Document:

Production Services Agreement

 Exhibit 10.7 
 PRODUCTION SERVICES AGREEMENT
  

THIS MASTER PRODUCTION SERVICES AGREEMENT (“Agreement”) is entered into as of July 20, 2009 between Audience Productions, Inc. a Washington corporation (“Financier”) and Bridge Productions, Inc., a Washington state corporation (“Service Company”). During the Term of this Agreement separate and distinct Statements of Work (“SOWs”) for each project to be covered by this Agreement shall be approved and executed by the parties and attached hereto, as Exhibit A for the first SOW, Exhibit B for the second SOW and continuing alphabetically thereafter.

 

RECITALS
  

WHEREAS, Financier desires to finance and arrange for the production of one or more Pictures and Service Company desires to furnish services thereon, pursuant to the terms and conditions set forth herein and as supplemented and/or revised in each mutually approved SOW, and;
 

WHEREAS, the parties desire that each SOW shall include the following mutually approved attachments: (i) Attachment 1 to each SOW shall be copy of the screenplay that is the subject of the SOW (the “Screenplay”); (ii) Attachment 2 to each SOW shall be a detailed schedule for performance of the production services that Service Company is to provide on the Screenplay (the “Production Schedule”); (iii) Attachment 3 to each SOW shall be the budget for the Service Company’s production of a motion picture (the “Picture”) based on the Screenplay (the “Budget”); (iv) Attachment 4 to each SOW shall be the schedule for the transfer of funds from Financier to Service Company (the “Cash Flow Schedule”); and Attachment 5 to each SOW shall be a list of the deliverables that Service Company shall deliver to Financier in fulfillment of Service Company’s obligations on the Picture (the “Deliverables”).
 

NOW, THEREFORE, in consideration of the promises and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows:

	 	1.	PRODUCTION OF THE PICTURE.

  

	 	(a)	Subject to the terms and conditions hereinafter set forth and in the applicable SOW, Financier agrees to furnish or cause a third party to furnish to Service Company, on a mutually approved cash flow schedule (“Cash Flow Schedule”), attached to the applicable SOW as Attachment 4, the amount of financing which Service Company represents, to the best of its ability, is the sum that will be required to finance the production of the Picture, and Service Company shall use all sums advanced hereunder for the sole purpose of furnishing the production services for the Picture in accordance with the approved screenplay, budget and production schedule, subject only to material deviations therefrom which are approved in writing by Financier under an applicable SOW. All obligations of Financier shall be subject to Financier first obtaining a completion bond from a reputable company, if necessary, as determined jointly by Financier and Service Company, which in form and substance shall be subject to Financier’s and Service Company’s approval, and the cost of which shall be added to the approved budget as an additional cost. All sums advanced hereunder shall be deposited in a production account, in accordance with the agreed upon Cash Flow Schedule, which has been designated, approved, and is controlled by Financier.

 

	 	(b)	Service Company’s obligations shall be complete upon its delivery to Financier of the Deliverables.

 

	 	(c)	Financier shall have the right of designation and approval of the following parties and/or entities engaged by Service Company on each Picture: writers, director, all producers (including producers, executive producers, co-producers, co-executive producers, line producers and associate producers), casting director, “star” talent, director of photography, editor, composer, production accountant and insurance company. Financier and Service Company shall jointly approve the location by Country and State or Province where all production and post production activities will take place taking into account the Budget and government sponsored production and/or tax incentives. All other parties and entities engaged on each Picture shall be selected and engaged by Service Company in consultation with Financier, provided that all such engagements (i) shall be with professional parties experienced in the respective fields in which they are each engaged, (ii) do not attach signatory status to any collective

 

	 	(c)	bargaining agreement that would create executory obligations for Financier or Service Company unless signatory status is agreed to in advance by Financier or as such status may be required by law; (iii) are upon terms and conditions standard within a reasonable range in the industry for such services, and (iv) provide for compensation to such parties in conformance with the Budget.

 

	 	(d)	During production, Service Company may reasonably reallocate expenses, up to five percent (5%), within the Budget due to cost shifts and needs arising from exigencies of production provided that total costs do not exceed the approved Budget. Any reallocation of budget expenses in excess of five percent (5%) shall be mutually agreed to between Financier and Service Company.

 

	 	(e)	Service Company shall perform all of its obligations hereunder to the best of its ability and in a workmanlike manner. Financier, or its assignee, shall own all right, title, and interest in and to all items that are conceived, made, discovered, written or created by Service Company personnel alone or jointly with third parties under this Agreement, including the Deliverables, whether completed or works-in-progress.  Without limiting the previous sentence, all Deliverables and other results and proceeds of Service Company’s services on a Picture, in whole and in part, shall be deemed “works made for hire” for Financier for all purposes of copyright law, and the copyright shall belong solely to Financier.  To the extent that any such Deliverables or other results and proceeds do not fall within the specifically enumerated works that constitute “works made for hire” under the United States copyright laws, and to the extent that any Deliverables or other results and proceeds include materials subject to copyright, trade secret, or other proprietary right protection then by virtue of this provision Service Company hereby immediately and irrevocably assigns, without further action, to Financier all its right, title and interest that it may be deemed to have in and to any of the Picture’s elements, which shall include, without limitation, all literary material written for the Picture, all stills, artwork and designs used in connection with the Picture, all film clips, recordings, trailers, sound tracks, and all other tangible and intangible property relating to the Picture, and all rights in and to the foregoing, exercisable throughout the universe, in perpetuity, and all subsidiary, ancillary and related rights, performing rights, publishing rights, merchandising and commercial tie-up rights, and the right to use the names, likenesses, and voices of all persons rendering services in connection with the Picture.  Service Company shall obtain, at its expense, such assignments for Financier, from Service Company’s employees, agents, and contractors as necessary to effectuate the purposes of the previous sentence.  Service Company also agrees not to assert any moral rights under applicable copyright law with regard to such items and Deliverables and to require its employees to do the same.  Service Company’s rights under any Agreement in connection with the Picture shall be freely assignable to Financier and upon Financier’s request, Service Company agrees to acknowledge, perform, execute, and deliver such assignments and other documents and instruments as may be necessary or appropriate to evidence Financier’s acquisition of rights hereunder. The Picture shall contain such production or presentation or release credit to Financier as Financier shall determine. Additionally, the end titles shall contain a copyright notice in the following form: “Copyright 20__, Audience Productions, Inc. All rights reserved,” or such other copyright notice as Financier shall designate.

 

	 	(f)	Upon Financier’s acquisition of all right, title and interest in and to the Picture as provided above, Financier shall assume, or cause the distributor of the Picture to contractually adhere to, the executory obligations of all contracts undertaken by Service Company in the normal course of business to produce the Picture, and Service Company shall be relieved of any liabilities arising therefrom.

 

	 	(g)	If Service Company, upon reasonable notice, shall fail to execute any instrument or document, which Financier requires to implement any term hereof or to perfect its rights hereunder, Financier shall have the right to execute such document or instrument on Service Company’s behalf, such right being an irrevocable power coupled with an interest. Copies of any such documents or instruments shall be immediately provided to Service Company.

 

 

	 	2.	PRODUCTION CONTRACTS. All contracts for personnel (including casting and directing), studio hire, purchase of goods and services, laboratory work and all other licenses, contracts and obligations in connection with the production of the Picture by Service Company, shall be made and entered into by Service Company in its own name as principal and not as agent for Financier and no obligations whatsoever shall be imposed upon Financier thereunder. All such contracts or undertakings shall be consistent with the provisions of this Agreement and industry custom and practice, which in no event shall be less restrictive than the requirements of Service Company under this Agreement. Such contracts and undertakings shall not be terminated, canceled, modified or rescinded in any manner which would or might prejudice the rights of Financier hereunder. All such contracts shall be assignable to Financier without restriction except only for obligations arising from approved artist agreements and collective bargaining agreements. Service Company shall have all responsibilities of an employer with respect to those personnel locally engaged by Service Company, including those arising under any present or future legal requirements relating to workers' compensation, insurance, social security, tax withholding, pension, health and welfare plans under any legal requirements or any applicable collective bargaining agreement, including foreign country equivalents of the foregoing, if any, although upon delivery of the Picture and completion of all obligations required hereunder of Service Company, Financier shall assume or cause the distributor of the Picture to assume such obligations and hold Service Company harmless therefrom. Service Company shall use due care in the selection and purchase of any items to be used in connection with the production of the Picture and shall assign Financier on demand all rights which Service Company shall obtain, by warranty and otherwise, from the supplier of such items.

 

	 	3.	CREDIT. Provided that Service Company fulfills its material obligations with regard to each SOW, then Service Company shall receive a single card “In Association With” production credit in the main titles of the Picture, in the next position immediately following Financier’s on-screen credit, or if Financier does not take an on-screen credit then in no later than second position after the distributor’s on-screen credit. Service Company’s credit shall be equal in size, font and prominence as to any other production or distribution company credit. Service Company shall also have a closing credit in the credit roll of the Picture to include Service Company’s logo with placement and all other elements of the closing credit at Financier’s discretion. Service Company shall be credited in all print and Internet ads in which any other production company credit appears, except for standard industry exclusions. In addition, as to each Picture on which he provides services, Eugene Mazzola shall be individually credited as a “Producer” in the main credits, either on a single card or in first position on a shared card, equal in size, font and prominence as to any other on-screen producer credit and in all print and Internet ads in which any other Producer credit appears, except for standard industry exclusions. No accidental or inadvertent failure to accord credit as provided for herein shall be deemed a material breach of this Agreement provided that Financier undertakes reasonable steps to correct such failure on a prospective basis.

 

	 	4.	INSURANCE. Service Company shall carry and pay for production insurance consistent with the Budget and the Cash Flow Schedule to cover all customary risks in connection with the production of motion pictures and the parties’ performance of their respective obligations hereunder, including without limitation, general liability, cast, and Workers’ Compensation insurance, which insurance shall specifically name Financier as an insured party and beneficiary. Service Company shall furnish Financier with certificates of insurance stating and certifying the amount and type of insurance and that Financier is an insured party and beneficiary thereunder along with copies of all said policies. If Financier or its  licensees or assignees require Errors and Omissions Insurance, and such insurance is not part of the Budget, the policy shall be secured and paid for by Financier prior to the first public exhibition of the Picture and such policy shall specifically name both Financier, Service Company and Eugene Mazzola as insured parties and beneficiaries.

 

	 	5.	CONTRACT PRICE. Time is of the essence with regard to Financier’s timely release of funds pursuant to the applicable Cash Flow Schedule. Except as provided in Paragraph 16 below, on the condition that Service Company is not in breach of its material obligations hereunder or under an SOW, Financier shall pay Service Company for services rendered an aggregate sum equal to the Budget inclusive of sums budgeted as “contingency” if and as used to produce and deliver the Picture, all in accordance with the Cash Flow Schedule. Supplemental payments will be made by Financier to Service Company for additional costs incurred during production of the Picture that are in excess of the budgeted “contingency” line item and arise from decisions, choices and/or delays arising from acts or failures to act of Financier.

 

 

	 	6.	PRODUCTION SCHEDULE AND FORCE MAJEURE EVENTS. Service Company shall provide the production services and deliver the Picture and all other Deliverables in accordance with the Production Schedule, subject only to delays arising from Financier’s failure to make timely payment or Force Majeure Events. If either party’s performance is prevented, hindered or delayed by fire, flood, earthquake, elements of nature or acts of God, acts of war, terrorism, riots, civil disorders, rebellions or revolutions, strikes, or any other similar cause beyond the reasonable control of such party (each, a “Force Majeure Event”), and such non-performance, hindrance or delay could not have been prevented by reasonable precautions, then the non-performing, hindered or delayed party will be excused for such non-performance, hindrance or delay, as applicable, of those obligations affected by the Force Majeure Event for as long as such Force Majeure Event continues and such party continues to use its best efforts to recommence performance whenever and to whatever extent possible without delay, including through the use of alternate sources, workaround plans or other means.  The party whose performance is prevented, hindered or delayed by a Force Majeure Event will immediately notify the other party of the occurrence of the Force Majeure Event, describe in reasonable detail the nature of the Force Majeure Event and shall exercise best efforts to mitigate delays and costs arising from the Force Majeure Event.

 

	 	7.	DISTRIBUTION. Financier shall have sole authority over the distribution of the Picture, without limitation, including whether the Picture is distributed at all.

 

	 	8.	REPRESENTATIONS AND WARRANTIES.

  

	 	
	Service Company hereby represents, warrants and agrees as follows:

  

	 	(a)	Service Company is a corporation duly organized and existing under the laws of the State of Washington and has the right to grant all rights granted herein, and is free to enter into and fully perform this Agreement.

 

	 	(b)	No liens, encumbrances, attachments or other matters constituting or possibly constituting any impediment to the clear marketable title and unrestricted commercial exploitation or disposition of the Picture as delivered, or any rights therein or pertaining thereto shall be permitted to occur (other than executory obligations arising from collective bargaining agreements, talent agreements, music rights clearances and/or  other clearance agreements) which shall or may arise by reason of any acts, omissions or activities of Service Company in connection with the performance or enforcement of this Agreement, any applicable SOW, or attachments by Service Company in connection with any litigation which Service Company shall be plaintiff against Financier or any other party whatsoever. Service Company will not create, make, cause or permit any lien, encumbrance, pledge (except as may be required by a film processing laboratory), hypothecation or assignment of or claim against the Picture, or any rights therein, or upon the copyrights thereof, or upon the literary material upon which the Picture is based, or the release, distribution, exploitation or exhibition rights therein, or upon any proceeds therefrom or any other rights, interests or property therein or pertaining thereto.

