Exhibit 10.2


 










*** 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


 










 


Dated as of July 2, 2004


 










 


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

  	
   

  



 


i
















 


	
  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
















 


	
  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

  	
   

  



 


iii
















 


	
  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
















 


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).


 
















 


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


 


2
















 


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


 


3
















 


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
















 


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
















 


(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
















 


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
















 


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
















 


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
















 


(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
















 


(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.


 


11
















 


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
















 


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
















 


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.


 


14
















 


(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


 


15
















 


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;


 


16
















 


(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.


 


17
















 


(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


 


18
















 


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.


 


19
















 


(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


 


20
















 


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


 


21
















 


(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


 


22
















 


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


 


23
















 


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);


 


24
















 


(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


 


25
















 


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


 


26
















 


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;


 


27
















 


(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


 


28
















 


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


 


29
















 


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


 


30
















 


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


 


31
















 


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;


 


32
















 


(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.


 


33
















 


(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.


 


34
















 


(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


 


35
















 


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


 


36





















 


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


 


37
















 


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.


 


38
















 


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


 


39
















 


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


 


40
















 


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


 


41
















 


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


 


42
















 


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;


 


43
















 


(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,


 


44
















 


(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,


 


45
















 


(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


 


46
















 


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


 


47
















 


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


 


48
















 


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


 


49
















 


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).


 


50
















 


(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


 


51
















 


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


 


52
















 


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:


 


53
















 


(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;


 


54
















 


(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;


 


55
















 


(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


 


56
















 


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,


 


57
















 


(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.


 


58
















 


(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.


 


59
















 


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.


 


60
















 


(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


 


61
















 


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:


 


64
















 


(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


 


72
















 


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:


 


75
















 


(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


 


79

















 


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


 


81

















 


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


 


82

















 


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


 


83

















 


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,


 


84

















 


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.


 


102

















 


(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


 


104

















 


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.


 


105

















 


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.


 


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BLANK.  NEXT PAGE IS A

SIGNATURE PAGE.]


 


106

















 


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

  	
   

  



 

















 


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


 

















 


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

















 


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

















 


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

















 


“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

















 


“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

















 


“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

















 


“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






















 


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.


 


9

















 


“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.


 


10

















 


“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.


 


11

















 


“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.


 


12

















 


“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.


 


13

















 


“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.


 


14

















 


“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.


 


15

















 


“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,


 


16

















 


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


 


17

















 


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.


 


18

















 


“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


 


19

















 


(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

















 


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:


 


21

















 


(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.


 


22

















 


“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

















 


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.


 


24

















 


“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


 


25

















 


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

















 


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.


 


27

















 


“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.


 


28

















 


“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,


 


29

















 


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.


 


30

















 


“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:


 


31

















 


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


 


32

















 


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.


 


33

















 


“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.


 


34

















 


“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.


 


35

















 


“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


 


36

















 


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.


 


37

















 


“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


 


38

















 


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.


 


39

















 


“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.


 


40

















 


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

  



 

















 


	
   

  	
  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

















 


	
   

  	
  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

















 


	
   

  	
  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

















 


	
   

  	
  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.

  



 


5

















 


	
   

  	
  [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

















 


	
  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

















 


	
   

  	
  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

















 


	
   

  	
  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

  



 


9

















 


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.


 

















 


(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

















 


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.


 


3

















 


(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

















 


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

















 


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

















 


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

















 


(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

















 


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

















 


	
  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.


 
















 


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


 


2
















 


(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


 


3
















 


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,


 


4
















 


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;


 


5
















 


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.


 


6
















 


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.


 


7
















 


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:


 


8
















 


(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.


 


9
















 


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
















 


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).


 


11
















 


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
















 


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
















 


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
















 


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
















 


(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
















 


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
















 


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


 


18
















 


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));


 


19
















 


(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 


 


21
















 


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;


 


22
















 


(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


 


23
















 


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


 


24
















 


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


 


25
















 


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.


 


26
















 


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


 


27
















 


(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.


 


28
















 


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.


 


32
















 


(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.


 


33





















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.


 


34
















 


(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.


 


35
















 


(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


 


36
















 


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


 


37
















 


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


 


39
















 


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
















 


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.


 


41
















 


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
















 


(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.


 


43
















 


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.


 


44
















 


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
















 


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.


 


46
















 


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

  
					



 


47
















 


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)).


 


48
















 


Exhibit
A


 


Certificate
of Formation of Partnership


 


See
attached.


 


49
















 


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


 


1
















 


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
















 


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
















 


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
















 


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
















 


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
















 


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