

225.00

 

Reflects work from Dec 21 fwd

 

Development

04/27/2004

 

Fulbright & Jaworski LLP

 

01.04

 

Legal

 

Quintana Site

 

Check

 

1819

 

240.00

 

240.00

 

 

 

Development

04/27/2004

 

Fulbright & Jaworski LLP

 

02.04

 

Legal

 

Quintana Site

 

Check

 

1819

 

336.25

 

116.25

 

 

 

Development

04/27/2004

 

Fulbright & Jaworski LLP

 

03.04

 

Legal

 

Quintana Site

 

Check

 

1819

 

45.47

 

45.47

 

 

 

Development

05/05/2004

 

Brownstein, Hyatt And Partner

 

02.01.04 - 02.29.04

 

Legal

 

Quintana Site

 

Check

 

1829

 

22,584.50

 

22,584.50

 

 

 

Development

05/05/2004

 

Mustang Engineering

 

02.01.04 - 02.29.04, ROW

 

Engineering

 

Pipeline (Engineering & ROW)

 

Check

 

1847

 

12,197.00

 

12,197.00

 

 

 

Development

05/05/2004

 

Mustang Engineering

 

02.01.04 - 02.29.04, ROW

 

Engineering

 

Pipeline (Engineering & ROW)

 

Check

 

1847

 

40,571.63

 

40,571.63

 

 

 

Development

05/05/2004

 

Patterson & Edquist

 

03.04

 

Legal

 

Pipeline ROW

 

Check

 

1851

 

1,320.00

 

1,320.00

 

 

 

Development

05/05/2004

 

Patterson & Edquist

 

03.04

 

Legal

 

Port Title COP Meeting

 

Check

 

1851

 

35,550.22

 

35,550.22

 

 

 

Development

05/18/2004

 

Village Quintana

 

Quintana Site Expenses

 

Professional Fees

 

Legal Fees

 

Check

 

1001

 

7,500.00

 

7,500.00

 

 

 

Land

06/22/2004

 

Mustang Engineering

 

02.01.04 - 02.29.04, Pipeline ROW

 

Quintana Site

 

Other

 

Check

 

1937

 

148,713.44

 

148,713.44

 

 

 

Development

06/07/2004

 

Patterson & Edquist

 

04.04

 

Legal

 

Quintana Site

 

Check

 

1911

 

26,976.25

 

26,976.25

 

 

 

Development

06/30/2004

 

Brownstein, Hyatt And Partner

 

April legal fees

 

Legal

 

Quintana Site

 

not yet pd

 

 

 

161,302.59

 

5,852.15

 

Only $6k land related

 

Development

06/30/2004

 

Patterson & Edquist

 

Pipeline ROW

 

Legal

 

Quintana Site

 

not yet pd

 

 

 

3,556.50

 

3,556.50

 

 

 

Development

06/30/2004

 

Patterson & Edquist

 

General Land & Port Lease

 

Legal

 

Quintana Site

 

not yet pd

 

 

 

14,515.27

 

14,515.27

 

 

 

Development

06/30/2004

 

Technip

 

Estimated April, May, and June construction support costs

 

 

 

 

 

not yet pd

 

 

 

240,000.00

 

240,000.00

 

Portion of $900k total Ap/My/Jn

 

Development

06/30/2004

 

Shiner Moseley

 

 

 

 

 

 

 

not yet pd

 

 

 

50,000.00

 

50,000.00

 

Portion of $900k total Ap/My/Jn

 

Development

06/30/2004

 

Mustang Engineering

 

 

 

 

 

 

 

not yet pd

 

 

 

120,000.00

 

120,000.00

 

Portion of $900k total Ap/My/Jn

 

Development

06/30/2004

 

King & Spalding

 

 

 

 

 

 

 

not yet pd

 

 

 

280,000.00

 

280,000.00

 

Portion of $900k total Ap/My/Jn

 

Development

06/30/2004

 

Mendain Worldwide

 

 

 

 

 

 

 

not yet pd

 

 

 

60,000.00

 

60,000.00

 

Portion of $900k total Ap/My/Jn

 

Development

06/30/2004

 

Chart, Inc (pd via Technip)

 

 

 

 

 

 

 

not yet pd

 

 

 

150,000.00

 

150,000.00

 

Portion of $900k total Ap/My/Jn

 

Development

Intentionally Blank

 

 

 

 

 

 

 

 

 

 

 

 

 

2,870,798.99

 

2,472,008.17

 

 

 

 

 

1

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

 

Reimbursable Expenses

 

Name

 

Memo

 

Account

 

Sub-Account1

 

Type

 

Num

 

Gross
Expense
Amount

 

Reimbursable
Portion from
Dec 21, 03 F’wd

 

Notes

 

FLNG Entity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Post Dec 21

 

 

 

 

 

Summary of Pre-Paids / Reimbursable Costs by Vendor

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brazos River Harbor Navigation District

 

 

 

 

 

 

 

 

 

 

 

 

 

1,031,100.00

 

 

 

 

 

Brownstein Hyatt And Farber

 

 

 

 

 

 

 

 

 

 

 

 

 

54,718.65

 

 

 

 

 

CSC

 

 

 

 

 

 

 

 

 

 

 

 

 

799.00

 

 

 

 

 

Chart Inc (pd via Technip)

 

 

 

 

 

 

 

 

 

 

 

 

 

160,000.00

 

 

 

 

 

Deluxe Bus. Sys.  Products

 

 

 

 

 

 

 

 

 

 

 

 

 

157.99

 

 

 

 

 

Fulbright & Jaworski LLP

 

 

 

 

 

 

 

 

 

 

 

 

 

628.72

 

 

 

 

 

King & Spalding

 

 

 

 

 

 

 

 

 

 

 

 

 

280,000.00

 

 

 

 

 

Meridian Worldwide

 

 

 

 

 

 

 

 

 

 

 

 

 

60,000.00

 

 

 

 

 

Mustang Engineering

 

 

 

 

 

 

 

 

 

 

 

 

 

446,436.68

 

 

 

 

 

Patterson & Edquist

 

 

 

 

 

 

 

 

 

 

 

 

 

151,640.13

 

 

 

 

 

Shiner Moseley

 

 

 

 

 

 

 

 

 

 

 

 

 

50,000.00

 

 

 

 

 

Technip

 

 

 

 

 

 

 

 

 

 

 

 

 

240,000.00

 

 

 

 

 

Village of Quintana

 

 

 

 

 

 

 

 

 

 

 

 

 

7,500.00

 

 

 

 

 

Wells Fargo

 

 

 

 

 

 

 

 

 

 

 

 

 

29.00

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

2,472,008.17

 

 

 

 

 

 

Summary of Pre-Paids / Reimbursable Costs by Entity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FLNG Development

 

Development

 

 

 

 

 

 

 

 

 

 

 

1,812,721.18

 

 

 

 

 

FLNG Land

 

Land

 

 

 

 

 

 

 

 

 

 

 

659,286.99

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

2,472,008.17

 

 

 

 

 

 

2

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