 

	 	(c)	Service Company shall at all times indemnify, defend, and hold harmless Financier, and the partners, officers, directors, employees, licensees, shareholders, subsidiaries, and agents of each of the foregoing, and their heirs, executors, administrators, successors and assigns, from and against any and all claims, damages, liabilities, actions, causes of action, costs and expenses, including reasonable attorneys’ fees, judgments, penalties of any kind or nature whatsoever arising out of (i) Service Company’s production and delivery of the Picture; (ii) any act or omission by Service Company or any person whose services or facilities shall be furnished by Service Company in connection with the Picture; and (iii) any breach by Service Company of any representation, warranty or agreement made by Service Company hereunder.

 

	 	
	Financier hereby represents, warrants and agrees as follows:

  

	 	(d)	Financier is a corporation duly organized and existing under the laws of the State of Washington and has the right to grant all rights granted herein, and is free to enter into and fully perform this Agreement.

 

 

	 	(e)	Financier controls all rights in and to the Screenplay and /or underlying literary material upon which the Screenplay is based or to be based, including changes, supplemental material and elements incorporated into the Screenplay or Picture during or after Production pursuant to direct instructions from Financier, and Financier indemnifies Service Company from any claims (including legal fees and costs) arising therefrom.

 

	 	9.	GOOD FAITH ASSURANCE. Neither party has nor will without the other’s prior written consent: (i) enter into any agreement, commitment or other arrangement, grant any rights or do any act or thing which reasonably could or might prevent or interfere with the production and completion of the Picture or prevent or impede the performance of all of the respective party’s obligations hereunder; (ii) do or fail to do any act which reasonably might or could interfere with or otherwise prevent such party from fully complying with all of the terms hereof; or (iii) engage in any conduct materially inconsistent with this Agreement or the other party’s rights hereunder. The foregoing shall not be interpreted as impairing or preventing Financier’s absolute right to abandon production of the Picture at anytime and/or to refrain from or cause the termination of the distribution of the Picture, all as provided in Paragraphs 12 and 16 below.

 

	 	10.	DEFAULT. Service Company specifically waives all rights and remedies, if available to Service Company, of rescission, injunction, restraint and specific performance and agrees in this regard that it shall have no right to revoke, terminate or rescind any rights acquired by Financier hereunder nor to restrain production, completion or distribution of the Picture and shall have no right to compel specific performance of any of Financier's obligations hereunder. Service Company understands and agrees that its sole remedy hereunder shall be for monetary damages, if any, in the event of breach by Financier.

 

	 	11.	SECURITY INTEREST. As security for the delivery of the Picture hereunder, Service Company hereby mortgages, sells, assigns, pledges, hypothecates, and sets over to Financier as collateral all of Service Company’s right, title and interest, if any, in and to the following:

  

	 	(a)	The Picture, in whatever form it may now exist or hereafter exist, including the negative, sound material and copyright thereto.

 

	 	(b)	The literary, dramatic and music material upon which the Picture is based or to be based, including without limitation, the Screenplay and all of Service Company’s right, title and interest in and to the copyrights to the foregoing.

 

	 	(c)	All of Service Company’s right, title and interest in and to any properties or things of value pertaining to rights, contract rights, claims, properties and material set forth in (a) and (b) above, whether now in existence or hereafter acquired by Service Company.

 

	 	(d)	Any other rights Service Company may have in or relating to the Picture.

 

	 	
	It is intended that the security granted above is and shall be a “security interest” as such term is defined in the Uniform Commercial Code and Service Company hereby agrees to execute and deliver a financing statement in form and substance which complies with the Uniform Commercial Code of any and all states which Financier may hereafter require. Service Company hereby authorizes Financier or its representative to file such financing statement(s) and to execute any continuation statements as well as to perform any and all other acts Financier may deem appropriate to perfect and continue Financier’s security interest in the collateral. Service Company represents and warrants that there shall be no lien or charge or encumbrance in whole or in part upon the collateral (other than a customary laboratory lien for processing services or liens required to secure obligations under collective bargaining agreements) or proceeds derived therefrom which are equal or superior to the lien and security interest above granted and that Financier’s security interest shall at all times be and remain a first and continuing lien and security interest on the collateral until Financier is repaid the entire sum herein elsewhere provided. Service Company shall at all times keep Financier advised as to the location of all collateral herein pledged. For clarity, liens arising from third party payment obligations duly incurred by Service Company in good faith pursuant to this Agreement and an SOW that are not released by the lien holder due to Financier’s failure to issue funds to Service Company pursuant to the Budget and Cash Flow Schedule shall be Financier’s responsibility.

  

 

	 	12.	TAKEOVER RIGHTS. At any time after the occurrence of any of the events hereinafter set forth, Financier shall have the right either to issue directions and instructions regarding production of the Picture, or to take over production of the Picture. The events entitling Financier to exercise the aforesaid rights shall be the following:

  

	 	(a)	If after commencement of production, the final projected cost of production in Financier’s best judgment, after consulting with Service Company, the production accountant and the completion bond company (or if there is no completion bond company, than with at least one experienced third party motion picture producer) that total Budget will exceed the then-current Budget by five percent (5%) excluding, (i) over-Budget costs that are reimbursed by insurance; (ii) over-Budget costs caused by a direct consequence of a third party breach of contract that is not with a subcontractor of Service Company; or (iii) additional costs induced, encouraged or arising from acts of Financier; or

 

	 	(b)	Financier or Service Company’s receipt of notice from the completion bond company, if any, of concerns that must be resolved to the completion bond company’s satisfaction to prevent the completion bond company’s exercise of its take-over rights and Service Company does not take immediate action to satisfactorily address such concerns in a timely fashion.

 

	 	
	If Financier exercises its right to issue directions and instruction in keeping with the foregoing, Service Company shall fully and faithfully abide by and follow all such instructions issued in connection with the production of the Picture and Service Company shall have no further creative approval and/or other production rights concerning production, post-production and/or distribution of the Picture. If Financier exercises its takeover rights as aforesaid, Service Company shall immediately do all that is necessary to place at Financier’s disposal and under Financier’s control, all persons, production funds and other items of and concerning production of the Picture. Service Company specifically acknowledges that if Financier takes over the Picture in keeping with the foregoing, Financier may abandon the Picture or complete production as Financier may at such time determine. Notwithstanding the foregoing to the contrary, Financier’s rights concerning production of the Picture shall be subject to payment obligations, creative and other approvals, and controls that are contained in those agreements between Service Company and third parties that were entered with Financier’s knowledge which are not terminated and Service Company shall be entitled to a pro rata (based on percentage of budget spent) payment of its budgeted service fees, reduced by 15%.

  

 

	 	
	If Financier exercises its takeover rights as aforesaid, Service Company shall immediately assign to Financier all third party agreements necessary to place at Financier’s disposal and under Financier’s control, all persons, contracts and other items necessary to allow for Financier’s continued production or abandonment of the Picture. Service Company shall immediately, after receipt of such notice, exercise best efforts to settle all its accounts and third party contractual obligations. Upon  the sooner of fifteen (15) days after Financier’s exercise of its takeover rights, or Service Company’s settlement of its accounts and obligations, Service Company shall repay to Financier one hundred percent (100%) of the balance of funds remaining in the Picture’s segregated bank account. Service Company specifically acknowledges that if Financier takes over the Picture in keeping with the foregoing, Financier may abandon the Picture or complete production as Financier may at such time determine. Financier’s rights concerning production of the Picture shall be subject to payment obligations, creative and other approvals, and controls that are contained in those agreements between Service Company and third parties engaged on the Picture and Service Company shall be entitled to a pro rata (based on weeks) payment of its budgeted service fees.

  

	 	13.	TERM, MINIMUM ORDER, OPPORTUNITY TO CURE AND TERMINATION. The term of this Agreement will commence on the date first set forth above (the “Effective Date”) for a term of two (2) years (the “Term”). The Term may be extended pursuant to the parties’ mutual written agreement or as extended in an SOW. As to Financier’s payment obligations only, if Financier materially defaults in its payment obligations to Service Company, then Service Company shall give written notice to the Financier and Financier shall have forty eight hours (48) hours to cure such default. If the default is not materially cured within such

 

	 	13.	period, then Service Company, upon written notice, may terminate this Agreement and the applicable SOW. If Service Company materially defaults in the performance of any of its material obligations under this Agreement, or an SOW, then Financier shall give written notice to Service Company describing in reasonable detail the nature of the default and the Service Company shall have five (5) days to cure such default. If the default is not materially cured within such stated period, then Financier, upon written notice, may terminate this Agreement and the applicable SOW. Upon the earlier of termination as provided for herein or delivery of a completed Picture, Financier shall assume all payment obligations, creative and other approvals, and controls that are contained in third party agreements entered into by Service Company in good faith in accordance with the Budget and Production Schedule.

  

	 	14.	STATUS OF PARTIES. The parties hereto expressly agree, each for the other, that the relationship between them hereunder is that of two principals dealing with each other as independent contractors for the sole and specific purpose that Service Company shall produce and deliver the Picture, subject to the terms and conditions of this Agreement. At no time, past, present or future, shall the relationship of the parties herein be deemed or intended to constitute a relationship with the characteristics of an agency, partnership, joint venture, or of a collaboration for the purposes of sharing any profits or ownership in common. Neither party shall have the right, power or authority at any time to act on behalf of, or represent, the other party, but each party hereto shall be separately and entirely liable for its own respective debts in all respects. This Agreement is not for the benefit of any person who is not a party signatory hereto or specifically named as a beneficiary herein. Financier may assign or license its rights hereunder in whole or in part to any person, firm or corporation. Except for assignment to Financier, Service Company may not assign or license any of its rights or obligations hereunder, or under any agreement entered into by Service Company with any third party. Subject to the foregoing, the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, administrators, executors, successors and assigns, and any past, present or future parent, subsidiary or affiliate company.

 

	 	15.	NOTICES. Any and all notices, communications and demands required or desired to be given hereunder by either party hereto shall be in writing and shall be validly given or made if served either personally or if deposited in the United States mail, certified or registered, postage prepaid, return receipt requested. If such notice or demand be served personally, service shall be conclusively deemed made at the time of such personal service. If such notice or demand be served by registered or certified mail in the manner herein provided, service shall be conclusively deemed made two business days after the deposit thereof in the United States mail addressed to the party to whom such notice or demand is to be given as hereinafter set forth:

 

	 	
	          To Financier:
          Audience Productions, Inc.
          2311 N 45th Street, Suite #310
          Seattle, WA 98103
          Attn: Jay Schwartz

          To Service Company:
          Bridge Productions, Inc.
          14208 160th Avenue NE
          Woodinville, WA  98072
          Attn: Eugene Mazzola

  

	 	
	Any party hereto may change its address for the purpose of receiving notices or demands as herein provided by a written notice given in the manner aforesaid to the other party hereto, which notice of change of address shall not become effective, however, until the actual receipt thereof by the other party.

  

 

	 	16.	ABANDONMENT. Financier shall have no obligation to finance, release, broadcast, distribute, complete production of, not abandon or otherwise exploit the Picture, provided Financier indemnifies Service Company against any loss from contracts entered into with Financier’s prior consent and knowledge. In the event Financier abandons the Picture, Service Company shall be entitled to a pro rata (based on percentage of budget spent) payment of its budgeted service fees.

 

 

	 	17.	MISCELLANEOUS.

 

	 	(a)	This Agreement shall be construed, interpreted and enforced in accordance with and shall be governed by the laws of the State of Washington applicable to agreements entered into and wholly to be performed therein. In the event of any conflict between any provisions hereof and any applicable laws to the contrary, the latter shall prevail, but this Agreement shall be deemed modified only to the extent necessary to remove such conflicts.

 

	 	(b)	Each of the parties hereto shall execute and deliver any and all additional documents, and shall do any and all acts and things reasonably required in connection with the performance of the obligations undertaken hereunder and to effectuate the extent of the parties thereto.

 

	 	(c)	This Agreement constitutes the entire agreement of the parties hereto and supersedes all oral and written agreements and understandings made or entered into by the parties hereto prior to the date hereof. No amendment, change or modification of this Agreement shall be valid unless it is made in writing and signed by both parties hereto, and any waiver of a failure to perform or breach shall not operate to waive any subsequent failure to perform or breach.

 

	 	(d)	The captions appearing at the commencement of the paragraphs hereof are descriptive only and for convenience in reference to this Agreement and should there be any conflict between any such heading and the paragraph at the head of which it appears, the paragraph thereof and not such heading shall control and govern in the construction of this Agreement.

 

	 	(e)	Execution by Counterpart/Facsimile:  This Agreement, and applicable SOWs, may be executed by fax or by counterpart, which, when taken together, shall constitute one entire, complete, and binding Agreement.

 

	 	(f)	In the event of a conflict between terms of the Agreement and any of its SOWs, the terms of the SOW shall prevail and this Agreement shall be deemed modified to the minimum extent necessary to conform therewith.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date first above written.
  

	BRIDGE PRODUCTIONS, INC.
	  		 	
				
	By:	  	 /s/ EUGENE MAZZOLA
	  		 	Date: JULY 20, 2009
	Name:	  	Eugene Mazzola	  		 	
	Title:	  	President	  		 	
				
	AUDIENCE PRODUCTIONS, INC.
	  		 	
				
	By:	  	 /s/ JAY T. SCHWARTZ
	  		 	Date: JULY 20, 2009
	Name:	  	Jay T Schwartz	  		 	
	Title:	  	President	  		 	

Exhibit A
 Statement of Work For Production Services
Related To The Feature Film “Lydia Slotnick Unplugged”
  

This SOW, dated as of  July 20, 2009 is between Audience Productions, Inc. and Bridge Productions, Inc.  This SOW is incorporated into and forms a part of the Agreement dated July 20, 2009, and is subject to all terms and conditions of that Agreement.  Terms that are capitalized in this SOW have the meanings set forth in the Agreement.

Attachment 1
 Screenplay and Author(s)
  

See Exhibit 99.3 of the Prospectus for the complete script.
  

Screenplay: “Lydia Slotnick Unplugged”
  

Author(s): Andrew Craft and Michael Zam
  

Attachment 2
 Approved Budget Amount
  

				
	 ACCOUNT
	  	BUDGET
	  Story and Other Rights
	  	$	 200,000 
		
	 Producer’s Unit
	  	$	554,600
		
	 Director’s Unit
	  	$	369,700
		
	 Talent
	  	$	739,500
		
	 Travel/Living
	  	$	184,900
		
	 TOTAL STORY, PRODUCER, DIRECTOR, TALENT, T/L
	  	$	 2,048,700 
		
	 Production Staff
	  	$	517,600
		
	 Art Direction
	  	$	110,900
		
	 Set Construction
	  	$	37,000
		
	 Set Decoration
	  	$	147,900
		
	 Property Department
	  	$	73,900
		
	 Camera Operations
	  	$	258,800
		
	 Electric Operations
	  	$	184,900
		
	 Grip Operations
	  	$	147,900
		
	 Production Sound
	  	$	73,900
		
	 Mechanical Effects
	  	$	37,000
		
	 Set Operations
	  	$	37,000
		
	 Wardrobe Department
	  	$	147,900
		
	 Makeup & Hair Department
	  	$	129,400
		
	 Location Department
	  	$	428,200
		
	 Transportation Department
	  	$	431,700
		
	 Atmosphere
	  	$	110,900
		
	 Production and Film Lab
	  	$	295,800
		
	 TOTAL PRODUCTION
	  	$	3,170,700
		
	 Editing
	  	$	295,800

  

 

				
	 ACCOUNT
	  	BUDGET
	 Post-Production Film/Lab
	  	$	73,900
		
	 Post-Production Sound
	  	$	147,900
		
	 Music
	  	$	110,900
		
	 Titles
	  	$	37,000
		
	 Opticals
	  	$	18,500
		
	 Post-Production Travel/Living
	  	$	18,500
		
	 TOTAL POST PRODUCTION
	  	$	702,500
		
	  Public Company Costs: 
	  	 	 
	        Periodic Reporting (e.g. 10-Qs, 10-Ks, 8-Ks, audited financial statements, proxy statements, etc.) 
	  	 $ 	 15,300 
	        Printing and Mailing Costs for Periodic Reporting 
	  	 $ 	 10,000 
	        Directors & Officers Insurance 
	  	 $ 	 14,000 
	        Miscellaneous Public Company Costs 
	  	 $ 	 2,000 
		
	  Total Public Company Costs 
	  	 $ 	 41,300 
		
	  Legal 
	  	$	180,800
		
	 Delivery Requirements
	  	$	110,900
		
	 Production Management Fee
	  	$	600,000
		
	  Accounting 
	  	$	53,300
		
	  Securities Registration Fees 
	  	$	 10,500 
		
	  Marketing 
	  	$	37,000
		
	 Bank Fees
	  	$	64,400
		
	  General and Administrative 
	  	$	25,000
		
	 Repayment of Officer Loans 1
	  	$	50,000
		
	 TOTAL OTHER
	  	$	 1,123,200 
		
	 TOTAL STORY, PRODUCER, DIRECTOR, TALENT, TRAVEL/LIVING
	  	$	 2,048,700 
		
	 TOTAL PRODUCTION
	  	$	3,170,700
		
	 TOTAL POST PRODUCTION
	  	$	702,500
		
	 TOTAL OTHER
	  	$	 1,123,200 
		
	 SUB-TOTAL
	  	$	 7,045,100 
		
	  Completion Bond 
	  	$	195,000
		
	 Insurance
	  	$	 83,600 
		
	 Contingency
	  	$	 676,300 
		
	 TOTAL
	  	$	8,000,000

   

 1) Amount has been allocated among various line items in the budget above and is not double counted in the total. 

Attachment 3
 Production Schedule
  

The following is a preliminary production schedule and will be updated once the Budget is raised.
  

 

						
	PRODUCTION SCHEDULE 
			
	  Time 
	  	  Project Milestone 

	  t = 0 
	  	 First Day of Pre-Production 
	  t + 21 days 
	  	 Middle of Pre-Production 
	  t + 42 days 
	  	 Beginning of Principal Photography 
	  t + 63 days 
	  	 Middle of Principal Photography 
	  t + 84 days 
	  	Beginning of Post-Production 
	  t + 252 days 
	  	 Delivery of Final Print 
	  
  DEFINITIONS 
	  		  		
		
	 Pre-Production 	  	 Pre-production will commence immediately after the production services agreement is signed with Bridge Productions. We anticipate executing the agreement within 30 days after the offering is declared effective. If we are unable to execute an agreement with Bridge Productions, another reputable production company, capable of securing a completion bond, will be selected to produce the Film.
During pre-production, the Film will be broken down into individual scenes and all the locations, props, cast members, costumes, special effects and visual effects will be identified. Sets will be constructed, the crew are hired, and a start date for the beginning of principal photography will be set. At some point in pre-production there will be a read through of the script, which will be attended by all cast members with speaking parts, the producer, and the director.

The screenplay will be finalized and all of the scenes will be numbered at the beginning of pre-production to avoid confusion. This means that even though additions and deletions may still be made, any particular scene will always fall on the same page and have the same scene number. 

		
	 Principal Photography 	  	 The filming of major components of the movie involving the lead actors. This is the phase of production where the Film is actually shot. 

		
	 Post-Production 	  	 Post production is the general term for all stages of production occurring after principal photography and is also the stage that consumes the greatest amount of time.
Post-production includes:

Editing the Film (60 days)

Recording the soundtrack (30 days)

Editing the soundtrack (15 days)

Adding visual, sound, and special effects (10 days)

Transfer of the Film to video or data (5 days)

		
	 Final Print 	  	 Final, fully-edited version of the film that is ready for sale or distribution. 

Attachment 4
 Cash Flow Schedule
  

The following is a preliminary Cash Flow Schedule and will be updated once the Budget is raised.
  

						
	 FUNDS DISTRIBUTION SCHEDULE 
			
	  Time 
	  	  Project Milestone 
	  	 Amount Distributed 
	  t = 0 
	  	 First Day of Pre-Production 	  	 $ 	 600,000 
	  t + 21 days 
	  	 Middle of Pre-Production 	  	 $	 1,100,000 
	  t + 42 days 
	  	 Beginning of Principal Photography 	  	 $ 	 1,700,000 
	  t + 63 days 
	  	 Middle of Principal Photography 	  	 $ 	 2,300,000 
	  t + 84 days 
	  	Beginning of Post-Production 	  	 $ 	 1,700,000 
	  t + 252 days 
	  	 Delivery of Final Print 	  	 $ 	 600,000 

Attachment 5
 Deliverables
  

The following is a preliminary Deliverables list and will be updated once the Budget is raised.
  

	 	Film	

 

	 	Original cut picture negative	
	 	Fine grain interpositive, and/or duplicate negative	
	 	Textless background original negative	
	 	Textless background interpositive	
	 	Trims and outs	

 

	 	Video	

 

	 	HD Master, Full Image (e.g. 1.85:1 or 16x9) Master	
	 	HD Master, Full Frame (4:3) Master	
	 	NTSC Full Frame DigiBeta Master	
	 	NTSC Letter Box DigiBeta Master	
	 	NTSC 16x9 DigiBeta Master	
	 	PAL Full Frame DigiBeta Master	
	 	PAL Letterbox DigiBeta Master	
	 	PAL 16x9 DigiBeta Master	

 

	 	Audio	

 

	 	DA88 of DM&E	
	 	DA88 of 2-Track Printmaster in Stereo and/or Dolby Surround 5.1	
	 	DA88 of Dialog & Music (M&E)	
	 	DA88 of Stems	
	 	DA88 of Music Masters	
	 	Optical Sound Track, Dialog, Music & Effects (DM&E)	

 

	 	Documents	

 

	 	Approved Billing Block	
	 	Cast Contracts	
	 	Cast List	
	 	Chain of Title / Writer’s Contract	
	 	Chronology of Production	
	 	Clearance Procedures Letter	
	 	Clearance Report	
	 	Composer’s Agreement	
	 	Combined Dialog Continuity/Spotting List	
	 	Credit Obligations	
	 	Crew List	
	 	Director’s Contract	
	 	Dolby License	
	 	Dubbing Restrictions Voice / Supervision	
	 	E&O Insurance Certificate	
	 	Employment List	
	 	Feature Dialog List, Disc & Hard Copy	
	 	Guild Approvals	
	 	Lab Access Letters	
	 	Literary Materials (Final Draft Screenplay)	
	 	Literary Assignment of Rights	

 

	 	Location Agreements	
	 	Main and End Credits	
	 	Motion Picture Copyright Certificate (Form PA)	
	 	MPAA Rating Certificate	
	 	Music Cue Sheet	
	 	Music Licenses	
	 	Paid Advertising Statement	
	 	Photo Identifications and Clearances	
	 	Principal Photography Start and End Dates	
	 	Procedure for Unsolicited Material	
	 	Producer’s Contract	
	 	Release of Liens	
	 	Still and Likeness Approvals	
	 	Synopsis	
	 	Title Report	
	 	Titles	
	 	Trailer Dialog List, Disc & Hard Copy	

 

	 	Other	

 

	 	Advertising Materials, if Budgeted	
	 	Publicity Materials / Press Kit, if Budgeted	
	 	Still Photographs, if Budgeted	

 

The parties have caused this SOW to be executed and each individual whose signature appears below hereby warrants that he/she is duly authorized to execute this Agreement on behalf of the Party he/she represents.
  

	BRIDGE PRODUCTIONS, INC.
	  		 	
				
	By:	  	 /s/ EUGENE MAZZOLA
	  		 	Date: JULY 20, 2009
	Name:	  	Eugene Mazzola	  		 	
	Title:	  	President	  		 	
				
	AUDIENCE PRODUCTIONS, INC.
	  		 	
				
	By:	  	 /s/ JAY T. SCHWARTZ
	  		 	Date: JULY 20, 2009
	Name:	  	Jay T Schwartz	  		 	
	Title:	  	Presidentexhibit_10-1.htm

EXHIBIT 10.1

 

 

 

PURCHASE AND SALE

 

AGREEMENT

 

by and among

 

CHENIERE FLNG, L.P.,

 

a Delaware limited partnership,

 

 CHENIERE ENERGY, INC.,

 

a Delaware corporation

 

and

 

ZACHRY AMERICAN INFRASTRUCTURE, LLC,

 

a Delaware limited liability company,

 

and

 

HASTINGS FUNDS MANAGEMENT (USA), INC.,

 

a Delaware corporation

 

  

  

  

	
ARTICLE 1

	  	  	
DEFINITIONS

	  	
5

	
1.1

	  	
Definitions.

	  	
5

	
ARTICLE 2

	  	  	
PURCHASE AND SALE OF THE INTEREST AND CLOSING

	  	
10

	
2.1

	  	
Purchase and Sale

	  	
10

	
2.2

	  	
Closing

	  	
10

	
2.3

	  	
HSR Act

	  	
10

	
2.4

	  	
Purchaser's Actions to Close

	  	
11

	
2.5

	  	
Seller and Cheniere Energy's Actions to Close

	  	
11

	
2.6

	  	
Partnership Agreement

	  	
11

	
2.7

	  	
Acknowledgement

	  	
11

	
2.8

	  	
Port Approval

	  	
11

	
2.9

	  	
Purchasing Entity

	  	
11

	
ARTICLE 3

	  	  	
REPRESENTATIONS AND WARRANTIES OF SELLER

	  	
11

	
3.1

	  	
Organization; Qualification

	  	
12

	
3.2

	  	
Power and Authority

	  	
12

	
3.3

	  	
Binding Effect

	  	
12

	
3.4

	  	
No Conflicts

	  	
12

	
3.5

	  	
No Consents

	  	
12

	
3.6

	  	
Books and Record

	  	
13

	
3.7

	  	
Title to the Interest; Effect of Transfer

	  	
13

	
3.8

	  	
Ownership and Capitalization

	  	
13

	
3.9

	  	
Finders and Brokers

	  	
13

	
3.10

	  	
Litigation

	  	
13

	
3.11

	  	
Absence of Bankruptcy Proceedings

	  	
13

	
3.12

	  	
Eyermann Patents

	  	
13

	
3.13

	  	
Representations Not Misleading

	  	
14

	
3.14

	  	
No Knowledge of MAE

	  	
14

	
ARTICLE 4

	  	  	
REPRESENTATIONS AND WARRANTIES OF PURCHASER

	  	
14

	
4.1

	  	
Organization

	  	
14

	
4.2

	  	
Power and Authority of Purchaser

	  	
15

	
4.3

	  	
Binding Effect

	  	
15

	
4.4

	  	
No Conflicts

	  	
15

	
4.5

	  	
No Consents

	  	
15

	
4.6

	  	
Finders and Brokers

	  	
15

	
4.7

	  	
Investment Company; Public Utility Holding Company

	  	
16

	
4.8

	  	
Restrictions on Interest

	  	
16

	
4.9

	  	
Litigation

	  	
16

	
4.10

	  	
Purchase Price

	  	
16

	
4.11

	  	
Investment Intent

	  	
16

	
4.12

	  	
Independent Investigation

	  	
17

	
4.13

	  	
No Other Representations

	  	
17

	
ARTICLE 5

	  	  	
CONDITIONS TO SELLER'S OBLIGATIONS

	  	
17

	
5.1

	  	
Representations, Warranties

	  	
17

	
5.2

	  	
Performance by Purchaser or the Purchasing Entity

	  	
17

	
5.3

	  	
No Injunction

	  	
17

	
5.4

	  	
Purchase Price

	  	
18

	
5.5

	  	
Broker's Fee

	  	
18

	
5.6

	  	
Approvals

	  	
18

	
5.7

	  	
FLNG GP Consent

	  	
18

 

 

  

2

  

 

	
5.8

	  	
Port Consent

	  	
18

	
5.9

	  	
Documents to be Delivered by Purchaser

	  	
18

	
5.10

	  	
Opinion of Counsel

	  	
18

	
ARTICLE 6

	  	  	
CONDITIONS TO PURCHASER ENTITY'S OBLIGATIONS

	  	
18

	
6.1

	  	
Representations, Warranties

	  	
19

	
6.2

	  	
Performance by Seller

	  	
19

	
6.3

	  	
No Injunction

	  	
19

	
6.4

	  	
Approvals

	  	
19

	
6.5

	  	
FLNG GP Consent

	  	
19

	
6.6

	  	
Absence of MAE

	  	
19

	
6.7

	  	
Opinion of Counsel

	  	
19

	
6.8

	  	
Acquisition of Other Interests

	  	
19

	
6.9

	  	
Port Consent

	  	
19

	
6.10

	  	
Documents to be Delivered by Seller

	  	
19

	
ARTICLE 7

	  	  	
INDEMNIFICATION AND LIMITATIONS ON DAMAGES

	  	
20

	
7.1

	  	
Indemnification by Purchaser

	  	
20

	
7.2

	  	
Indemnification by Seller and Cheniere Energy

	  	
20

	
7.3

	  	
Survival

	  	
21

	
7.4

	  	
LIMITATIONS ON DAMAGES

	  	
21

	
7.5

	  	
Procedures.

	  	
22

	
7.6

	  	
No Materiality

	  	
23

	
7.7

	  	
Exclusive Remedy

	  	
23

	
ARTICLE 8

	  	  	
TERMINATION

	  	
23

	
8.1

	  	
Termination

	  	
23

	
8.2

	  	
Effect of Termination

	  	
23

	
ARTICLE 9

	  	  	
MISCELLANEOUS

	  	
23

	
9.1

	  	
Amendment and Waiver

	  	
23

	
9.2

	  	
Severability

	  	
24

	
9.3

	  	
Entire Agreement

	  	
24

	
9.4

	  	
Successors and Assigns; Assignment

	  	
24

	
9.5

	  	
Counterparts; Facsimile Signatures

	  	
24

	
9.6

	  	
Notices

	  	
24

	
9.7

	  	
Governing Law

	  	
25

	
9.8

	  	
Jurisdiction

	  	
25

	
9.9

	  	
Interpretation

	  	
26

	
9.10

	  	
Incorporation of Exhibits

	  	
26

	
9.11

	  	
Expenses

	  	
26

	
9.12

	  	
No Third Party Beneficiaries

	  	
26

	
9.13

	  	
Construction

	  	
26

	
9.14

	  	
Specific Performance

	  	
26

	
9.15

	  	
Rights and Remedies

	  	
27

	
9.16

	  	
Further Assurances

	  	
27

	
9.17

	  	
Public Announcements

	  	
27

	
9.18

	  	
No Shop

	  	
27

 

  

3

  

Exhibits

 

Exhibit 1.1                                         Form of Assignment Agreement

Exhibit 5.10                                       Venable Opinion Issues

Exhibit 6.7                                        Andrews Kurth Opinion Issues

Exhibit 6.10(f)                                   Form of Waiver and Release

 

 

 

  

4

  

PURCHASE AND SALE AGREEMENT

 

PURCHASE AND SALE AGREEMENT (this "Agreement") dated as of April 21, 2010 (the "Effective Date"), by and among (a) CHENIERE FLNG, L.P.,  a Delaware limited partnership ("Seller"), and (b) ZACHRY AMERICAN INFRASTRUCTURE, LLC, a Delaware limited liability company ("ZAI"), and HASTINGS FUNDS MANAGEMENT (USA), INC., a Delaware corporation ("HFM," and together with ZAI, "Purchaser"), and (c) CHENIERE ENERGY, INC., a Delaware corporation ("Cheniere Energy").  Each of Seller and Purchaser is sometimes referred to herein as a "Party" and both of them together are sometimes referred to herein as the "Parties."

 

RECITALS

 

WHEREAS, Seller owns a 30% limited partner interest (the “Interest") in Freeport LNG Development, L.P., a Delaware limited partnership (“FLNG”);

 

WHEREAS, Seller wishes to sell to the Purchasing Entity (as defined in the third Whereas clause below) and the Purchasing Entity wishes to purchase from Seller, the Interest on the terms and subject to the conditions set forth in this Agreement;

 

WHEREAS, the Purchasing Entity will not be established until a date after the date on which this Agreement is executed by the Parties, Purchaser has agreed to enter into this Agreement and, prior to the Closing (as defined in Section 1.1), Purchaser intends to assign this Agreement and all of its rights, interest and obligations under this Agreement to ZHA FLNG Purchaser, LLC, which will be an Affiliate of ZAI (although the legal structure and name of the Purchasing Entity have yet to be finally determined (hereinafter the "Purchasing Entity") in accordance with the terms hereof; and

 

NOW THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter set forth, the Parties agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

1.1 Definitions  As used herein, the following terms shall have the following meanings:

 

"Affiliate" means, with respect to a specified Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such specified Person, and for such purposes the terms "controls," "controlled by" and "common control" shall mean the direct or indirect ownership of more than 50% of the voting rights in a Person.  A Person that is a limited partnership shall be deemed to be controlled by its general partner(s), and a Person that is a limited liability company shall be deemed to be controlled by its manager(s).

 

"Agreement" has the meaning set forth in the preamble.

 

"Angler" means Angler Pipelines, LLC, a Delaware limited liability company.

 

"Assignment Agreement" means the Assignment and Assumption Agreement dated as of the Closing Date, in the form of Exhibit 1.1, as such form may be modified by mutual agreement of the Parties.

 

  

5

  

"Basket" has the meaning set forth in Section 7.4(b).

 

“Broker’s Fee” has the meaning set forth in Section 3.9.

 

"Claim" means any claim, demand, suit, action, investigation, proceeding, governmental action or cause of action of any kind or character (in each case, whether civil, criminal, investigative or administrative), known or unknown, under any theory, including those based on theories of contract, tort, statutory liability, strict liability, negligence, employer liability, premises liability, products liability, breach of warranty or malpractice that is brought by or owed to a third party.

 

"Closing" has the meaning set forth in Section 2.2.

 

"Closing Date" has the meaning set forth in Section 2.2.

 

“Competing FLNG Transaction” has the meaning set forth in Section 9.18.

 

“Conditional Payments” has the meaning set forth in Section 4.10.

 

"Cross-Receipt" means the Cross-Receipt dated as of the Closing Date, whereby the Purchasing Entity accepts assignment of the Interest and Seller acknowledges receipt of the Purchase Price.

 

"Dispute" means any dispute, controversy or claim (of any and every kind or type, whether based on contract, tort, statute, regulation, or otherwise) arising out of, relating to, or connected with this Agreement, including any dispute as to the construction, validity, interpretation, termination, enforceability or breach of this Agreement, as well as any dispute over arbitrability or jurisdiction.

 

"Effective Date" has the meaning set forth in the preamble.

 

"FERC" means the Federal Energy Regulatory Commission.

 

"FLEX" means Freeport LNG Expansion, L.P., a Delaware limited partnership.

 

"FLEX GP" means Freeport LNG Expansion GP, Inc., a Delaware corporation.

 

"FLNG" has the meaning set forth in the preamble.

 

"FLNG Formation Documents" means the Certificate of Limited Partnership of FLNG dated September 3, 2002 and the FLNG Partnership Agreement.

 

"FLNG GP" means Freeport LNG-GP, Inc., a Delaware corporation, and the general partner of FLNG.

 

“FLNG GP Consent” means the written consent of FLNG GP to the transfer of the Interest from Seller to the Purchasing Entity required by Section 16.1(a) of the FLNG Partnership Agreement.

 

"FLNG Partnership Agreement" means the Amended and Restated Limited Partnership Agreement of FLNG, dated as of February 27, 2003, as amended by the First Amendment to

 

  

6

  

Amended and Restated Limited Partnership Agreement dated as of December 20, 2003, as amended, restated, supplemented or otherwise modified from time to time.

 

"FLNG Subsidiaries" means Land I, FLEX, FLEX GP, Land II, ANGLER, Storage and Storage GP.

 

"Governmental Approval" means any permit, license, franchise, approval, consent, waiver, certification, qualification or other authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Entity or pursuant to any applicable Law.

 

"Governmental Entity" means any federal, tribal, state, local or foreign government or any provincial, departmental or other political subdivision thereof, or any entity, body or authority exercising executive, legislative, judicial, regulatory, administrative or other governmental functions or any court, department, commission, board, bureau, agency, instrumentality or administrative body of any of the foregoing.

 

"HFM" has the meaning set forth in the preamble.

 

"HSR Act" means the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended from time to time.

 

“Indemnified Party” has the meaning set forth in Section 7.5(a).

 

“Indemnifying Party” has the meaning set forth in Section 7.5(a).

 

“Interest” has the meaning set forth in the preamble.

 

"IRC" means the Internal Revenue Code of 1986, as amended from time to time, and regulations issued by the IRS pursuant to the Internal Revenue Code.

 

"IRS" means the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of Treasury.

 

"Land I" means FLNG Land, Inc., a Delaware corporation.

 

"Land II" means FLNG Land II, Inc., a Delaware corporation.

 

"Law" means any applicable statute, law, regulation, ordinance, rule, judgment, rule of law, order, decree, requirement or other governmental restriction or any similar form of decision of any Governmental Entity having jurisdiction over the matter or matters in question, in each case as amended (including all of the terms and provisions of the common law of such Governmental Entity) and as in effect on the Closing Date.

 

"Liability" means any liability or obligation (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether incurred directly or consequentially and whether due or to become due), including any Tax or other liability arising out of applicable statutory, regulatory or common law, any contractual obligation and any obligation arising out of tort.

 

  

7

  

"Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge, claim or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset and (c) in the case of securities or other equity interests, any agreement to sell, preemptive right, subscription right, right of first refusal, purchase option, call or other agreement or commitment (including any stockholders agreement) or right of a third party with respect to such securities or other equity interests or any other limitation on the ability to transfer or to vote such securities or other equity interests.

 

"LNG" means any hydrocarbon or mixture of hydrocarbons consisting predominately of methane in a liquid state.

 

"Material Adverse Effect" means any material adverse event, change, cause or effect which is or could reasonably be expected to be materially adverse to the business, properties, assets, liabilities or results of operations of a Person, taken as a whole, excluding any event, change, cause or effect arising out of or in connection with or resulting from:  (a) general economic, business or regulatory conditions or changes therein; (b) financial market conditions, including without limitation interest rates, or changes therein; (c) industry conditions, events or circumstances (including any change in the prices of natural gas, natural gas liquids, LNG or other hydrocarbon products), or changes in Law, affecting businesses similar to the business of such Person, to the extent they do not have a disproportionate effect upon such Person in particular; (d) any action, omission, change, effect, circumstance or condition contemplated by this Agreement or attributable to the execution, performance or announcement of this Agreement or the transactions contemplated hereby; or (e) any action or failure to act on part of Purchaser or the Purchasing Entity.

 

"Novation Agreement" has the meaning set forth in Section 9.4.

 

"Partnership Notice" has the meaning set forth in Section 6.10(c).

 

"Party" and "Parties" have the meanings set forth in the preamble.

 

"Permitted Liens" means: (a) Liens imposed by Law for Taxes, assessments or charges or claims by Governmental Entities that are not yet due or are being properly contested; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's, landlords' and other like Liens imposed by Law or Contract, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being properly contested; (c) easements, zoning restrictions, rights-of-way, licenses, covenants, conditions, minor defects, encroachments or irregularities in title and similar encumbrances on or affecting any leased real property; (d) Liens now or hereafter imposed under any credit facility or other financing documents.

 

"Person" means any individual, partnership, corporation, limited liability company, association, joint stock company, trust, joint venture, unincorporated organization or Governmental Entity.

 

“Port Consent” means the written consent of Port Freeport, Texas (f/k/a Brazos River Harbor Navigation District of Brazoria County, Texas) to the transfer of the Interest from Seller to the Purchasing Entity required by (i) Section 12 of the Unlimited Continuing Guaranty Agreement executed January 28, 2004 by FLNG, as guarantor and (ii) Section 6.2 of the

 

  

8

  

Assignment, Consent and Amendment Agreement dated January 28, 2004, by and among Brazos River Harbor Navigation District of Brazoria County, Texas, FLNG, and Land I.

 

“Proceeding” has the meaning set forth in Section 7.5(a).

 

"Purchase Price" means the consideration payable to Seller pursuant to Section 2.1(b).

 

"Purchaser" has the meaning set forth in the preamble.

 

"Purchaser Ancillary Agreements" has the meaning set forth in Section 4.2.

 

"Purchaser Cap Amount" has the meaning set forth in Section 7.4(c).

 

"Purchaser Indemnitees" has the meaning set forth in Section 7.2

 

"Purchaser Losses" has the meaning set forth in Section 7.2.

 

“Purchasing Entity” has the meaning set forth in the preamble.

 

“Sagent” has the meaning set forth in Section 3.9.

 

“Securities Act” has the meaning set forth in Section 4.11.

 

"Seller" has the meaning set forth in the preamble.

 

"Seller Ancillary Agreements" has the meaning set forth in Section 3.2.

 

"Seller Cap Amount" has the meaning set forth in Section 7.4(b).

 

"Seller Indemnitees" has the meaning set forth in Section 7.1.

 

"Seller Losses" has the meaning set forth in Section 7.1.

 

"Seller Partnership Agreement" means the Partnership Agreement of Seller executed to be effective as of December 17, 2003, as amended, restated, supplemented or otherwise modified from time to time.

 

"Storage" means FLNG Storage, L.P., a Delaware limited partnership.

 

"Storage GP" means FLNG Storage GP, Inc., a Delaware corporation.

 

"Subsidiary" means, with respect to any Person, any corporation, company, person or entity at least 50% of the voting or equity interests of which are owned or controlled, directly or indirectly, by such Person.

 

"Tax" means any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Section 59A of the IRC), customs duties, capital stock, franchise, profits, withholding, social security (or similar, including FICA), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated or other tax of any kind whatsoever, including any interest, penalty or addition thereto.

 

  

9

  

"Termination Date" means June 30, 2010; provided, however, that Purchaser or Seller may extend the Termination Date by up to 20 days by giving written notice to the other Party if all approvals required under the HSR Act have not been obtained or all applicable waiting periods thereunder have not expired or terminated by such date.

 

“Third Party Claim” has the meaning set forth in Section 7.5(b).

 

"ZAI" has the meaning set forth in the preamble.

 

ARTICLE 2

 

PURCHASE AND SALE OF THE INTEREST AND CLOSING

 

2.1 Purchase and Sale.

 

(a) Subject to the terms and conditions set forth in this Agreement, on the Closing Date, Seller shall sell to the Purchasing Entity and the Purchasing Entity shall purchase from Seller all of Seller’s right, title and interest in and to the Interest, free and clear of all Liens other than (i) Liens under the FLNG Formation Documents, (ii) transfer restrictions imposed by federal and state securities laws, and (iii) Liens arising from acts of Purchaser or its Affiliates.

 

(b) Purchase Price.  Upon the terms and subject to the conditions contained herein, as consideration for the purchase of the Interest and in consideration for the agreements contained herein, the Parties agree that the Purchasing Entity shall pay an aggregate of $108,000,000 in immediately available funds at Closing by wire transfer to Seller.

 

2.2 Closing.  Subject to Article 5 and Article 6, the purchase and sale of the Interest (the "Closing") will take place at 10:00 a.m. local time at the offices of Andrews Kurth LLP in Houston, Texas, on the date which is five business days following the date on which the last of the of the conditions set forth in Sections 6.4, 6.8, and 6.9 is satisfied (the "Closing Date") or such other place or time as the Parties otherwise agree.

 

2.3 HSR Act.  Purchaser shall: (a) as promptly as practicable following the execution of this Agreement, take all actions necessary to make the filings required of it or any of its Affiliates under the HSR Act in respect of the transactions contemplated hereby, including requesting early termination of the waiting period thereunder; (b) comply at the earliest practicable date with any request for additional information or documentary material received by it, or any of its Affiliates, from the United States Federal Trade Commission or Department of Justice pursuant to the HSR Act; (c) cooperate with FLNG in connection with any filing under the HSR Act and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement commenced by the United States Federal Trade Commission or Department of Justice or the attorneys general of any state, as applicable; and (d) use commercially reasonable efforts to resolve such objections, if any, as may be asserted with respect to the transactions contemplated by this Agreement.  Purchaser shall promptly inform Seller of any material communication received by Purchaser from the United States Federal Trade Commission, Department of Justice or any other Governmental Entity regarding any of the transactions contemplated hereby, and of any understandings, undertakings, or agreements (oral or written) Purchaser proposes to make or enter into with the United States Federal Trade Commission, Department of Justice, as applicable, or any other Governmental Entity in connection with the transactions contemplated hereby.

 

  

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2.4 Purchaser's Actions to Close.  Purchaser shall take all commercially reasonable actions necessary to ensure that those conditions precedent to the Parties’ obligation to close, as set forth in Article 5 and Article 6, that are within Purchaser’s control are fulfilled prior to or at the Closing.

 

2.5 Seller and Cheniere Energy's Actions to Close.  The Seller and Cheniere Energy shall take all commercially reasonable actions necessary to ensure that those conditions precedent to the Parties’ obligations to close, as set forth in Article 5 and Article 6, that are within Seller’s or Cheniere Energy’s control are fulfilled prior to or at the Closing.

 

2.6 Partnership Agreement.  Effective upon the Closing, the Purchasing Entity shall join in the execution of the FLNG Partnership Agreement (including the execution of an adoption agreement) and hereby agrees to execute and deliver a counterpart to the FLNG Partnership Agreement and any other documents, agreements or certificates required by FLNG GP.  The Purchasing Entity agrees to be bound by and comply with the provisions of the FLNG Partnership Agreement applicable to it, including any provision that limits or restricts the assignment or transfer of the Interest

 

2.7 Acknowledgement. The Parties acknowledge and agree that (a) any obligation under this Agreement expressed to be an obligation of the Purchasing Entity will only be effective, and enforceable against the Purchasing Entity, upon Purchaser assigning its rights, interests and obligations under this Agreement to the Purchasing Entity in accordance with Section 9.4; and (b) for the avoidance of doubt, at no time will Purchaser have, or purport to have, responsibility for any obligation expressed to be an obligation of the Purchasing Entity under this Agreement.

 

2.8 Port Approval.  Purchaser shall use reasonable efforts (without the obligation to spend money) to assist FLNG in trying to obtain the approval of Port Freeport to the transactions contemplated hereby prior to May 7, 2010; provided, however, that Purchaser shall have no Liability to Seller, and this Agreement shall not be affected in any way, in the event such approval is not obtained by such date.  Purchaser and Seller shall each reimburse FLNG for one-half of the compensation paid by FLNG to Port Freeport in obtaining such consent, up to a maximum of $50,000 in the aggregate.

 

2.9 Purchasing Entity.  Purchaser shall request capital commitments from potential investors in the Purchasing Entity of at least $108,000,000 in the aggregate for purposes of the transaction contemplated hereby as soon as practicable following execution of this Agreement, but in any event not later than May 20, 2010.  Purchaser shall promptly notify Seller in writing if it determines that it will be unable to obtain such capital commitments.  As soon as practicable after obtaining such capital commitments, Purchaser shall cause (a) the Purchasing Entity to be formed and (b) Purchaser’s rights, interests and obligations hereunder to be assigned to the Purchasing Entity as provided in Section 9.4.

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

In order to induce Purchaser and the Purchasing Entity to enter into and perform this Agreement and to consummate the transactions contemplated hereby, Seller hereby represents and warrants to Purchaser and the Purchasing Entity as of the Effective Date and as of the Closing Date as follows:

 

  

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3.1 Organization; Qualification.  Seller is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware.  Seller has all requisite partnership power and authority to own its properties and to conduct its business as presently being conducted by it, and is duly qualified and in good standing as a foreign partnership in every jurisdiction in which the conduct of its business or the ownership of its properties and assets requires it to be so qualified, except jurisdictions in which the failure to be so qualified would not have a Material Adverse Effect on the Seller.

 

3.2 Power and Authority.  Seller and Cheniere Energy, as applicable, have the full right, power and authority to execute, deliver and carry out the terms of this Agreement, the Assignment Agreement, and the Cross-Receipt, to perform their respective obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby (the Assignment Agreement and the Cross-Receipt are collectively referred to herein as the "Seller Ancillary Agreements").  All partnership acts and other proceedings required to be taken by Seller, and all corporate acts and other proceedings required to be taken by Cheniere Energy, as applicable, to authorize the execution, delivery and performance of this Agreement and the Seller Ancillary Agreements, and the consummation of the transactions contemplated hereby and thereby have been duly and properly taken.

 

3.3 Binding Effect.  This Agreement has been, and the Seller Ancillary Agreements will be, duly executed and delivered by Seller and Cheniere Energy, as applicable, and this Agreement constitutes (and when executed and delivered, the Seller Ancillary Agreements will constitute) the legal, valid and binding obligations of Seller and Cheniere Energy, as applicable, enforceable against Seller and Cheniere Energy, as applicable, in accordance with their respective terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization and similar laws affecting creditors’ rights generally and by general principles of equity.

 

3.4 No Conflicts.  None of the execution and delivery by Seller or by Cheniere Energy, as applicable, of this Agreement or the Seller Ancillary Agreements, the consummation of the transactions contemplated hereby or thereby, or the compliance with the terms hereof or thereof, do or will conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or to increased, additional, accelerated or guaranteed rights or entitlements of any Person under, or result in the creation of any Lien (other than Permitted Liens) under any provision of (a) the Seller Partnership Agreement, Cheniere Energy’s certificate of incorporation or by-laws, (b) any note, bond, mortgage, indenture, deed of trust, license, lease, commitment, or other contract to which Seller or Cheniere Energy is a party, or by which any of their respective properties or assets are bound or affected, or (c) any Law applicable to or binding upon Seller or Cheniere Energy, or any of their respective properties or assets, other than, in the case of clauses (b) and (c) above, any such items that, individually or in the aggregate, would not have a Material Adverse Effect on Seller or Cheniere Energy.

 

3.5 No Consents.  Other than the FLNG GP Consent, the Port Consent, and subject to any approval or the expiration of any waiting period under the HSR Act, no Governmental Approval of, or registration, declaration or filing with, any Governmental Entity, including FERC, or the consent or approval of any other Person, is required to be obtained or made by or with respect to Seller in connection with the execution, delivery and performance of this Agreement by Seller or the consummation of the purchase and sale of the Interest hereunder.

 

  

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3.6 Books and Records.  Each Seller Formation Document is in full force and effect in accordance with its terms and has not been amended, modified or rescinded.

 

3.7 Title to the Interest; Effect of Transfer.  Seller is the sole and exclusive owner of, and has good, valid and marketable title to, the Interest, free and clear of any Liens other than (i) Liens under the FLNG Formation Documents, (ii) transfer restrictions imposed by federal and state securities laws or Governmental Entities, and (iii) Liens arising from acts of Purchaser or its Affiliates.  At the Closing, good and valid title to the Interest shall pass to the Purchasing Entity, free and clear of any Liens other than (i) Liens under the FLNG Formation Documents, (ii) transfer restrictions imposed by federal and state securities laws or Governmental Entities, and (iii) Liens arising from acts of Purchaser or its Affiliates.  Other than as expressly set forth in this Agreement and the FLNG Partnership Agreement, the Interest is not subject to any voting trust agreement or other contract, including any contract, restricting or otherwise relating to the voting, rights to distributions or disposition of the Interest.

 

3.8 Ownership and Capitalization.  As of the Effective Date and immediately prior to the consummation of the transactions contemplated by this Agreement, Seller owns and controls 30% of the limited partner interests in FLNG.  Seller is indirectly owned 100% by Cheniere Energy.

 

3.9 Finders and Brokers.  Other than a broker’s fee payable to Sagent Advisors, Inc. (“Sagent”) by the Seller at Closing out of proceeds hereunder in an amount equal to $3,000,000 (the “Broker’s Fee”), none of Seller, Cheniere Energy or any of their Affiliates has incurred any Liability to any financial advisor, broker or finder for any financial advisory, brokerage, finder’s or similar fee or commission in connection with the transactions contemplated by the sale of the Interest pursuant to this Agreement for which Purchaser or any of its Affiliates could be liable.

 

3.10 Litigation.  There are no Claims pending or, to the knowledge of Seller, threatened against or involving Seller that seeks to enjoin, prohibit or otherwise question the validity of the transactions contemplated by this Agreement.

 

3.11 Absence of Bankruptcy Proceedings.  There are no bankruptcy, reorganization or arrangement proceedings pending against, being contemplated by, or to the knowledge of Seller, threatened against Seller.

 

3.12 Eyermann Patents.

 

(a)  Neither Cheniere Energy nor any of its Affiliates has any right, title or interest, or right to acquire, any right, title or interest (including a lien or a profits interest) in or to United States Patent number 6,622,492, titled "Apparatus and process for vaporizing liquefied natural gas (lng)," filed on June 3, 2002 and issued September 23, 2003 and/or  United States Patent No. 6,644,041, titled "System in process for the vaporization of liquefied natural gas," filed as a continuation-in-part of the application for United States Patent number 6,622,492 on November 14, 2002 and issued November 11, 2003 or any of the inventions disclosed therein or foreign counterpart (each an “Eyermann Patent” and together the “Eyermann Patents”), except for such non-exclusive license rights granted in that certain "Cheniere License Back Agreement" dated November 24, 2004 between Air Tower LLC and Cheniere Energy Inc.

 

(b) All membership, equity or other ownership interests of Cheniere Energy or any Affiliate thereof in Air Tower LLC, a Texas limited liability company (“Air Tower”) or any successor or predecessor thereof has been assigned and transferred to the estate of Volker

 

  

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Eyermann, and Cheniere Entities and their affiliates do not own or have the right to acquire any interest in Air Tower.

 

(c) Neither Cheniere Energy nor any Affiliate thereof has any on-going rights in the License Agreement dated December 19, 2003 between Cheniere Energy Inc. and Freeport LNG Development L.P. or the License Agreement dated December 19, 2003 between Cheniere Energy Inc. and Freeport LNG Investments LLC.

 

3.13 Representations Not Misleading.  No representation or warranty made by Seller in this Agreement or any of the Seller Ancillary Documents contains any untrue statement or, to the knowledge of Seller, omits to state material fact necessary to make any of them, in light of the circumstances in which it was made, not misleading.

 

3.14 No Knowledge of MAE.  Seller has no knowledge of any fact that has specific application to Seller, acquired in writing from FLNG GP by virtue of Seller’s position as a limited partner of FLNG, that would reasonably be expected to have a Material Adverse Effect on FLNG and the FLNG Subsidiaries, taken as a whole, that has not been set forth in this Agreement.

 

 

ARTICLE 4

 

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

In order to induce Seller to enter into and perform this Agreement and to consummate the transactions contemplated hereby, ZAI and HFM, jointly and severally, hereby represent and warrant to Seller as of the Effective Date and as of the Closing Date as follows:

 

4.1 Organization.  ZAI is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.  ZAI has the requisite power and authority to own, lease or otherwise hold and operate its properties and assets and to carry on its business as presently conducted.  ZAI is duly qualified and in good standing to do business as a foreign limited liability company in each jurisdiction in which the conduct or nature of its business or the ownership, leasing, holding or operating of its properties makes such qualification necessary except jurisdictions in which the failure to be so qualified would not have a Material Adverse Effect on ZAI.  HFM is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  HFM has the requisite power and authority to own, lease or otherwise hold and operate its properties and assets and to carry on its business as presently conducted.  HFM is duly qualified and in good standing to do business as a foreign corporation in each jurisdiction in which the conduct or nature of its business or the ownership, leasing, holding or operating of its properties makes such qualification necessary, except jurisdictions in which the failure to be so qualified would not have a Material Adverse Effect on HFM.  When formed, the Purchasing Entity will be a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.  When formed, the Purchasing Entity will have all requisite power and authority to own, lease or otherwise hold and operate is properties and assets and to carry on its business as conducted.  When formed, the Purchasing Entity will be duly qualified and in good standing to do business as a foreign limited liability company in each jurisdiction in which the conduct or nature of its business or the ownership, leasing, holding or operating of its properties makes such qualification necessary, except jurisdictions in which the failure to be so qualified would not have a Material Adverse Effect on the Purchasing Entity.

 

  

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4.2 Power and Authority of Purchaser.  Purchaser has, and, once formed, the Purchasing Entity shall have, the requisite right, power and authority to execute and deliver this Agreement, the Assignment Agreement, the Novation Agreement and the Cross-Receipt (the Assignment Agreement, the Novation Agreement and the Cross-Receipt are collectively referred to herein as the "Purchaser Ancillary Agreements"), to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  All corporate acts and other proceedings required to be taken by Purchaser to authorize the execution, delivery and performance of this Agreement and the Purchaser Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly and properly taken.  Once formed, the Purchasing Entity will duly and properly take all limited liability company acts and other proceedings required to be taken by the Purchasing Entity to authorize the execution, delivery and performance of this Agreement and the Purchaser Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby.

 

4.3 Binding Effect.  This Agreement has been duly executed and delivered by Purchaser and Purchaser Ancillary Agreements will be duly executed and delivered by Purchaser and the Purchasing Entity, as applicable, and this Agreement constitutes (and when executed and delivered the Purchaser Ancillary Agreements will constitute) the legal, valid and binding obligations of Purchaser or the Purchasing Entity, as applicable, enforceable against Purchaser or the Purchasing Entity, as applicable, in accordance with their respective terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization and similar laws affecting creditors’ rights generally and by general principles of equity.

 

4.4 No Conflicts.  None of the execution and delivery by Purchaser or the Purchasing Entity, as applicable, of this Agreement or the Purchaser Ancillary Agreements, the consummation of the transactions contemplated hereby or thereby, or the compliance with the terms hereof or thereof, do or will conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or to increased, additional, accelerated or guaranteed rights or entitlements of any Person under, or result in the creation of any Lien (other than Permitted Liens) any of the properties or assets of Purchaser or the Purchasing Entity under, any provision of (a) the constituent documents of Purchaser or the Purchasing Entity, (b) any note, bond, mortgage, indenture, deed of trust, license, lease, contract, commitment, agreement, arrangement or other Contract to which Purchaser or the Purchasing Entity is a party or by which any of their respective properties or assets are bound or affected or (c) any Law or any judgment, order or decree, award or injunction of any Governmental Entity applicable to or binding upon Purchaser or the Purchasing Entity or any of their respective properties or assets, other than, in the case of clause (b) above, any such items that, individually or in the aggregate, would not materially impair the ability of Purchaser or the Purchasing Entity to consummate the transactions contemplated by this Agreement.

 

4.5 No Consents.  Other than the Port Consent and subject to any approval or the expiration of any waiting period under the HSR Act, no Governmental Approval of, or registration, declaration or filing with, any Governmental Entity, or the consent or approval of any other Person, is required to be obtained or made by or with respect to Purchaser or the Purchasing Entity in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.

 

4.6 Finders and Brokers.  Neither Purchaser nor any of its Affiliates (including the Purchasing Entity) has incurred any Liability to any financial advisor, broker or finder for any

 

  

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financial advisory, brokerage, finder’s or similar fee or commission in connection with the transactions contemplated by the sale of the Interest pursuant to this Agreement for which Seller or any of its Affiliates could be liable.

 

4.7 Investment Company; Public Utility Holding Company.  Purchaser is not, and once formed the Purchasing Entity will not be, an "investment company," a company "controlled" by an "investment company", or an "affiliated person" of, "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended from time to time.  Purchaser is not, and once formed the Purchasing Entity will not be, a "holding company," an "affiliate" of a "holding company," 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 from time to time.  Purchaser is not, and once formed the Purchasing Entity will not be, subject to regulation under any Law relating to public utilities, gas utilities, public service corporations or similar entities.

 

4.8 Restrictions on Interest. Each of Purchaser and the Purchasing Entity acknowledges and understands that (i) the Interest is subject to restrictions on sale, transfer, assignment, disposition, repurchase and voting, among other rights and obligations, pursuant to the FLNG Partnership Agreement and (ii) the rights granted to Seller under Section 16.1(b) of the FLNG Partnership Agreement are personal to Seller and may not be transferred to Purchaser or the Purchasing Entity, as applicable, without the prior written consent of the FLNG-GP, which may be withheld in its sole discretion.  Neither Seller nor Cheniere Energy is under any obligation to seek or obtain such consent, and the consummation of the transactions contemplated hereunder are not conditioned upon, or subject to, the obtaining of such consent.

 

4.9 Litigation.  There are no Claims pending or, to the knowledge of Purchaser, threatened against or involving Purchaser or, once formed, the Purchasing Entity, that seeks to enjoin, prohibit or otherwise question the validity of the transactions contemplated by this Agreement.

 

4.10 Purchase Price.  The Purchase Price represents, on a per percentage point basis, the same purchase price the Purchasing Entity is paying to the seller of a sufficient interest (the "Additional Interest") in FLNG to give the Purchasing Entity a majority limited partner interest in FLNG upon Closing hereof, except to the extent such seller is entitled to certain future payments and shares of revenues (the “Conditional Payments”) related to, and conditioned upon, the success of the FLNG Subsidiaries in pursuing a “Phase 2 Project” as such term is defined in FLNG’s principal credit facilities.  Purchaser agrees that the Purchase Price hereunder will be increased pro rata in the event the purchase price payable to such seller (other than the Conditional Payments) is increased.

 

4.11 Investment Intent.  Purchaser or the Purchasing Entity, as applicable, is purchasing the Interest for investment for its own account and not with a view to, or for sale in connection with, any distribution thereof.  Purchaser has, and when formed the Purchasing Entity will have (either alone or together with its advisors), sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Interest and is capable of bearing the economic risks of such investment.  Purchaser is, and when formed the Purchasing Entity will be, an “accredited investor” as such term is defined in Regulation D under the Securities Act of 1933, as amended (the “Securities Act”).  Purchaser and the Purchasing Entity understand that the Interest will not have been registered pursuant to the Securities Act or any applicable state securities Laws, that such

 

  

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Interest shall be characterized as “restricted securities” under federal securities Laws and that under such Laws and applicable regulations the Interest cannot be sold or otherwise disposed of without registration under the Securities Act or an exemption therefrom.

 

4.12 Independent Investigation.  Purchaser hereby acknowledges and affirms, and when formed, the Purchasing Entity acknowledges and affirms, that it has completed its own independent investigation, analysis and evaluation of FLNG and the FLNG Subsidiaries, that it has made all such reviews and inspections of the business, assets, results of operations and condition (financial or otherwise) of FLNG and the FLNG Subsidiaries as it has deemed necessary or appropriate, and that in making its decision to enter into this Agreement and to consummate the transactions contemplated hereby it has relied on its own independent investigation, analysis and evaluation of FLNG and the FLNG Subsidiaries and the representations, warranties and covenants of the Seller contained herein.  Purchaser has had access to all materials, books, records, documents and information relating to FLNG and the FLNG Subsidiaries and has been able to verify the accuracy of the information contained therein.

 

4.13 No Other Representations.  Purchaser hereby acknowledges, and when formed the Purchasing Entity acknowledges, that neither Seller nor Cheniere Energy has made any representation or warranty except as expressly set forth in this Agreement.  Without limiting the generality of the foregoing, Purchaser acknowledges, and when formed the Purchasing Entity acknowledges, that neither Seller nor Cheniere Energy makes any representation or warranty with respect to (i) any projections, estimates or budgets delivered to or made available to Purchaser or the Purchasing Entity of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) of FLNG or the FLNG Subsidiaries or the future business and operations of FLNG or the FLNG Subsidiaries, or (ii) any other information or documents made available to Purchaser or its counsel, accountants or advisors with respect to FLNG or the FLNG Subsidiaries or their businesses or operations, except as expressly set forth in this Agreement.

 

ARTICLE 5

 

CONDITIONS TO SELLER'S OBLIGATIONS

 

The obligations of Seller to transfer, sell and assign the Interest to the Purchasing Entity on the Closing Date are subject to the satisfaction or waiver in writing, on or prior to the Closing Date, of each of the following conditions:

 

5.1 Representations, Warranties.  All representations and warranties of Purchaser contained in this Agreement shall be true and correct in all material respects (except to the extent such representations or warranties are qualified by materiality, in which case such representations and warranties shall be true and correct in all respects), at and as of the Closing Date as if such representations and warranties were made at and as of the Closing Date.

 

5.2 Performance by Purchaser or the Purchasing Entity.  Each of Purchaser and the Purchasing Entity shall have performed and complied in all material respects with all its agreements, covenants and obligations required hereby to be performed by it prior to or at the Closing Date.

 

5.3 No Injunction.  No injunction, stay or restraining order shall be in effect prohibiting the consummation of the transactions contemplated by this Agreement and no action shall be

 

  

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pending seeking to make illegal, to delay materially or otherwise indirectly restrain or prohibit the consummation of the transactions contemplated hereby or otherwise seeking material damages.

 

5.4 Purchase Price.  The Purchasing Entity shall have paid to Seller the Purchase Price in accordance with Section 2.1(b), less the Broker’s Fee.

 

5.5 Broker’s Fee.      The Purchasing Entity shall have paid the Broker’s Fee to Sagent on behalf of Seller.

 

5.6 Approvals.  All approvals required under the HSR Act or required by any third party, including any Governmental Entity, for the consummation of the transactions contemplated by this Agreement shall have been obtained, and all applicable waiting periods under the HSR Act shall have expired or been terminated

 

5.7 FLNG GP Consent.  Seller shall have received the FLNG GP Consent.

 

5.8 Port Consent.  FLNG shall have received the Port Consent.

 

5.9 Documents to be Delivered by the Purchasing Entity.  At the Closing, the Purchasing Entity shall have delivered to Seller the following documents, in each case duly executed or otherwise in proper form:

 

(a) a certificate signed by an executive officer of the Purchasing Entity that each of the representations and warranties made by Purchaser in this Agreement is true and correct in all material respects (except to the extent such representations or warranties are qualified with materiality, in which case such representations and warranties shall be true and correct in all respects), on and as of the Closing Date with the same effect as though such representations and warranties had been made or given on and as of the Closing Date, and that the Purchasing Entity has performed and complied in all material respects with all of its obligations under this Agreement which are to be performed or complied with on or prior to the Closing Date;

 

(b) certified copies of the resolutions of the managing member of the Purchasing Entity, authorizing and approving this Agreement and the consummation of the transactions contemplated hereby; and

 

(c) the Purchaser Ancillary Agreements, each duly executed by an authorized officer of the Purchasing Entity.

 

5.10 Opinion of Counsel.  Venable LLP shall have delivered an opinion with respect to the issues set forth in Exhibit 5.10 hereto, subject to such assumptions, qualifications and exceptions as are customary in such opinions.

 

ARTICLE 6

 

CONDITIONS TO PURCHASING ENTITY'S OBLIGATIONS

 

The obligations of the Purchasing Entity to purchase the Interest as provided hereby are subject to the satisfaction or waiver in writing, on or prior to the Closing Date, of each of the following conditions:

 

  

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6.1 Representations, Warranties.  All representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects (except to the extent such representations or warranties are qualified by materiality, in which case such representations and warranties shall be true and correct in all respects), at and as of the Closing Date as if such representations and warranties were made at and as of the Closing Date.

 

6.2 Performance by Seller.  Seller shall have performed and complied, in all material respects, with all agreements, covenants and obligations required hereby to be performed by it prior to or at the Closing Date.

 

6.3 No Injunction.  No injunction, stay or restraining order shall be in effect prohibiting the consummation of the transactions contemplated by this Agreement and no action by any third party, including without limitation any Governmental Entity, shall be pending seeking to make illegal, to delay materially or otherwise indirectly restrain or prohibit the consummation of the transactions contemplated hereby or otherwise seeking material damages.

 

6.4 Approvals.  All approvals required under the HSR Act or required by any third party, including without limitation any Governmental Entity, for the consummation of the transactions contemplated by this Agreement shall have been obtained, and all applicable waiting periods thereunder shall have expired or been terminated.

 

6.5 FLNG GP Consent.  Seller shall have received the FLNG GP Consent.

 

6.6 Absence of MAE.  No event shall have occurred following the Effective Date which would reasonably be expected to have a Material Adverse Effect on FLNG and the FLNG Subsidiaries, taken as a whole.

 

6.7 Opinion of Counsel.  Andrews Kurth LLP shall have delivered an opinion with respect to the issues set forth in Exhibit 6.7 hereto, subject to such assumptions, qualifications and exceptions as are customary in such opinions.

 

6.8 Acquisition of Other Interests.  The Purchasing Entity shall have acquired the Additional Interest.

 

6.9 Port Consent.  FLNG shall have received the Port Consent.

 

6.10 Documents to be Delivered by Seller.  At the Closing, Seller shall have delivered to the Purchasing Entity the following documents, in each case duly executed or otherwise in proper form:

 

(a) a certificate signed by an executive officer of the general partner of Seller that each of the representations and warranties made by Seller in this Agreement is true and correct in all material respects (except to the extent such representations or warranties are qualified with materiality, in which case such representations and warranties shall be true and correct in all respects) on and as of the Closing Date with the same effect as though such representations and warranties had been made or given on and as of the Closing Date, and that Seller has performed and complied in all material respects with all of its obligations under this Agreement which are to be performed or complied with on or prior to the Closing Date;

 

(b) the Seller Ancillary Agreements, each duly executed by an authorized officer of the general partner of Seller;

 

  

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(c) a copy of the written notice from Seller delivered to FLNG and the other limited partners of FLNG at or prior to the Closing pursuant to Section 16.1(a) of the FLNG Partnership Agreement indicating (i) that Seller intends to transfer the Interest to the Purchasing Entity, (ii) the Purchasing Entity's address, and (iii) the date of the proposed transfer (the "Partnership Notice");

 

(d) a copy, certified as of the Closing Date by the Secretary of the general partner of Seller, of the resolutions adopted by the board of directors or other governing body of the general partner of Seller authorizing the transactions contemplated by this Agreement and the Seller Ancillary Agreements;

 

(e) a copy, certified as of the Closing Date by the Secretary of Cheniere Energy, of the resolutions adopted by the board of directors of Cheniere Energy authorizing the transaction contemplated by this Agreement and the Seller Ancillary Agreements to which Cheniere Energy is a party; and

 

(f) a waiver and release executed by Seller and Cheniere Energy in the form attached hereto as Exhibit 6.10(f).

 

ARTICLE 7

 

INDEMNIFICATION AND LIMITATIONS ON DAMAGES

 

7.1 Indemnification by Purchaser.  Subject to the limitations set forth in this Article 7, ZAI, HFM and the Purchasing Entity shall, jointly and severally, indemnify and hold harmless Seller, Cheniere Energy, and their respective Affiliates (but for purposes of this Section 7.1, the term "Affiliates" shall exclude FLNG and FLNG Subsidiaries) and the officers, directors, employees, agents, partners and representatives of each of them (collectively, the "Seller Indemnitees") from, against and in respect of any and all Liabilities, judgments, liens, injunctions, charges, orders, decrees, rulings, damages, dues, assessments, losses, fines, penalties, court costs, injuries, deficiencies, demands, expenses, fees, costs, amounts paid in settlement (including reasonable attorneys’ fees and disbursements in connection with defending or settling any action or threatened action) (collectively "Seller Losses") to the extent arising from, relating to or otherwise in respect of any breach of any representation, warranty, covenant or agreement of Purchaser or the Purchasing Entity contained in this Agreement, in any certificate delivered pursuant hereto or in any Purchaser Ancillary Agreement.

 

7.2 Indemnification by Seller and Cheniere Energy.  Subject to the limitations set forth in this Article 7, Seller and Cheniere Energy shall jointly and severally indemnify and hold harmless Purchaser, the Purchasing Entity, and their respective Affiliates (but for purposes of this Section 7.2, the term "Affiliates" shall exclude FLNG and FLNG Subsidiaries) and the officers, directors, employees, agents, partners and representatives of each of them (collectively, the "Purchaser Indemnitees") from, against and in respect of any and all Liabilities, judgments, liens, injunctions, charges, orders, decrees, rulings, damages, dues, assessments, losses, fines, penalties, court costs, injuries, deficiencies, demands, expenses, fees, costs, amounts paid in settlement (including reasonable attorneys’ fees and disbursements in connection with defending or settling any action or threatened action) (collectively "Purchaser Losses") to the extent arising from, relating to or otherwise in respect of any breach of any representation, warranty, covenant or agreement of Seller contained in this Agreement or in any certificate delivered pursuant hereto or in any Seller Ancillary Agreement.

 

  

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7.3 Survival.  The representations and warranties set forth in this Agreement shall survive the Closing and shall terminate 18 months from the Closing Date, provided that (a) the representations and warranties set forth in Sections 3.1 (Organization; Qualification; Ownership Interests), 3.2 (Power and Authority), 3.3 (Binding Effect), 3.7 (Title to Interest; Effect of Transfer), 3.8 (Ownership), 3.9 (Finders and Brokers), 4.1 (Organization), 4.2 (Power and Authority of Purchaser), 4.3 (Binding Effect) and 4.6 (Finders and Brokers) shall terminate upon the expiration of any applicable statute of limitations, and (b) any party may pursue a claim after any applicable survival date as provided in this Section 7.3, so long as written notice of such claim is given to the indemnifying party on or prior to such survival date.  All covenants and agreements set forth in this Agreement, any certificate delivered pursuant hereto or in any Seller Ancillary Agreement or Purchase Ancillary Agreement which are to be performed or complied with prior to or at Closing shall terminate as of the Closing, all other such covenants and agreements shall survive the Closing indefinitely or for the shorter period explicitly specified therein.

 

7.4 LIMITATIONS ON DAMAGES.

 

(a) NEITHER PARTY SHALL BE LIABLE FOR, AND EACH PARTY RELEASES THE OTHER PARTY AND ITS RESPECTIVE INDEMNIFIED PERSONS FROM, ANY PUNITIVE, EXEMPLARY, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING DAMAGES ASSOCIATED WITH LOST PROFITS) ARISING AS A RESULT OF THIS AGREEMENT.

 

(b) NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS AGREEMENT, (I) NO AMOUNTS SHALL BE PAYABLE BY SELLER UNDER SECTION 7.2 UNLESS AND UNTIL THE AGGREGATE AMOUNT OTHERWISE PAYABLE BY SELLER IN THE ABSENCE OF SUCH CLAUSE EXCEEDS $1,000,000 (THE "BASKET"), IN WHICH EVENT ALL LOSSES, AND NOT ONLY THE AMOUNT IN EXCESS OF THE BASKET, SHALL BE DUE, AND (II) SELLER’S INDEMNIFICATION OBLIGATIONS UNDER THIS AGREEMENT IN RESPECT OF BREACHES OF ANY REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT SHALL NOT EXCEED IN THE AGGREGATE $25,000,000 (THE "SELLER CAP AMOUNT"), PROVIDED, THAT, THE BASKET AND THE SELLER CAP AMOUNT SHALL NOT APPLY TO ANY CLAIMS MADE BY THE PURCHASING ENTITY FOR PURCHASER LOSSES ARISING OUT OF FRAUD AND SUCH FRAUD CLAIMS AS DESCRIBED IN THIS PROVISO SHALL NOT COUNT TOWARD WHETHER THE BASKET OR THE SELLER CAP AMOUNT IS REACHED, PROVIDED, FURTHER, THAT THE BASKET SHALL NOT APPLY TO ANY CLAIMS ARISING OUT OF A BREACH OF REPRESENTATION CONTAINED IN SECTION 3.7 AND THE SELLER CAP AMOUNT WITH RESPECT TO SUCH CLAIMS SHALL BE THE PURCHASE PRICE.

 

(c) NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS AGREEMENT, (I) NO AMOUNTS SHALL BE PAYABLE BY PURCHASER UNDER SECTION 7.1 UNLESS AND UNTIL THE AGGREGATE AMOUNT OTHERWISE PAYABLE BY PURCHASER IN THE ABSENCE OF SUCH CLAUSE EXCEEDS THE BASKET, IN WHICH EVENT ALL LOSSES, AND NOT ONLY THE AMOUNT IN EXCESS OF THE BASKET, SHALL BE DUE, AND (II) PURCHASER’S INDEMNIFICATION OBLIGATIONS UNDER THIS AGREEMENT IN RESPECT OF BREACHES OF ANY REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT SHALL NOT EXCEED IN THE AGGREGATE $25,000,000 (THE "PURCHASER CAP AMOUNT"), PROVIDED, THAT, THE BASKET AND THE PURCHASER CAP AMOUNT SHALL NOT APPLY TO ANY CLAIMS MADE BY SELLER FOR SELLER LOSSES ARISING OUT OF FRAUD AND SUCH FRAUD CLAIMS AS DESCRIBED IN

 

  

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THIS PROVISO SHALL NOT COUNT TOWARD WHETHER THE BASKET OR THE PURCHASER CAP AMOUNT IS REACHED.

 

7.5 Procedures

 

(a) The party seeking indemnification under Section 7.1 or 7.2 (the “Indemnified Party”) agrees to give prompt notice to the party against whom indemnity is sought (the “Indemnifying Party”) of the assertion of any claim, or the commencement of any suit, action or proceeding (“Proceeding”) in respect of which indemnity may be sought under such Sections and will provide the Indemnifying Party such information with respect thereto that the Indemnifying Party may reasonably request.  The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have adversely prejudiced the Indemnifying Party.

 

(b) By giving written notice within 30 days of receiving notice of a Proceeding, the Indemnifying Party shall be entitled to participate in the defense of any Proceeding asserted by any third party (“Third Party Claim”) and, subject to the limitations set forth in this Section 7.5, shall be entitled to control and appoint lead counsel acceptable to the Indemnified Party for such defense, in each case at its expense.  Notwithstanding any provision herein to the contrary, the Indemnifying Party shall not have the right to assume control of such defense and shall pay the fees and expenses of counsel retained by the Indemnified Party, if the claim which the Indemnifying Party seeks to assume control (i) seeks non-monetary relief, (ii) involves criminal or quasi-criminal allegations, or (iii) involves a claim which, upon petition by the Indemnified Party, the appropriate court rules that the Indemnifying Party failed or is failing to vigorously prosecute or defend.

 

(c) If the Indemnifying Party shall assume the control of the defense of any Third Party Claim in accordance with the provisions of this Section 7.5, then (i) the Indemnifying Party shall obtain the prior written consent of the Indemnified Party (which shall not be unreasonably withheld, conditioned or delayed) before entering into any settlement of such Third Party Claim, if the settlement does not unconditionally release the Indemnified Party from all liabilities and obligations with respect to such Third Party Claim or the settlement imposes injunctive or other equitable relief against the Indemnified Party, and (ii) the Indemnified Party shall be entitled to participate in the defense of such Third Party Claim and to employ separate counsel of its choice for such purpose. The fees and expenses of such separate counsel shall be paid by the Indemnified Party.

 

(d) Each Party shall cooperate, and cause their respective Affiliates to cooperate, in the defense or prosecution of any Third Party Claim and shall furnish or cause to be furnished such records and information, as may be reasonably requested in connection therewith.

 

(e) Each Indemnified Party shall mitigate in accordance with Law any loss for which such Indemnified Party seeks indemnification under this Agreement.  If such Indemnified Party mitigates its loss after the Indemnifying Party has paid the Indemnified Party under any indemnification provision of this Agreement in respect of that loss, the Indemnified Party must notify the Indemnifying Party and pay to the Indemnifying Party the lesser of (i) the extent of the value of the benefit to the Indemnified Party of that mitigation (less the Indemnified Party’s reasonable costs of mitigation) and (ii) the amount of indemnification previously received from the Indemnifying Party, in each case, within five (5) business days after the benefit is received.

 

  

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7.6 No Materiality.  For purposes of this Article 7 (Indemnification), the representations and warranties contained in this Agreement shall be deemed not to be qualified by any references to materiality or to Material Adverse Effect.

 

7.7 Exclusive Remedy.  Other than in connection with fraud, the indemnification provisions of this Article 7 shall be the sole and exclusive remedy for each Party for any breach of the other Party’s representations and warranties contained in this Agreement, any certificate delivered pursuant hereto or in any Seller Ancillary Agreement or Purchaser Ancillary Agreement.

 

ARTICLE 8

 

TERMINATION

 

8.1 Termination.  This Agreement may be terminated and the sale and purchase of the Interest is abandoned at any time prior to the Closing:

 

(a) by mutual written consent of Seller and Purchaser;

 

(b) by Purchaser, (i), no later than three business days after delivery of the notice specified in Section 2.9 to Seller, but in any event not later than May 20, 2010, (ii) in the event that the conditions to its obligations set forth in Article 6 have not been satisfied or waived in writing at or prior to the Termination Date, or (iii) in the event Seller has breached any representation, warranty or covenant contained in this Agreement in any material respect, Purchaser has notified Seller in writing of the breach and the breach has continued without cure for a period of 10 calendar days after the notice of breach; or

 

(c) by Seller (i) in the event it receives the notice specified in Section 2.9 from Purchaser, (ii) in the event that the conditions to its obligations set forth in Article 5 have not been satisfied or waived in writing at or prior to the Termination Date, or (iii) in the event Purchaser or the Purchasing Entity has breached any representation, warranty or covenant contained in this Agreement in any material respect, Seller has notified Purchaser of the breach in writing and the breach has continued without cure for a period of 10 calendar days after the notice of breach.

 

Notwithstanding the foregoing, (i) Purchaser shall not have the right to terminate this Agreement if the failure for Closing to occur is the breach of this Agreement by Purchaser or the Purchasing Entity and (ii) Seller shall not have the right to terminate this Agreement if the failure for Closing to occur is the breach of this Agreement by Seller.

 

8.2 Effect of Termination.  If this Agreement is terminated pursuant to Section 8.1 all rights and obligations of the Parties hereunder shall terminate, and no Party shall have any Liability hereunder to any other Party, except for obligations of the Parties in Section 9.11, which shall survive the termination of this Agreement.  Notwithstanding the foregoing, nothing herein will relieve any Party from Liability for any breach of this Agreement prior to such termination.

 

ARTICLE 9

 

MISCELLANEOUS

 

9.1 Amendment and Waiver.  No modification, amendment, or waiver of any provision of this Agreement will be effective unless such modification, amendment, or waiver is approved in writing by each Party.  The failure of any Party to enforce any of the provisions of this

 

  

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Agreement will in no way be construed as a waiver of such provisions and will not affect the right of such Party thereafter to enforce each and every provision of this Agreement in accordance with its terms.

 

9.2 Severability.  Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

 

9.3 Entire Agreement.  This Agreement and the Purchaser Ancillary Agreements and Seller Ancillary Agreements embody the complete agreement and understanding between the Parties with respect to the subject matter of this Agreement and supersedes and preempts any prior understandings, agreements, or representations by or between the Parties, written or oral, that may have related to the subject matter of this Agreement in any way.  Notwithstanding the foregoing, nothing herein shall be deemed to affect the validity or effectiveness of the confidentiality provisions set forth in that certain letter agreement between the parties dated March 24, 2010.

 

9.4 Successors and Assigns; Assignment.  Except as otherwise provided in this Agreement, this Agreement will bind and inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns.  Purchaser shall have the right to, and shall, assign its rights, interests and obligations under this Agreement to the Purchasing Entity if the Purchasing Entity (a) shall have delivered to Seller evidence reasonably satisfactory to Seller that the Purchasing Entity has received capital commitments from its owners totaling no less than $108,000,000 for purposes of the transaction contemplated hereby, and (b) the Purchasing Entity shall have assumed Purchaser's responsibility, obligations and Liability to Seller hereunder.  Upon such assignment and Purchaser, the Purchasing Entity and Seller entering into a novation agreement reasonably acceptable to such parties (the “Novation Agreement”), Purchaser shall be released from all responsibility, obligations and Liability to Seller or any other party with respect to this Agreement, and references to Purchaser shall be interpreted as references to the Purchasing Entity (except with respect to those references to Purchaser which appear in the third Whereas clause and in Sections 2.8 and 2.9, which shall be interpreted as references to Purchaser).  The Purchasing Entity shall deliver to Seller the evidence referred to in the second sentence of this Section 9.4 promptly after the Purchasing Entity receives the capital commitments referred to in such sentence.  Except as otherwise provided in this Agreement, no Party may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of the other Parties.

 

9.5 Counterparts; Facsimile Signatures.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.  Each Party agrees to accept the facsimile signature of the other Party and to be bound by its own facsimile signature.

 

9.6 Notices.  All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by an nationally recognized overnight courier service, or by confirmed facsimile or confirmed email transmission to the respective Parties at the following addresses:

 

If to Seller:

 

  

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Cheniere Energy, Inc.

700 Milam Street, Suite 800

Houston, Texas 77002

Facsimile: (713) 375-6000

Attn:  Charif Souki, Chief Executive Officer

Email: charif.souki@cheniere.com

with copies to:

 

Andrews Kurth LLP

600 Travis, Suite 4200

Houston, TX 77002

Fax: 713.220.4285

Attn:  Geoffrey Walker, Esq.

Facsimile:  (713) 238-7433

Email: gwalker@andrewskurth.com

 

If to Purchaser:

 

c/o Zachry Hastings Alliance

12625 Wetmore Road, Suite 301

San Antonio TX 78247

Attn:  Peter Taylor and Robert Heitmann

Facsimile  (210) 871-6922

Email:  peter.taylor@hfm.com.au

Bob.heitmann@zachryamerican.com

with copies to:

 

Venable LLP

Rockefeller Center

1270 Avenue of the Americas

New York, NY 10020

Attn:  Mark Vecchio

Facsimile:  (212) 307-5598

Email:  MVecchio@Venable.com

or at such other address as the Parties may specify by notice given to the other Party in accordance with this Section 9.6.  The date of giving of any such notice shall be the date of hand delivery, the day after delivery to the overnight courier service or the date sent by facsimile or email transmission.

 

9.7 GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE TO THE EXTENT SUCH PROVISIONS OR RULES WOULD APPLY THE LAW OF ANOTHER JURISDICTION.

 

9.8 Jurisdiction.  Each of the Parties irrevocably and unconditionally (i) consents to submit itself to the exclusive personal jurisdiction of any State or Federal court located in New York County in the State of New York in the event any Dispute arises out of this Agreement, (ii)

 

  

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agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) waives (and agrees not to plead or claim) any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement, and (iv) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION RELATED TO OR ARISING OUT OF THIS AGREEMENT.

 

9.9 Interpretation.

 

(a) The headings used in this Agreement are for convenience only and shall not be construed as having any substantive significance or as indicating that all of the provisions of this Agreement relating to any topic are to be found in any particular Section.

 

(b) Reference to the singular includes a reference to the plural and vice versa.

 

(c) Reference to any gender includes a reference to all other genders.

 

(d) Unless otherwise provided, reference to any Section or Exhibit means a Section or Exhibit of or to this Agreement.

 

(e) The words "hereof," "herein," "hereto" and "hereunder" and words of similar meaning shall, unless otherwise expressly specified, refer to this Agreement as a whole and not to any particular portion or provision of this Agreement.

 

(f) The words "include," "includes" and "including" shall be deemed to be followed by the words "without limitation."

 

9.10 Incorporation of Exhibits.  The Exhibits to this Agreement are incorporated herein by reference and made a part hereof.

 

9.11 Expenses.  Except as otherwise expressly provided in this Agreement, each Party will pay all of its expenses, including attorneys’ and accountants’ fees, in connection with the negotiation of this Agreement and the performance of its obligations and the consummation of the transactions contemplated hereby.  Purchaser shall pay the HSR Act filing fee.

 

9.12 No Third Party Beneficiaries.  Except as specifically set forth herein, this Agreement shall not confer any rights or remedies upon any person other than the Parties and their respective successors and permitted assigns.

 

9.13 Construction.  The Parties have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.

 

9.14 Specific Performance.  Each Party acknowledges and agrees that the other Party would be damaged irreparably in the event any of the provisions of this Agreement is not performed in accordance with its specific terms or otherwise is breached.  Accordingly, each Party agrees that, in addition to any other relief which may be available, the other Party shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in addition to

 

  

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any other remedy (subject to the provisions set forth in Article 7) to which it may be entitled, at law or in equity.

 

9.15 Rights and Remedies.  Except where this Agreement expressly provides to the contrary, the rights and remedies contained in this Agreement are cumulative and not exclusive of any rights and remedies provided by law.

 

9.16 Further Assurances.  Following the Closing, each of the Parties shall deliver to the others such further information and documents and shall execute and deliver to the others such further instruments and agreements and take such other actions as the other Party shall reasonably request to consummate or confirm the transactions provided for in this Agreement, to accomplish the purpose of this Agreement or to assure to the other Party the benefits of this Agreement.  In the event compensation payable by FLNG to Port Freeport in connection with the grant of its consent to this transaction exceeds $50,000, the Parties agree to work together to find a mutually acceptable comprise with respect to who should bear the economic burden of such fee.

 

9.17 Public Announcements.  Except as otherwise agreed to by the Parties, or as required to comply with applicable Law, including without limitation regulations and rules of the SEC and the NYSE Amex applicable to Cheniere Energy, no Party shall issue any report, statement or press release or otherwise make any public statements with respect to this Agreement or the transactions contemplated hereby, except with the prior written consent of the other Party, such consent not to be unreasonably withheld.  Cheniere Energy agrees to consult with Purchaser with respect to the text of any public announcement required to be made by law, including any applicable securities regulations.

 

9.18 No Shop. From the date hereof through the earlier of (i) the Closing Date, (ii) the date this Agreement is terminated or (iii) June 30, 2010, neither Seller nor Cheniere Energy shall, directly or indirectly through any officer, director, employee, stockholder, agent, partner, affiliate, or otherwise, directly or indirectly (a) enter into any agreement, agreement in principle or other commitment (whether or not legally binding) relating to any sale of any interests in FLNG owned by Seller or relating to any other similar transaction (a "Competing FLNG Transaction"), (b) solicit, initiate or encourage the submission of any proposal or offer from any person or entity (including any of its officers, directors, employees or agents) relating to any Competing FLNG Transaction, or (c) participate in any discussions or negotiations regarding, furnish to any other person or entity any non-public information with respect to, or otherwise cooperate with, assist, participate in, facilitate or encourage, any effort or attempt by any person or entity to effect a Competing FLNG Transaction.

 

[SIGNATURE PAGE FOLLOWS]

 

  

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.

 

 

 

	  	
SELLER:

	  	
CHENIERE FLNG, L.P.

	  	
By:

	  	
Cheniere FLNG-GP, LLC, its general partner

	  	
By:

	  	
/s/ Meg A. Gentle

	  	  	  	
Name:  Meg A. Gentle

	  	  	  	
Title:    Chief Financial Officer

 

	  	  	  	
CHENIERE ENERGY, INC.

	  	
By:

	  	
/s/ Meg A. Gentle

	  	  	  	
Name:  Meg A. Gentle

	  	  	  	
Title:    Senior Vice President & CFO

 

	  	
PURCHASER:

	  	
ZACHRY AMERICAN INFRASTRUCTURE, LLC

	  	
By:

	  	
/s/ Robert Heitmann

	  	  	  	
Name:  Robert Heitmann

	  	  	  	
Title:    Chief Operating Officer

 

	  	  	  	
HASTINGS FUNDS MANAGEMENT (USA), INC.

	  	
By:

	  	
/s/ Peter Taylor

	  	  	  	
Name:  Peter Taylor

	  	  	  	
Title:    Executive Director, Infrastructure

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